US studios target movie sharers under ISP notice-and-notice regime

Industry Canada’s Intellectual Property Policy Directorate recently released a report examining the effects of the current notice-and-notice copyright infringement regime on Internet service providers (ISPs). Once ISPs are notified that infringing activity is taking place through the use of their service, the regime requires that they pass on a notice to the appropriate customer. Excerpts of the report, which was prepared by Paul Chwelos at the University of British Columbia’s Sauder School of Business, appear below. Large and small ISPs diverged in their awareness of "the current status of ISP copyright liability in Canada"….Large ISPs indicated they were aware of the current status of Canadian copyright law, and the majority were aware of copyright law as it pertains to ISPs in other jurisdictions….On the other hand, only 46% of small ISPs indicated that they were aware of the current status of Canadian copyright law as it pertained to ISPs, and very few indicated awareness of other jurisdictions. This difference is reflected in recourse to legal expertise, where all large ISPs either had in-house legal counsel dealing with copyright liability (87.5% of large ISPs) or had sought external counsel for copyright liability (12.5%); in stark contrast, only 2% of small ISPs had internal counsel and only 19% had ever sought external legal advice. Only a minority of firms were aware of subscribing to any form of insurance that included liability for copyright infringement. Typically, these policies had deductibles in the range of $100,000 per incident and included copyright insurance as part of professional liability insurance. Three-quarters of large ISPs are currently following some version of a voluntary notice-and-notice system, versus only 58% of small ISPs. Clearly, NN is not currently universally applied by Canadian ISPs. In addition, NN, as currently practiced, has evolved from the original CAIP/CCTA/CRIA agreement in two ways. First, all ISPs now accept copyright infringement notices via email as well as in writing. Second, some ISPs no longer send a written (or email) acknowledgement back to the rights holder originating the copyright notice. Unfortunately, only large ISPs had what were judged to be reliable records on the number of notices received either on a monthly or yearly basis for any period longer than six months. Three major trends are evident…The number of notices is following a generally upward trend since ISPs began collecting these data (2001). In terms of number of notices received per ISP, the annual growth rate is 77.8% per year for the period 2001-2005. The number of notices received by large versus small varies significantly. On average, large ISPs receive 3.3 times as many notices per high-speed (cable or DSL) subscriber than do small ISPs. There is considerable variance in the number of notices received across ISPs. For large ISPs, the ratio of the max to the min is more than 13:1, indicating that on a per-subscriber basis, some ISPs get more than 13 times as many notices as other ISPs. The range is even larger for small ISPs, a number of which report receiving zero notices. Thus, there is considerable heterogeneity in the number of notices generated per subscriber, both within and across size categories of ISPs. The implication of this difference is that ISPs may bear very different burdens in terms of adhering to a notice-and-notice regime. The relationship between each type of subscribers and the number of infringement notices received was analyzed. Overall, two main results emerge. First, high-speed subscribers (cable and DSL) generate more copyright infringement notices than do dial-up subscribers. Second, large ISPs receive more notices per subscriber than do small ISPs. The total number of infringement notices received by ISPs is increasing over time, at an average rate of 77.8% per year. Analysis reveals that the effects of time differ, however, across subscriber types. In particular, the number of copyright notices received per high-speed subscriber (cable or DSL) has been increasing over time at a steady rate whereas the number of copyright notices received per dial-up subscriber has been falling over time. Three main effects are apparent from this analysis:The number of notices generated per subscriber is higher for cable and DSL subscribers than for dial-up subscribers. As of the start of 2005, the number of notices per subscriber is now approximately equal for cable and DSL subscribers. The number of notices per subscriber is significantly higher for large ISPs than small ISPs. On average, large ISPs receive 2.7 times as many notices per high-speed subscriber as do small ISPs. The number of notices generated per high-speed subscriber has been increasing since 2001 at the rate of 25.3% per year. The number of notices generated per dial-up subscriber has been decreasing since 2001 and it appears that, by 2005, dial-up subscribers have ceased to be a significant driver of copyright complaints for large ISPs. For the most part, ISPs did not keep records of the senders of infringement notices. However, two large ISPs were able to provide a sample of the sources of all notices for two recent time periods (2003-2005) spanning several months….The vast majority of reported notices (96%) originated in the US, either from studios, software publishers, the Motion Picture Association of America (MPAA) or US firms acting on behalf of rights holders that were not revealed. Less than 2% of notices could be linked directly to Canadian rights holders, although it is not known what proportion of notices is ultimately on behalf of Canadian rights holders. Unfortunately, the ISPs could not separate out notices by type of media concerned (e.g., music, movies, television). Since most Hollywood studios represent at least two if not all of these categories of media, it is impossible to classify the type of media within the notices received from these studios. However, qualitative assessment of respondents within both large and small ISPs formed a strong consensus that the vast majority of notices from US studios now relate to movies rather than to music. …Although nearly all ISPs have changed their prices in the last three years, nearly all providers of Internet access priced their offerings very close to their competitors....Given the competitiveness of the Internet access market, it appears likely that prices haven’t increased as a result of notice-and-notice to this point in time. It is possible, however, that absent these notice-and-notice costs, prices of Internet access would have fallen more than they actually have. In many large ISPs, the resources and people who handle infringement notices typically have other duties; in many organizations the "abuse desk" handles copyright notices, as well as issues like spam, denial of service, inappropriate content, etc. Some ISPs suggested that the ability of their abuse departments to attend to these other issues may have been compromised as a result of the increasing number of copyright notices. Consequently, the quality of service experienced by subscribers may be lower than would have been otherwise.

US studios target movie sharers under ISP notice-and-notice regime

Broadcast | March 31, 2006

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