And the Winner Is...

No, this is not another blog post about the Oscars.  In case you missed it, this week the USTR released its “Out-Of Cycle Review of Notorious Markets.” This used to be published as part of the Special 301 Report which looks at IP violations by U.S. trading partners, but is now published separately. Basically, this is a sampling of some of the “Worst of the Worst” places for copyright infringement and counterfeiting. USTR describes the list as follows:

“The Notorious Markets List identifies selected markets, including those on the Internet, which exemplify the problem of marketplaces dealing in infringing goods and helping to sustain global piracy and counterfeiting.  These are marketplaces that have been the subject of enforcement action or that may merit further investigation for possible intellectual property rights infringements.”

So what’s on the list? The report identifies nine different categories of markets, both online and offline (although mostly online):

• Pay-per-download sites that sell pirated content (e.g. allofmp3 clones)
• Sites that provide links to infringing material (e.g. Baidu, the Chinese search engine)
• B2B & B2C websites (e.g. Taobao)
• BitTorrent Indexing sites (e.g. The Pirate Bay, IsoHunt, Btjunkie)
• BitTorrent Tracker sites (e.g. Rutracker, Demonoid)
• Social media sites and cyberlockers (e.g. vKontakte)
• Live sports piracy (e.g. TV Ants)
• Smartphone software piracy (e.g. 91.com)
• Physical markets (e.g. Harco Glodok in Jakarta, Nehru Place in New Delhi)

The findings here are not surprising to people who follow this issue. However, the fact that the USTR publicly cites the problem has ruffled some feathers. Groups like Public Knowledge have already begun to publicly grumble about the report claiming that the USTR is taking on too much of a law enforcement role. (Of course, it is not just the USTR taking on law enforcement that Public Knowledge objects to, but any government or private sector entity enforcing copyright laws online, as is evidenced by their continued objection to increased enforcement efforts.) Groups like Public Knowledge and EFF also criticize the process by which USTR creates these reports, while not actually denying that any of the examples are incorrect. In fact, Public Knowledge even recently admitted, “PK can’t claim to know whether any services that appear on the USTR’s watchlist would violate US law were it applicable, or whether they violate Chinese, South Korean, or any other country’s laws.”

Public Knowledge may not be sure if these examples are valid, but most of us are. For example, the Bahia Market in Guayaquil, Ecuador is accurately identified as a location where a large number of vendors sell illegal goods. I visited the market earlier this year and can attest to the validity of its inclusion in this list. Even my guidebook, ever wanting to put the best face on the city, described it diplomatically as, “La Bahía, near the Malecón north of Olmedo, is more of a black market. All kinds of goods, from shoes to refrigerators, arrive in a tax-free, semi-legal way.”

The list of online “notorious markets” is equally valid. The growing problem of online piracy with websites like cyberlockers is fairly well-documented. As David Price, Head of Piracy Intelligence reported at a recent ITIF event, copyright infringing use of cyberlockers is responsible for approximately 5.1 percent of global Internet traffic. Neither is the problem of rampant online sports piracy a big secret. For example, a recent article in BusinessWeek detailed the growing problem of live sports piracy and how the impact it has on U.S. industries.  Some online streaming services, such as Justin.TV work with IP rights holders to protect their content and respond to piracy. But many sites (and countries) do nothing.

Of course, some might question why the government is even publishing this list in the first place. Is this like publishing a list of “Best Street Corners to Buy Illegal Drugs?” However, this report does not reveal information that isn’t already widely known. The fact that IP theft occurs in these locations is no secret.

The report also underscores some of the main points we have made before at ITIF: 1) that piracy and counterfeiting are such intractable problems precisely because in many places it is a profitable business (and thus we should try to limit its profitability); 2) that many of these “notorious markets” thrive when government ignores the activity; and 3) that the U.S. needs to look towards new solutions like COICA to fight back at online infringement because existing tools are not enough.

Increasingly copyright infringement should be recognized as a global problem, not just because it happens in every country, but because in a global economy, the losses will be shared by many. When Chris Corbould accepted the Oscar for Visual Effects for the movie Inception (a movie which can easily be found to download illegally online) he thanked his special effects teams in the US, Canada, France, UK and Morocco who all helped to make the final product. This should serve as a reminder to every country that contributes to the creative economy that they have a stake in protecting IP. It should also remind Congress that one reason they should take action domestically is because too little is being done by our international partners, and at least for the near future, we have the most to lose.

So rather than defend the interest of foreign criminals whose actions directly hurt hard working and law abiding American workers and consumers, as Public Knowledge and their allies do, we should be instead asking what next?  What else can we do with this list to protect rights holders? Here’s one idea: use this list to hold recipients of American and multinational (e.g., World Bank) foreign aid accountable. Why are we giving aid to Russia when they openly allow Legalsounds.com and other allofmp3 clones to thrive (and no, the “sounds” are not legal)? Why are we giving aid to China when the vast majority of software consumed there is pirated? This is worse than our prior policy toward tobacco when we subsidized tobacco farmers yet spent millions getting people not to smoke (or the current federal programs that promote excessive cheese consumption to benefit dairy farmers while also running anti-obesity campaigns). So rather than complain that USTR is doing its job by identifying criminal activity that directly threatens America’s economic well-being, we should instead be advocating that it is time to put real consequences behind the list. If you are a nation and you want America’s help, we’re happy to give it, but not if you are stealing from us.