Here there be pirates…

With Australians sitting at the top of the online piracy charts, it comes as no surprise that the Federal government is considering cracking down on illicit downloading with a “three strikes” graduated response scheme.

What is a graduated response scheme?

Graduated response schemes involve sending a series of warning notices to owners of Internet accounts that have been used for copyright infringement. These notices lead eventually to sanctions including fines, bandwidth reduction, monitored access, or even disconnection from the Internet.

How are graduated response schemes structured?

France, the UK and New Zealand (amongst others) have introduced graduated response schemes with the following common features:

  • a rights holder initiates the process by reporting an infringement to the relevant Internet Service Provider (ISP), who must then issue a ‘first strike’ notice to the infringer;
  • the infringer is the owner of the Internet account, who has either committed the infringement orfailed to take reasonable steps to prevent an infringement by others;
  • subsequent strikes will follow if further infringing activities are detected;
  • once an infringer has been issued with a prescribed number of strike notices, the rights holder is entitled to take enforcement action either by commencing civil proceedings or reporting to the relevant authority.

If Australia adopts a graduated response scheme, it is likely that it will have a similar structure.

Problems with graduated response schemes

Copyright is not black and white

Copyright law is notoriously complex, and the question of infringement is not always easy to determine. Graduated response schemes presume:

  • those claiming rights are indeed the rightful owners;
  • the pirated goods are copyright ; and
  • the alleged infringements are not subject to any copyright exceptions or defences.

ISPs do not have the legal expertise, authority or resources to determine such matters on a case by case basis. If the law requires them to act on all infringement reports, they will be forced to comply, whether by issuing notices, monitoring connections or limiting access to Internet accounts.

Innocent users held accountable

Graduated response schemes do not target pirates specifically, but rather account holders whose connections are used for pirating activities. In 2012, Alan Prevost became the first person under the French three-strikes law prosecuted for failing to secure his Internet connection, after his then wife downloaded copyrighted music without his knowledge. The same thing could happen to landlords, employers, education providers, libraries and any public Wi-Fi providers.

Internet users who do not keep detailed records of their usage and those that provide access to unidentified users might struggle to defend themselves against prosecution. Participating in Telstra’s national-wide user-driven wi-fi network, for example, could earn you a conviction for a crime you did not commit.

Cost to the consumer

Whilst graduated response schemes may save rights holders from funding expensive litigation to protect their property, arguably this burden is simply being transferred to ISPs, and therefore ultimately the consumer.

In France, ISPs’ annual costs of compliance are on the order of €50 million (A$70 million). These costs have resulted in significant rates hikes for broadband services.

The British government estimates that ISPs will incur upfront costs of up to £500 million (A$900 mihllion) over ten years for identifying subscribers, notifying them of alleged infringements, surveillance and policing, data retention, running call centres and investing in new equipment to manage their systems. ISPs are expected to recoup some of these costs from higher broadband charges which is expected to result in up to 40,000 people becoming unable to afford their Internet access.

How effective would it be?

The cost of implementing a graduated response scheme in Australia might be justifiable if it achieved the goal of curbing piracy. Unfortunately, this is unlikely.

Although statistics from France and New Zealand reveal a significant reduction in peer-to-peer file-sharing numbers, they also confirm an increase in the use of tunnelling services, secure file transfer and remote access applications. In reality, pirating evolved to alternative transmission protocols with less likelihood of identification and detection.

A better way forward

Pirates are typically aged from 18 to 35. These consumers have grown up in the Web 2.0 age, accustomed to the bountiful fruits of a highly competitive creative industry. They have high expectations. Commonly-cited motivators for piracy include:

  • the portability of digital file formats across multiple devices;
  • the high cost of legal versions;
  • to avoid commercials;
  • to avoid access restrictions from DRMs and geolocation lockouts;
  • time lag before release of a legal version; and
  • inability to obtain a product via legal channels.

Major copyright owners like Adobe and Warner Bros have stressed the need to understand pirates and to develop products that will convert them into customers. Such suppliers are reinventing their business models (think iTunes, Spotify, Adobe Creative Cloud and e-book publishers) and offering value-added services.

Renewing the appeal of legitimate markets may generate far higher profits than embracing flawed solutions like the three-strike laws.

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