See discussions, stats, and author profiles for this publication at: https://www.researchgate.net/publication/220478904 Piracy in Cyber Space: Consumer Complicity, Pirates and Enterprise Enforcement Article in Enterprise Information Systems · May 2011 DOI: 10.1080/17517575.2010.524942 · Source: DBLP CITATIONS READS 25 239 4 authors: Peggy E. Chaudhry Sohail S. Chaudhry Villanova University Villanova University 58 PUBLICATIONS 521 CITATIONS 66 PUBLICATIONS 1,321 CITATIONS SEE PROFILE SEE PROFILE Stephen A. Stumpf Hasshi Sudler Franklin University Switzerland Internet Think Tank, Inc. 117 PUBLICATIONS 2,263 CITATIONS 3 PUBLICATIONS 35 CITATIONS SEE PROFILE SEE PROFILE Some of the authors of this publication are also working on these related projects: Demarketing Strategies to Resolve the Jeopardies of Undesirable Demand View project All content following this page was uploaded by Stephen A. Stumpf on 05 February 2015. The user has requested enhancement of the downloaded file. All in-text references underlined in blue are added to the original document and are linked to publications on ResearchGate, letting you access and read them immediately. CE: EP PG: sadasivans 17/1/11 08:15 2008 – Style 2 TEIS_A_524942 (XML) RefSty-(V Harvard) Enterprise Information Systems Vol. 00, No. 0, Month 2011, 1–18 Piracy in cyber space: consumer complicity, pirates and enterprise enforcement Peggy E. Chaudhrya*, Sohail S. Chaudhrya, Stephen A. Stumpfa and Hasshi Sudlerb aDepartment of Management and Operations/International Business, Villanova University, Villanova School of Business, 800 Lancaster Avenue, Villanova 19085, USA; bInternet Think Tank Inc, San Francisco, USA (Received 4 May 2010; final version received 15 September 2010) This article presents an overview of the growth of internet piracy in the global marketplace. The ethical perceptions (or lack of) of the younger generation is addressed, in terms of their willingness to consume counterfeit goods on the web. Firms face the task of educating the consumer that downloading music, software, movies and the like, without compensation, is unethical. This awareness is critical for decreasing the demand for counterfeit goods in the virtual marketplace, where a consumer can exhibit a rogue behaviour with a limited fear of prosecution. We address the pyramid of internet piracy, which encompasses sophisticated suppliers/facilitators, such as the Warez group. Recent sting operations, such as Operation Buccaneer, are also depicted to highlight successful tactical manoeuvres of enforcement agencies. An overview of the Digital Millennium Copyright Act and the No Electronic Theft Act is included to debate the controversy surrounding this legislation. A discussion of enterprise enforcement mechanisms and novel anti-piracy technology for cyberspace is provided to reveal some of the tools used to fight the pirates, such as innovations in digital watermarking and NEC’s recently announced video content identification technology. Enterprise information systems and its interdependence on the internet are also demanding new technologies that enable internet investigators to rapidly search, verify and potentially remove pirated content using web services. The quality of service of web services designed to efficiently detect pirated content is a growing consideration for new anti-piracy technology. Keywords: anti-piracy technology; internet piracy; cybercrime; consumer complicity; Warez; Digital Millennium Copyright Act; net act; watermarking 1. Introduction Business managers need to monitor several trends relating to the protection of a firm’s intellectual property on the internet. On the one hand, the internet has presented many companies with the opportunity to explore markets, gather information and sell through the web. On the other hand, this virtual marketplace has been a way for unscrupulous players in an intricate game of cyber crime to infringe a company’s intellectual property rights and channel illicit goods by way of *Corresponding author. Email: [email protected] ISSN 1751-7575 print/ISSN 1751-7583 online Ó 2011 Taylor & Francis DOI: 10.1080/17517575.2010.524942 http://www.informaworld.com 2 P.E. Chaudhry et al. the pyramid of internet piracy. The overall positive growth in global technology, such as internet penetration rates, has also paradoxically created a lucrative distribution channel for the counterfeit trade. Moreover, the augmentation of legislation designed to curb internet piracy, such as the Digital Millennium Copyright Act (DMCA), has ignited controversy surrounding its enforcement, especially the ‘safe harbour’ provisions. The recent divergent outcomes of the litigation filed against EBay for selling counterfeit goods at its internet auction site by both Tiffany’s and Louis Vuitton are testimony to the dilemma-facing firms that goods are sold by way of the internet. In July 2008, after 4 years in the US court system, a US judge declined the liability of EBay regarding counterfeit jewellery sold at its site. However, in June 2008, a French court awarded Louis Vuitton e 38 million as compensation from EBay for failure to prevent the sale of its luxury goods on this internet auction site (Waters 2008; Waters and Tait 2008). Litigation and other law enforcement methods constitute one approach to dealing with internet piracy. Recently, however, enterprises and internet investiga- tors are placing a greater emphasis on anti-piracy technology. Advancements in information hiding techniques, such as digital watermarking and digital video fingerprinting, are making it easier to track digital content back to the content owner. Other technologies are being introduced to prevent piracy of web applications and brand goods over the internet. 2. Turbulent virtual waters: anticipated growth in a sea of piracy Passariello, in her article in the Wall Street Journal, reports that the internet is now the third largest market for the sale and distribution of counterfeits, behind China and Italy, and that companies such as Rolex and Tiffany & Co. have sued EBay to promote more responsible selling at its internet site (Passariello 2004). The counterfeiters have attracted the attention of policymakers, as the sale of fake pharmaceuticals, baby formula, airplane parts, and the like stimulates health and safety concerns. Carol Matlock of Business Week, in her personal interview with Jean-Rene´Fortou, former head of the International Chamber of Commerce, asked what attributed to the dramatic increase in government policy makers’ attention to curbing counterfeit trade (Matlock 2005). In response, Mr. Fortou claims that recent government policy changes are resulting from the rampant growth and scale of the piracy problem, especially since the illicit trade is related to organised crime. Mr. Fortou cites the alarming increase in counterfeit goods that potentially threaten public health and safety, resulting in a broader perception of the scope of a problem which was initially associated primarily with the luxury goods sector. Buzzeo, in his work on counterfeit pharmaceuticals, reports the success of the US Drug Enforcement Administration sting operation, Operation Cyber Chase, in shutting down 200 illegal e-pharmacies that were associated with a sophisticated black market industry. Overall, the increase of fake drugs as a dimension of the counterfeit market is a result of large profit potential, anonymous distribution channels by way of the internet, and price sensitive consumer demand. According to the Food and Drug Administration (FDA) official William Hubbard, ‘some experts are telling us it is more lucrative to sell a counterfeit drug than it is to sell a narcotic such as heroin’ (Buzzeo 2005, p. A20). The problem of counterfeit trade is growing and the seizure statistics of physical goods provided by the US Customs and Border Protection show a change in total Enterprise Information Systems 3 number of seizures in 2005 at 8022 (estimated US domestic value of $93,234,510) to 2009 at 14,841 (estimated US domestic value of $260,697,937) in this 5-year time frame (Intellectual Property Rights, US Customs and Border Protection 2009, p. 6). However, even with this significant growth in seizure data, Chaudhry and Zimmerman (2009) argue that these figures represent just a fraction of the increased volume of counterfeit trade in physical goods since it is estimated that the US Customs and Border Protection authorities search less than 5% of all goods entering the USA. However, these data collected by the US Customs and Border Protection represent physical goods seized at some port of entry into the USA and the problem of counterfeit trade in a virtual marketplace, such as via internet auctions on e-Bay or peer-to-peer downloading, is an activity that many industry associations claim is growing, especially with internet penetration expanding in many global markets, yet the illicit trade in cyber space is difficult to measure. The Internet World Stats (IWS 2008) estimates there are 1,319,872,102 internet consumers in the world (www.in- ternetworldstats.com). The IWS estimates that 676.6 million consumers are located in markets (43 countries) with greater than 50% internet penetration. The Business Software Alliance (BSA) claims that the demand for counterfeit computer software will go up or down as a function of consumer education, law enforcement, the number of new users coming into the market, the ease of access to pirated software and certain external factors, such as political conditions. The BSA also notes elements