10 Little Portland Street Tel: +44 (0) 20 7861 7861 Email: [email protected] London W1W 7JG Fax: +44 (0) 20 7861 7862 Web: www.ukfilmcouncil.org.uk

Film theft in the UK Anti-Piracy Task Force: an analysis and recommendations for action The UK Film Council is the lead agency for film in the UK ensuring that the economic, cultural and educational aspects of film are effectively represented at home and abroad. creativity encouraging the development of new talent, skills, and creative and technological innovation in UK film and assisting new and established filmmakers to produce successful and distinctive British films enterprise supporting the creation and growth of sustainable businesses in the film sector, providing access to finance and helping the UK film industry compete successfully in the domestic and global marketplace imagination promoting education and an appreciation and enjoyment of cinema by giving UK audiences access to the widest range of UK and international cinema, and by supporting film culture and heritage

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Tel: + 44 (0) 20 7861 7861 Fax: + 44 (0) 20 7861 7862 Email: [email protected] Web: www.ukfilmcouncil.org.uk Contents

1 Chair’s foreword ...... 4 2 Executive summary ...... 6 3 Introduction ...... 9 4 Film theft in the UK: the current climate ...... 10 The business of film ...... 10 Film piracy in the UK ...... 12 Physical piracy ...... 12 Internet piracy ...... 19 Pay-TV piracy ...... 24 UK piracy in a European picture ...... 26 The future digital home ...... 27 5 Combating film theft ...... 28 The demographics of piracy ...... 28 Legal framework for combating piracy ...... 29 Copyright protection in the UK ...... 29 International harmonisation: the WIPO Treaties and TRIPS . . . . .32 Copyright protection in the US and EU ...... 34 Enforcement ...... 35 Enforcement at a local level ...... 37 The need for international co-operation ...... 40 Security measures ...... 41 The filmmaking process ...... 41 Controlling content in the digital domain ...... 42 Education and consumer awareness ...... 43 The needs of educational institutions ...... 44 Developing new business models ...... 46 6 Consumer issues ...... 48 7 Recommendations ...... 51 The UK Government ...... 51 The film industry ...... 54 Government-backed and other film sector stakeholders ...... 55 Action plan ...... 58 Appendices (See following page) ...... 62 Footnotes ...... 85

Film theft in the UK | 1 2 Appendices

i Lessons from the music industry ...... 62 The size of the problem ...... 62 Why digital music piracy exploded ...... 63 Dealing with music piracy ...... 65 Security measures ...... 65 Enforcement measures ...... 66 Education and consumer awareness ...... 68 Legitimate online services ...... 68 ii Technical solutions to the problem of piracy ...... 71 iii Copyright and Related Rights Directive Regulations 2003 – How the new law affects the film and video industries ...... 74 The basic rights ...... 74 Fair dealing exceptions (‘permitted acts’) ...... 74 Protection of technological measures ...... 75 Electronic rights management information ...... 76 Enforcement ...... 76 iv Alliance Against Counterfeiting and Piracy: Views on the EC Enforcement Directive ...... 77 v Signatories of the Memorandum of Understanding on the Co-operation in the Field of Detection, Investigation and Prosecution of Intellectual Property Rights Offences ...... 78 vi Glossary ...... 79 vii Anti-Piracy Task Force ...... 81

Film theft in the UK | 3 1 Chair’s foreword

The pirate is often seen as a romantic hero That is why the UK Film Council, the figure, someone who steals but does so in an Government’s strategic agency for film, has honourable and victimless way. The truth is very established an Anti-Piracy Task Force. The Task different. Force brings together the key stakeholders in Film piracy is the single largest threat facing the the UK film industry to deliver a joined-up anti- UK film industry today. Film piracy is theft. Like piracy strategy in the UK to reduce film theft all forms of theft it has damaging financial and and to build public awareness of the social consequences. These effects may be less importance and benefit of copyright immediately visible than those that stem from protection. the theft of a physical object – but they are no This report maintains that film theft must be less harmful as a consequence. tackled using all available means. There is need Piracy undermines the economic basis of the for urgent action from both Government and film industry by depriving rights holders of the the film industry itself, but there is no single revenues needed to fund future films, and to magic bullet. The solutions involve, among provide jobs in our industry. Piracy cheats other things, tougher legislation, education of consumers by duping them into paying money consumers as to the economic and social for a product which is often of extremely poor consequences of piracy and in the long term a quality. Piracy also provides illicit revenues to rethinking of our business models to enable those engaged in a range of organised criminal consumers to buy legitimately what is currently activities at home and overseas. being stolen. The problem of film theft is now growing at an Also the film industry needs to prepare for alarming rate. In 2001, the number of illegal future sale and rental of films digitally through video products seized by the Federation Against broadband and via the internet. This report is Copyright Theft (FACT) was 314,000. This figure intended to help inform the debate. Failure to almost doubled in 2002 to 607,000 units, but confront this challenge will also result in in 2003 the total number of films seized rose to serious damage to our film industry. nearly 2 million units; a 223% increase on the previous year. Increasingly these problems are also transferring into the digital world by copying and file sharing on the net. This level of damage and loss to our industry is simply unsustainable.

4 Of course, the real challenge is to ensure that the legitimate rights of citizens and consumers are safeguarded whilst ensuring that adequate measures are introduced to enable rights owners to protect their intellectual property. Action is required now – at this point our industry has everything to lose.

Nigel Green Chairman UK Film Council, Anti-Piracy Task Force

Film theft in the UK | 5 2 Executive summary

The ability to generate intellectual property are generating for the UK’s Creative Industries increasingly represents one of the keys to the sector. It is a cross-Government body – success of a modern economy. The protection including the devolved administrations – and of intellectual property rights, such as those industry, and brings together key players from generated by film and other creative industries, across the sector. The challenges posed by is therefore one of the keys to enhancing overall piracy and file-sharing are high on the agenda 1 economic competitiveness. of the Forum. Equally, the protection of the rights created by Physical piracy and the illegal transmission of an industry such as film is in the interests of films through file-sharing networks are major citizens and consumers. Without such concerns requiring urgent attention. protection the economic basis of an industry In recent years, physical piracy activity at the like film – which depends on a virtuous circle in professional criminal level in the UK has been which revenue is recycled as investment capital increasing. In 2003, the number of illegal video for future projects – will be undermined. This products seized by the Federation Against will ultimately lead to a decline in the variety of Copyright Theft (FACT) increased to nearly 2 projects made and a reduction of choice and million units, a 223% rise as compared with cultural diversity in the market. 2002. In an era when digital technology is increasingly Physical piracy costs the film industry in the UK important across the film sector, one of the key hundreds of millions of pounds every year. The challenges for the industry and for policy- UK has one of the highest piracy rates in makers is how best to maximise the ability of Western Europe. According to the Motion that technology to offer films to consumers Picture Association (MPA), only Austria and with a greater degree of choice and Germany had a higher percentage of DVD and convenience, while also ensuring the protection video piracy in 2003. and enforcement of intellectual property rights. The methodology used to quantify the losses Equally, it is important to ensure that the caused by piracy is in need of improvement. It potential of digital technology to enhance is possible, therefore, that current figures could creativity and innovation is maximised, without significantly underestimate the impact of piracy undermining the value of rights. on the UK film industry. The Government has recently created a Creative The pace of change of digital entertainment Industries Forum on Intellectual Property to technologies is accelerating. This means that discuss how best to meet the opportunities and any response to the threat of piracy must be threats that rapid technological developments

6 sufficiently flexible to respond to fluid likely industry and Government-backed and other changes in technology. The growing threat of stakeholders on how these measures could be copyright theft also extends to digital TV improved. The most important of these are services and the Internet. Peer-to-peer (P2P) summarised below. Internet filesharing networks are increasingly used as a means of illegally downloading films for free. The growth of P2P and broadband Recommendations for the (which facilitates the exchange of large files) UK Government presents serious challenges to the attempt to protect the value of film rights. • Make it legally possible to extract financial damages from those pirating film by extending Equally, however, these developments offer an the legal concept of ‘exemplary’ and ‘statutory’ opportunity to create new business models damages to cases of copyright infringement. which provide consumers with a legitimate and convenient means to download films. The • Introduce a comprehensive package of development of Apple’s i-Tunes service and of legislative reforms designed to curb the sale of other models for downloading music illustrates pirate products at street markets, car boot sales the ways in which digital technology can be and via other forms of informal trading. used to provide legitimate services which offer • Make the act of camcording a film in a increased convenience for the consumer at very cinema a criminal offence. little marginal cost to rights holders. • Through the Creative Industries IP Forum, This report considers both the scale and extent and working in conjunction with Ofcom and of copyright theft and means of countering this other appropriate organisations, promote the threat. Measures to combat piracy are reviewed development and spread of open cross- under five headings: platform global standards related to Digital 1 The legal framework; Rights Management (DRM). 2 Enforcement; • Recognise that the Government target for “the UK to have the most extensive and 3 Security measures; competitive broadband market in the G7 by 4 Education and consumer awareness; and 2005” needs to be supported by complementary measures which ensure 5 The development of new business models. protection of intellectual property rights. 2 As a result of this review, we have made 30 • Ensure that the Patent Office’s national IP recommendations for Government, the

Film theft in the UK | 7 enforcement strategy remains sufficiently Recommendations for other flexible to respond to changes in the sourcing public sector organisations and supply of illegally copied films. and trade bodies • Through the European Union, prioritise co- Consult with all relevant stakeholders and operation with other EU Governments to • with research experts on developing improved further harmonise regulatory and anti-piracy methodologies to quantify the scale and enforcement measures. impact of all forms of film industry piracy, • Work with other international trade paying particular attention to the impact of organisations (eg the World Trade Internet P2P filesharing. Organisation) as appropriate to encourage Develop best practice security procedures for enhanced protection of intellectual property • the handling of film prints and digital materials rights across the globe, especially in those throughout the production process and make countries which have been identified as these procedures a condition of support significant sources of pirated material. schemes administered by the UK Film Council • Ensure that the Creative Industries IP Forum and other public sector funders. These on Intellectual Property results in a productive procedures to build upon the Film Print and dialogue between rights holders and Internet Digital Disk Management Protocol published by Service Providers on the most effective means the Film Distributors Association in July 2004. to stem piracy. • Further develop public campaigns to highlight the dangers of piracy, in particular Recommendations for the focusing on the links between piracy and film industry organised crime, the illegal nature of piracy and • Work with the Government’s Creative file-sharing; the threat to the development of Industries IP Forum and individual Government creativity and culture in the UK and the dangers departments to develop a strategy to deal with of unsuitable material becoming available to unauthorised Internet P2P filesharing that fairly children and teenagers younger than 18. balances consumer interests with the legitimate • Through the UK Film Council, forge links with rights of the industry to exert copyright EFAD (the forum of European Film Agency ownership and contain misuse. Directors) to further European co-operation in • Through the relevant trade associations, the fight against copyright theft. work with Ofcom, the UK Film Council and • The UK Film Council to convene discussions other relevant stakeholders to ensure that to consider ways to expand the financial regulatory barriers to the development of new, resources available for enforcement activities. legitimate business models for the online Our report also includes a review of the many delivery of film are minimised. lessons to be learnt from the experience of the • Through the relevant trade associations, music industry in the face of digital piracy. Two work with the bfi, Film Education, First Light of these are of critical importance: and other appropriate organisations to help Take into account the industry’s relationship ensure that young people are aware of the • with the consumer, and manage consumer damage that piracy can inflict on their expectation more skilfully. enjoyment of films. • Don’t wait; act now.

8 3 Introduction

Piracy has long been a major cause for concern There are five key sections to this report: for the global film industry. Since the • An examination of the current climate of film appearance of the videocassette in the 1970s, theft as it impacts the UK film industry, with a the illegal manufacture and sale of pirated special focus on the emerging threats from movie content has increased enormously. online piracy and Internet filesharing. However, while until recently movie piracy has • An assessment of the measures available to been a ‘physical’ activity using analogue combat piracy in the UK; particular attention is technology, the digital revolution has triggered given to legal and enforcement methods. This a quantum leap in the means of copying and section also includes examination of possible disseminating copyrighted works. With the security measures, education and consumer advent of the Internet and the accelerated awareness initiatives, and the development of development of ‘off-the-shelf’ digital new business models for the industry. entertainment and PC technologies, it is now easier than ever to illegally copy and distribute • A review of consumer attitudes and film content. This applies both to copying by behaviour, and how the film industry might large-scale criminal organisations and to illegal respond to the challenges of balancing the copying by consumers. rights of citizens and consumers with those of content providers. In short, the digital age, has brought with it a startling array of threats and challenges. If • Preliminary recommendations on how the these threats and challenges are not addressed UK government, film industry and other they could have extremely serious stakeholders in the film sector, such as the UK consequences for the film business, and for the Film Council and the Federation Against diversity of film culture, across the globe. To Copyright Theft (FACT), can work together to this end, this report evaluates the task ahead deal with the growth of film piracy. for the UK film industry, as it squares up to the • An appendix which includes an analysis of challenge posed by film theft in the early 21st the music industry’s experience – an industry century. that has suffered significant losses from both physical piracy and file-sharing over the Internet because of a failure to act in a timely fashion.

Film theft in the UK | 9 4 Film theft in the UK: the current climate

The business of film recent years there has been a steady reduction in the time lag between the US theatrical The film industry is based on a business model release and theatrical release elsewhere – and which involves a complex series of release indeed some movies are now released more or windows. This model maximises profits by less simultaneously in all key global territories. exploiting film content via three key interlinked dimensions: time, technology and geography. This business model has been developed over decades as a commercially viable way of Time is exploited through sequential release • generating a sufficient return on investment to windows tied to technological platform or protect filmmakers against the risks inherent in format (essentially, when and how the film bringing new movies to the market, many of becomes available) which do not make a profit. Indeed, not every • Geography is exploited through rights tied project that is developed becomes a motion to territory and language (that is, where the picture and not every film that is produced is film becomes available), based on the territorial profitable. According to the MPA, nature of copyright. approximately ten projects are developed for every major film project that is “greenlit” (ie, a As technology stands currently, this means that decision is made to produce a motion picture a film premieres first in the cinema (the based on that project), and four out of every theatrical window), then makes its way onto ten films do not recoup their total production DVD, VHS video and in some territories Video- and distribution costs. CD (the video window), before progressing onto television – first on pay-per-view and Production costs are not recouped from subscription television (the pay-TV window), theatrical revenues alone4; rather production then onto free-to-air television.3 In each costs, as well as overhead and the costs of instance, exclusive access to a new film ahead those projects that have been developed but of the next ‘window’ in the value chain has not produced, are recouped from all media and been considered by the industry to be critical to markets in which the film is exploited. If any maximising turnover. medium or market is cannibalised or destroyed by piracy, the loss is felt not only in that market, It also means that a film becomes available in but in all subsequent distribution markets, and some territories earlier than it does in others. the amount of money available for production For practical reasons, most films are released of the picture at issue (not to mention earlier in the US (the largest single revenue recoupment of development costs and losses generating country for film) than Europe or on non-profitable pictures) are similarly indeed the rest of the world. However, over

10 reduced. The consequence is that these lost been the UK video/DVD sector, which is revenues must be recovered from other Europe’s largest video market. Thanks to the markets (ie prices are increased) or quality phenomenon of DVD, UK consumer spending reduced, all to the ultimate detriment of the on video (both retail and rental) passed the consumer. £2.5 billion mark in 2002. By end 2003, the market was generating £2.9 billion. Though An example of how consumers can lose out demand for other genres, such as children’s due to piracy and of how it can threaten and music, is increasing, feature film still cultural diversity comes from Stefan Arndt, the dominates DVD/video. producer of the highly acclaimed German film Good Bye, Lenin!. Arndt recently reported that The UK also has Europe’s largest pay-TV market piracy had caused him losses of about (and the second largest globally). As of end 3m and that, as a result, he had had to cancel 2003, there were more than 13 million UK four film projects by new filmmakers – thus digital television households, largely driven by depriving consumers of viewing productions the strategic dominance of BSkyB’s satellite from fresh talent. Prior to the DVD release of platform, Sky Digital, which accounted for just Good Bye, Lenin! last September, it is estimated over half the total figure. that some 770,000 German households owned Put simply, exploitation of film via television pirate copies of the film, either downloaded takes place in three sequential stages: pay-per- from the Internet or purchased on pirate view (PPV), pay-TV and free-to-air TV. optical disc. PPV is a system whereby consumers order a The film industry is an important component of one-off screening of a film via the remote the UK economy and cultural life. By the end of control (or by making a telephone call) for a 2003, according to Screen Digest calculations, single fee. In comparison to the cinema and the sector had a turnover of approximately £5 video businesses, PPV is still in its earliest stages billion annually. of life. In 2003, PPV movies generated an In 2002, the UK exhibition sector recorded its estimated £96 million in the UK. best box office for 30 years, with 175.9 million Pay-TV in contrast is based on a subscription cinema visits. Figures released by the Cinema model. Subscribers to a movie channel package Advertising Association (CAA) showed a 13% are provided with unlimited access to a range rise in admissions over 2001. In 2003, the total of pre-scheduled film titles. In November 2003, revenue was £742 million. Sky announced that it had signed 5 million Even more successful in revenue terms has subscribers to its movie channels (equivalent to

Film theft in the UK | 11 around 80% of total customers), making its sales, or by vendors operating on the street. film service the most popular outside of the US. Physical piracy is of particular concern to the Free-to-air television is generally considered the movie industry, given that the home video final point in the value chain, where films are market is the most lucrative single window in broadcast on one of the five terrestrial TV the film value chain. channels. There are two main sources for this type of It is worth noting that, while the growing piracy: revenues generated by the different • Professional piracy operations distribution elements that comprise the UK film • Consumer home copying industry are impressive, these gross numbers do not always translate into similarly impressive profitability. Indeed, the economics of the Professional piracy industry can often be fragile, particularly as the cost side of the business continues to escalate. Large-scale professional piracy, usually the From this perspective, the threat of piracy and domain of organised crime, with profits being the spectre of associated lost revenues is an channelled into other criminal activities, has especially worrying prospect. received considerable legal attention in recent years (examined in the next chapter). The Asia Pacific region has been identified as a key base Film piracy in the UK for importing counterfeit films into the UK. According to the Federation Against Copyright Piracy at any stage in this process can cause the Theft (FACT), the main sources of imported film industry to sustain heavy financial losses pirate DVDs in the UK are now Pakistan (36%), across the whole value chain. If consumers are Malaysia (31%) and China (14%). Pakistan has able to acquire and view a film title illegally, the now become one of the world’s leading incentive to see and acquire that film by exporters of pirate optical discs of all kinds and legitimate means is diluted; whether in the is known to have eight illegal facilities in cinema, on DVD/video (rented or purchased), operation. In 2003, these facilities produced or pay-TV. Also, the logical extension of this upwards of 180 million discs, far in excess of argument is that the earlier the pirated copy local market demand. Pakistan’s socio- appears in a film’s business lifecycle, the geographical position in the Middle East makes heavier the potential revenue loss is likely to be. this of exceptional concern. According to local Essentially, the earlier the act of piracy is, the sources, optical disc piracy appears to be taking greater is the number of ‘windows’ of over from drug trafficking as a low risk high exploitation that become vulnerable to yield source of revenue for criminal elements in diminished revenues. Pakistan and, according to some sources, by international terrorist groups. Physical piracy FACT representatives have stated that film piracy in London is believed to be feeding Physical piracy, as it stands at the moment, is Chinese organised crime and human the manufacture and distribution of illegally trafficking. copied movies on either videocassette or optical disc (mainly DVD, DVD-R and CD-R). More recently, Russia has joined the ranks of These illegal copies are typically traded in high those countries supplying large amounts of street shops (as ‘under the counter’ trade), on illegal copies of films. The Motion Picture the Internet, in street markets and car boot Association (MPA) has estimated that Russian

12 UK annual box office turnover (£m)

800.0

700.0

600.0

500.0

400.0

300.0

200.0

100.0

0.0 1999 2000 2001 2002 2003

UK annual consumer video spending (all formats) (£m)

3,500.0

3,000.0

2,500.0

2,000.0

1,500.0

1,000.0

500.0

0.0 1999 2000 2001 2002 2003

UK annual PPV movies revenue (£000)

120,000

100,000

80,000

60,000

40,000

20,000

0 1999 2000 2001 2002 2003 Source: Screen Digest from industry sources Film theft in the UK | 13 DVD plants are capable of manufacturing FACT total seizures of about 200 million DVDs a year. Over the past two years, there has been a major surge of counterfeit products (2003) large-scale factory production of DVDs in FORMAT SEIZED Russia. The latest numbers indicate that there are now at least 34 DVD lines (both legal and VCD 120,722 pirate) in the country. Russia has become one VHS 86,501 of the world’s largest producers and DVD-R 178,577 distributors of pirate optical discs of all kinds. This production has devastated the domestic DVD COMPILATION 2,515 market and is now threatening markets DVD 1,573,510 throughout Europe and beyond. In 2002, the film industry’s local anti-piracy organisation, Total DVD format seized 1,754,602

RAPO, seized over 226,000 pirate DVDs in raids Source: FACT on warehouses and outlets across Russia; in 2003, this number exceeded 1.4 million DVDs. in 2003 DVD became the dominant pirate Despite vigorous enforcement activities by format accounting for more than 90% of all RAPO and, more recently, ex-officio actions confiscated products – that is, 1.75 million against pirate DVD plants (four have been DVD units. raided since the beginning of 2004 and over This figure of 1.75 million units compares with 3 million pirate DVDs seized), barely a dent has around 145 million DVDs sold legitimately in been made in the problem, despite significant the UK last year – seizures thus representing a political pressure on the Russian Government. little over 1% of legitimate sales in volume Piracy activity at the professional level in the UK terms. However, as discussed below, it is very appears to have been increasing. The most difficult to extrapolate from numbers reliable indication of this is the rise in the confiscated to the number of pirate products number of counterfeit products seized by FACT. actually sold. Nevertheless, based on the MPA In 2001, the number of illegal video products estimate that the UK piracy rate is 20%, the seized by FACT was 314,000. This almost number of pirate DVDs sold in the UK last year doubled in 2002 to 607,000 units, but in 2003 was 36.25 million. This implies that FACT the total seized rose even further, close to seized less than 5% of the counterfeit DVDs in 2 million units; a 223% increase on the circulation. previous year. Of the total seizures made by FACT, about 50% Whilst it is likely that FACT’s operations are are made as the illegal items enter the country becoming increasingly effective, and therefore – as a result of joint actions with Customs and successfully confiscating a greater proportion Excise authorities5. The remainder is divided of the pirate product that is distributed, it is roughly 50:50 between seizures made while very reasonable to assume that the escalating pirate product is being stored (in warehouses, volume of product impounded is indicative of garages, houses, etc) and seizures made at the an underlying growth in pirate traffic. point of sale. A key trend has been the move towards DVD as Pirate product is primarily sold via the 7,000 the pirates’ medium of choice. In 2001, less ‘occasional sale’ venues that are estimated to than 30% of the counterfeit product seized in operate on a regular basis across the UK. These the UK was on DVD. During 2002, the DVD consist primarily of unlicensed street markets, proportion of the total increased to 57%, while computer fairs and so-called ‘car boot sales’.

14 In addition to imported pirate DVDs, there is market, most of which are linked either to the also an active business in burned CD-Rs, and TV or the PC and which simplify home DVD-Rs (single use recordable DVDs used with recording. PCs and consumer recorders). In 2003, FACT In the TV-based environment, consumer seized over 178,500 DVD-Rs and 549 DVD-R electronics manufacturers launched two key burners (compared with 85,353 DVD-Rs and technologies in 2001: the consumer DVD 43 burners in 2002). These discs, recorder, and the hard disk-based personal manufactured in small labs and often mastered video recorder (PVR). In the right from imported pirate product or from Internet circumstances, both technologies can allow the downloads, are a fast-growing problem. In consumer to make perfect or near-perfect May 2003, FACT conducted a controlled copies of DVDs and videocassettes. delivery of DVDs seized by Customs and discovered a storage facility containing over With prices heading below £200, the number 100,000 pirate DVDs and a DVD-R burning lab of UK households with a DVD recorder is with ten DVD-R burners. growing fast. At the end of 2003, there were approximately 260,000 UK homes with a There is a big variation in the quality of pirated consumer DVD recorder. In 2003 alone, content. Since pirated copies are made illicitly, according to Screen Digest’s calculations based the finished article often has poor visual and on market data, there were 187,000 DVD audio presentation. This of course largely recorders sold. It is expected that the number depends on the source of the original master of UK DVD recorder households will pass copy, an issue that is further examined below in 1 million in 2004, with the device becoming the context of Internet piracy, and also in the the must-have affordable consumer electronics next chapter in the context of security item of Christmas 2004. measures. In many cases, however, the customer who buys a pirated DVD or VHS The PVR market meanwhile has been slower to cassette is left with a poor image captured in a grow, but is starting to show significant signs cinema by a handheld video camera, complete of life as the hard disk recording function is with ambient cinema noise and people walking increasingly embedded in digital TV set-top past the screen. boxes (for example, BSkyB earmarked £20 million in late 2003 to push its ‘Sky+’ PVR service), VCRs and DVD recorders. Screen Consumer home copying Digest estimates that there were 250,000 PVR households in the UK by the end of 2003. Consumer home copying on the other hand poses a far more difficult activity to assess as a Home copying of DVDs and other digital potential threat to the film industry. In the mid audiovisual content is in part possible due to 1990s the analogue home VCR was the only the phenomenon known as the ‘analogue consumer device that enabled illegal copies to hole’. This refers to the fact that all connections be made in the home. The only way to do this to TV sets (as well as to other devices like VCRs) was by ‘back-to-back’ copying’; connecting are analogue. Regardless of the fact that two VCRs together via an analogue cable, one modern home entertainment appliances like set to play, the other set to record. DVD players and pay-TV decoders are digital, their output must be converted from digital to Less than ten years on, the home recording analogue in order to display them on a TV set. environment has changed dramatically. The Moreover, because DVD players are optimised digital revolution has resulted in a variety of to deliver the best possible (analogue) picture new digital recording devices appearing on the and sound quality to the TV set, they can

Film theft in the UK | 15 potentially provide a high-quality analogue The bottom line is that it is possible to make source for copying to a blank DVD. The high-quality copies of some commercial DVD resulting copied DVD will have none of the movies by connecting an off-the-shelf DVD digital copy protection of the original DVD and player directly to an off-the-shelf DVD recorder can thus be used to make an infinite number of or PC-based DVD writer with a simple cable. further perfect digital copies of this single The PC environment has developed at an even analogue copy. Exploitation of the ‘analogue faster pace. Advances in computer peripherals hole’ in this manner can also be used to make and software allow for affordable and efficient digital file copies for further circulation on the recording (usually termed ‘ripping’ in the PC Internet. environment) of DVDs using a standard home For DVD, there are two main technical options computer. The content can then be burnt onto for ‘plugging’ this ‘analogue hole’. One is a blank CDs or DVDs using off the shelf CD/DVD proprietary copy protection system developed writer devices, which now come as either by the firm Macrovision, which has also been standard with new PC purchases, or can be used for many years to protect some pre- acquired at retail for around £99. Copying of recorded VHS releases. Some, but by no means DVDs using a PC can either be done via the all, DVD movie releases utilise this Macrovision ‘analogue hole’ described above, or using system. The other option is a non-proprietary technology that allows a direct digital copy of system (ie free to use without paying a further the DVD to be made. One company has sold licence fee) called CGMS-A (Copy Generation almost 1 million copies of a software Management System for Analogue signals) application that enables DVDs to be copied that is part of the DVD specification. However, with a PC,8 and similar software can be found some DVD players do not correctly implement for free on the Internet9. The threat posed by CGMS-A and, therefore, do not properly signal the home computer comes into its own in the to recording devices whether or not a signal context of Internet piracy (see below), since it can be copied6. These players effectively make makes it very easy for the consumer to generate this form of copy protection useless7. physical copies (CD or DVD) of illegal movie downloads.

UK TV-based DVD hardware: HH with at least one DVD player or recorder (m)

12.0

10.0

8.0

6.0

4.0

2.0

0.0 1999 2000 2001 2002 2003

Source: Screen Digest

16 In February 2003, research firm GfK conducted UK piracy levels are somewhere between 20- a survey10 of 10,000 German households, 30% of the video market. According to the looking at consumer reasons for buying MPA, 2001 and 2002 estimated piracy levels in CD/DVD recording hardware, and their the UK were fairly steady at around 18%, with recording habits. Of those surveyed, 22.5% the level rising in 2003 to 20% (with estimated responded that recording downloaded movies US industry losses rising from $40 million in onto an optical disc was at least an ‘important’ 2001 to $120 million in 2003). These apparent reason for purchasing the hardware. discrepancies over figures underline the fact Meanwhile, 55.7% responded that they record that coming up with reliable estimates is a downloaded films from the PC to a blank CD. difficult – but crucial – task. A subsequent study by GfK for the German Because the scale of the losses occupies such a Federal Film Board in September 2003 central role in the arguments, the imperative to concluded that 58.5% of downloaders burned develop more robust and consistent the films onto CD-R discs and 7.4% burned methodology is stronger than ever. There is a them onto DVD-R discs. good case for having a defensible methodology based on reasonable assumptions that is used However, consumer home recording raises on a consistent basis by all organisations difficult issues in a public policy context. The concerned. Current methodological issue of commercial versus private copying approaches used by the industry to measure goes to the heart of how the concept of piracy the impact of piracy are in urgent need of itself is defined. It seems difficult to argue that revision. casual home copying is an activity with serious deleterious commercial consequences. At what For instance, the widely quoted concept of a point does legitimate copying end and piracy video ‘piracy rate’ can be a difficult one to pin begin? For example, if a consumer purchases a down and is certainly open to legitimate copy of a DVD, and then makes a misinterpretation. The MPA maintains that its ‘back-up’ copy for personal use, is this to be piracy rate is a measure of volume and a considered unlawful piracy or a legitimate percentage of the sum of the legitimate and right? Indeed, should there be any concept of pirate markets. legitimate home copying at all? In the past there may have been a tendency to The issue of the balance between individual assume that all pirate video copies sold at a freedom and the interests of the film industry is pirate street price represent a lost legitimate a sensitive one. This is addressed more sale at a full retail price – and calculate the loss thoroughly in the examination of the legal accordingly. However, it appears extremely measures to combat piracy. unlikely that such a one-to-one relationship exists. In other words, it is far from self-evident that a consumer who buys a pirate DVD at £5 The loss to the industry would have bought a legitimate copy at £15 if they had not been offered the pirate version. Measuring the losses to the legitimate industry Nevertheless, the Chancellor of the Exchequer from piracy – even physical video piracy which put the average value of every DVD seized by is more established – is an extremely difficult HM Customs & Excise in 2003 at £15.25 and exercise. According to FACT11, actual revenue the corresponding average value of loss to the UK film industry at a retail level in videocassettes seized at £8.6912. 2002 was £400 million, significantly higher than the figure in 2001, which was £330 There is also some uncertainty over exactly million. FACT equates this figure to mean that what element of lost business is being

Film theft in the UK | 17 calculated. Some sources quote losses in terms transactions is worthy of further investigation. of retail sales values, while the MPA’s version of Reports on the impact of physical piracy tend losses appears to equate only to losses suffered to focus exclusively on the damages to home by the US film industry itself. This seems to be video revenues; there have been few attempts based on an estimate of the US share of the to estimate the impact of any forms of piracy legitimate market and the wholesale price on theatrical film revenues. However, there is (rather than retail price) of legitimate products. likely to be an impact on cinema box office For example, the MPA’s stated methodology on from Internet downloads that occur before, or calculation of losses13 says that “the number of during the exhibition window (see next stores that rent pirate video product and the section), as well as from the circulation of number of shops and vendors that sell pirate physical pirate products that circulate in a video product are multiplied by the average similar time frame. This can be particularly number of pirate video product rented or sold deleterious for so-called ‘second run’ cinemas per shop or vendor each year”. However, no (those that specialise in showing films after explanation is given as to how the number of their initial theatrical screening run). Indeed, pirate vendors is arrived at, nor is it indicated the Cinema Exhibitors Association reports that how the average number of transactions per some UK exhibitors are already suffering from pirate vendor is estimated. illegal pirate ‘competition’. Cinemas that serve smaller communities are particularly at risk. The MPA then goes on to take “the resulting total number of pirate video products sold and The bottom line is that lost revenues to the UK rented each year in the country [that] is then film industry from physical piracy undeniably multiplied by the percent of pirate video runs into the hundreds of millions of pounds. product that would have been sold or rented Furthermore, current estimates of industry legitimately” (emphasis added). Again, no losses from physical piracy do not take into explanation is given regarding the numerical account the impact of home copying – for assumptions that underline the relationship example, where one person buys a DVD and between sales of pirate product and potential makes multiple copies for friends and family sales of legitimate product that could have using a PC or DVD recorder. Nor do they take been made in the absence of the illicit trading. into account the impact of Internet piracy (see The MPA has acknowledged that the current next section)14. position is unsatisfactory and at present its There is also a wider point about the affect of Research Department is soliciting feedback piracy, not just on retail sales, but also on the from MPA members on a revised methodology. longer-term value of film rights, not least for the One of the most reliable and methodologically independent producer. This may be in relation robust indicators of the scale of the physical to a specific instance of piracy. For instance, the piracy problem is the escalating number of distribution of pirate copies of a film sourced pirate copies seized by FACT in the UK and by from a pre-release preview screening could corresponding enforcement agencies completely destroy the prospect of making sales elsewhere. However, judging reliably the ratio of the rights to that film to local distributors in between the number of pirate copies one or multiple territories where the pirate confiscated and the number that are still sold copies are circulating. through to the public by pirate traders is At a macro level, fears about the negative extremely challenging. Moreover, the precise consequences of piracy could undermine nature of the relationship between pirate confidence in the entire film industry sector, transactions and corresponding lost legitimate not least amongst the investment community.

18 This could result in real falls in the valuations of release. This creates serious issues of underage entire companies and particularly to the long- access to unsuitable films, especially in the term value of film libraries and film rights Internet environment (where many users are generally. under 18). Moreover, commercial losses suffered by the film industry due to piracy will weaken the economic viability of the entire sector and Internet piracy ultimately result in the loss of jobs throughout The UK broadband market is growing very the value chain (studios/infrastructure, rapidly. By end 2003, there were over 3 million production, post-production, distribution, broadband enabled UK households, a number exhibition, retail, etc). Reduced revenues will set to pass 12 million by 2008 – by which time, also result in reduced tax revenues (both according to Screen Digest, the UK will have corporation tax and VAT) for the Government. the largest number of broadband subscribers in The Chancellor of the Exchequer currently Europe. Significantly, broadband has brought makes no estimates of the losses it suffers from with it a new threat to the film industry – the film piracy15. prospect of Internet piracy. And not all ‘loss’ from piracy is financial. Film One line of argument from sceptics has been also plays an important cultural and social role that, unlike music files, feature film files are too in society. For example, one of the problems large to be downloaded efficiently. Therefore, caused by pirated titles finding their way into they contend that there is not only an aesthetic UK homes is that they will not have been disincentive (“who wants to watch a movie on certified by the British Board of Film a PC screen?”), but also a technological one Classification (BBFC). This is especially true of (“who wants to wait several hours to download those titles that hit the streets, or are available a movie when it is much easier to go to the for download, ahead of their UK theatrical cinema/video store/retail outlet?”). Many also

UK broadband households (m)

14.00

12.00

10.00

8.00

6.00

4.00

2.00

0.00 2000 2001 2002 2003 2004 2005 2006 2007 2008 Source: Screen Digest

Film theft in the UK | 19 argue that, while most music consumers like to persuade the US studios to investigate and play the same content multiple times, film invest in business models exploiting direct consumers want to watch a movie only once or Internet movie delivery – resulting in the launch twice – and therefore have less incentive to of ‘Movielink’ in November 2002, supported by download them. As technology develops, these all the major studios except Fox. arguments become less persuasive. In November 2002, the regulatory body OFTEL conducted a broadband survey that found that P2P filesharing only 1% of subscribers had signed up to the Internet piracy has two main public distribution service with movie downloading as their main ‘channels’: specialist websites, and peer-to- intention. This equated to around 10,000 peer (P2P) filesharing networks. Whilst the broadband homes at the time.16 former, such as Film88.com, have been easy to A year on, the situation seems to be changing. identify (operating out of countries such as Iran Cable operators NTL and Telewest are now and Malaysia via the Netherlands) and shut offering higher broadband speeds (1Mbits/s down, the latter have been far more and 2Mbits/s respectively) that enable the anonymous, difficult to combat and are downloading of movies in around two hours, exploding in popularity. with British Telecom already piloting its own However, before pirate content reaches these 1Mbits/s connections. And according to a 2004 public channels, it is usually distributed via survey17 commissioned by the British Video more secretive means. Typically, when a stolen Association (BVA), Film Distributors’ media file is first uploaded to the Internet it is Association (FDA) and British Phonographic made available on a private site, access to Institute (BPI), 4% of weekly UK Internet users which is closely guarded by a relatively small have illegally downloaded a feature film. group of hacker-type enthusiasts. The next Figures show a corresponding 2% drop in DVD stage is usually for the file to be communicated purchases with a calculated loss in sales of £46 further via news group and chat ‘channels’. million in 200318. Only then is the file usually uploaded to P2P Also, digital compression technology is networks. The US anti-piracy company improving, meaning that movie files are getting MediaDefender estimates that only 20,000- ever smaller. New compression formats19 are 30,000 people have access to these private able to reduce a 4.7Gb DVD down to a file size sites, while around 100,000 use the relevant 20 as low as 700Mb – small enough to download news groups . Only when the file in question in two to three hours using a standard reaches the P2P networks does distribution 512Kbits/s broadband connection, and to fit explode. The most popular P2P filesharing on a standard CD-R. On a normal TV set, the client Kazaa has around 3 million users at any downloaded movie looks much like a VHS given moment. recording (or sometimes better). P2P filesharing is a relatively new phenomenon Access to free content appears to be a major with its roots firmly planted in the late-1990s. source of motivation for those who seek out For a whole generation of young technology- illegal copies of a film. In GfK’s 2003 German savvy adults and teenagers, file sharing, survey, 71% of respondents said that getting whether legal or otherwise, is now an the content for ‘free’ was an important reason acceptable mode of obtaining film and music for downloading feature films. The threat of content. Alongside this development the Internet piracy has been sufficiently serious to number of homes that are able to burn these films onto CDs and DVDs has also been rising –

20 thus the threat is physical as well as virtual. It should, however, be noted that the new P2P services are claimed not to be solely designed P2P networks have gone through at least three for illegal distribution of content – one of the main generations of technology in their short factors that have made legal attempts to shut history, each new one making the sharing of them down largely unsuccessful – so far22. large movie files easier and at the same time Sharman Networks is an example of a P2P becoming harder to police. Napster was the company encouraging legitimate use of its original first-generation P2P network and product. In 2003, its US-based digital content application that popularised the concept to partner Altnet struck a deal with IndiaFM.com, millions of users around the world. This was a popular Bollywood website, to make available followed by the second-generation network paid-for downloads to Kazaa users of movies Gnutella that advanced the technology by from 35 Bollywood producers. The first title, removing the requirement for the centralised Supari, was made available in November 2003 servers used by Napster. Although the latter for $2.99. The downloaded file is encoded by was efficient and user-friendly, it made policing proprietary copy-protection solutions, and self- easy – just a question of shutting down the destructs after viewing. central servers that indexed the files held on users’ own machines. By contrast, the Gnutella But the fact is, in the P2P environment, getting network was completely decentralised and illegal movies for free on the Internet has never connected users directly to each other without been easier. Within a single day of release, The the need for a centralised server. Matrix Reloaded, which had a tight security cordon drawn around all preview screenings Third-generation P2P technology has taken the (including the banning of all electronic Gnutella concept a stage further by improving devices), was available on Kazaa, and attracted the efficiency of the networking process and approximately 200,000 downloads within the enhancing file transfer speeds as well as cutting first week. Similarly Disney’s Finding Nemo and the time required to search for desirable files. Fox’s Daredevil found themselves on P2P The most important third-generation P2P networks within one day and three days network is called Fasttrack. A number of client respectively of their theatrical release. One of applications have been developed to use this the earliest victims was Star Wars Episode II: network, including Kazaa, Grokster and The Attack of the Clones, available in 2002 on Morpheus. P2P networks a week before its premiere. Sharman Networks, the company behind the The emphasis from downloaders throughout Kazaa application, has recorded over 250 appears to be access to new and blockbuster million downloads of its software worldwide, content. In December 2003, according to citing 60 million regular users around the BayTSP, a digital tracking firm serving some of globe. Though there has been a recent dip in the US studios, Terminator 3: The Rise of the Kazaa’s numbers, this has been attributed to Machines was the most widely available film on the appearance of a new generation of P2P networks, with 57,008 locations available applications. This latest generation of for download (this, says the company, was a applications are specifically designed to slight decline from 62,827 locations in facilitate the downloading and sharing of large November). files, such as films. Examples of these new protocols are BitTorrent, Overnet and P2P filesharing also seems to be acting as a eDonkey21. The latter saw its user-base triple to ‘preview’ process by some downloaders. In 1.8 million in 2003. 2003, for example, Universal Pictures’ The Hulk was leaked onto a P2P filesharing network

Film theft in the UK | 21 more than two weeks before its official often have small differences from the released premiere whilst special effects on the movie version or include incomplete audio or visuals. were being completed. The critical panning of Unauthorised copying of a critic’s advanced the movie that followed on Internet chat sites • copy of a movie. This may have the text was, according to sources at Universal Studios, “Screener copy only, property of some name” responsible for what it called a relatively poor appearing on the screen occasionally. $62.6 million opening weekend in the US (which ironically was a record June opening • Unauthorised copying of a promotional or weekend). Notably, it was an opening that was preview screening copy. This may be marked in disappointing enough to knock 12% off Marvel a similar fashion to critics’ versions. Comics’ share value on the New York Stock • Unauthorised copying of an awards judge Exchange. presentation of a movie. Copies may be marked with the text “For your consideration”. Sources of internet piracy • Digital ‘through-the-air’ video recording by a projectionist at a cinema with aspect-correct The Hulk case highlighted another significant video, suitable exposure, and direct audio. issue. An individual involved in marketing the These copies have highly variable video quality, movie leaked the copy that found its way onto but can often be very good. the Internet. The culprit was eventually tracked down by the FBI and prosecuted. But the affair • Unauthorised copying of a consumer cast light on the extent of leaks within the post- medium such as DVD or VHS at the factory or production and distribution process. any other point prior to sale. These copies are unmarked and of near perfect quality. According to a recent study23 by AT&T Research and the University of Pennsylvania, over 77% of The MPA has taken issue with the AT&T all illegal movies on P2P networks are the result research, pointing the finger more squarely at of ‘insider leaks’. That is, employees the camcorder pirates in preview screenings, somewhere along the filmmaking chain ripping who are reckoned by the MPA to be responsible and uploading ‘screener’ copies intended for for 90% of all pirated films. According to the non-commercial use. The AT&T study MPA, the AT&T research is flawed because the conducted an 18-month empirical analysis of survey relied heavily on a single, unnamed P2P filesharing networks, looking for a random Internet portal to identify which films were selection of film titles in the US box office top online and by confining their analysis to movies 50 between 1 January 2002 and 27 June 2003. available 100 days after release, the researchers The resulting data, compiled from an eventual excluded the major source of online piracy, 312 movies, were interesting. Of all films, 77% namely camcords at theatrical screenings. This were sourced back to within the filmmaking resulted in the exclusion from the analysis of and distribution process, as set out above. poor quality copies, primarily those deriving According to the same piece of research, over from use of camcorders in cinemas. According 90% of movie content available on P2P to the MPA, between May 2002 and May networks is before the US DVD release. 2003, over 50 major movie titles were stolen by camcording prior to their theatrical release in The AT&T listed the following as points of risk the US. The MPA has also criticised AT&T’s in the filmmaking chain: definition of industry “insider”, suggesting it • Unauthorised copying of a movie in the encompasses too broad a universe of people, editing room or nearby in the supply chain, including couriers, ad agencies and cinema whether first cut or final product. These copies projectionists.

22 Some argue that this line of argument is A number cited by organisations such as the inconsistent with the MPAA’s efforts in 2003 to MPA, from US research firm Viant25, is that prevent the circulation of so-called awards 400,000 movies are downloaded illegally on ‘screeners’ (preview copies of films on DVDs or P2P networks every day. However, the VHS traditionally sent to voting members of methodology underpinning that number has various industry guilds and associations, such been criticised by experts – and the estimate is as AMPAS and BAFTA, by distributors). It is anyway now very old. The bottom line is that it argued that this move represented an implicit is extremely difficult to quantify the financial criticism of the film industry itself.24 It also does impact of illegal Internet downloading. not seem to tally with some empirical evidence However, the seriousness of the threat posed showing downloads to be clearly copies of a by P2P filesharing has been finally recognised DVD, or telecined during the latter stages of by the US studios at least. Serious enough to the filmmaking process (see the next chapter move the studios to foster the development of for further analysis). Meanwhile, BayTSP, the legal online movie services, such as Movielink company that investigates unauthorised movie and CinemaNow, to encourage people away downloads on behalf of several studios, says from illegal P2P channels. And serious enough that the largest volume of movie files available to prompt a number of studios to employ on P2P networks are copies of commercial ‘cyberspace investigators’ such as BayTSP. The DVDs – a finding that appears to contradict the latter tracks 1.5 million-3 million copyright AT&T research. Clearly this is a sphere that infringements a day worldwide. Moreover, the requires much closer scrutiny. MPA has mounted a global campaign to curb Perhaps the most interesting proposal to Internet piracy. In 2003 alone, over 225,000 emerge from the AT&T report, one which the infringement notices were sent to Internet MPAA appears to be looking at in terms of the Service Providers worldwide by the MPA’s US film industry, is a ‘chain of custody’ practice, Worldwide Internet Enforcement group, and similar to that used by the Federal Bureau of local programmes around the globe have Investigation (FBI) for sensitive intelligence and conducted large numbers of raids and initiated evidence. Such a procedure would track a pre- many legal actions against Internet pirates. release copy of a film at all times, as well as It is worth noting that some consumer research designating individuals responsible throughout indicates that movie downloading actually has the whole process. a positive impact on the film industry rather than a negative one. For instance, a study of US Internet users conducted by Yankee Group26 The loss to the global industry from found that 8% had downloaded one or more Internet piracy films in the previous three months. These 13.5 Internet piracy cannot, by its nature, ever be million individuals downloaded an average of quantified territorially – the repercussions are 3.6 movies per month, with the 13-24-year-old global. At peak periods, Kazaa (currently one of demographic being the heaviest culprits. the most popular P2P services) attracts almost However, when asked about their cinema- 5 million simultaneous users worldwide sharing going and video rental/purchase activity after over 1 billion files. According to they started downloading, a greater proportion BigChampagne, a firm analysing global P2P of respondents from this heavy-downloader Internet file sharing trends that spent three group indicated that their frequency of cinema- years monitoring active file sharers, 7% of all going and video rental/purchase had increased files traded via P2P networks are feature films. than the percentage that said they had

Film theft in the UK | 23 subsequently reduced this activity. Overall, 86% and DVD quality/extras respectively). of 13-17-year-olds and 87% of 18-24-year-olds Nonetheless, since some consumers tend to who download say they now rent/purchase view films just once, this may be a moot point. video the same or more frequently than they did prior to the start of their downloading. However, a similar survey conducted by the Pay-TV piracy BVA, the FDA and the BPI in the UK found Pay-TV operators use technologies called evidence of a negative impact on legitimate conditional access (CA) systems to attempt to business. In this survey, 18% of film ensure that only authorised paying customers downloaders said that they were buying fewer can access their television signals. In addition to VHS cassettes, whilst 10% said it was adversely securing payment from subscribers for affecting DVD buying. Similar percentages television services, these CA systems are also seem to operate for the rental market: 13% of intended to ensure that signals are kept within those surveyed said they were renting fewer the territorial boundaries for which programme VHS tapes, with again 10% were renting fewer rights have been granted to the broadcaster. DVDs. They also perform the function of enabling adult subscribers to control the viewing of Indeed, subsequent UK research by TNS for the children and teenagers aged under 18 and BVA shows that downloaders are heavier DVD protect them from viewing unsuitable material. buyers, but that their purchases have been reduced by 2% due to downloading. This CA systems are sophisticated and expensive suggests that, overall, downloading is having a technologies that require significant and detrimental effect on consumer DVD buying ongoing investment by operators. Indeed, pay habits. TV broadcasters routinely spend around 5% of their revenues on security28, which can total In another recent study by OTX in conjunction very sizeable sums. with the MPA27 covering eight countries, 26% of users admitted buying fewer videos and Like any other technologies designed to protect 17% admitted attending cinemas less valuable audiovisual content, the CA systems frequently. This average figure was inflated by used by pay-TV operators have come under particularly high results in Korea; the attack by hackers. The latter have usually been percentage of UK downloaders admitting to seeking commercial gain by selling their reduced movie buying was 12%. Moreover, circumvention solutions to consumers attracted respondents were not asked if they bought by the prospect of gaining access to high value more videos or attended the cinema more pay-TV packages for a much reduced sum. frequently after they started downloading. The Most of the major European pay-TV operators incidence of downloading movies was found to utilise a smart card-based CA system29. This be higher in the UK than Germany, Australia involves bona fide subscribers each being and Japan, but lower than in Korea, France and issued with a unique smart card on which the US. information about their viewing entitlements is stored. Once activated, the smart card It is possible then that some P2P users may be communicates with the decryption system in using online downloads as a way of trialling the pay-TV set-top box and the appropriate film content – subsequently visiting the cinema channels can be decrypted and decoded for or purchasing the DVD if they like it. This is an viewing. area that requires further investigation, especially as the cinema and DVDs have fairly Most pay-TV piracy in the UK and the rest of unique selling points (the theatrical experience Europe has involved the sale of counterfeit

24 smart cards of some form or another. The now- the UK. The sale of pay-TV and pay-per-view defunct British digital terrestrial television (DTT) rights for British films to broadcasters around pay-TV operator ITV Digital was hit particularly the world has become an increasingly badly by the circulation of pirate cards that important revenue stream and this is directly circumvented its CA system. At the peak of this threatened by signal piracy. The structure of problem, pirated smart cards were widely deals for film sales to pay-TV operators are distributed for a one-off payment of £20-£30, normally tied to subscriber numbers, so a often via street market stalls. These enabled reduction in the number of paying subscribers unlimited viewing of pay TV packages that will often directly impact the revenues should have cost around £30 a month. The returning to UK film companies. Chief Executive of ITV Digital estimated that Notwithstanding the fact that the UK has a this smart card piracy cost the company in strong pay-TV broadcaster in BSkyB, it is excess of £100 million in lost revenues30. certainly the case that the economics of the Indeed, ITV Digital insiders consider this pay-TV broadcasting business can frequently be problem to be one of the major contributors to fragile; there have been a number of company the company’s demise. failures as well as a general trend towards Because of the levels of technological industry consolidation. There is no doubt that sophistication generally required to defeat CA piracy is a contributing factor to this difficult systems, the distributors of pirate smart cards operating environment. When pay-TV tend to be well-organised ‘professional’ broadcasters are under financial pressure, they criminals. However, the relatively easy generally have less money to spend on the availability of ‘how-to’ information on the acquisition of movie packages – thus directly Internet on the subject of CA system hacking impacting the revenues returning to film means that there is a spectrum of pirate activity companies. Moreover, the failure of operators – – ranging from casual hobbyists who circulate such as ITV Digital – reduces the level of their hacks amongst family and friends, via competition in the market, which in turn will small-scale criminal production, all the way up often tend to reduce the value of film rights (as to ‘industrial-level’ criminal activity. there are fewer parties bidding for the rights). The organisation responsible for combating Another dimension to pay-TV piracy is the pay-TV piracy is the European Association for impact on territorial exploitation of film rights. the Protection of Encrypted Works and Services When signal piracy allows widespread viewing (AEPOC). While AEPOC concedes that “it is in unauthorised geographical regions, this may quite impossible to evaluate the actual size of a reduce the possibilities for the same film rights so pulverized and mushrooming illegal to be sold to legitimate operators in those phenomenon”, it goes on to state “it is ‘over-spill’ territories. reasonable to say that at least 1 billion is The ‘free’ availability of movies via pirated TV spent yearly in the EU to buy pirate cards services may also help reduce the market for and/or to get manipulated decoding other films in other formats, particularly the apparatuses”31. There is no explanation or sale and rental of films on DVD and video. methodological justification given for this number in the source document, but AEPOC From the perspective of content regulation, it suggests that the problem is getting worse not should also be noted that the circumvention of better. It says that the comparable spend in CA technology removes the ability of pay-TV 1996 was more than 200 million32. operators to control access to potentially offensive programming that could therefore be Pay-TV piracy clearly affects the film industry in more easily viewed by minors.

Film theft in the UK | 25 Piracy in the UK in a March 9, 2004, the European Parliament voted European context (by 330 votes to 151) to approve the text of the EU Enforcement Directive, which will be finally Compared with its European neighbours, the adopted by the Member States on 26 April 2004. UK has a significant piracy problem. According to the MPA, only Austria and Germany had a The EU Commission originally proposed the higher percentage of DVD and video piracy in urgent adoption of a Directive on the 2003. For example, in terms of actual financial enforcement of intellectual property rights in its loss to the US film industry, given the size of “Follow-up Communication” of 2000. This was the UK video market, only Italy had a worse a follow-up to the Commission’s Green Paper record. In 2003, according to the MPA, piracy on Piracy and Counterfeiting of October 1998. in the UK lost the US film industry $120 million, When the Commission’s text finally appeared in whilst piracy in Italy accounted for a $140 January 2003, it had been restricted and was million loss. limited to infringements “committed for commercial purposes” or causing “significant Piracy is increasingly becoming a topic of harm to the right holder”. As a result of interest for the European Commission, the pressure from rights holders, however, many European Parliament and the EU member features of the draft were removed or reduced, states’ governments. Important results have so resulting in legislation which rights holders far been achieved. believe substantially improves their position in On 21 March 2003, the EU Heads of State and civil enforcement proceedings although it still Governments at the European Council does not fulfil all their aspirations. EU Member approved a resolution against piracy and States have 15 months in which to implement counterfeiting. The declaration: ‘… calls upon the Directive in national law. the Commission and Member States to Member States were adamantly opposed to the improve exploitation of intellectual property inclusion of any penal provision in the rights by taking forward measures against Enforcement Directive, there being at present counterfeiting and piracy, which discourages litigation in the European Court of Justice as to the development of a market for digital goods the competence of the Community to pass and services…’ criminal legislation. However, the EU Subsequently, on 5 June 2003, the European Commission’s Directorate-General for Justice Parliament adopted a declaration against piracy and Home Affairs is planning to propose a and counterfeiting. It was sponsored by British Council Framework Decision to set minimum MEP Arlene McCarthy and signed by 321 MEPs. thresholds for sentences in cases of piracy and It was a major political signal of a tougher counterfeiting and to improve police and attitude toward piracy in Europe. Finally, on judicial co-operation in this field.

MPA Piracy Metrics Country Rate of video and optical disc piracy Estimated losses for the US film industry UK 20% $120 million France 10% $65 million Italy 20% $140 million Germany 22% $100 million

Source: MPA 26 The future digital home blank media before viewing on a DVD player.33 The development of digital entertainment There will also be an increasing trend towards technologies is accelerating. Consequently, any portable devices that allow audiovisual media response to the threat of piracy must take to be consumed outside the home. Products account of the likely future directions of that allow hundreds of films to be recorded on technology development. a video equivalent of the iPod hard disk-based music player and viewed on the move are One key future development is likely to be a already on the market. The emergence of new blurring of the boundaries between media that categories of device like this is often have hitherto been distinct. For instance, while unanticipated by regulators and technologists broadband Internet has to date primarily been alike, the net result of which is that they will associated with the PC, it is probable that sometimes ignore or bypass the copy broadband will increasingly be a feature of the protection and other security systems that have TV space as well. been designed for older products34. In the In the future, new digital TV set-top boxes and future, increasingly powerful portable video receivers will increasingly be designed in such a devices are also likely to be connected to way that Internet services are integrated broadband networks – and hence P2P seamlessly into the package. More and more distribution systems. they will also start to include computer-type And the technology driving broadband hard disks and ever-larger measures of networks and P2P distribution will of course processing power. As well as being connected not remain static. To cite just one example, a to the open Internet, these devices will team at the California Institute of Technology progressively be connected to networks inside claim to have developed a new data transfer the home. These home networks will eventually protocol for the Internet fast enough to come to link all media devices in the home, be download a full-length DVD movie in less than they networked media products like TV five seconds35. At the same time, compression receivers or packaged media devices like DVD technology is moving on rapidly, so that the players. size of the file to be downloaded is decreasing Over the longer term, the hard-and-fast all the time, while the picture quality keeps distinctions between TV devices and PC devices improving. are likely to blur. Instead, homes will likely be furnished with a multitude of screens of different shapes and sizes. These will probably all be connected to at least one ‘fat pipe’ down which will flow all sorts of digital signals, including those we today categorise as TV and Internet. As far as piracy is concerned, it will potentially be far easier to move unauthorised copies of films around the home from one device to another. It will also be possible to download media files from the Internet directly to a TV device, rather than the current situation where a downloader has to use a PC and either watch the movie on a small PC screen or copy it to

Film theft in the UK | 27 5 Combating film theft

There are several methods available to pickings are to be had from what remains a government and industry to combat piracy: low risk, high reward illegal racket operating in the context of widespread ignorance of • Strengthening the legal framework; intellectual property rights. • Improving enforcement efforts; It is also important to recognise that not all • Enhancing industry security measures; unauthorised copyright use is organised, nor is • Improving education and consumer it undertaken for financial gain. awareness; and • Developing new services and business The demographics of piracy models. Large-scale physical piracy tends to be the All of these methods are already part of the domain of organised crime. That is, industry’s strategy to combat piracy. However, professional operations usually seeking refuge there is still much that needs to be done. in countries with a relaxed anti-piracy regime; The root causes of piracy can be broken down such as Pakistan, Russia, and some territories in into three simple rules of access, quality and the Far East. In contrast, unauthorised Internet cost. That is: downloading, in terms of P2P filesharing, is typically the playground of juveniles and young • If there is a gap in supply, the pirates will film buffs; teenagers and students who have a exploit the opportunity. high volume appetite for movies, but do not • If the retail price of content is perceived to be necessarily have either the will or financial too high, or higher than that which the ability to satisfy that appetite. The key consumer feels justified given the quality of underlying difference is that there is no direct that content, then the pirates will achieve sales economic gain for the Internet filesharers, as at a lower price36. there is for the professional pirates. • If the conditions under which a product can Professional commercial piracy is based on a be acquired are perceived to be too strict, the simple supply-and-demand rule, which takes pirates will provide an easier alternative. advantage of gaps evident in the ‘windows’ The above operates in an environment in which model of film distribution. Counterfeit discs are the theft of intellectual property is not made for next to nothing, and then sold on for considered by authorities and the judicial a profit to consumers who wish to see the films system as a serious enough criminal activity to quickly and cheaply. warrant robust regulation, and where rich Unauthorised Internet distribution is driven by

28 a similar urge to see the film quickly and movies in their bedroom. The tactic of cheaply (or, as in almost all cases, freely). prosecuting (young) consumers may not only However, the motivations are generally be bad business practice, but may also act to different – so-called ‘filesharing’37 is not entrench and inflame negative feelings toward necessarily for direct economic gain. It is done the industry. for the supplier to get access to the files of This understanding of demographics is crucial other sharers, and thus might be better termed if the film industry is to tackle piracy in a more file ‘exchange’. Therefore, there is a effective manner than the music industry has. ‘community’ element that is usually not present There is a strong argument that the music in cases of organised commercial piracy (it is industry derailed its own efforts to combat arguable that the supplier can become piracy, and in many consumers’ eyes it perceived as a ‘Robin Hood’ figure of sorts). weakened its case by treating all ‘pirates’ in a There is also another tier of activity, which can similar manner (the music industry’s experience be called ‘casual’ consumer unauthorised is discussed at length in the next chapter). practice. This is typically not carried out by juveniles nor organised criminals, but the average consumer using standard home Legal framework for recording equipment to make copies of a combating piracy legally acquired or borrowed DVD or Intellectual property is at the heart of the videocassette for distribution on a one-to-one economic and political challenges posed by basis. piracy as it touches upon the growth of Different types of unauthorised use of investment and cultural diversity. To sustain copyright works are perpetrated by people cultural activities, the UK and the European from different demographic backgrounds, who Union needs to protect and reward its creators will respond to different levels of regulation, and investors for their specific contributions. technical restrictions and education; a Failure to do so will seriously damage the ability combination of ‘carrot and stick’, education, of artists and companies to make their works rewards and enforcement. For example, strict and catalogues available. legal measures may be the best way to deal with piracy arising out of organised crime, or ‘insider’ leaks from film companies, but may Copyright protection in the UK not afford the same effectiveness when dealing In the UK, the principal legislation on copyright with a 12-year-old uploading/downloading can be found in the Copyright, Designs and

Film theft in the UK | 29 Patents Act 1988 (CDPA) (as amended). Part I copyright offences – relating to making for sale of the Copyright Act deals with the definition and dealing in copies infringing copyright, illicit and protection of copyright. It establishes recordings of performances and unauthorised measures aimed at safeguarding authorship decoders for the reception of satellite and ownership of copyright, covers cases of broadcasts – to an unlimited fine and/or up to copyright infringement and provides for ten years in prison. remedies for copyright owners and licensees • The improvement of, and in some cases the (such as injunctions and damages). introduction of, new powers enabling the In terms of copyright infringement, under police to obtain a warrant for the search of Section 107 CDPA, a person who possesses premises and the seizure of evidence of an pirated material essentially commits an offence offence, so that warrants are available for all if he or she distributes or exhibits it, whether in the offences in the copyright and related rights the course of a business or not. The CDPA also areas and in respect of trade mark offences. renders illegal the possession of any device • The introduction of new provisions on designed or adapted to make copies of a forfeiture of illegal material which has been particular copyright work. seized during the investigation of such The CDPA is a major instrument to ensure offences, modelled on the existing forfeiture consumers are protected and that creators, provisions in trademarks law. manufacturers and designers have the Furthermore, Kent County Council introduced incentive to innovate. Nevertheless, the an important piece of local legislation in 2001, legislative framework still needs improvement which if extended nationwide in an improved in the following areas: form, could give a significant advantage to • Burden of proof; enforcement agents. The Kent Act 2001, which came into force on December 2001, enables • Damages; Kent Police to investigate ‘occasional places of • Devices designed to circumvent copyright sale’ (ie ‘car boot’ sales and irregular open air protection; markets) as likely places of disposal for stolen • Enforcement of legal obligations for Trading or counterfeit goods. However, according to Standards; FACT there have been no prosecutions of organisers of occasional markets or of Protection for whistleblowers; and • landowners under the Kent Act 2001. Camcording. • In January 2002, the Home Office Pressure from bodies such as the Alliance commissioned Kent Criminal Justice Centre to Against Counterfeiting and Piracy (AACP)38, has evaluate the introduction and operation of the resulted in progress being made in some of legislation on a national scale. The Act also these areas. For example, the Copyright etc and requires organisers of occasional markets to Trade Marks (Offences and Enforcement) Act provide 21 days notice to local authorities 2002, first introduced as a Private Member’s about sales taking place – a tool for Trading Bill, has gone some way to plugging gaps in Standards Officers to monitor likely locations enforcement powers and bringing maximum for infringing and counterfeit items. copyright theft penalties up to that of trade Introducing such a provision into UK-wide marks (ten years’ imprisonment). legislation would appear considerably more logical and economic, given that the likely cost Key points in the 2002 Act are: to each local authority to legislate individually • The raising of the maximum penalty for would be approximately £50,000 a time39.

30 (Legal measures to improve enforcement at The response from 321 Studios was a claim occasional markets are discussed further below that consumers are fed up with buying digital under the Enforcement section.) products, such as CDs and DVDs, which are not always as robust as the industry claims. Hence, There is also the implementation of the EU according to the company there was a Copyright Directive into UK law on 31 October legitimate consumer need to back up copies. 2003 (see below), which has brought with it a tightening up of existing legislation; amending In early August 2004, 321 Studios ceased existing provisions on circumvention of copy- operations apparently as a result of financial protection, giving much enhanced protection pressures brought on by various lawsuits. for right holders, and clarifying the relationship The following week, the MPAA announced the between exceptions and technological successful resolution of the litigation that measures in situations considered to be ‘fair began over two years ago. In a private dealing’. settlement with the motion picture companies, Limitations on when copying is not infringing 321 Studios and its founders agreed to cease have been fairly robust. For example, the selling its DVD copying software on a existing exception for time-shifting (home worldwide basis. Rejecting the ‘fair use’ recording) in section 70 of the Copyright argument, the Courts decided that 321’s Designs and Patents Act 1988 is tightened by a product enables circumvention of the copy requirement that the copy be made “in protection technology included in DVDs and domestic premises”. Such a copy may not be any such circumvention contravenes section sold, hired out, offered or exposed for sale or 1201 of the Digital Millennium Copyright Act40. communicated to the public. This means that A continuing area of concern is that of copies of films and programmes recorded for damages, and the judiciary’s attitude towards later viewing cannot be used for other the severity of copyright theft. Though the purposes. Similarly, the taking of a photograph penalty for copyright infringement is now a of a broadcast work from the television screen maximum of ten years’ imprisonment, some for private and domestic use remains excepted question whether the judiciary is actually from liability, but the photograph must be applying this. Anecdotal evidence suggests that taken in domestic premises and may not the majority of infringements go largely under- subsequently be dealt with for commercial punished,41 although recent cases have resulted purposes. in fines of £180,000 and three years’ However, there are areas still open to debate – imprisonment. raising serious issues of consumer rights: such A clear shortcoming in the UK legal framework as, should there be a right to create personal is the absence of exemplary damages in ‘back-up’ copies from legitimately purchased infringement cases. These are ‘punitive’ DVDs? As the law now stands, it is a criminal damages requested and/or awarded where the offence to make home copies of any copy- defendant’s wilful acts were malicious, violent, protected work. To this end, in December oppressive, fraudulent, wanton or grossly 2003, Warner Home Video UK filed a civil reckless, and are awarded not only as a action for an injunction against US-based 321 punishment, but to set an example to the Studios in the High Court, under the new 2003 public. Regulations. Warner alleged that 321 Studios, which sells software enabling DVD back-ups to Section 97(2) of the CDPA permits the court to be made (called ‘DVD-X Copy’), circumvents award “additional damages” in cases where DVD copy-protection and is not ‘fair dealing’. the defendant has behaved particularly badly or

Film theft in the UK | 31 has made profits from the infringement. area where it is often impossible to assess the Although this provision seems to have been extent of infringing activity. The criminal nature intended to permit awards of exemplary of piracy usually means that records showing damages42 there remains judicial uncertainty as the extent of pirate sales do not exist, or any to the precise meaning of the section.43 that do exist are unreliable. This does not appear to tally with requirements Whilst camcording a film in a movie theatre is a in the EC Copyright Directive that national law clear civil infringement, there is no clear criminal provide a ‘dissuasive’ remedy for copyright offence. Section 107 of the CDPA states that an infringement. One clear approach appears to offence is committed only if a copy is made “for be to amend the Copyright Designs and Patents sale or hire” and this may not be the case. Other Act 1998, along the lines of section 128 of the possibly relevant offences must be done “in the Irish Copyright and Related Rights Act 2000, to course of business”. It is arguable whether a make it clear that exemplary damages should person who has camcorded a film and then be available in claims for copyright passes it to another person has distributed in infringement. Commonwealth territories such the sense required by s.107(e), and in any event as Canada, Australia and New Zealand also this will not have occurred if a person is caught provide for similar provisions. whilst still camcording. The AACP has lobbied the Department for Proving criminal intent (beyond reasonable Constitutional Affairs about the issue of doubt) is extremely difficult. Even if it is exemplary damages as a piracy deterrent, but implausible that someone would be with little result. No convincing case has yet camcording for the fun of it, if they claim they been made why the government should not are, how can it be proved otherwise? That is extend the legal concept of ‘exemplary why it needs to be illegal per se, or at least damages’ to cases of copyright infringement. there needs to be the presumption that it is Exemplary damages are paid as a punitive being done for gain, so that the onus is on measure rather than compensating for actual someone to prove otherwise. loss in cases where, simply put, there has been Specific camcording legislation has been and is some form of malicious intent behind the being introduced in a number of US states and actions. Given that much organised piracy is there is a clear need for similar legislation in the UK. carried out with a clear intent to reap a reward from another’s loss, the extension of the As a result of lobbying efforts, the Licensing Act principle would appear logical and persuasive. 2003 – under which UK cinemas are licensed – Such a move would act as a disincentive by does contain several provisions relating to considerably increasing the financial risk to copyright protection. The net result of these is organised pirates. that licensees stand to lose their licences – and potentially their livelihood – if they fail to observe In addition, or as an alternative, the CDPA copyright arrangements or knowingly keep any could be amended to provide for pre- goods on licensed premises that have been established or statutory damages, so that where imported without duty or unlawfully imported. it is difficult for a rights owner to prove the scale or extent of its losses (which also includes disclosing often confidential information), the International harmonisation: judge is able to award an appropriate amount within a set range. Such damages are available the WIPO Treaties and TRIPS in other countries such as the US, Canada and Due to the global nature of both the Internet Israel, and constitute an effective remedy in an and piracy, it is essential to harmonise

32 regulations internationally. The set of key their work). measures needed to protect and enforce In relation to private copying the WIPO Treaties copyright and neighbouring rights in the digital provide that exceptions to the reproduction world are as follows: right cannot conflict with the normal • New standards of protection to take into exploitation of the work and should not account digital downloading and digital prejudice the legitimate interests of the right copying; holders. They do not, however, specify how to protect best this legitimate interest. This • Protection against the circumvention of remains for the time being a matter for technological copyright protection methods national legislations. and rights management; Whilst these instruments do not solve all the • Harmonisation of procedural law to fight issues, they provide a useful framework for against computer-related crimes and piracy; future national or regional legislative efforts in • Liability rules for on-line service providers in this field. However, some important legal relation to copyright infringement; and matters, such as the liability of Internet Service • Consistent approaches to data protection Providers (ISPs) in relation to online copyright and privacy laws. infringements, remains untouched at international level. These topics may well come under WIPO’s scrutiny in the near future. WIPO Treaties The WIPO Treaties have been open to In the field of copyright and neighbouring ratification since December 1996. The rights, international harmonisation is well European Union should ratify the Treaties in under way with the adoption at the World 2004 or 2005. Intellectual Property Organisation (WIPO) of two international copyright Treaties in 1996. The WIPO Diplomatic conference took place in TRIPS Agreement (WTO) Geneva in December 1996. The conference At international level, the second major adopted two international Treaties: The WIPO legislative instrument aimed at fighting Copyright Treaty (WCT) and the WIPO copyright infringements is represented by the Performances and Phonograms Treaty (WPPT). TRIPs (Trade Related Aspects of Intellectual These Treaties were negotiated to update Property Rights) Agreement. This Agreement international norms of copyright protection to was adopted with the creation of the WTO the new technology order. (World Trade Organisation) at the end of the First, the Treaties establish that copyright and Uruguay Round of Multilateral Trade neighbouring right holders must be able to Negotiations in 1994. The TRIPs Agreement control the electronic delivery of their works to deals with various areas of intellectual property individual members of the public in relation to including copyright and related rights. It sets on-demand services. Second, the Treaties out the minimum standards of protection to be require countries to prevent the circumvention granted to intellectual property rights (IPR) by of technical measures and interferences with Member States. Part III of the TRIPs agreement rights management information used by sets out enforcement rules. The agreement lays copyright holders to protect or identify their down certain general principles applicable to works. Thirdly they provide a moral right to all IPR enforcement procedures. In addition, it performers (the right to be identified and to contains provisions on civil and administrative object to any distortion or manipulation of procedures and remedies, provisional

Film theft in the UK | 33 measures, special requirements related to could affect uptake of broadband services. border measures and criminal procedures, An uncomfortable middle ground was reached which specify, in a certain amount of detail, with the US Digital Millennium Copyright Act the procedures and remedies that must be (DMCA) of October 1998, which provides a available so that right holders can effectively remedy to copyright owners for on-line enforce their rights. The TRIPs Agreement copyright infringement whilst limiting the entered into force on 1 January 1996 for liability of ISPs. Under the DMCA, ISPs must developed countries (including the EU), establish a policy for the termination of the whereas developing and least-developed service to users who are repeat infringers. countries were granted different transition Second, the ISP must accommodate and not periods (from 2000 to 2006) to implement interfere with the copyright owners’ use of its provisions. “technical measures” to prevent unauthorised copying. The ISP has no obligation to monitor copyright infringements but must respond to Copyright protection in the copyright owners’ requests for information or US and the EU action through a Notice and Take Down i) The status in the US Procedure. To encourage co-operation in the fight against piracy, the ISP is exempt from The first regulatory step in the US in relation liability arising from the removal of infringing to new media took place with the adoption material after it has received notice from the of the 1992 Audio Home Recording Act, copyright owner. which introduced levies on digital tapes and The same US legislation aims at implementing digital recordings with measures to prohibit the WIPO Treaties by providing protection circumvention of copy protection. The Act against circumvention of technical protection purports in some degree to compensate for systems as well as by safeguarding the integrity damage suffered by the music industry as a of copyright management information. result of home recording. At the time of the Act, levies in relation to private audio ii) The status in the European Union copying already existed in Germany and The situation in the EU is somewhat similar, France, becoming a feature of national with Member States and institutions working European legislations in the 1980s. on a programme of harmonisation of The real problem, however, has been how to intellectual property. legislate for unauthorised Internet The European Enforcement Directive has distribution. already been discussed (see above, ‘Piracy in Whilst copyright owners have the right to the UK in a European context’). prevent unauthorised distribution, on-line One early initiative was to deal with Pay-TV downloaders (and uploaders) are difficult to piracy. The 1998 Conditional Access Directive, investigate since they are located around the incorporated into national law by 2000, world and constantly switch web servers. established a Europe-wide rule against piracy ISPs take the view that they have no caused by counterfeit TV smart-cards and capability to identify infringing activity and illegal decoding devices, to protect European no obligation to police their networks – operators and broadcasters (see previous indeed from an ISP business perspective, a chapter: pay-TV piracy). ‘monitored’ Internet connection poses an unattractive offer to the consumer and However, the directive only protects the TV

34 service not the underlying copyright Enforcement protected work being broadcast. It explicitly The issue of enforcement is fundamental in the provides for member states to ensure that fight against piracy, as any law is only as providers of services have access to effective as the efforts taken to enforce it. In appropriate remedies. It protects the signal the UK, FACT has been very active in this area, against theft. But the use of illicit devices for working in conjunction with HM Customs and private purposes is not prohibited. Excise, UK police authorities and Trading 44 The EU Directive on e-commerce addresses Standards offices across the country. the liability issue in a wider context than the According to FACT, the total number of seizures copyright-only application of the US Digital of pirated DVD and VHS product in 2003 was Millennium Copyright Act (DMCA). The result about 2 million units.45 Of the total, about 50% very much parallels that of the DMCA providing of the seizures were made as the illegal items circumstances under which ISPs would be entered the country – as a result of joint actions liable. The most significant difference from the with Customs and Excise authorities. The US approach is that the EU directive establishes remainder was divided approximately equally both civil and criminal liabilities whereas the US between seizures made from sites of stored legislation addresses only civil liability. The E- material (in warehouses, garages, houses, etc) Commerce Directive also lacks certain tools and seizures made at the point of sale. contained in the DMCA. For instance, it does not have threshold conditions, there is no There have been a number of high profile established procedure for notifying successes. In December 2003, FACT and the UK infringements to ISPs, and provides no means police raided premises in north London, to get information on subscribers (even as recovering 250,000 counterfeit discs of major limited by the current status of the Verizon film titles, imported from the Far East, destined case). The issue of ISP liability is also dealt with for UK car boot sales and street markets. The in the Copyright Directive, which legislates for street value of the goods was set at £1.25 creation of temporary copies. million. Titles included some that were still six months away from release. To ensure free provision of electronic services in the internal market, the E-commerce Directive But controls and seizures by the police and lays down the principle that the law applicable customs authorities are insufficient to bring to is the one of the member states in which the an end the massive import of counterfeit service provider is established. This is very material. important in relation to mail-order businesses FACT’s activities also stretch to the Internet, but using the Internet, as some countries’ rules are are limited in scope. The form of online crime more business friendly than others. that FACT encounters regularly includes film Of most relevance, of course, has been the piracy, encryption circumvention, pay-TV piracy Copyright Directive, discussed above in the and malicious passing-off, taking place from a context of UK law. Notably, the directive grants variety of sources including web-sites, auction enhanced protection to technological security sites, email (including spam), FTP, bulletin measures and creates criminal offences to boards and file-sharing programmes. protect copyrighted works against The organisation takes a two-tier approach to unauthorised electronic creation and tackling online piracy, which it recognises to be distribution. an ever-increasing percentage of the overall caseload. In the first instance, if illegal trading is found on, for example, Internet auction sites,

Film theft in the UK | 35 a notice is served for infringing items to be since P2P users acquire and disseminate removed. If the traders continue to post the copyright material without paying the infringing items, they may be liable to a full copyright holder for the privilege. FACT investigation that could end in One approach of the music industry has been prosecution. One example was that of an to sue individual P2P users, primarily teenagers individual in Derbyshire who headed up a and students, for copyright infringement. counterfeit ring aiding online sales of infringing Whether or not this is a desirable tactic for the product. After a long and protracted film industry to pursue is addressed in the next investigation and collation of evidence, the chapter. The film industry so far has not sued trader responsible for the online payment individual P2P users. The MPA and its member system to facilitate all financial transactions companies are, however, considering all of was prosecuted in March 2002 and pleaded their legal enforcement options against P2P guilty to offences under the Trade Marks Act. services and against the heavy users of such According to FACT, he was sentenced to six services, although the MPA member companies months imprisonment and ordered to pay costs view litigation as an option of last resort. of £8,00046. All offending domains were closed down. The MPA’s worldwide Internet Enforcement programme is currently focused on notifying Most recently in January 2004, FACT, working ISPs of the abuse of their services. The in conjunction with the British Phonographic programme uses a search engine to search the Industry (BPI) and Police and Trading Standards, Internet, looking for unauthorised files. When smashed an Internet piracy ring, which it finds an infringement, an email is sent to the consisted of 300 subscribers, in approximately service provider, seeking the taking down or a dozen major UK towns and cities. According blocking of the site or file in question. Over to FACT, material found ranged from music, 225,000 such notices were issued in 2003, over films, software, computer games and 101,000 of them to ISPs located in the paedophilic material. European, Middle East and African region. The However, such actions do not address the vast majority of the notices sent concern illegal biggest threat posed by the Internet: P2P downloading, particularly P2P infringements. filesharing networks. Although FACT’s This process of searching takes place in the monitoring of online activity can also take it public space of the Internet and the main focus into P2P filesharing, the effective monitoring of is on the service provider, not the user. P2P networks and other Internet distribution However, according to the MPA, ISPs have been channels is a highly specialist activity requiring becoming increasingly unco-operative in advanced technical capabilities and systems. relation to downloads, but remain reasonably This is currently mostly the preserve of a helpful in the fight against hard goods piracy. handful of expert companies, which mostly reside in the US. The MPA also pursues repeat infringers from time to time, and encourages local initiatives In general terms, it is fair to suggest that the designed to secure criminal enforcement film industry has yet to formulate a fully against Internet piracy that is commercial, coherent strategy to deal with copyright organised, or large scale. Since 2001, FACT has infringements via P2P networks. One reason for been a member of the Internet Enforcement this is that, in the main, P2P users are not Group (IEG), a cross-industry body of Internet trading film files as a commercial act, but investigators representing the book publishing, exchange files with other users as a means of music, games, software, merchandising and saving money. This diminishes legitimate sales film industries. The IEG meets to share

36 knowledge, develop best practice techniques money and manpower. The areas covered by a and enhance expertise in this area of unified authority – which are all currently enforcement. This includes the development of covered for the film industry by FACT – would standard ‘take down’ notices to be issued to be: ISPs. • Investigation of possible offences and the US digital tracking firm BayTSP acts on behalf follow-up of leads and complaints; of several Hollywood Studios, monitoring P2P • The prevention of offences being file usage, looking for offending material, then committed (so far as is possible) by initiating issuing several Cease and Desist emails to those self-help industry measures; sharing illegal movie files. According to the company, 85% of individual users who are • Extending the work to other organisations; notified do not reappear again. • Computer forensic services; and One factor that has been highlighted by many • Product examination services. recent investigations, such as the January 2004 raid profiled above and the P2P phenomenon, is that piracy is a cross-industry problem. Enforcement at local level Increasingly, investigations in the UK are The Cinema Exhibitors’ Association describes unearthing larges caches of pirated films, music cinema exhibition staff as the ‘eyes and ears’ of and computer software, with joint operations the industry. Whilst such staff certainly play a being undertaken by FACT, the BPI, MCPS and key role in trying to keep a look-out for illicit the games industry, through the Entertainment camcording of film performances, there are and Leisure Software Publishers’ Association limits to the extent of patrolling of auditoria (ELSPA). Moreover, Internet piracy that takes that can be undertaken by cinema employees. place is also across the board – files most Moreover, until the law is changed to make commonly traded tend to be music, films and such camcording a criminal activity (see earlier games. This then raises the question of section on copyright protection in the UK), the whether a single unified enforcement body only recourse for cinema staff is to eject might not be a more cost-effective and efficient offenders under the cinema’s conditions of method of dealing with the matter. Such a entry clauses. cross-industry body could have both a policymaking role (for example, in terms of Finding ways to improve the extent of in- consumer education) and an enforcement cinema enforcement would be welcomed by remit across all three sectors – the film, music most of the industry, but this will have to be and games industries. done carefully. For instance, while limited use has already been made of night-vision goggles It is understood that all four organisations have to scrutinise audiences in some UK public film been in discussion and are about to performances, some have questioned the commission an audit to evaluate the cost practice on Human Rights and Health and benefits of merging their operations. Safety grounds47. Though there is currently a cross-industry As mentioned earlier, in the US, the Motion Memorandum of Understanding in place Picture Association of America recently regarding the investigation and prosecution of introduced a Anti-Camcording Rewards copyright theft (see Appendix iv), there is a Program, under which projectionists stand to view that a merger of some sort could create a receive $500 payouts if they successfully stop definitive, nationally robust enforcement suspects trying to record movies being structure – providing more efficient use of

Film theft in the UK | 37 screened in their cinemas. However, by Customs Officers. consideration of the introduction of any such On 21 April 2004, the Patent Office convened scheme in the UK should be coupled with the a meeting of government agencies and outlawing of in-cinema camcording so as not industry representatives to discuss its proposals to encourage cinemas staff to do something for a national IP enforcement strategy. The that could put them in an untenable position. Patent Office had met with the National Crime When it comes to physical piracy, local council Intelligence Unit (NCIS), which had provided and Trading Standards Officers (TSOs) are often valuable guidance as to the strategic approach in the front line where illicit trading is taking needed to tackle organised IP crime, drawing place. This is especially so when dealing with on its existing models for drug-related and distribution of physical piracy at computer fairs, other organised criminal activity. market stalls and car boot sales, otherwise The result is that a national strategy to combat known as ‘occasional points of sale’. What intellectual property crime was formally makes these places so difficult to regulate announced by the Industry Minister, Jacqui centrally is the irregular nature of the activity. Smith, on 10 August 2004. Developed by the Authorities tend to have little notice of such Patent Office, this IP Crime Strategy brings events taking place, and in this way, they together brand owners, police, trading standards provide perfect and common cover for selling and customs with the declared aim48 of: counterfeit product. To this end, it is an area that appears particularly suited to enforcement • Increasing the sharing of intelligence at local level. between different agencies; TSOs have to date ably assisted organisations • Improving training for those working at the such as FACT, BPI, MCPS and ELSPA in making front-line; in-roads into tackling distribution of pirated • Better co-ordinating the agencies involved in material at the point of sale. In 2002, the the fight against intellectual property crime; and Trading Standards Institute donated 17.5 Monitoring progress and success by tonnes of seized and counterfeit goods to be • publishing an annual national enforcement recycled, with funds going to the Birth Defects report. Foundation charity. The goods, which encompassed counterfeit DVDs and CDs were The IP Crime Strategy offers a real prospect of accumulated as a result of work by 130 local securing significantly improved enforcement Trading Standards offices. against piracy in the UK. Central to the strategy is an annual National Enforcement Report In early 2004, the Patent Office established the (inspired by the National Intellectual Property IP Crime Group. This new cross-industry, cross- Law Enforcement Co-ordination Council Report agency and cross-government department presented annually to the US President and body is, as part of its remit, looking at Congress), which will establish the status of enforcement of copyright law by TSOs and enforcement efforts by all relevant agencies. local authorities. This follows from a June 2003 The report will inform the setting of priorities Patent Office national scheme to train TSOs in for prevention and enforcement by a Strategic not only tackling copyright infringements, but Tasking and Co-ordination Group, which will also taking counterfeiting and piracy seriously. include industry representatives. One of the Patent Office’s initiatives is the development of a database of contacts so that An analytical model for data is being developed, the key individuals can be contacted speedily to based on that used in high-level policing against inspect a seized delivery of suspect goods held illegal drugs. An intelligence hub will be set up

38 within the Patent Office to gather key facts for given to local authorities to combat copyright planning and decision-making. This will address piracy, it may never be spent to this effect. three separate areas: local issues; cross-border Second, by leaving the burden of funding in crime; and serious and organised crime. An IP piracy cases largely to the discretion of Crime Group will meet twice a year as a forum individual councils, a UK-wide disparity exists in for public officials and industry to discuss best England and Wales – which may lead to piracy practice and review progress. ‘black-spots’. For instance, as noted earlier, The data and strategies developed in the Kent County Council (KCC) enacted the Kent process of implementation will inform the UK’s Act 2001, making it easier for TSOs to monitor outreach to priority foreign countries. The sales of illegitimate products because they have annual report is intended to allow advance notice of them taking place. However, measurement of the impact of the strategy Shropshire County Council, as an example, has against its objectives. stated that it would cost up to £50,000 to pass similar legislation and has shown no intention The position of enforcement of copyright law of doing so, choosing to spend funds at local level remains inadequate. Most elsewhere. In a 2003 questionnaire compiled pressingly, there is no duty imposed on local by the Trading Standards Institute, 42 local authorities to combat copyright infringements. authorities stated that they had no proactive This is in contrast to the law on trademarks; policies to deal with counterfeiting. Moreover, TSOs are duty bound by amendments in the 54 authorities cited staff and 52 cited money as Trademarks Act 1994 to combat violations. the main barriers to doing more to tackle The imposition of a duty on local authorities to counterfeiting at a local level. deal with copyright has languished as an It is arguable that until s107A is enacted, and amendment (s107A) to the Copyright Designs an obligation imposed on local authorities to and Patents Act 1988 that has never been investigate and prosecute copyright offences, enacted. There appears to have been no logical local enforcement will remain piecemeal, reason for this not to have become law apart under-funded and ultimately not as effective as from a series of historical issues tied to it could be. The burden of funding is unlikely to Parliamentary time and the former Conservative be significant. According to a 2002 survey government’s reorganisation of local conducted by the Local Authorities Co- government funding. ordinators of Regulatory Services (LACORS)49, it This oversight has had a two-pronged effect. would cost £3.53 million for TSOs to enforce First, it has left a key gap in local copyright copyright in England and Wales. enforcement. Until s107A is enacted, TSOs The Alliance Against Counterfeiting and Piracy have no powers to pursue cases of pure has argued for a comprehensive package of copyright infringement (ie when no other legislative reform to address the problems offence – such as trademark infringement – posed by local markets in a co-ordinated appears to have been committed. At present, national manner50. Measures proposed are: central government is unwilling – outside of New powers to allow TSOs to close down the education sphere – to dictate (‘ring-fence’) • occasional sales that persistently include how local authorities spend allocated capital. trading of counterfeit goods. It is suggested Therefore, without an explicit duty to deal with that this could be done via an enforcement a specific task, any extra capital given to a local order under the Enterprise Act (formerly “stop council is likely to be spent on many different now” orders). This would require the recipient concerns. In other words, even if extra capital is of the order (the sale organiser) to comply with

Film theft in the UK | 39 the local authority order to cease allowing the The need for international illegal practice. In default an injunction can be co-operation sought. Alternatively an offence could be created for failure to comply with the notice; The international element in computer-related crime creates new problems and challenges for A requirement for the person giving • criminal procedural law. Systems may be registration details to the authorities on behalf accessed in one country, the data manipulated of the trader to be over 18 years. This is in another and the consequences felt in a third. intended to clamp down on the habit of Pirates can operate physically in one country, traders using under-age children as a front for move electronically across the world from one their illegal activity in order to avoid liability. network to another and access databases on a While it will not be able to stop this entirely, it different continent. The result of this is that will ensure that an adult has to be present different sovereignty jurisdictions and laws when registration is taking place and will come into play. More than in any other trans- remain within the precinct of the market; national crime, the speed, mobility and • Amendment of the Proceeds of Crime Act to flexibility of computer crime challenge the enable trading standards to recover the costs of existing rules of criminal procedural law. prosecution of IP offences. This would help Law enforcement agencies have argued for the address the problem of local authorities not preservation of a minimum of traffic-related having sufficient funds to allocate to data considered as essential for investigating prosecution of IP crime and ensure that serious and prosecuting computer crime offences. Co- IP offences could be pursued in the courts; operation between industry, law • Enaction of Sections 107A and 198A to give enforcement/judiciary and privacy authorities in TSOs the power to enforce copyright; identifying whether this could be acceptable and what, if any, these minimal elements could • Make it a legal obligation for Trading be, is clearly needed. Standards to submit information on investigations and prosecutions being Given the trans-national nature of these crimes, undertaken for IP infringement to the Patents the need for enhanced co-operation in the Office. This would require amendment to enforcement of copyright is therefore Copyright Designs and Patents Act (in tandem particularly acute. Yet the trans-border with implementation of s107A) and to the character of offences enters into conflict with Trade Marks Act 1994, and possibly to TDA as the territoriality of national criminal law51. well to allow disclosure to the Patents Office An Internet strategy must include an and to include investigations; and understanding that activities contemplated • Introduction of an improved registration may require defensive litigation in a foreign scheme that would require owners and country because of the uncertainty as to what organisers of occasional sales to notify the local law governs electronic contracts. A premise in Trading Standards authority 21 days in advance international copyright law is that copyright as well as place an obligation on the organiser protection is territorial: each country to gather names, address and vehicle licence determines what is the scope of copyright details of all dealers at the sale. The Alliance protection and the remedies available in case of also recommends pressing for an obligation on infringement. This territorial approach is under organisers also to note the type of goods being strain with regards to the digital world. Which sold (eg anyone selling new DVDs is going to law is applicable in the case of online be of interest). exploitation? This is a crucial question if one is

40 to determine the author of the work, whether Security measures the work is still copyright protected, the The issue of security falls into two broad penalties to an act of copyright infringement, categories: physical security in the filmmaking or the jurisdiction in charge of enforcing the process and the value chain, and security of the right. content itself. The former is largely a question In relation to intellectual property rights of work practices and ethics whilst the second enforcement where does the copyright owner is largely one of technology. pursue infringement? In the country where the operator (s) of the website(s) is (are) located? Or where the online service carries the website? The filmmaking process and Copyright protection may become illusory if the value chain claim must be pursued in a multiplicity of places. Though there is debate as to its findings, the AT&T research54 into the sources of ‘leaks’ in Some international experts advocate the view the filmmaking process does throw up one that the law applicable for enforcement important issue: a number of films find their purposes is the law of the country in which the way onto P2P filesharing networks from server that hosts the alleged infringing content somewhere within the production, post- is located, provided this law is consistent with production and marketing process. the Berne convention and WCT norms.52 In recent years, studios and distributors have Others believe that authors’ rights would be been putting into place measures to plug better protected by applying the law of the security gaps in the supply chain. These have country of emission – to obtain damage for the primarily included the banning of photographic whole prejudice – coupled with the law of the equipment from test and preview screenings different countries of reception with a view to (enforced by security guards with night vision obtain damages in the different countries goggles), an embargo on pre-release ‘screener’ where infringement takes place.53 Another copies to film critics and the members of suggestion would be to apply the law of the various film academies around the world, and country where the right holder resides or is the extensive use of ‘watermarking’ of copies established (France – Conseil d’Etat). used internally and within the post-production These debates notwithstanding, it appears process. essential for the UK government to prioritise Indeed, the studios are spending substantial co-operation with its partners in the European amounts of money to upgrade movie print Union, as well as international trade security and have retained security companies organisations and others to further harmonise to conduct routine bag examinations and international regulatory and anti-piracy handheld metal detector inspections at pre- enforcement measures. theatrical screenings. Warning signs have also been posted prohibiting camcording and alerting audiences that they might be observed by guards using night-vision monoculars, or other methods55. The Motion Picture Association of America (MPAA) has also recently introduced a new Anti-Camcording Rewards Program, under which projectionists stand to receive $500 payouts if they

Film theft in the UK | 41 successfully stop suspects trying to record consumer hardware manufacturers (the latter movies being screened in their cinemas. often presenting their case as the voice of the consumer via organisations like the Home However, whether or not these measures have Recording Rights Coalition). been sufficient is open to debate. One need only look back at the mass of evidence New digital TV sets and digital video devices suggesting that movie titles are appearing launched into the US market are increasingly more and more, earlier and earlier, on P2P incorporating secure interfaces that allow networks to question whether enough is being content to be securely transferred from one done (see Chapter 4 for an analysis of P2P device to another. As far as recording is movie filesharing). concerned, content owners and digital broadcasters have the facility to apply varying The UK film industry needs to conduct a ‘usage rules’ to content travelling over the thorough review of security risks and potential digital connections. The three basic levels are: sources of ‘internal leaks’ in the pre- production, production, post-production and Copy Freely: broadcast signals that are distribution process. Such a review could draw provided to viewers free of charge can be on lessons from the research undertaken by recorded by digital machines much like VCRs AT&T (discussed in chapter 4, ‘Sources of do at present. internet piracy’). Copy Once: Pay-TV subscription programming The Film Distributors’ Association (FDA) has such as the BSkyB movie channels in the UK, or already undertaken work in this area through HBO and Showtime in the US, can be set to its film print working group that now includes only be recordable once for archiving purposes, the UK Film Council. For some time this group but preventing additional copies from being has been working towards improved made. procedures and an extensively revised Film Print Copy Never: Aimed at pay-per-view (PPV) and and Digital Disk Management Protocol was video-on-demand (VoD) service providers, issued in July 2004. programmes can be set so as to not to be recordable by a digital home recorder. Controlling content in the There are many contentious issues still being digital domain debated, particularly in the US. These include the proposal to protect digital free TV from There are several types of technologies that can unauthorised redistribution via the Internet help control copyright content in the digital using a so-called Broadcast Flag. This would domain. The motivation is to keep content insert a trigger signal in digital broadcasts that secure when it is stored on a device and when could be used to limit the recording and it is transferred in a digital format between retransmission capability of free TV devices. Ideally, these solutions should enhance programming. The controversial dimension is the business choices open to the rights owner that consumers have been used to freely being as to how to exploit their content, while at the able to record free TV programming and this same time maximising the control, choice and technology would permit broadcasters to limit convenience for the consumer. This is often that in the future in the interests of preventing referred to as Digital Rights Management further unauthorised redistribution. (DRM). However, many of the issues involved in the deployment of these systems have been Another divisive proposal being aired in the US contentious, resulting in lengthy disputes is that to allow so-called ‘downresolution’ to between the content owners, regulators and limit the dangers of recording HDTV content

42 via the ‘analogue hole’. This would allow Education and consumer content providers to remotely degrade the awareness signal coming from analogue outputs. Given that most existing HDTV sets only have Consumer education and awareness is crucial analogue inputs, this could disadvantage a in the war against piracy, especially given that majority of early adopters. much piracy and unauthorised copyright use is in some form or another a response to Developments in copy protection and Digital consumer demand. Most initiatives focus on Rights Management (DRM) technology are awareness of one or more of several primary becoming increasingly important to the future messages: of all content industries, not least the film industry. And, with a few exceptions56, most of • Pirated goods are of inferior quality; the key debates over the selection and • Piracy fuels organised crime; implementation of these systems are Piracy has a negative economic impact on happening on the other side of the Atlantic. • the film industry; and The UK and European film industries could usefully learn to engage with these debates • Piracy is illegal (particularly for online piracy). and the implications which flow from them.57 FACT, the BVA and the UK Film Council have There may also be a case for UK Government been involved in several initiatives along these and regulators to learn from the US experience lines. In November 2003, the UK Film Council of the Federal Communications Commission launched a Christmas awareness campaign (FCC) – particularly with respect to its rule- urging consumers not to buy pirated DVDs and making actions that seek to find a ‘middle-way’ videocassettes. This campaign focused on all through contentious technology and copyright the points highlighted above. The BVA issues The FCC seeks to work with key repeated its pre-Christmas PR campaign which stakeholders and encourage them to reach a received national media coverage and, most consensus that can then be cemented and recently, FACT worked with a GMTV presenter subsequently enforced by government or and consumer affairs champion, Lynn Faulds regulator action. Wood, who has been highlighting unwitting consumer contributions to organised crime by A recent report on DRM by the Broadband visiting the counterfeit trading hotspot, the Stakeholder Group concluded that “none of Barras Market in Glasgow. the available solutions cater for all content types and platforms and there remain major FACT has also been running anti-piracy trailers issues of interoperability and access. If content produced by the industry over the last few services are to provide a significant push to the years, with organised crime being a special take up of broadband there must be a target. FACT’s most interesting move was to concerted effort by industry and government to use cinema advertising to dissuade ‘camcorder create the optimal conditions for the pirates’ in the UK. As a preventative measure, a development of DRM enabled solutions and 20 second copyright warning was introduced their adoption by the widest possible range of as a trailer, beginning with the release of content providers.” 58 X-Men 2 on 1 May 2003, to educate film viewers that cinema camcording is a crime. It also provided a hotline number to FACT investigators for those who wish to report illegal activities. The text reads as follows:

Film theft in the UK | 43 WARNING FROM THE FEDERATION produced films as it is obviously more impactful AGAINST COPYRIGHT THEFT LTD (FACT) if these films are played in front of all features “IT IS A CRIMINAL OFFENCE TO COPY OR in every site across the country. The UK version ATTEMPT TO COPY ANY FILM, OR FILM of this has been showing in British cinemas on RELATED ARTICLE, SHOWN OR DISPLAYED a regular basis since 15 July 2004. IN THIS CINEMA. PUNISHMENT OR Another key UK initiative has been the CONVICTION IS AN UNLIMITED FINE AND establishment of the Industry Trust for IP IMPRISONMENT UP TO A MAXIMUM OF Awareness, which has been created by all 10 YEARS. YOU ARE NOT PERMITTED TO sectors of the British video industry with an BRING ANY CAMERA OR RECORDING initial budget of £1.2 million. This has been EQUIPMENT INTO THIS CINEMA. THIS registered as a non-profit making company WILL BE TREATED AS AN ATTEMPT TO with the objective of creating a fighting fund to BREACH COPYRIGHT. ANY PERSON DOING tackle copyright theft. The founding company SO CAN BE EJECTED AND THE POLICE members (ten distributors and six retailers) will MAY CONFISCATE SUCH ARTICLES. WE decide how funds will be spent across a range ASK THE AUDIENCE TO BE VIGILANT of tactics, including retail training, government AGAINST ANY SUCH ACTIVITY AND lobbying, additional support for FACT, and to REPORT ANY MATTERS AROUSING raise consumer awareness of the links between SUSPICION TO CINEMA STAFF. THANK counterfeiting and serious and organised YOU. crime. An official launch event for the Trust In the US meanwhile, the MPAA has gone one took place on 12 July 2004. There is a web step further. It has been heavily pushing its component to the initiative at anti-piracy message in 36,000 classrooms – www.piracyisacrime.com. especially targeting the nine-12 age range. In a campaign similar to the ‘Just Say No’ anti-drugs campaign of the mid-1980s, trained instructors The needs of educational are pushing a message of ‘Digital Citizenship’ institutions to 900,000 school children highlighting the One important factor that must be problems of downloading, and the economic acknowledged in any level of copyright control and emotional impact of film piracy on artists, and enforcement is the needs of educational creators and producers. Schoolchildren are institutions. It is undoubted, and has been seen given stickers bearing slogans such as: ‘Copying by debate in the US, that limitation of any sort a movie or a CD for a friend is illegal’ and ‘If of use of copyrighted material creates an you haven’t paid for it, you’ve stolen it’. environment in which schools and universities Recently, the MPAA launched a website find it more difficult to legally access content initiative, www.respectcopyrights.com, as part for educational purposes. of its ongoing education campaign. There are In the UK, the S32-36 CDPA 1988 legislation also two international trailers produced by the recognises the need for providing leeway in this MPA, one to address physical piracy and the scenario. The Act explicitly provides an other Internet piracy. These are being rolled out exception to copyright, enabling teachers to in several territories world wide in conjunction make use of dramatic works for educational with local anti-piracy consumer awareness purposes – in particular ensuring that campaigns. In the UK they were released along classroom screenings, in the course of with the launch of the Industry Trust for IP teaching, are not defined as a public Awareness (see below). Since then the FDA has performance. requested that exhibitors play these specially-

44 Under the CDPA, the Educational Recording This initiative is a good example of co- Agency (ERA) was established59 providing a operation that should be further developed. licensing framework for schools and Another positive move is that the British Film universities that wish to record and use Institute (bfi) now has the support of the copyright content in an educational context. Hollywood studios for its ScreenOnline60 Many industries are already represented and Internet movie archive. This initiative is participate in the ERA’s scheme – including the premised on the bfi acting as intermediary to BPI, BBC, MCPS, ITV, Channel 4, Channel 5 and UK education by providing secure access online the Author’s Licensing and Collecting Agency. to clips to schools, colleges and libraries, using Notably, there is at present no clear affiliation its own digital rights management solution. from film industry bodies such as the BVA Educational use of digitised material is now an (though the British Universities Film and Video important goal in many countries. In the US, Council [BUFVC] is involved). Anecdotal this has led to the emergence of the Creative evidence from within the film industry itself Commons movement and the establishment of indicates a reticence from certain quarters of a range of Creative Commons licences, which the film industry to enable educational provide for rightsholders to offer limited rights establishments from legally acquiring content to any user. for classroom purposes – not least so from the MPA and members of the BVA. The inherent potential for viewing, copying and creative reuse of audiovisual content is This attitude is somewhat surprising given the inhibited by the strict application of MPAA’s initiatives in the US to work more commercial exploitation rights, and this has led closely with schools to educate children about to non-commercial activities being included the impact of piracy (see above). It also sits under the all-embracing piracy umbrella. Such uneasily alongside UK Film Council initiatives to activities might be better understood as useful promote the development of young filmmakers contributions to a society’s learning and and to encourage media literacy and film encouraged as part of the necessary structure education. of innovation and invention. Furthermore, it is The problem appears to be a failure by some likely that rightsowners will gain wide public elements of the film industry to view education support for the vigorous protection of all as an ally. Entering a dialogue with education, commercial exploitation against commercial and enabling schools to license content at a fair piracy where they agree to apply a Creative and reasonable price is likely not only to push Commons licence to their material. forward film education in the UK, but also to foster a spirit of quid pro quo co-operation. To this end, the film industry can enlist the support of schools to pass on its anti-piracy message to a demographic that is very susceptible to infringing activity – teenagers and students. Indeed, film distributors have a long history of engaging with the education sector and began to commission resources for teachers from the organisation Film Education as far back as 1985 (and have done so every month since). Earlier this year, Film Education began developing plans for an anti-piracy resource for UK primary and secondary schools.

Film theft in the UK | 45 Developing new business every studio and significant mini-major except models Fox and its subsidiaries. The only details Movielink has so far revealed Not all action, however, has to be defensive. about its experience to date are some facts The Hollywood studios have been open to the about the demographics of its users – which possibilities of developing new business models are predominantly male and between the ages and using the Internet for the digital delivery of of 25 and 49 – contrary to early expectation content to the PC and TV set – an example that that the target market would be the 18-25 year could be followed by other content rights olds (this could be explained by the tendency of holders. Internet video-on-demand (VoD) the 18-25 year olds to favour illegal P2P file strategies, and the delivery of broadband sharing). The company has subsequently entertainment to the TV set, can be a positive planned for a multi-million dollar ad campaign step in the face of the potentially damaging through traditional print and TV media to long-term impact of the type of piracy that has extend its consumer base. damaged the music industry. Such strategies, subject to adequate digital rights management In early 2004, Movielink struck a deal with (DRM) and other security measures, may allow computer chip manufacturer Intel to studios and distributors to establish valuable collaborate on marketing and technology. ‘direct’ relationships with their customers. Importantly, the two companies have announced the start of co-operation to develop The concept of Internet VoD at present is content-protection and home networking simple. In return for a one-off fee (typically solutions, enabling consumers to wirelessly between $2-$5) or a monthly subscription transfer Movielink content from their PC to the (usually around $9.95), the customer is allowed TV and other portable storage devices. to download a copy-protected digital movie file onto their PC hard drive, where it is generally Movielink has a number of competitors. There ‘active’ for a month. Typically, during that are three other start-up initiatives of note in the period, the user can watch the full movie on US and Europe – CinemaNow, Moviesystem their PC at any time, but once viewing has and NetFlix. US venture CinemaNow is started, the user has a 24-hour ‘window’ to supported by Microsoft, amongst others, whilst watch it in. Once the 24 hours are over, the file Moviesystem is a pioneering French VoD expires from the hard disk. An alternative content provider acquired recently by Canal approach is to ‘buffer’ and stream the film Plus. NetFlix, the US online DVD rentals firm, within a 24-hour window, providing more-or- has only recently unveiled its plans for an less instant access, though this theoretically Internet VoD platform, but has the implicit provides less control for the customer. The film support of PVR company TiVo. All the services can be viewed on the PC screen or can be have shown intent to use the open Internet (or viewed on the TV via a simple cable link from IP solutions) to eventually deliver on-demand the PC. movies to the TV set as well as the PC. In November 2002, all the Hollywood studios, It is unlikely that the studios expect to generate with the exception of Fox and Disney, launched much profit from the ventures – at least in the the Movielink Internet VoD platform. The short term. Nevertheless, this is an acceptance service started with a library of 175 titles, that demand for the delivery of online movies including some titles released to video rental does exist, and if legal providers don’t get there only a few weeks earlier, but following a first with a coherent business model, then the number of licensing deals, this has risen to pirates will. Moreover, an Internet VoD service more than 500 – offering titles from practically (or at least a platform based on open-standards

46 Internet solutions that will deliver movies to the TV) could eventually create an opportunity to extend the direct sell model of retail DVD into the digital distribution arena. It should be noted that such services still have to resolve a number of important issues. For example, titles on Movielink are only available after the DVD release, with most VoD services only being able to access content in the PPV window. The window in which titles become available on new platforms will be of significance when dealing with piracy, though other business factors (such as the current size and success of the retail DVD market, which a movement of the windows may cannibalise) will have to be taken into account.

Film theft in the UK | 47 6 Consumer issues

What some education and awareness initiatives quality of films made, or the impact of piracy as have so far failed to acknowledge is that something other than a ‘victimless crime’. consumers who buy or download pirated films The extent of the challenge can be illustrated may well be more aware of the issues than they by the campaigning tactic of trying to attach are given credit for. Specifically, they may be ‘victims’ to piracy. This approach has been to aware of the illegality of the act, the link with point out the economic loss to the industry, a organised crime and the content quality risks message that can perhaps appear contradictory they may be running in acquiring counterfeit in the context of an industry that thrives on a products. As will be explained in Appendix i historic image of glamour, wealth and (‘Lessons from the music industry’), the latest superstardom. surveys suggest that most people across Europe know that nearly all file-swapping is Respect for the consumer in the field of illegal. copyright has been a point of debate for many years, especially in the US. At what point does Increased consumer awareness of the issues tackling piracy end and infringement of a involved in piracy needs to be complemented consumer’s moral, civil and human rights with an understanding of consumer demand. begin? A number of organisations have taken One needs to only go back 20 years, when the entertainment content industries to task on Universal Studios tried unsuccessfully to bury some of these issues. The Home Recording VCR home recording under a mountain of Rights Coalition (HRRC) and the Electronic litigation, to see that many of the issues and Frontier Foundation (EFF) have both been vocal fears arising today are just the latest symptom advocates of protecting consumer rights – and of the tension between the film industry’s have considerably raised public awareness of desire to protect existing revenue streams and the issues. However, both bodies have been the development of new technologies. criticised for having more than just consumer interests at heart – allegedly upholding the It may be necessary to recognise that the digital vested interests of specific industry sectors age has brought to an end an era during which (primarily consumer electronics manufacturers, the industry could fully dictate the chain of IT, retailer and Internet interests). distribution from theatrical release to home video to TV. It has ushered in an era in which Established in 1981, and supported by the business needs to be more understanding consumer electronics, Information Technology of consumer demands and to communicate and retailer organisations, the HRRC was accordingly on that level: whether in terms of instrumental in a landmark legal victory in pricing, value proposition of content, the 1984, when Sony defeated Hollywood

48 attempts to outlaw the VCR. Since then, the music industry, consumer groups in Europe are, coalition has gone from strength to strength, much like the HRRC, becoming increasingly focusing most of its efforts against the DMCA vocal in their opposition to limits placed on legislation. Some of the organisation’s major consumer rights in the name of piracy. claims are that the restrictions on Looking at developments in the various circumvention devices have had a negative spheres, such as the compromises within the impact on free speech, consumer right of ‘fair DMCA in the US, or the activity of the HRRC, it use’ (eg making back up copies), technological becomes clear that consumer empowerment is competition and scientific research. The last driven by technological developments in a point was supported in October 2002 at MIT number of different sectors: namely consumer by the White House head of Cyber Security electronics, telecommunications and new Richard Clarke, who called for legal reform, media technologies. To this end, not only are expressing concern that the ban on there the consumer bodies to think of, but circumvention was holding back legitimate there are also powerful industrial interests at software research. work, creating an environment in which the The EFF meanwhile was founded in 1990 in film industry can no longer work in isolation – response to what the organisation viewed as as the music industry largely tried to do to its oppressive behaviour by the US Secret Service detriment. Given that content is key to the in tracking down pirated government-sensitive growth of many of the new economy business software. The group, which is a donor- models (such as, for example, broadband supported organisation, now defends what it Internet), it may be advisable for the film believes are the interests of consumers in the industry to enter some form of permanent electronics landscape and those of the dialogue with these industries to develop technology industry. It has to date supported mutually acceptable strategies and greater co- defendants in high-profile ‘hacking’ cases, such operation in the effort to combat piracy. as that of 2600 Magazine, which was In this context it is worth noting that, while the responsible for posting DeCSS DVD copyright Government’s key advisory group on the roll- hacking software (see above). out of broadband services – the Broadband In Europe, the protection of consumer rights Stakeholders Group – has over 450 members, has been mostly left to the national watchdogs only about a dozen could be described as – which represent themselves as a truly representing content interests (and this independent barometer of consumer includes games, music and TV, in addition to expectation. As explored in the context of the film). Another group, called the Internet

Film theft in the UK | 49 Enforcement Group (IEG)61, has been operating since 2001. One of the objectives of the IEG – which represents the book publishing, music, games, software, merchandising and film industries – is to create an environment for enforcement bodies and ISPs to work co- operatively towards fighting Internet piracy, with a view to promoting a best practice approach. Part of the ideology of the consumer interest lobby is that, in the modern economy of competing interests, the consumer dictates everything. According to this logic, if consumers are showing a demand for a particular type of distribution channel, such as the Internet, then it is the obligation of the content owners to supply that. If consumers demand lower prices, then it is up to the content owners to address the issue. Any failure to do so will result in the consumer getting product from other sources of distribution – that is, they will get it from the pirates or simply indulge in unauthorised copying or distribution themselves. While no one should assume that consumer interest lobbying groups represent the interests of all consumers, there is no doubt that a greater understanding of the consumer should be a top priority for the industry in the 21st century.

50 7 Recommendations

The analyses in the previous chapters point to FACT. It is anticipated that the Government one important conclusion: film piracy in the UK recommendations contained in this report will is a major concern and demands immediate be evolved in partnership with the attention. Although the industry has been Government’s recently formed Creative implementing strategies against piracy for Industries Forum on Intellectual Property. many years, resources are limited and the industry must depend on assistance from the State and its enforcement agencies. There is no The UK Government single magic bullet that will eradicate piracy. If anything, the little reliable empirical evidence In the short term that currently exists on the scale and impact of 1 Extend the legal concept of ‘exemplary the problem only serves to suggest an industry damages’ to cases of copyright infringement. that has some work to do in order to prepare Exemplary damages are paid as a punitive for the rapidly changing digital entertainment measure rather than compensating for actual environment already upon us. loss in cases where, simply put, there has been some form of malicious intent behind the The film industry is used to a structured and actions. Given that much organised piracy is controlled approach to the distribution of its carried out with a clear intent to reap a reward own content, with a high degree of power over from another’s loss, the extension of the each facet of the value chain. However, this is a principle makes perfect jurisprudential sense. position that is now under threat. Moreover, Such a move will act as a disincentive by there is a fear about the emergence of considerably increasing the financial risk to potential new ‘gatekeepers’ in the value chain, organised piracy. It would also bring UK law in such as information technology companies and line with Ireland and several other consumer electronics manufacturers. This is Commonwealth territories. exacerbated by a legal system that fails to quite recognise the full social and economical (See Chapter 5, sub-heading: ‘Copyright implications of copyright infringement. protection in the United Kingdom’.) Although there has been reform, much still 2 Make a provision for rights holders to be able needs to be done. to claim pre-established or statutory damages. The following is a list of recommendations for This is particularly appropriate where it is the UK Government, film industry, difficult for a rights owner to prove the scale Government-backed and other film sector or extent of its losses (which also includes stakeholders such as the UK Film Council and disclosing often confidential information). The

Film theft in the UK | 51 judge would then be able to award an with the notice; appropriate amount within a set range. Such • Introduction of a requirement for the person damages are available in other countries such giving registration details to the authorities on as the US, Canada and Israel, and constitute an behalf of the trader to be over 18 years. This is effective remedy in an area where it is often intended to clamp down on the habit of impossible to assess the extent of infringing traders using under-age children as a front for activity. The criminal nature of piracy usually their illegal activity in order to avoid liability. means that records showing the extent of While it will not be able to stop this entirely, it pirate sales do not exist, or any that do exist are will ensure that an adult has to be present unreliable. when registration is taking place and will (See Chapter 5, sub-heading: ‘Copyright remain within the precinct of the market; protection in the UK’.) • Amendment of the Proceeds of Crime Act to 3 Introduce a comprehensive package of enable trading standards to recover the costs of legislative reforms designed to curb the sale of prosecution of IP offences. This would help pirate products at street markets, car boot sales address the problem of local authorities not and via other forms of informal trading62 having sufficient funds to allocate to prosecution of IP crime and ensure that serious These reforms would include: IP offences could be pursued in the courts; and • Enactment of amendment s107A of the Make it a legal obligation for Trading Copyright, Designs and Patents Act 1988 • Standards to submit information on (CDPA) so that trading standards professionals investigations and prosecutions being have the power to enforce copyright law, undertaken for IP infringement to the Patents bringing the sector into line with the law of Office. This would require amendment to the trademarks; Copyright Designs and Patents Act (in tandem • Introduction of an improved registration with implementation of s107A) and to the scheme that would require owners and Trade Marks Act 1994, and possibly to TDA as organisers of occasional sales to notify the local well to allow disclosure to the Patents Office Trading Standards authority 21 days in advance and to include investigations. as well as place an obligation on the organiser (See Chapter 5, sub-heading ‘Enforcement at a to gather names, address and vehicle licence local level’.) details of all dealers at the sale. The scheme should also oblige organisers to also note the 4 Introduce legislation to make the act of type of goods being sold (eg anyone selling camcording a film in a cinema a criminal new DVDs is going to be of interest); offence. It is implausible that someone camcording in a cinema would be doing so for • Introduction of new powers to allow Trading any other reason than financial gain. This is Standards Officers to close down occasional already being done in a number of US states. sales that persistently include trading of counterfeit goods. This could be done via an (See Chapter 5, sub-heading ‘Copyright enforcement order under the Enterprise Act protection in the UK’.) (formerly “stop now” orders). It would require 5 Through the Creative Industries IP Forum, the recipient of the order (the sale organiser) to and working in conjunction with Ofcom and comply with the local authority order to cease other appropriate organisations, promote the allowing the illegal practice. In default an development and spread of open cross- injunction can be sought. Alternatively an platform global standards related to Digital offence could be created for failure to comply Rights Management (DRM), maintaining the

52 option of intervention to ensure compliance content regulation in the UK (including the with standards agreements or where the functions of the BBFC and Ofcom). parties fail to agree. (This echoes a (See Chapter 4, sub-heading: ‘The loss to the recommendation of the Broadband global film industry from Internet piracy’.) Stakeholders Group63 and the European Commission’s High Level Group on Digital 10 Recognise that the Government target for Rights Management.) “the UK to have the most extensive and competitive broadband market in the G7 by (See Chapter 5, sub-heading ‘Controlling 2005” needs to be supported by content in the digital domain’.) complementary measures which ensure 6 Ensure that the Patent Office’s national IP protection of intellectual property rights. enforcement strategy remains sufficiently (See Chapter 4, sub-heading: ‘Internet piracy’.) flexible to respond to changes in the sourcing and supply of illegally copied films. 11 Ensure that the Creative Industries IP Forum on Intellectual Property results in a productive (See Chapter 5, sub-heading ‘Enforcement at dialogue between rights holders and Internet local level’.) Service Providers on the most effective means to stem piracy. In the medium term The French Government is encouraging such a dialogue with particular regard to the music 7 Through the European Union, prioritise co- sector. operation with other EU Governments to further harmonise regulatory and anti-piracy (See Appendix i ‘Lessons from the music enforcement measures and to proceed with the industry’, sub-heading ‘Legitimate online aim of smoothing out conflicts in criminal services’.) procedural law to enable greater co-operation amongst national enforcement agencies. Work with other international trade organisations (eg In the long term the World Trade Organisation) as appropriate 12 Aim to bring diplomatic pressure for to encourage enhanced protection of changes in policy on the part of governments intellectual property rights across the globe, of countries that currently do little or nothing especially in those countries which have been to prevent organised physical piracy from identified as significant sources of pirated taking place within their borders and those that material. allow large quantities of pirate product to be (See Chapter 5, sub-heading: ‘UK legal exported to the UK. enforcement in the global picture’.) (See Chapter 4, sub-heading: ‘Professional 8 Implement judicial training exercises to raise piracy’, and Chapter 5, sub-heading ‘UK legal awareness as to the nature and impact of enforcement in the global picture’.) physical and Internet piracy. (See Chapter 5, sub-heading: ‘Copyright protection in the UK’.) 9 Review the extent to which the increasing availability of pirate copies of films to British young people through multiple distribution channels undermines the entire system of

Film theft in the UK | 53 The film industry (See Chapter 4, sub-heading: ‘Consumer home recording’ and Chapter 5, main-heading: In the short term ‘Security measures’.) 13 Conduct a thorough review of security risks 16 Develop clear commercial strategies in and potential sources of ‘internal leaks’ in the relation to Internet film distribution. These pre-production, production, post-production strategies are likely to involve co-operation and and distribution process. partnership with a variety of companies (See Chapter 4, sub-heading: ‘Sources of working in different sectors (eg consumer Internet piracy’, and Chapter 5, main-heading: electronics manufacturers, computer ‘Security measures’.) companies, broadband operators, etc). The key point is that survival and success for the UK film 14 Review all possible procedural measures to industry in the 21st century will mean throwing tighten security and then implement optimal off the harness of insularity and increasingly physical security measures throughout the looking outwards to new opportunities. production, post-production, pre-distribution and distribution process. Options to consider (See Chapter 4, sub-heading: ‘Internet piracy’, should include some form of a ‘chain of Chapter 4, main-heading: ‘The future digital responsibility’ system, ensuring that home’, Chapter 5, sub-heading: ‘Controlling responsibility for any professional copies of a content in the digital domain’, and Appendix i, film throughout its life reside with named ‘Lessons from the music industry’.) individual persons. Important steps have 17 Work with the Government’s Creative already been taken under the aegis of the Film Industries IP Forum and individual government Distributors’ Association, which has a Film Print departments to develop a strategy to deal with and Digital Disk Management Protocol that unauthorised Internet P2P filesharing that fairly was extensively revised and updated in July balances consumer interests with the legitimate 2004. rights of the industry to exert copyright (See Chapter 5, main-heading: ‘Security ownership and contain misuse. measures’.) In the first instance, an effective method is the issue of ‘cease and desist’ notices against Internet downloaders, although this can only In the medium term be done with the co-operation of Internet 15 Maintain a watching brief and regular Service Providers (ISPs) as film companies will review of both new technological not normally be able to identify uploaders or developments that pose novel threats to the downloaders without ISP co-operation. In industry as well as those that offer security order to minimise the risk of negative public solutions and new means of commercially relations and maximise the containment exploiting filmed entertainment in the digital impact, legal action against individual Internet domain. This should include review of – and users should be kept as a measure of last where appropriate, adoption of – copy resort, and only then used against carefully protection and digital rights management selected high volume users. (DRM) technologies. Special attention should (See Chapter 4, sub-heading: ‘Internet piracy’, be paid to existing security vulnerabilities, not and Appendix i, ‘sub-heading: ‘Enforcement least the risks posed by the so-called ‘analogue measures’ (music).) hole’ – particularly in relation to DVDs, but also in relation to other consumer technologies.

54 18 Through the relevant trade associations, Government-backed and work with the bfi, Film Education, First Light other film sector and other appropriate organisations to help ensure that young people are aware of the stakeholders damage that piracy can inflict on their In the short term enjoyment of films. 20 Consult with all relevant stakeholders and In return for facilitating use of copyrighted with research experts on developing improved material for educational purposes, schools and methodologies to quantify effectively the scale universities can become allies in pushing and impact of all forms of film industry piracy, through the anti-piracy education message to paying particular attention to the impact of young people. Internet P2P filesharing. (See Chapter 5, sub-heading: ‘The needs of This methodology must take into account educational institutions’.) potential losses across all windows of distribution – primarily, theatrical, video and pay TV. It should also assess and highlight the In the long term financial loss to the Treasury from the illegal 19 Through the relevant trade associations, trading of films. Consideration should be given work with Ofcom, the UK Film Council and as to how a standardised methodology could other relevant stakeholders to ensure that be developed to address the issue of measuring regulatory barriers to the development of new, losses suffered by the music and games legitimate business models for the online industries in addition to the film sector. Such a delivery of film are minimised. This will involve cross-industry initiative could benefit from a co- an examination of existing film distribution ordinated approach to the research as well as business models with a view to minimising the the funding to support it. commercial opportunities left open for (See Chapter 4, sub-heading: ‘The loss to the exploitation by pirate operators. This should industry’.) include a thorough appraisal of release 21 Implement a special investigation into all windows (both those between the US and the impacts of Internet P2P filesharing services UK/Europe and rest of world, and those on the film industry. between different media – theatrical, home video, pay TV, etc), pricing strategies and the (See Chapter 4, sub-heading: ‘Internet piracy’.) possibility of opening a new Internet release 22 Develop best practice security procedures window as early as possible in the distribution for the handling of film prints and digital chain. The industry should ensure that copy materials throughout the production process protection and DRM technologies are used in a and make these procedures a condition of manner that maximises control, choice and support schemes administered by the UK Film convenience for the consumer, while at the Council and other public sector funders. These same time ensuring a viable and secure procedures to build on the Film Print and business model for the industry. Digital Disk Management Protocol published by (See Chapter 4, main-heading: ‘The business of the Film Distributors’ Association in July 2004. film’, Chapter 4, main-heading: ‘Film piracy in (See Chapter 5, main-heading: ‘Security the UK’, Chapter 4, sub-heading: ‘Internet measures’.) piracy’, Chapter 5, main-heading: ‘Education and consumer awareness’ and Appendix i, 23 Further develop public campaigns to ‘Lessons from the music industry’.) highlight the dangers of piracy, in particular

Film theft in the UK | 55 focusing on the links between piracy and auditoria looking for unauthorised camcorder organised crime, the illegal nature of piracy and usage. This should be done in conjunction with file-sharing; the threat to the development of the introduction of legislative measures to creativity and culture in the UK and the dangers make in-cinema camcording a criminal offence of unsuitable material becoming available to (see recommendation 4). Such a scheme was children and teenagers younger than 18. recently introduced in the US by the Motion Picture Association of America and details of (See Chapter 5, main-heading: ‘Education and this programme should be critically reviewed. consumer awareness’.) 28 Develop innovative educational schemes to 24 Through the UK Film Council, forge links teach young people the social and financial with EFAD (the forum of European Film Agency implications of film piracy. For example, this Directors) to further European co-operation in could include integration of an understanding the fight against copyright theft. of copyright theft into the UK Film Council’s Building on EFAD discussions to date, this First Light scheme for introducing eight-18- should initially focus on information exchange year-olds to filmmaking, as well as into wider about activities in each country, but then also educational initiatives on media literacy. This encompass discussion about the best ways to could build on Film Education’s initiative to develop and maximise new forms of develop anti-piracy resources for primary and distribution for European film (especially online secondary schools. distribution). (See Chapter 5, main-heading: ‘Education and (See Chapter 5.) consumer awareness’.) 29 Facilitate further dialogue between educational institutions and film industry in an In the medium term effort to foster a spirit of co-operation in the 25 The UK Film Council to convene discussions fight against piracy. to consider ways to expand the financial (See Chapter 5, sub-heading: ‘The needs of resources available for enforcement activities. educational institutions’.) These could include mandatory levies on 30 Establish new platforms and where companies receiving financial support via appropriate support existing platforms for schemes administered by the UK Film Council, communication between the film industry and as well as the Industry Trust for IP Awareness technology companies, such as broadband set up by the British Video Association. ISPs, consumer electronics manufacturers and (See Chapter 5, main-heading: ‘Enforcement’.) Internet technology firms. Closer dialogue is 26 Develop a ‘carrot and stick’ strategy to crucial for the UK and European film industry to combating piracy – such as ‘reward for become cognisant of developments in information’ schemes to incentivise the public technology that could pose future threats as to provide information that may lead to piracy well as new technological opportunities and convictions. counter measures. Decisions and information on these matters should not be left solely to (See Chapter 5, sub-heading: ‘The US-based companies. These communication demographics of piracy’, and Chapter 5, sub- platforms could help resolve potential business heading: ‘Understanding the consumer’.) interest conflicts that may facilitate film piracy 27 Consider the introduction of a reward as well as build on areas of mutual interest (eg scheme to incentivise cinema staff to patrol the growing determination of broadband

56 operators to exploit media content to help grow their subscription businesses). (See Chapter 4, sub-heading: ‘Internet piracy’, Chapter 4, main-heading: ‘The future digital Home’, and Chapter 5, sub-heading: ‘Controlling content in the digital domain’.) The recommendations should be read in conjunction with the action plan on the following pages, which sets out the timetable to which the recommendations will be delivered. The Task Force, with additional members, will remain in existence for a further year, working with industry and Government to take forward the action plan. Specific recommendations falling to the Government will be delivered in partnership with the new intellectual property rights forum recently announced by DCMS/DTI.

Film theft in the UK | 57 Action plan

Implementation date The UK Government

Short term Make it legally possible to extract financial damages from organised pirates by extending the legal concept of ‘exemplary’ and ‘statutory’ damages to cases of copyright infringement

Introduce a comprehensive package of national legislative reforms designed to curb trading of pirate products at street markets and occasional sales

Make the act of camcording a film in a cinema a criminal offence

Promote the development and spread of open cross-platform global standards related to Digital Rights Management (DRM)

Support the Patent Office’s national IP enforcement strategy

Medium term Prioritise co-operation with European and international partners to further harmonise international regulatory and anti-piracy enforcement measures

58 The film industry Government-backed and other film sector stakeholders

Review security risks and potential sources of Consult on research methodologies to quantify ‘internal leaks’ in all facets of the industry and effectively the scale and impact of all forms of then implement optimal physical security film industry piracy, paying special attention to measures throughout the affects of Internet P2P filesharing

Make implementation of approved security procedures a condition of financial support schemes administered by the UK Film Council and other public sector funders

In advertising and public relations efforts, highlight: the links between piracy, organised crime and international terrorism; the threat to grass-roots UK film development and long-term creativity; the dangers of non-certified films becoming available to the young; and the fact that piracy is illegal

Forge closer links with film agencies in other European countries to further international co-operation in the fight against copyright theft

Engage with technological developments that Consult on innovative approaches to expanding pose novel threats to the industry and those that the financial resources available for enforcement offer security solutions and new means of activities commercially exploiting filmed entertainment in the digital domain

Continued on following page

Film theft in the UK | 59 Action plan (continued)

Implementation date The UK Government

Medium term Implement judicial training exercises to raise awareness as to the nature and impact of physical and Internet piracy

Review the extent to which the increasing availability of uncontrolled pirate copies of films to British young people undermines the UK system of content regulation

Recognise that initiatives to promote ‘Broadband Britain’ and wider broadband access should be coupled with complementary initiatives and measures to protect and enforce copyright ownership

Consider possibilities for facilitating co-operation between content owners and Internet Service Providers

Long term Apply pressure for changes in policy on the part of governments of countries that do little or nothing to prevent organised physical piracy from taking place within their borders and those that allow large quantities of pirate product to be exported to the UK

60 The film industry Government-backed and other film sector stakeholders

Develop clear commercial strategies in relation to Develop schemes to incentivise the public and Internet film distribution industry staff to provide information that may lead to piracy convictions

Develop a strategy to deal with unauthorised Develop innovative educational schemes to teach Internet P2P filesharing that fairly balances young people the social and financial implications consumer interests with the entirely legitimate of film piracy rights of the industry to exert copyright ownership and contain misuse

Foster a spirit of co-operation with educational Facilitate dialogue between educational institutions so that they may become allies in institutions and film industry in an effort to foster pushing through the anti-piracy education a spirit of co-operation in the fight against piracy message to young people

Establish new platforms or support existing platforms for communication between the film industry and technology companies, such as broadband ISPs, consumer electronics manufacturers and Internet technology firms

Examine existing film distribution business models with a view to minimising the commercial opportunities left open for exploitation by pirate operators

Film theft in the UK | 61 Appendices

Appendix i: Lessons from the music industry

The plight of the music industry in the face of the consumer using standard home equipment growing piracy has been a cause célèbre. such as a PC or CD burner. Secondly, music Spurred on by popularisation of the MP3 piracy can either take physical form (such as a compression format and proliferation of counterfeit music CDs) or be digital (song files Internet distribution, digital piracy is widely on a PC). perceived to have cut a swathe through the According to the International Federation of music industry’s profits. the Phonographic Industry (IFPI), commercial Many theories have been put forward to physical piracy has been fairly consistent in its explain just how the industry found itself in share of the global market (though it varies such a predicament. The primary accusation greatly across territories, with Eastern Europe, has been that the business showed a lack of for example, having much higher degree of insight: not only in the face of rapidly illegal music sales, compared with the EU). In developing technology, but also the changing 2001, the revenue share of pirated material behavioural patterns of its customer base. The was estimated to be 11.3%, down 1% from experience of the music industry holds valuable 1996. In real terms however, the global sales lessons for the challenge facing the film value of physical commercial piracy in the industry. period 1996-2001 dropped from $5.1 billion to $4.3 billion. These figures, however, do not As seen in previous chapters, broadband take into account the impact of CDs copied or speeds are increasing exponentially and movie ‘burnt’ in the home or the impact of P2P filesharing on P2P networks is growing in filesharing. popularity. Internet piracy has ballooned; driven by the growth of broadband, P2P networks, and the The size of the problem proliferation of home storage devices. Music piracy takes very similar forms to that of According to the British Phonographic film piracy. Industry’s (BPI) most recent annual piracy report, 1 billion song files are illegally In the first instance, activity can be commercial downloaded in the UK every year64. In the or private; that is, it either takes place as a consumer survey carried out jointly by the BPI, highly organised venture using large-scale FDA and BVA in 2003, it was found that 26% production outfits, or is carried out privately by of the UK’s weekly Internet users download

62 music, more than half of whom burn on The ease of downloading and recording in the average 4.2 CDs a month. The IFPI estimated home is also enabling the business models of that there was an estimated 900 million professional commercial pirates to evolve. The infringing music files on the Internet as of BPI’s Anti-Piracy Unit is increasingly January 2004, from an estimated 6.2 million encountering commercial pirates who are simultaneous P2P users. operating ‘CD factories’ from a garage or spare room at home and then selling the product via In the UK, where commercial piracy statistics car boot sales or places of work. also take into account illegal ‘home burning’ of CDs in conjunction with an Internet The impact for individual companies of the downloading service, the picture is quite downturn in the music market has been alarming. In 2000, the UK CD sales market devastating. Sony Music Entertainment, for amounted to 314 million units, of which 31% example, has been forced to streamline its were thought to be illegitimate copies. By operations and cut advertising costs. Despite 2002, where the total market was 406 million this, the company still reported quarterly losses units, legitimate sales held practically of $50 million in mid-2003, showing quarterly unchanged whilst the unauthorised market sales to have capitulated below $1 billion. share was said to be 45% and rising fast.65 The BPI estimates that in 2004, the number of CDs illegitimately burnt in the home will overtake Why digital music piracy those legitimately bought in shops. It is exploded calculated that consumers are annually burning The major record labels were hit hard by digital in excess of 120 million CDs from music piracy because they failed to respond from the downloaded from the Internet. outset to threats and opportunities raised by the development of broadband Internet. Annual sales of CD albums Though Strauss Zelnick, the former CEO of in the UK BMG, praised the development of online music distribution as far back as July 2000, expecting 2000 2002 it to ‘more than double’ the music business, Legitimate sales 217m 226m the practical stance adopted by the music industry was to ‘sit back’. That is, the majors Unauthorised sales 97m 184m took the view that they could wait and see Total sales 314m 406m rather than pioneer, believing that content, Source: BPI deep pockets and marketing muscle would

Film theft in the UK | 63 enable them to jump into any business model technology is protected under the Sony that emerged out of the Internet environment. Betamax case ruling, which found that the Added to this was a desire to maintain the courts could not hinder technological value of existing physical distribution, which it advancements. was feared electronic distribution would The ruling was described by the music industry cannibalise, as well as preventing technology as an important step in the development of a companies such as Microsoft, Apple or Sony legitimate international online music market. from becoming gatekeepers to music However, in the context of the Napster distribution. litigation, the majors were accused of What this sit-back approach failed to preventing the emergence of new services by acknowledge was that a growing base of refusing to license their repertoire. If anything, young music fans wanted music online, quickly the Napster case shed light on a huge gulf in and cheaply, regardless of business understanding between the majors and their considerations. As the majors dawdled, the young customers. In a survey of 1,170 US teens business model that emerged was Napster. and young adults, aged 12 to 22, carried out by Forrester Research in June 2003, it was Napster was a first generation P2P music found that there was general contempt across sharing service – one that has given birth to the the board for the high cost of CDs and the new generations of filesharing services such as perceived greed of music executives and Kazaa and eDonkey. The controversial Napster artists.68 site listed thousands of unlicensed tracks from popular artists, which consumers could It was only after the Napster case that the download and share with its user-friendly music industry really began investing in its own software. In December 1999, the company was alternatives – such as Sony/Universal’s sued for copyright infringement by the ‘Pressplay’, Listen.com, and AOL MusicNet. Recording Industry Association of America (the However, by then, the lack of a serious RIAA). legitimate alternative had already rationalised (if not legitimised) illegal P2P filesharing in the Armed with a study66 indicating that one-third eyes of downloaders. Moreover, the open- of Napster users access the file-sharing source nature of the MP3 has meant that software to get songs for free, the RIAA and putting technical limits on the technology has the National Music Publishers' Association67 proved very difficult. asked in June 2000 for a preliminary injunction forcing Napster to remove from its directories the songs that are allegedly violating their members' copyright. In a surprise decision, U.S. District Court Judge Marilyn Patel granted the RIAA's request for a preliminary injunction on 26 July 2000. The judge ordered Napster to come up with a software programme to remove the infringing material. In her decision, Judge Patel shot down Napster's defence that the software is being used for non-infringing purposes such as promoting new artists. She also determined that Napster cannot claim fair use under the Audio Home Recording Act and dismissed the company's claim that its

64 Dealing with music piracy creating an open-standards Digital Rights Management (DRM) solution. In an attempt to turn back the tide, the music industry has tackled piracy from a number of Current measures for music DRM are a mixed angles, with varying degrees of success. These bag of proprietary technologies. Microsoft have included: Windows Media Player 9 and Apple’s iTunes, for example, have brought to bear years of • Security measures; experience in software DRM to create systems • Enforcement measures; that are actually proving difficult to beat (although, as seen below, it’s a constant battle • Education and consumer awareness; and with hackers, and both have been supposedly • Legitimate online services. cracked at one point or another). Microsoft especially trumpeted its music Windows Media DRM 9. Other companies, such as OD2 in Security measures Europe, also provide their own solutions. The major record companies supported copy Proprietary DRM technologies though create a protection from the very beginning. If they major conundrum for the music majors: how could somehow encrypt digital files or their much control to hand over to the technology equivalents, then they reasoned they could firms? This is a question that raises its head in control online distribution. To this end the the context of online music services (see below). majors put a great deal of faith in the Secure Where the music industry has decided to take Digital Music Initiative (SDMI), a 200-strong the lead, such as in the use of copy protection industry body set up to develop open on CDs, it has encountered heavy opposition – technology specifications that protect the predominantly because the solutions have not playing, storing and distributing of digital worked exactly as planned. music. The announcement of SDMI in December 1998 by the RIAA signalled the In January 2004, Belgian consumer watchdog industry's attempt to leverage its position in the Test-AanKoop69 launched a legal action against online music boom. The music companies also four of the five major music companies (except announced that they intended to have songs Warner), on the grounds that their use of copy by major artists available for online purchase by protection technology on major CD releases the end of 1999. short-changed consumers. This was because some of the technology used by the major Unfortunately, anything that can be encrypted labels to block consumers from ripping tracks can also be hacked. In September 2000, SDMI onto their computers allegedly also prevented put out an open letter offering $10,000 to them from being played properly in certain CD anyone that could hack its encryption or erase players. Tied into the lawsuit is also a ‘fair use’ its digital watermarks. The response was almost accusation, questioning the right of labels to immediate and most of the hack challenges stop consumers putting tracks from legally were successfully met. This was despite a purchased CDs onto computers or MP3 players general boycott of the offer by most of the for personal consumption. The test case is hacking community. based on 200 individual complaints filed with As a result, SDMI effectively ended its efforts in Test Aankoop by consumers. If the case is May 2001. With it, it took the music industry’s successful before the Belgian courts, it could initial hopes to use copy protection as a way of trigger similar actions by other consumer rights controlling digital transaction of files at groups across Europe. The action was refused consumer level. It also took away hopes of on 25 May 2004. An appeal has since been

Film theft in the UK | 65 lodged by Test-Achats. counterfeit music and film discs were seized. Aside from copy protection, a technique for The operations were part of a concerted drive marking recordings – called watermarking – is to crack down on piracy in the run-up to extensively used in physical copies of music Christmas. Many high-profile releases are used for pre-release and preview purposes. launched in the final quarter and the music Although the impact this has on piracy is not pirates are quick to react with counterfeits of yet determined. the best-selling new titles. However, it has been the behaviour of the RIAA in the US, targeting the ‘consumer’ pirates Enforcement measures rather than professional outfits, which has A significant weapon in the majors’ arsenal has captured the headlines. In August 2003, the been legal enforcement. Many believe that the organisation took the battle to the music industry has wielded this tool clumsily – downloaders by simultaneously suing 261 P2P serving to entrench anti-industry feeling. filesharers tracked down by their Internet However, the industry’s strategy of bringing Protocol addresses and file usage. lawsuits against consumers does appear to What was unfortunate from a public relations have brought some results. angle was that one of the first defendants The BPI’s Anti-Piracy Unit (APU) has been turned out to be a 12-year-old girl, Brianna extremely active in the battle against music Lahara, who claimed she had no idea that she pirates in the UK. With piracy being more was doing anything wrong. Convicted and widespread than ever before, the BPI has fined $2,000, the venture went some way to expanded its workforce at a regional level so that frightening children and teenagers from using the network of investigators covers the entire P2P services – and showing that the record country. Internationally, the BPI works very closely business means business. However, it only with the IFPI, sharing intelligence with other served to widen the gulf between customers national groups. During the course of 2002, the and record companies, and enflame anti- APU attended or gave evidence in almost 700 industry feeling. Grokster President Wayne criminal cases, and was involved in 125 raids at Rosso branded the music industry as ‘bullies’ premises throughout the UK to seize illegal and show-business’ ‘version of the Taliban’. recordings and replication equipment. P2P United, a coalition of "peer-to-peer" song- Most recently, in December 2003, the APU swapping networks, and New York radio disc carried out its largest ever joint anti-piracy raid jockey Brother Wease offered to pay Brianna’s with FACT and ELSPA70 at an open-air market legal bill, whilst online music retailer near Edinburgh. Over 100 officers from the MusicRebellion.com said it would allow her to Lothian and Borders police force took part in download $2,000 worth of free music from its the raid where they seized an estimated £10 legitimate music website. million worth of counterfeit CDs, DVDs, as well This hasn’t deterred the RIAA. In November as business and games software. 2003, 15-year-old Megan Dickinson was sued A further six raids involving BPI investigators for a similar infringement to Brianna Lahara. were subsequently carried out on private Megan also claimed that she had no idea what addresses in the Rochdale area, Greater she was doing was illegal. The lawsuit Manchester. Three people were arrested under demanded the family either pay a $3,500 the Trade Marks Act and a large amount of settlement, or fight the suit and go to court. copying equipment with thousands of Out of the 261 lawsuits, more than 50 had

66 settled by the end of 2003. clear is the importance of educating the consumer and raising awareness. What the In January 2004, a US survey of 1,400 Internet RIAA lawsuits have also highlighted is the users by the Pew Internet & American Life negative publicity generated for an industry Project and comScore Media Metrix, a Web should it litigate against potential customers. tracking firm, found that the percentage of Americans who download music online has The RIAA is meanwhile proceeding with the halved since the lawsuits began. Whereas 29% lawsuits against individual P2P users into 2004. of Internet users surveyed in May 2003 had said In the UK, the BPI has so far kept its lawsuits to they sometimes download songs to their more PR-friendly defendants. In April 2003, the computers, by December 2003, this figure had organisation scored a legal victory against dropped to 14%. The figures also showed that EasyInternet Café, when the latter agreed to the usage of Kazaa fell 15% from November pay compensation to the record industry for 2002 to November 2003, whilst other P2P copyright infringement. EasyInternet had been networks also experienced usage declines. The charging customers to burn illegally drop at BearShare, was 9%, while WinMX lost downloaded tracks from the Internet onto 25% of its audience and Grokster plunged 59%. recordable CDs. Though Mitch Bainwol, the chairman and CEO However, in January 2004, the BPI caused a of the RIAA, openly embraced the findings, the public backlash, when it took legal action figures have been greeted with mixed reaction. against websites offering cheap CDs. It alleged Rob Glaser, the chief executive of that CDWow.com, whose business model is RealNetworks, which makes software that plays based on buying legitimate products in music and video, has pointed out that in light cheaper territories and offering them for sale of the lawsuits there is likely to be into the UK, was breaching EU importation unwillingness amongst downloaders to admit laws, and forced the supplier to substantially to their activity. Cindy Cohn, legal director for up its prices. Much of the press surrounding the Electronic Frontier Foundation, a lobbying the litigation, which was settled out of court, civil liberties group, has echoed these painted the BPI in a very negative, anti- sentiments, saying that most people are aware consumer light. In terms of P2P, the BPI recently of the RIAA lawsuits, so “probably figure telling made clear that it would soon follow the RIAA’s a stranger on the phone about their experience, and adopt a strategy of suing downloading isn't a very good idea”. individual users. P2P monitoring firm BigChampagne According to the IFPI71, the music industry's meanwhile has said that its empirical evidence campaigns against illegal file-swapping have shows that the use of services like Kazaa, both sharply raised public awareness both in the US in terms of the number of users and in terms of and in Europe. In a recent IFPI-commissioned the volume of material, is still rising survey of consumers in four major European dramatically. markets – Denmark, France, Germany and UK – There is also the possibility that some of the more than two thirds of respondents stated decline in use of the likes of Kazaa, Grokster they were aware that distributing music online Bearshare has been due to users moving on to without permission is illegal and an average of new P2P protocols such as eDonkey, BitTorrent, 54% of consumers surveyed support legal and Overnet (see Chapter 4). action being taken against infringers. These very high levels of awareness are put down to Whether or not the RIAA lawsuits are working the escalation of the industry's Internet anti- to reduce filesharing is open to debate. What is piracy efforts in 2003. In addition to lawsuits

Film theft in the UK | 67 against hundreds of large-scale Internet users, Elsewhere, individual music majors have been the campaign has included the dispatch of lobbying of their own accord. For example, millions of 'instant messages' emailed to file- Alain Levy, the CEO of EMI, has been drumming swappers' computers, mass information up support for the fight against piracy in campaigns in colleges and universities in over Brussels for some time. It is believed that this 20 countries, and the launch of the was instrumental in getting the European international educational website Council to pass its anti-piracy resolution in www.pro-music.org. March 2003. The IFPI also claims that the anti-piracy campaign has dented Internet piracy levels worldwide. After doubling to 1 billion files Legitimate online services between 2002 and the start of 2003, the As of mid 2003, there were no more than ten number of files illegally on the Internet at any legitimate online music services offering one time has fallen over the last nine months anything resembling a realistic consumer by 20% to 800 million in January 2004. proposition. Of these, the most prominent However, the organisation acknowledges that, have been AOL MusicNet, which costs $8.95 while the overall fall in the number of files on per month and already has over 100,000 peer-to-peer services is driven by a sharp subscribers, MusicMatch and RealOne reduction in files on the best-known FastTrack Rhapsody. network (which hosts the Kazaa service), there The music industry’s own direct efforts to offer has been an increase in the number of files on online services have somewhat dried up, with other peer-to-peer networks. the much touted Pressplay.com website now leading straight to the reborn legitimate Napster website. Pressplay in its original form Education and consumer was a good example of the music industry awareness getting the online business proposition wrong. The music industry has never quite got its act It tried to operate on a monthly subscription together in terms of educating the consumer – basis; the problem was that if you cancelled fostering a siege mentality, relying on litigation your subscription, all the files you had to educate, choosing to concentrate on downloaded would cease to function and your lobbying government. investment became worthless. In the UK, the BPI has been carrying out a However, the real light at the end of the tunnel programme of regular visits to CD has proved to be Apple’s iTunes online music manufacturing plants, record companies and service. The iTunes Music Store was launched in enforcement groups around the country. The April 2003 in the US, selling music files encoded organisation has also been staging one-off using a proprietary format (not the widely used events, such as hosting a stand at the North MP3 format) at 99 cents per track. Initially only East Fraud Forum in March 2003 to profile anti- available to Apple Mac users in the US, and piracy activities to the audience of delegates. subsequently extended to Windows PC owners, iTunes was an immediate success. By the end of The organisation has also been involved in December 2003, 25 million songs had been supporting cross-industry initiatives, and was downloaded on the service, with downloads at instrumental in ensuring that the private the end of 2003 averaging around 1.5 million member’s bill – Copyright, etc and Trade Marks per week – translating into about 75 million (Offences and Enforcement) Act 2002 – downloads a year on an annualised basis. US became law in November 2002 (see Chapter 5).

68 music consumers are now buying almost twice Music Club, Virgin Downloads, Tiscali Music as many ‘singles’ in digital form over the Club, HMV Digital Downloads, Fnac, TDC Internet as they are on CDs from retailers. musik, Karstadt and MTV. According to OD2, the number of aggregated online users in The success of iTunes really goes hand in hand Europe has gone from 380,000 at the end of with the success of Apple’s iPod personal music 2002 to 450,000 at the end of 2003. storage device. By leveraging the ‘sexy’ desirable brand of the iPod, on which On the independent front, Warp Records has downloaded music can be listened to on the launched its popular Bleep.com service, offering move, Apple has single-handedly created an tracks from dance music producers on paid environment in which people are prepared to download. Germany's cross-industry business- pay for downloading music simply because of to-business platform Phonoline, another the ‘must-have’ status of the iPod technology independent venture, was due to launch in early amongst young demographics. By 20 2004 with 250,000 tracks available. December 2003, 1.32 million iPod devices had In the US, the situation has been no different. In been sold since the device’s launch in 2002. January 2004, retail chain Wal-Mart began iTunes brought with it an important change in testing a digital service and Sony announced the attitude: the music industry has had to come to launch of its Connect downloads service for April terms with the fact that it will never completely 2004, featuring 500,000 tracks. As in Europe, control the digital domain, but has to work the market is beginning to increasingly see within it. Moreover, by doing nothing at the ‘white label’ download stores designed for third outset, by sitting back and observing, the parties to build branded digital music services.74 opportunity to build online music services has It appears that finally, after sustaining heavy been lost to the gatekeepers they most feared; in losses, some sort of sea change is taking place iTunes’ case, Apple, whilst Microsoft is planning in the music industry’s relationship with the to launch its Windows equivalent of iTunes and online business model. According to the IFPI75, the iPod towards the end of 2004. The distrust some half a million people are already signed of these ventures on the part of the music up to more than 30 different legal websites in industry still lingers. Despite the demonstrable Europe and the trade body predicts this figure success of the iTunes service, some record will rise sharply this year as 20 new services companies are still holding back their content – launch worldwide and record companies or in some cases, only distributing older titles in continue to license their catalogue for the digital format (leaving new releases only legitimate distribution online. available legitimately on CD). As broadband penetration increases, ISPs are Other third party companies are also getting in also looking to content to attract and retain on the act. In a bizarre twist, Coca Cola is customers. In Europe, T-Online, Tiscali, throwing its lot into the marketplace. In Wanadoo, AOL, Spain’s Telefonica, the January 2004, the myCoke Music72 site went Netherlands’ KPN and BT are amongst a host of live in the UK, with the drinks manufacturer companies offering music download services. promising a selection of over 250,000 songs from 8,500 artists at a cost of 99p each. Like Other innovative business models are also most of the European services, the myCoke appearing – such as Wippit and PlayLouder Music offering is being operated by the ‘white MSP in the UK. Wippit is the world’s first label’73 online music distributor and DRM subscription-based P2P music service to secure supplier OD2. The latter also provides a service legitimate licences in a bid to offer its 5,000 to a range of other operations, including MSN subscribers (as at end 2003) access to music

Film theft in the UK | 69 files for an annual fee. commitments listed below are to be undertaken respectively by ISPs, signatory music authors’ While a critical mass of legitimate online rights holders, signatory music producers/on- services is taking hold in Europe, the IFPI line distribution platforms, and together by the reports that consumer awareness of them is aforementioned groups and Government. still very low. The number of tracks available Broadly, the commitments relate to: rose from 220,000 to 300,000 (up more than 30%) in the last three months of 2003 – but • Education/awareness activities; only one in four consumers surveyed are aware • Dissuasive actions (instant messaging, they can get music online legally. testing of filtering systems); Nevertheless, music downloading is now • Repressive actions (possible termination of beginning to expand beyond the PC, with subscriber access, legal cases to be brought by mobile operators looking to launch services as rights holders); part of their multimedia offering. In the UK, O2 launched its download to mobile service in • Promotion of legal services (augmenting the November 2003, allowing users to download catalogue of available works, making them music and transfer files to a player device available on non-discriminatory terms, manufactured by Siemens. The appearance of obligation to supply/license); and multimedia handsets, such as the Microsoft- • Agreement to pursue, with Brussels, enabled Mpx200 Motorola handset, which initiatives to lower VAT rates on disks, and offers a fully functioning Windows Media Player, prepare an initiative to secure lower VAT rates is making mobile music more and more a reality. for related on-line services. There is however an unwelcome footnote to The battle for online music still goes on, and the iTunes and legitimate download story. In the lessons can be best summed up as follows: November 2003, Jon Johansen, a 19-year-old It is important to act early; the digital tried for cracking the CSS DVD copy protection • revolution is here, it’s impossible to hold back code (see Appendix ii), surfaced again, having the tide of consumer demand. allegedly developed a programme to circumvent iTunes copy protection. The • Offering legitimate online services is software, called QTFairUse, was posted on his imperative in the war against Internet piracy. website. It legally opens and plays a protected The iTunes experience shows that the consumer music file, but then, essentially, drains the is willing to pay for Internet download of unprotected music data into a new and parallel entertainment content as long as the cost, file; thus creating a perfect clone of the original content range and product positioning is done music file. In its current form, the software effectively (see Movielink analysis in Chapter 5). leaves the unprotected music data in a form • Technology and hardware companies have that is unplayable without additional software. an important role to play in encouraging use of Some European Governments are looking at legitimate online services and developing DRM facilitating solutions for P2P piracy by bringing solutions (albeit proprietary ones). together content owners and ISPs. On 28 July • Lawsuits may be an effective method of 2004 representatives of the French discouraging filesharing, especially among Government, the French music industry and teenagers and children. However, if they are too French ISPs signed a charter of commitments to confrontational or are perceived to target the promote: the development of legal Internet ‘weak’, they can lead to anti-industry feeling services, respect for intellectual property and and negative publicity among consumers. the fight against digital piracy. The specific

70 Appendix ii: Technical solutions to the problem of piracy

The use of technology to protect film content is licensee without further charge. a critical part of security measures designed to • Macrovision: a copy-protection system built combat piracy. Different technologies are into VHS and DVD releases (and into hardware, appropriate to the protection of films during which protects the analogue output signal. distinct parts of its exploitation life cycle and to This is a proprietary technology that incurs a deal with specific threats. However, the use of royalty charge for its use. technological solutions must be coupled with the complementary adoption of all the other • CGMS (Copy Generation Management types of measure outlined in this chapter (ie System): analogue copy-protection system built more secure industry practices, legal into the DVD specification, designed to stop instruments, enforcement actions, and consumer DVD recorders copying from a DVD educational/awareness initiatives). player via an analogue output. A part of the DVD specification, CGMS-A can be used by any For instance, a number of different solutions DVD licensee without further charge. have been proposed to counter the unauthorised use of camcorders in cinemas. However, the use of these technical solutions in However, none of these has yet won the the home video sector has been far from confidence of the whole industry, with a view smooth. to mainstream deployment. First, hackers broke the CSS digital copy Extensive use is already made of ‘watermarking’ protection system soon after it was first techniques to trace copies of films used implemented. ‘DeCSS’ is a small piece of internally and within the post-production software that breaks the CSS encryption and process.76 For example, in October 2003, allows the reading of encrypted DVDs by Universal Pictures entered a multi-year personal computers and home DVD players. A agreement with technology firm Verance to use simple Internet search returned over 50 sites the latter’s audio watermark on film and video offering DeCSS software, including a DeCSS entertainment. The Verance watermark contains solution that consisted of only seven simple lines inaudible information designed to be read and of code, and 42 ways to distribute the software. understood by consumer and computer devices. The film industry has tried to prosecute the The mark will impart usage information about hackers, with mixed results. the content, including content identification, In 2000, the MPAA won a landmark court case forensic tracking and copy control information. when a US federal judge ruled that DeCSS There are also similar moves underway for violated the US Digital Millennium Copyright watermarking files used for the play-out of films Act. However, in December 2002, the California in digital cinema screens. Supreme Court held that out-of-state Internet In terms of specifically protecting content on users who post DVD copying software on the DVD and videocassettes, there are several Internet cannot be sued in California courts solutions currently in use: unless they have business interests in that state. • CSS (Content Scrambling System): an The decision means that the studios will have algorithm-based method used primarily to to sue individuals separately in their own scramble pre-recorded content on DVD to jurisdictions, rather than en masse in California. prevent unauthorised duplication. A part of the In January 2003, a court in Oslo, Norway, DVD specification, CSS can be used by any DVD cleared teenager Jon Johansen of DVD piracy

Film theft in the UK | 71 charges in a similar DeCSS case brought by the analogue copy protection. MPA on behalf of the main Hollywood studios. In November 2001, Macrovision CEO Bill The charges filed against Johansen were Krepick, in announcing slowing sales, stated brought under the Norwegian criminal code that major studios selectively reduced the section 145.2, which outlaws bypassing number of DVD titles that have Macrovision technological restrictions to access data that copy protection in an effort to cut costs, noting one is not entitled to access. Johansen's that content owners consider copy protection a prosecution was the first time that this law has discretionary expense. been used to prosecute a person for accessing his own property. The data theft law had been Indeed, a number of high profile titles have in used in the past only to prosecute those who recent times been made available without illegally access another's bank or phone records Macrovision protection. This is largely due to or data that they have no lawful right to access. commercial considerations and individual negotiations between studios and Macrovision The Oslo court ruled that Johansen (who was and probably should not be construed as a lack 15 years old at the time) had not broken the of concern over the threat of piracy. However, law by helping to write the DeCSS code for the net result is a greater availability of DVDs Linux systems. This point was contested in the with reduced protection. case, but Norway is not in the EU and therefore the MPA could not rely on the Copyright When it comes to protecting against analogue Directive. Even more significantly, the court recording, the alternative to the proprietary rejected the MPA’s claim that it had the right to Macrovision is the (free) CGMS-A standard that control the way in which an individual viewed is built into the DVD specification. However, as a DVD after purchase. The court raised the discussed in Chapter 4, not all DVD players spectre of consumer rights once again, stating implement the CGMS-A system correctly. As a that ‘someone who buys a DVD film that has result some DVD players/recorders – especially been legally produced has legal access to the those in PAL territories such as the UK – can film.’ copy DVD movie discs onto blank DVDs. According to some estimates, 60% of DVD Norway’s Economic Crime Unit (ECU) appealed players are not doing what they should to stop the loss and Johansen was retried between 2- a DVD recorder copying a DVD movie disc. Low 11 December 2003, again in Oslo. Since cost mass-market machines, usually retailing Johansen's is a test case, it is not unusual for for £50 or less, are the main culprits. the case to be retried on an appeal. However, on 22 December 2003, the appeals court According to the MPA, its member companies upheld the acquittal. The ECU chose to drop have begun enforcement activities to ensure plans to appeal further, accepting defeat. compliance with the CGMS-A specifications amongst manufacturers. However, even if the So the position in some European territories, at specification were enforced amongst all least those few outside of the EU, differs manufacturers, this would not address the considerably. Had Johansen been tried in the millions of machines already installed in homes US, he would have been found in violation of that do not implement the technology the Digital Millennium Copyright Act, as he correctly. may have been if Norway had been in the EU and under the jurisdiction of the Copyright The Macrovision issue also highlights a degree Directive. of underestimation as to the nature of analogue piracy. ‘Digital’ is the buzzword, Another issue is a lack of cohesion in film therefore there is a tendency for anything industry practice as to the importance of

72 analogue to be considered a 20th century It is estimated that there are now 50 different problem. This is not so. Analogue copying of DVD ripping solutions available for free DVDs can be easier, cheaper and far more download on the Internet79, of which the most convenient than digital copying, with very little popular is called DVD Shrink80. These not only loss in picture quality. strip out the copy protection on DVDs, but also allow the user to compress the resulting With the increasing proliferation of DVD recording on to a single blank DVD-R disc as recorders in UK homes (see Chapter 4), millions well as make their own edits of the original of consumers will within the next five years be content. able to copy DVDs by simply running a standard video lead from the analogue output So far, two different products have been of a DVD player to the analogue input of a DVD developed to combat DVD ripping – one from recorder. Moreover, other devices – like PCs and Macrovision (RipGuard) and another from Sony portable digital video players – often do not (ArccOS). Both have to be introduced during implement any analogue copy protection the process of making a new DVD and are schemes. The net result is that the ‘analogue currently being evaluated by the industry. hole’ is likely to become an increasingly When it comes to technical solutions designed important issue into the future.77 to combat Internet distribution of media files – This has been recognised by those involved in and particularly P2P networks – developments negotiating standards for a next-generation DVD are at a relatively early stage. One measure that system to succeed current DVDs. Next-generation has proven effective is the use of so-called DVDs will have vastly larger storage capacity ‘spoofing’. This involves the deliberate compared with today’s discs; this will enable distribution of huge numbers of dummy files them to hold movies (and other content) in a that appear to be counterfeit film copies, but high-definition format. However, Hollywood actually contain nothing, or just a film trailer or studios are determined not to repeat the warning against illegal downloading. Some mistakes made with the current DVD standard. systems can effectively ensure that the spoof Thus, the issue of copy protection – both files are returned at the top of the P2P search analogue and digital – is at the heart of the results. Many downloaders who spend hours current discussions between the studios and the downloading files only to find they are spoofs manufacturers. Some studios are even tend to be put off the practice thereafter. suggesting that next-generation DVD machines This has been taken further by specialist should have no analogue output at all. If companies like Macrovision, MediaDefender and adopted, this would mean that such devices Overpeer, which have been evolving elaborate would not be compatible with most of the legacy technical counter-measures to combat illegal file TV sets currently installed in consumer homes. trading. Media owners must first contract these Meanwhile, the industry has begun to engage companies to protect certain named titles. As with the problem of digital copying of DVDs, soon as these named titles are found on the often termed ‘ripping’. This has been the subject Internet, these companies go to work. The basic of extensive legal efforts through the case principle is to use a combination of the spoof files against 321 Studio78, but the problem now is discussed above with systems that interfere with that most DVD ripping software now available is the download process itself. Initial results suggest not sold through commercial channels by these technical counter-measures can be very companies like 321 at all. Instead, it is being effective. However, it may be some time until the made freely available as so-called freeware by majority of the industry can afford to employ individuals who are difficult to trace. such measures to protect all their content.

Film theft in the UK | 73 Appendix iii: Copyright and Related Rights Directive Regulations 2003 – How the new law affects the film and video industries

• The European Union passed the “Directive on works, but also their transmission over the Certain Aspects of Copyright and Related Internet. The new communication right Rights in the Information Society” (2001/29/EC) includes making a work available in an on 22 May 2001. electronic on-demand service. • On 31 October 2003, the Copyright and The Regulations reformulate the exclusive Related Rights Directive Regulations 2003 rights relating to broadcasting and cable (2003 No. 2498) came into force in the UK. transmission, redefining the broadcasting right These regulations implement the EU’s to include cable transmission and non- Copyright Directive. interactive Internet transmission (scheduled audio or audio-visual Internet services, live The Regulations adapt the basic rights of • webcasts and simulcasting) and deleting the copyright holders to the Internet Age, clarify former exclusive right to prohibit inclusion of a the exceptions to copyright, grant enhanced work in a cable programme service. protection to technological measures, protect Retransmission by cable or otherwise of a electronic rights management information and broadcast is deemed to be a separate act of create new criminal offences to protect works broadcasting. against unauthorised electronic communication to the public and the supply of A new criminal offence is created in relation to tools and services for circumvention of the unlicensed communication of a work to the technological measures. public (s. 107(2A), CDPA). Where a person infringes copyright by an electronic Implementation of the Directive will allow • communication to the public carried out in the the EU and its Member States to ratify the course of a business or to such an extent as to World Intellectual Property Organisation’s prejudice the copyright owner, he commits an Copyright Treaty of 1996. The Treaty (already offence. He is liable, however, only if he knows signed by 42 states, including the US in 2002) or has reason to believe that he is infringing sets the international standard for copyright copyright in the work communicated. The protection. maximum sentence is two years’ imprisonment The Regulations amend the Copyright, Designs and a fine. and Patents Act 1988 (“CDPA”) and came into force on 31 October 2003. The following Fair dealing exceptions (‘permitted summary refers only to provisions relevant to acts’) the film and video industries. For a precise The Regulations provide that, where certain understanding of the new law, direct reference conditions are satisfied, it is not an should be made to the text of the Regulations. infringement of copyright to make a temporary The basic rights copy which is “transient or incidental”. The conditions are that the making of the copy (i) is The Regulations create a broad right of an integral and essential part of a technological electronic communication to the public. It is process; (ii) has as its sole purpose the enabling now clear that right holders have the right to of a transmission of the work in a network control not only the broadcasting of their between third parties by an intermediary or a

74 lawful use of the work; and (iii) has no (s. 71, CDPA) remains excepted from liability, independent economic significance. This but the photograph must be taken in domestic exception protects, for example, certain premises and may not subsequently be dealt telecommunications providers whose with. equipment is used by customers for infringing The cable retransmission of a wireless transmissions on the Internet. It does not affect broadcast remains excepted in certain the liability of the user responsible for the circumstances (s. 73, CDPA). The Regulations transmission. now provide that for these purposes cable The existing fair dealing exception for criticism retransmission includes microwave and review of a copyright work (s. 30, CDPA) is transmission between terrestrial fixed points. limited by addition of a requirement that the Currently, designated, not-for-profit bodies are work has legally been made available to the permitted to copy broadcasts in order to public. The exception for news reporting (ibid.) provide sub-titled or otherwise specially- is tightened by requiring the user to give a adapted copies to handicapped persons (s. 74, sufficient acknowledgment of the copyright CDPA). The Regulations make it clear that such holder, unless it would “for reasons of bodies may, in addition to rental or transfer, practicality or otherwise” be impossible to do provide adapted copies by way of loan. so. Protection of technological measures The making of copies by teachers for purposes of instruction and examination in film and The CDPA already provide protection for copy- television schools (s. 32, CDPA) remains protection measures (s. 296). With the advent permitted, but a sufficient acknowledgement is of digital media and the Internet, such now required, unless this would be impossible technical protection is of great importance to (as above). The exception for instruction is now the video industry. The Regulations limited to that carried out for a non- substantially amend the existing provision, commercial purpose. Similarly, the exception giving much enhanced protection for right for copying of broadcasts by or for educational holders. establishments (s. 35, CDPA) now requires The circumvention of an effective technological sufficent acknowledgement of the broadcast to measure (a copy- or access-control measure or be given and limits the exception to non- a process of scrambling or encryption) applied commercial educational purposes. The revised to a copyright work is a civil wrong (s. 296ZA, section permits electronic transmission of such CDPA). The copyright holder, his exclusive a copy within the school or college concerned, licensee or a person who issues copies of the providing the transmission is limited to the work or communicates it to the public with the premises of the establishment. benefit of such technological protection may The existing exception for time-shifting (s. 70, sue any person who carries out the CDPA) is tightened by a requirement that the circumvention with reasonable grounds to copy be made “in domestic premises”. Such a know that he is pursuing that objective. Those copy may not be sold, hired out, offered or carrying out research into cryptography are not exposed for sale or communicated to the liable, unless the rights of the copyright holder public. This means that copies of films and have been prejudiced. programmes recorded for later viewing cannot An offence is committed by anyone carrying be used for other purposes. Similarly, the taking out the commercial manufacture or of a photograph of a broadcast work from the importation of devices primarily designed, television screen for private and domestic use produced or adapted to circumvent

Film theft in the UK | 75 technological measures, dealing with such an act which is exempted from copyright devices in the course of a business or infringement liability under the CDPA and there distributing them otherwise than in the course is no voluntary scheme to address the issue, the of a business to such an extent as to affect Secretary of State may give directions to the prejudicially the copyright owner (s. 296ZB(1), copyright holder or his exclusive licensee to CDPA). provide to the person concerned the means necessary to carry out the permitted act (s. Similarly, anyone who provides, promotes, 296ZE, CDPA). This does not apply, however, advertises or markets a service the purpose of where works are made available to the public which is to circumvent such measures is guilty on agreed contractual terms through an on- of an offence, where the dealing takes place in demand system. the course of a business or is carried out to such an extent as to prejudice the copyright Electronic rights management owner (s. 296ZB(2), CDPA). The maximum information sentence is two years’ imprisonment and a fine. It is a defence to prove that the defendant did Right holders may include electronic data in a not know and did not have reasonable grounds copy of a work, such as the identity of the for believing that the device or service author or the terms of its use. Where a person concerned enabled or facilitated circumvention knowingly and without authority removes or of effective technological measures. Search alters such rights management information or warrants and forfeiture orders are available as distributes, imports for distribution or with existing illegal decoder (“smart card”) communicates to the public copies of a work offences. thus tampered with, he will be civilly liable to the copyright owner, his licensee or a person Civil liability will arise from dealing with devices issuing copies of the work to the public, on the or services (i) promoted, advertised or same basis as if he had infringed copyright (s. marketed for the purpose of circumvention; (ii) 296ZG, CDPA). This liability arises only if the which have only a limited commercially defendant knew or had reason to believe that significant purpose other than to circumvent; he was contributing to copyright infringement or (iii) are primarily designed, produced by his act. adapted or performed for the purpose of enabling or facilitating circumvention of Enforcement technological measures (s. 296ZD, CDPA). The The Regulations expand the remedies available right holder may sue a person who to right holders in two important respects. manufactures, imports, markets, hires out or First, where a person uses the services of an has in his possession for commercial purposes Internet Service Provider to infringe copyright, any such device, or provides such a service. The the High Court may grant an injunction against right of action extends to any exclusive licensee the service provider to prevent continued of the copyright, to any person who issues infringement, where the service provider has copies of the work or communicates it to the actual knowledge of the user’s infringing public with the benefit of such technological activity (s. 97A, CDPA). Second, a non-exclusive protection and to the owner or exclusive licensee of copyright may sue for infringement licensee of the protection technology. Such of copyright, where the infringing act is directly violations are treated as copyright connected to a prior licensed act of the licensee infringements. and his licence expressly grants to him a right Where technological measures prevent those of action under the section (s. 101A, CDPA). with lawful access to a work from carrying out

76 Appendix iv: Alliance against Counterfeiting and Piracy: Views on the EC Enforcement Directive

The Alliance welcomes the Commission’s • The Directive’s provision on disposal outside intention to legislate on enforcement, and the channels of commerce (Article 13) should wishes to help ensure an effective and be clarified by a Recital, to make it clear that harmonised enforcement of IP law across all goods may not re-enter the distribution chain Member States. This is a brief outline of our (as, eg, by donation to charity shops). main concerns: Destruction of goods (Article 14) should be the • The scope of the Directive (Article 2) is rule, unless the right holder opts for other unclear and should extend to all IP disposal. infringements to avoid a burdensome, two-tier • Courts should have the power to grant enforcement system and prejudice to preventive measures (Article 15) against any development of online services. Also this is similar infringement of the claimant’s rights. inconsistent with Article 41 of TRIPs. • The Directive’s provision on damages (Article • On the right to sue (Article 5), representative 17) is valuable, but recovery of the infringer’s bodies should have standing only where they profits should always be granted to the have actually been authorised by the right claimant in addition to compensatory holder. damages, to ensure deterrence. Pre-established • Presumptions (Article 6) should extend to the damages (as in Canada – and see Article 45(2) subsistence of copyright and (for droit d’auteur of TRIPs)) and exemplary damages (as in countries) the related rights of producers. Ireland) make best use of judicial and investigative resources. • On evidence (Article 7) the Directive should permit the use of reasonable samples to • The criminal law provisions (Article 20) seek establish that a bulk load of goods infringes the to rewrite Article 61 of TRIPs, creating a rights of the claimant. Anonymous evidence subjective test of liability. The law should from hotlines and insiders should, at the penalise knowing or negligent acts of judge’s discretion, be admissible in applications infringement (as per s. 107, CDPA), where for interim measures. direct or indirect economic advantage is sought or substantial damage inflicted. • On evidence protection measures (Article 8) the Directive should refer to seizure of all forms • Technical devices (Article 21) detectable only of evidence (see Article 50(1), TRIPs). The 31- by enforcement officials and those applied day time-limit should run from service of the after manufacture (eg holograms) should be order (as per Article 50(6), TRIPs), not from the protected. “seizure”. The same error affects Article 10(3) • Codes of Conduct (Article 22) for the use of (provisional measures). Any system of optical disc identification codes (an essential guarantees to be harmonised as per new investigative tool) should be mandatory in the Customs Regulation. EU. • The right of information (Article 9) should cover all participants in the supply chain (as per Article 47, TRIPs and Norwich Pharmacal), not just those with commercial motives. Sanctions required for failure to comply with court orders.

Film theft in the UK | 77 Appendix v: Signatories of the Memorandum of Understanding on the Co-operation in the Field of Detection, Investigation and Prosecution of Intellectual Property Rights Offences

The Association of Chief Police Officers of England Wales and Northern Ireland (ACPO) The National Criminal Intelligence Service (NCIS) The National Crime Squad (NCS) Her Majesty's Customs & Excise (HMCE) The Trading Standards Institute (TSI) The Local Authorities Co-ordinating Body on Food and Trading Standards (LACOTS) The Medicines Control Agency (MCA) The Anti Counterfeiting Group (ACG) The British Phonographic Industry (BPI) The Mechanical Copyright Protection Society (MCPS) The Federation Against Copyright Theft (FACT) The Federation Against Software Theft (FAST) The Entertainment and Leisure Software Publishers’ Association (ELSPA.) Anti Copying in Design (ACID) The Business Software Alliance (BSA) The European Anti-Counterfeiting Network (REACT UK)

78 Appendix vi: Glossary controlling access to digital content AACP – Alliance Against Counterfeiting and DSL – Digital Subscriber Line; broadband Piracy technology used in traditional copper-based telecommunications networks. Most common AEPOC – European Association for the type of DSL in the UK is ADSL (asymmetric Protection of Encrypted Works and Services digital subscriber line). BAFTA – British Academy of Film and Television EFF – Electronic Frontier Foundation Arts ELSPA – Entertainment and Leisure Software BBFC – British Board of Film Classification Publishers’ Association BPI – British Phonographic Industry FACT – Federation Against Copyright Theft Broadband – high-speed Internet connection, FDA – Film Distributors’ Association on average ten times faster than normal dial-up connections (see below) HDTV – High-definition television; a television broadcast and playback standard offering more BSA – Business Software Alliance than twice the screen resolution of standard BVA – British Video Association television images

CA Systems – Conditional Access technology HRRC – Home Recording Rights Coalition regulating viewer access to digital pay-TV IFPI – International Federation of the services Phonographic Industry CGMS – Copy Generation Management IIPA – International Intellectual Property System; analogue copy-protection for DVD Alliance Compression – technology enabling large ISP – Internet Service Provider audio-visual or computer data files to be digitally compacted to a smaller size, enabling Kbits/s – Kilobits per second; measurement of easier download/upload Internet and network connection speeds Copy protection – technology designed to Linux – computer operating system designed to prevent unauthorised copying of content provide PC users with a free or low cost alternative CSS – Content Scrambling System; digital copy protection for DVD Mbits/s – Megabits per second; 1 Mbit/s is equal to 1,000 Kbits/s (see Kbits/s) DeCSS – software designed to disable CSS copy protection MPA – Motion Picture Association (international counterpart of the Motion Dial-up – basic Internet service that uses a Picture Association of America) simple telephone line to dial a connection to the Internet MPAA – Motion Picture Association of America Download – transferring of content or data Ofcom – UK Office of Communications from the Internet to a terminal (which can be a P2P Filesharing – peer-to-peer filesharing; PC, personal digital assistant, mobile phone or communications applications in which Internet some other Internet-enabled digital device) users can exchange files with each other Downresolution – downgrading of high- directly definition images during copying PPV – Pay-per-view television DRM – Digital Rights Management; systems for PVR – Personal Video Recorder; consumer

Film theft in the UK | 79 recording device that stores programmes on a hard disk rather than conventional tape. RIAA – Record Industry Association of America Timeshifting – consumer recording of broadcast programming for later viewing. TRIPs – Trade Related Aspects of Intellectual Property agreements Upload – transfer of content or data from a personal device to the open Internet Watermarking – placing of digital identifiers on a piece of audio-visual content; watermarks survive subsequent copying, allowing identification of a copy’s source. WIPO – World Intellectual Property Organisation

80 Appendix vii Alliance Against Counterfeiting and Anti-Piracy Task Force Piracy Lavinia Carey, Chair, Alliance Against Members Counterfeiting and Piracy; Director General, Nigel Green (Chair) British Video Association; Director, Federation Against Copyright Theft Mark Batey (Film Distributors’ Association) The Alliance Against Counterfeiting and Piracy Stephen Bristow (UK Film Council) is a cross-industry pressure group, representing Colin Brown (Cinesite) the video, film, music, games and business Pete Buckingham (UK Film Council) software industries, branded goods manufacturers, publishers, designers and Lavinia Carey (British Video Association) retailers. Included in the membership are Carol Comley (UK Film Council) several industry enforcement bodies, including FACT, BPI APU, ELSPA, BSA, FAST. Dara MacGreevy (Motion Picture Association Europe) The Alliance has been promoting the value of intellectual property rights and lobbying for John McVay (Producers Alliance for Cinema and legislative reforms for the last six years, during Television) which time several new pieces of legislation Chris Marcich (MPA Europe) have successfully been achieved, including the Richard Paterson (bfi) increase in penalty for copyright theft from two to ten years’ imprisonment. It has built up Marc Samuelson (Samuelson Productions) strong relationships with the Trading Standards Nigel Sharrocks (Warner Bros. Distributors) Institute and works with LACORS and the LGA to improve enforcement by local authorities. Margaret Taylor (UGC Cinemas) The Alliance participates in the Patent Office's IP Neil Watson (UK Film Council) Crime Group and is part of the Creative John Wilkinson (Cinema Exhibitors’ Industries IP Forum launched by the DCMS in Association) July 2004. John Woodward (UK Film Council) 167 Great Portland Street London W1W 5PE Observer Tel +44 (0) 20 7436 0041 Emma Cockell (Department for Culture, Media Web www.aacp.org.uk and Sport)

British Film Institute Research and analysis Richard Paterson, Head of Knowledge and Arash Amel (Screen Digest) Project Director of screenonline Ben Keen (Screen Digest) The British Film Institute recognises the dangers of piracy to the financial stability of the film industry. In its operations the British Film Additional research Institute is careful to ensure full copyright clearance is obtained for all its activities. Kern European Affairs

Film theft in the UK | 81 However, it has endeavoured to maintain the where to report incidents of video piracy. right to educational fair use of film material, 167 Great Portland Street recognising that protection of the rights of the London owners of intellectual property have to be balanced with the gains to society of W1W 5PE educational endeavour and creativity from the Tel +44 (0) 20 7436 0041 intellectual property’s reuse. Web www.bva.org.uk 21 Stephen Street London Cinema Exhibitors' Association W1T 1LN John Wilkinson – Chief Executive Tel +44 (0) 20 7255 1444 Email [email protected] The Cinema Exhibitors' Association is the dedicated industry body for those involved in Web www.bfi.org.uk cinema exhibition in the UK. It represents the interests of almost every UK cinema exhibitor British Video Association including Odeon, Vue (Warner), UCI, UGC, Cineworld, National Amusements, Apollo Lavinia Carey, Director General, British Video Cinemas, Ster Century and smaller circuits. Association; Chair, Alliance Against Counterfeiting and Piracy; Director, Federation In their conditions of entry into cinemas, Against Copyright Theft exhibitors remind customers that recording of films and music within a cinema is not allowed. The BVA represents the interests of the home Staff training highlights the importance of entertainment market. Our members include being alert to the possibilities of illegal copying the UK distribution divisions of the major film and the action to be taken. The CEA studios and independents, television encourages cinema staff to patrol cinema companies and independent video publishers, premises when the public is present and plus the manufacturers and suppliers to the member operators follow the industry protocol industry. In all they represent 90% of the UK for receipt, storage and dispatch of films in market. their cinemas. Operators can act as the eyes The BVA supports FACT in its PR and lobbying and ears of the industry, reporting breaches of activities. The BVA has also registered a new copyright rules to the distributor, FACT, local company, the Industry Trust for IP Awareness, a licensing officers and local trading standards non-profit making company limited by offices. The new rules under Section 182 of the guarantee. It is an all industry partnership Licensing Act 2003 will enhance the whose members contribute to the Trust to importance of cinema staff in the fight against create an anti-piracy fund. The approx £1.5 misuse of copyright material. million budget will be distributed between 22 Golden Square contributions to FACT, to the Alliance and to a London national consumer awareness building W1F 9JW campaign that will support the Motion Picture Association's new anti-piracy cinema trailers Tel +44 (0) 20 7734 9551 with press, posters and PR and a 4,000 store Fax +44 (0) 207 734 6147 promotion to increase retail and consumers Email [email protected] understanding of the importance of IP Web Under construction protection, the links with organised crime and

82 Cinesite (Europe) Ltd Film Distributors’ Association Ltd Colin Brown, CEO Cinesite Mark Batey, Chief Executive Cinesite (Europe) Ltd The Film Distributors’ Association (FDA) is a Medius House long-standing member of the FACT Council 2 Sheraton Street and of the cross-industry Alliance Against London Counterfeiting and Piracy. It compiles and W1F 8BH publishes the UK’s Film Print Management Protocol, which seeks in practical ways to make Tel +44 (0) 20 7973 4000 it as difficult as possible for piracy to originate Fax +44 (0) 20 7973 4326 from the UK theatrical sector. The FDA invests Email [email protected] in research, jointly with the BVA and BPI, to Web www.cinesite.com gauge levels of downloading among UK cinemagoers, and also encourages, and contributes frequently to, press coverage of Federation Against Copyright Theft film piracy. Anti-piracy activity is a regular topic Raymond Leinster, Director General at FDA Council meetings and in its dealings with other industry bodies. Jim Angell, Director of Operations 22 Golden Square The Federation Against Copyright Theft Ltd London (FACT) is a non-profitmaking company set up to protect the Film and Broadcasting Industry W1F 9JW against copyright and trademark infringements Tel +44 (0) 20 7437 4383 in the UK. FACT, although not a statutory Email [email protected] authority or public body, is an accepted Web www.launchingfilms.com prosecuting authority in its own right. This has been achieved over a period of 21 years by custom and practice. It has involved FACT in Motion Picture Association – Europe prosecuting major criminals within the film Chris Marcich, Senior Vice President & piracy scene through the criminal courts. It has Managing Director resulted in many custodial sentences of a significant length. In terms of anti-piracy Dara MacGreevy, Vice President & Regional effectiveness, FACT seized nearly 2 million units Director Anti-Piracy of all types of film work in 2003. MPA represents: Buena Vista International, Inc. FACT Ltd Columbia TriStar Films Distributors 7 Victory Business Centre International Inc. Worton Road Metro-Goldwyn-Mayer Studios Inc. Isleworth Middlesex Paramount Pictures Corporation TW7 6DB Twentieth Century Fox International Tel +44 (0) 20 8568 6646 Corporation Fax +44 (0) 20 8560 6364 Universal International Films Inc. Email [email protected] Warner Bros. Pictures International, a division Web www.fact-uk.org.uk

Film theft in the UK | 83 of Warner Bros. Pictures Inc. UK Film Council The MPA supports 34 Anti-Piracy Organisations Chief Executive Officer John Woodward (APO) covering 42 countries in the EMEA 10 Little Portland Street region. The MPA and the APOs implement and London WIW 7JG strengthen existing copyright protection Tel +44 (0) 20 7861 7861 legislation, assist local government and law Fax +44 (0) 20 7861 7862 enforcement authorities in the investigation and prosecution of piracy cases, initiate civil Email [email protected] litigation on behalf of its member companies Web ukfilmcouncil.org.uk against copyright infringers and conduct The UK Film Council is the lead agency for film education outreach programmes regarding the in the UK ensuring that the economic, cultural harmful effects of piracy. and educational aspects of film are effectively Rue du Trône, 108 represented at home and abroad. B-1050 Brussels Belgium Tel +32 2 778 27 11 Fax +32 2 778 27 00 Web www.mpaa.org

Producers’ Alliance for Cinema and Television Chief Executive John McVay 45 Mortimer Street London W1W 8HJ Tel +44 (0) 20 7331 6000 Fax +44 (0) 20 7331 6700 Email [email protected] Web www.pact.co.uk Founded in 1991, PACT is the UK trade association that represents and promotes the commercial interests of independent feature film, television, animation and interactive media companies.

84 Footnotes

1For full details see: http://www.culture.gov.uk/ outputs shall implement CGMS-A in global/press_notices/archive_2004/dcms089_ accordance with a specific European 04.htm. This forum is hereafter referred to as Telecommunications Standards Institute (ETSI) the Creative Industries IP Forum. specification, and that DVD player manufacturers must be more diligent in 2Target as set out in UK National Broadband fulfilling the technical requirements of the Strategy, 2004 available at: http://www.dti. system. The MPA’s member companies have gov.uk/industry_files/pdf/uknational_broadban begun enforcement activities to ensure d_strategy_2004.pdf compliance with the DVD-CCA specifications. 3 There are also additional windows such as in- 8 321 Studios released a product called DVD X flight entertainment and hotel pay-per-view Copy in 2002 and was engaged in a protracted (PPV), which tend to sit between the theatrical legal dispute with Hollywood studios which and video window, as well as a new Internet was finally settled in August 2004 in favour of PPV window, which tends to fall after the the studios. The company claimed that its video release. product was designed solely for consumers to 4 According to the MPA, only one in ten films make back-up copies of their own media and ever gets its investment returned through that this should be legal under ‘fair use’ theatrical exhibition alone. provisions. The Hollywood studio rejoinder 5 HM Customs & Excise seized 342,616 DVDs was that back-up copies are not fair use or fair and 1,151 videocassettes in 2003 according to dealing. The MPA maintains that there is no a House of Commons written answer to Don provision in UK law that would have allowed a Foster, MP, 11 February 2004. However, this 321 Studios-type argument to be mounted in estimate of DVD seizures has been questioned British courts. by the MPA. 9 321 Studios has now gone out of business, 6 This issue has been highlighted in particular by perhaps in part due to the proliferation of free the technical journalist Barry Fox. See software on the Internet that has similar http://www.screendigest.com/events/peve200 functionality to the commercial software it 4.html/NSMH-5QYJW4/PEVE03_ produced. Barry_Fox_text.pdf See also further discussion 10 GfK Gruppe, CD-Writer Study 2003. in the next chapter. 11 See FACT website: http://www.fact-uk.org.uk 7 The MPA maintains that the DVD CSS 12 House of Commons written answer to Don Procedural Specification unambiguously Foster, MP, 11 February 2004. provides that DVD players with PAL or SECAM

Film theft in the UK | 85 13 See http://www.iipa.com/pdf/2003SPEC301 response, the MPAA said it would appeal, and METHODOLOGY.pdf. It is understood that the the matter appeared to be a significant cause MPA is currently reviewing its methodologies. of division in the industry. The Guardian, 5 December 2003. 14 However, the BVA has been commissioning pioneering research designed to quantify UK 25 Viant Corporation, The Copyright Crusade industry losses from Internet piracy (see 2001. section on P2P file sharing later in this 26 See www.yankeegroup.com chapter). 27 See http://www.mpaa.org/MPAAPress/ 15 House of Commons written answer to Don Foster, MP, 11 February 2004. 28 Source: Latens, a CA system manufacturer. 16 See website: http://www.oftel.gov.uk 29 Smart cards are credit card-sized cards with an embedded microchip and data storage 17 The fieldwork was conducted November/ capability. December 2003 by TNS. 30 The Guardian, 13 March 2002. 18 According to TNS survey. 31 The Problem of Piracy Against Conditional 19 Such as DivX and XviD. Access Systems, http://www.aepoc.org/inter/ 20 Los Angeles Times, 7 January 2004. 2.htm 21 Although there are important distinctions 32 Report from the Commission to the Council, between these applications, the basic principle the European Parliament and the European is that they allow multiple users to Economic and Social Committee on the simultaneously download different parts of a Implementation of Directive 98/84/EC of the large file, while at the same time start sharing European Parliament and of the Council of 20 bits of the file already downloaded with others November 1998 on the legal protection of before the whole file is in place. The services based on, and consisting of, applications allow downloads to be stopped conditional access, p.19. and re-started numerous times and 33 One initiative worth mentioning in this context intelligently re-create the original file structure is the work of the European Digital Video from many fragments. Broadcasting group on Content Protection and 22 The main US legal cases on this issue are on Copy Management. This has focused on the appeal and the MPA contends that the idea of an "authorised domain" within the Amsterdam Supreme Court ruling on this did digital in-home network. The idea is to not address the main issue. The US case enhance functionality (such as moving and against the Aimster P2P service was won by copying works) within the domain, but the MPA. prevent unauthorised moves outside the domain (eg unauthorised retransmission over 23 AT&T Research and CIS Department, University the Internet). The domain can extend beyond of Pennsylvania Analysis of Security the main home to cars, vacation homes, etc. Vulnerabilities in the Movie Production and Distribution Process 2003. See 34 For example, the ‘Cinema to Go’ devices from http://www.research.att.com Archos do not recognise the analogue copy protection systems that have been designed to 24 In December 2003, district judge Michael secure DVDs. Mukasey granted a temporary restraining order against the ban, leaving it up to 35 See http://pr.caltech.edu/media/Press_ individual members to decide on the issue. In Releases/PR12356.html

86 36 A study conducted by OTX in conjunction with services, in particular electronic commerce, in the MPA found that European movie the Internal Market ('Directive on electronic downloaders cited their perception of movies commerce') Official Journal L 178, 17 July being too expensive as a major reason for 2000 p. 0001 – 0016 Internet downloading. See http://www.mpaa. 45 See http://www.fact-uk.org org/MPAAPress 46 See FACT news releases: http://www.fact- 37 The MPA argues that the term ‘filesharing’ is a uk.org misnomer and should be acknowledged to be file copying rather than sharing. 47 See letters, The Times, 26 & 28 July 2004. 38 http://www.aacp.org.uk/index.html. The 48 Patent Office press statement 10 August 2004. Alliance is a coalition of British trade The paper Counter Offensive – An IP Crime associations and industry enforcement Strategy is available at: http://www.patent. organisations, including the music, audio- gov.uk/about/enforcement/ipbook.pdf visual, retail, brand manufacturing and 49 www.lacors.gov.uk business and games software industries. It was 50 Proposed Strategy for Local Markets – established in 1999. Its main purpose is to Legislative Proposal, Alliance Against persuade the Government to reform Counterfeiting and Piracy. intellectual property laws and to introduce legislation to strengthen the hand of 51 Within the European Union, Directive enforcement agencies in the battle against 95/46/EC harmonises the conditions of the counterfeiting and piracy. protection of the right to privacy enshrined in the legal systems of the Member States. This 39 According to Shropshire County Council Directive gives substance to and amplifies the sources. principles contained in the European 40 See later section on US copyright law. Convention for the Protection of Human 41 According to interview with Mr Randhawa Rights of 4 November 1950 and in Council of Sukhwant, Vice President of Legal Affairs from Europe Convention No. 108 of 28 January Eros Entertainment. Mr Sukhwant cited the 1981 for the Protection of Individuals with case of a man who was caught 12 times by regard to Automatic Processing of Personal customs authorities at the Heathrow airport Data. Directive 97/66/EC particularises the transporting suitcases full of counterfeit DVDs, provisions of this Directive in the but went unpunished. Mr Sukhwant blamed telecommunications sector. Both Directives both the lack of resources of enforcement apply to processing of personal data on the authorities and the lenient attitude of courts Internet. A basic data protection principle (see towards piracy to explain the high rate of Articles 6(1)(c) and 7 of directive 95/46/EC) is counterfeit goods in the UK. that the personal data collected in any http://www.erosentertainment.com situation should be limited to that which is necessary and relevant to the purpose, for 42 See report of the Whitford Committee, Cmnd example connecting to the Internet and using 6732 (1977) the services provided over it. Directive 43 See Redrow Homes v Bett Bros (House of 97/66/EC specifies this with particular regard Lords, 22 January 1998) to traffic data by prohibiting storage longer than necessary for billing purposes. The 44 Directive 2000/31/EC of the European consequence is that, after erasure of these Parliament and of the Council of 8 June 2000 data, the individual is again anonymous. In on certain legal aspects of information society addition, Article 5 of this Directive obliges

Film theft in the UK | 87 Member States to ensure the confidentiality of 58 DRM – Missing links in the broadband value communications. chain. The Broadband Stakeholder Group. www.broadbanduk.org 52 Ginsburg – WIPO Group of Experts, December 1998 – Geneva – Private International Law 59 www.era.org.uk Aspects of the Protection of Works and 60 www.screenonline.org Objects of Related Rights Transmitted through Digital Networks. 61 See www.ieg-uk.org 53 Prof. Lucas – Aspects de droit international 62 In support of the measures proposed by the privé de la protection d’oeuvres et d’objets de Alliance Against Counterfeiting and Piracy. droits voisins transmis par réseaux numériques 63 Digital Rights Management: Missing links in mondiaux – December 1998 – Geneva. the broadband value chain, Broadband 54 See Chapter 4. Stakeholder Group. www.broadbanduk.org 55 Night vision surveillance was, for example, 64 The British Phonographic Industry Piracy used in the UK by the distributor Warner Report 2003, 16 May 2003 Brothers to protect screenings of Harry Potter 65 The BPI Piracy Report 2003, 16 May 2003. and the Prisoner of Azkaban. However, the 66 For the study, commissioned by the RIAA, Field film was unfortunately camcorded in one UK Research polled 3,218 college students from cinema that had apparently declined to use May 10 to May 24. In the survey, 482 of the the equipment provided. See also discussion in 500 who had used Napster said they later section on local enforcement. downloaded music so they didn't have to buy 56 One of the main exceptions is the work of the CDs and 33% said they had downloaded more Digital Video Broadcasting (DVB) Group’s Copy than 75 songs over the past four months. Protection Commercial and Technical Module More than 40% said their Napster use has had groups. The DVB project is an important “some” or “a great deal of impact” on their “voluntary standards body” formed in part at music purchases. the insistence of the European Commission as 67 In a consumer study Jupiter communications a forum wherein industry could promote the surveyed 2,300 online music users and “harmonious and market-driven development concluded that 46% of Napster users are more of digital broadcasting via cable, satellite and likely to buy music. Billboard, 29 July 2000. terrestrial means, including broadband wireless (MMDS, LMDS, etc.), [and] interactive 68 Forrester Research, From Disc to Download, services”. The DVB essentially operates as a August 2003 “giant patent pool”. While still somewhat 69 http://www.testaankoop.be Euro-centric, DVB has grown to become an international body with over 300 members 70 Entertainment & Leisure Software Publishers (CE, IT, broadcast, content owners, regulatory Association bodies, etc). All DVB specifications have been 71 Online Music Report, published by IFPI 22 adopted by European standards bodies January 2004. See http://www.ifpi.org/site- (mostly ETSI). A number of DVB specs have content/press/20040122.html been adopted beyond Europe. 72 http://www.mycokemusic.com 57 While the Government-sponsored Broadband 73 A ‘white label’ service is a ready-to-go service Stakeholder Group has authored a report on that is supplied on a wholesale basis for DRM, this organisation has very few members another company (in this case Coca Cola) to from the film industry.

88 retail under its own brand. 74 See www.loudeye.com 75 Online Music Report, published by IFPI 22 January 2004. See http://www.ifpi.org/site- content/press/20040122.html 76 Watermarking was successful used to trace leaked ‘screener’ copies back to Academy members in 2004. 77 Although new technical solutions have been proposed, including the use of embedded watermarking technologies, these will involve the inclusion of watermark detectors in all analogue-to-digital converters. No legacy systems are fitted with such detectors. 78 See ‘Copyright protection in the UK‘ section. 79 Although most of these use a very similar underlying ‘engine’. 80 See http://www.dvdshrink.org

Film theft in the UK | 89 90 The UK Film Council is the lead agency for film in the UK ensuring that the economic, cultural and educational aspects of film are effectively represented at home and abroad. creativity encouraging the development of new talent, skills, and creative and technological innovation in UK film and assisting new and established filmmakers to produce successful and distinctive British films enterprise supporting the creation and growth of sustainable businesses in the film sector, providing access to finance and helping the UK film industry compete successfully in the domestic and global marketplace imagination promoting education and an appreciation and enjoyment of cinema by giving UK audiences access to the widest range of UK and international cinema, and by supporting film culture and heritage

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Film theft in the UK Anti-Piracy Task Force: an analysis and recommendations for action