[Commons-Law] File-sharing and piracy linked to terrorism?

[Jeebesh Bagchi]

Article: http://www.kuro5hin.org/story/2003/3/14/234939/956

Testimony of Jack Valenti President and CEO
Motion picture association of america
before the
SubCommittee on Courts, the Internet,
and Intellectual Property
Committee on the Judiciary
U.S. House of Representatives
“international Copyright Piracy:Links to Organized Crime and Terrorism”

March 13, 2003

America’s crown jewels -- its intellectual property -- are being looted.
Organized, violent, international criminal groups are getting rich from the
 high gain/low risk business of stealing America’s copyrighted works. We
 don’t know to what end the profits from these criminal enterprises are put.
 US industry alone will never have the tools to penetrate these groups or to
 trace the nefarious paths to which those profits are put. For these reasons
 it is entirely suitable and necessary that the Subcommittee on Courts, the
 Internet and Intellectual Property of the House of Representative’s
 Committee on the Judiciary hold this hearing and illuminate the nature of
 the problems and the effect on the copyright industries (consisting of
 movies, TV programs, home videos, books, music, computer games and
 software).


The Economic Worth of the Copyright Industries

The copyright industries were responsible in 2001 for some five percent of
 the GDP of the nation. Over the past quarter century, these industries’
 share of GDP grew more than twice as fast as the remainder of the economy.
 They earn more international revenues than automobiles and auto parts, more
 than aircraft, more than agriculture. The copyright industries are creating
 new jobs at three times the rate of the rest of the economy. The movie
 industry alone has a surplus balance of trade with every single country in
 the world. No other American industry can make that statement. And all this
 comes at a time when the U.S. is suffering from some $400 billion in trade
 deficits.

Digital Piracy: The Delivery Dream, the Piracy Nightmare

It would be a serious mistake to take our past successes for granted. While
piracy has been a sad fact illuminating our lives since the blossoming of the
home video entertainment business a quarter century ago, the forms of digital
piracy we now face raise serious, new challenges that we need your help in
addressing.

I must admit, with all appropriate modesty, that we had become fairly good at
combating the old forms of analog video tape piracy. With the help of our
government and international trade agreements, such as the World Trade
Organization’s Agreement on Trade Related Intellectual Property, most
 countries have adopted modern copyright laws. We had been seeing declining
 loss rates in many of the traditional centers of piracy. Despite our
 successes, we were losing close to $3 billion dollars a year.

And then the world changed. Digital technologies, which offer so much in
 terms of enhanced clarity of image and sound, and exciting new ways to
 deliver high quality entertainment directly to people’s homes, also gave
 birth to serious new forms of piracy.

By now, I presume that all of you have heard of our concerns about Internet
piracy – and I assure you, that dialogue will continue. The mysterious magic
 of being able, with a simple click of a mouse, to send a full-length movie
 hurtling with the speed of light to any part of the planet, is a marketing
 dream and an anti-piracy nightmare. Ask the music industry how Internet
 piracy can devastate an industry’s bottom line. As computer modem speeds
 accelerate and broadband access spreads across the United States and around
 the world, more people are gaining the ability to download full length
 motion pictures quickly. The threat to the motion picture industry from
 Internet piracy is growing.

Internet piracy is not the only digital threat we face. Today, I’d like to
 focus on another form of digital piracy – widespread piracy of optical discs
 – CDs, Video CDs, DVDs, and recordable versions like CD-Rs and DVD-Rs. The
 piracy of DVDs and other optical media products is dominated by organized
 crime and increasingly threatens our international markets, which account
 for 40 percent of revenues earned by the filmed entertainment industry.
 Indeed, all industries that rely on intellectual property protection,
 including the music and video game industries, are facing huge losses from
 optical disc piracy, especially in international markets. Microsoft products
 are another favorite target for the pirates.

The motion picture industry seized over 7 million pirate DVDs worldwide last
year. DVD piracy didn’t exist for our industry as recently as 1999.

“Die Another Day:” An Example of Pirates in Action

 The damage from pirated DVDs is enormous. DVD piracy erodes our home video
revenues, but also corrodes revenues from our international theatrical
 business. Pirate DVDs often enter the market months before the release of
 legitimate DVDs – often before a movie is released into the theaters. Let me
 give you just one example. MGM’s latest James Bond film, Die Another Day,
 was released theatrically in major cinemas in the United States on November
 22. The first pirate copy, camcorded from a press screening in the United
 States, showed up in pirated DVD format in Malaysia on November 21. By the
 28th, only six days after its US theatrical release, every major market in
 Asia was already infected with pirate copies of Die Another Day. In Taiwan,
 theatrical release wasn’t scheduled until February 1 to coincide with
 Chinese New Years holidays – normally a big period for cinema sales in that
 part of the world. The pirates had nine full weeks to sell our products in
 pirated form before the film was legitimately released in theaters.

A Snapshot of Optical Disc Piracy Around the World

The problem of large-scale pirate optical disc production began in China in
 the mid-90s. When China cut off the export of piratical discs in the late
 1990s, the pirates packed up their equipment and relocated to more
 hospitable areas where enforcement was lax or absent. Now we are seeing
 major problems with DVD production in Malaysia, Thailand, Taiwan,
 Philippines, and Indonesia. Pakistan, Bangladesh, Ukraine, and elsewhere in
 Central Europe are host to factories replicating pirate copies of music CDs.
 The music industry’s problems today are always a danger sign for us, since
 pirates often start with music and then move on to movies, video games and
 other products.

In the past year, we have also witnessed a major surge of large-scale factory
production of DVDs in Russia. Today there are at least 26 optical plants in
Russia, including at least five that specialize in the production of DVDs.
 The number and overall capacity of these plants has more than doubled in the
 past two years. Nine of these plants are located on property owned by the
 Russian Government.

Pirate DVDs have devastated the local market in Russia. Pirate DVDs have so
saturated the Russian market that the pirates have resorted to selling them
 on the streets by the kilo. Pirate DVDs are sold everywhere – at street
 markets, in kiosks, in retail stores and over the Internet.

Those 26 plants in Russia currently have capacity to replicate about 300
 million DVDs and CDs a year; legitimate demand in Russia is approximately 18
 million units. This excess capacity points to the fact that the Russian
 pirates are targeting export markets – OUR export markets. Piracy in Russia
 poses a major threat to revenues across Europe. In 2002 MPA’s anti-piracy
 operations seized pirate Russian DVDs in markets across Central and Eastern
 Europe. In July a raid at a retail market in Poland turned up over 4000
 copies of pirate discs from Russia. Those discs contained 15 different
 language tracks – from Finnish and Swedish to Greek and Turkish, Dutch,
 Danish, to Indian and Arabic. If bold actions aren’t taken quickly to shut
 down this piracy, American sales of copyrighted works to Western Europe -
 our most lucrative market in the world - will be demolished by these pirated
 imports from Russia. The time to act is now before these criminals further
 build out their distribution networks and alliances throughout Central and
 Western Europe.

Even before large-scale factory production has been brought under control, we
are now seeing the rapid growth of local burning of movies and other forms of
copyrighted content onto blank recordable media – CD-Rs and DVD-Rs. This kind
 of piracy is more dispersed geographically, since the piracy takes place in
 medium to small “labs” with banks of CD burners, but is often still highly
 organized. The retail markets in Taiwan are filled with this kind of pirate
 product; not coincidentally, Taiwan is one of the world’s largest producers
 and exporters of blank optical discs, fueling this problem around the world.

The Organized Crime Connection

Several U.S. government agencies are bringing attention to the link between
organized crime and copyright piracy. The Federal Bureau of Investigation’s
website home page states the following:

“Unlike criminals who engage in other types of criminal activity, those who
commit IP crimes can not easily be categorized. Counterfeiters, software
pirates, and trade secret thieves are as different as the intellectual
 property they counterfeit, steal, and sell. In general, software pirates
 have an acute interest in computers and by extension, the Internet. Many
 counterfeiters hail from foreign countries, such as South Korea, Vietnam, or
 Russia. They are frequently organized in a loosely knit network of importers
 and distributors who use connections in China, Southeast Asia, or Latin
 America to have their counterfeit and imitation products made inexpensively
 by grossly underpaid laborers. There is also strong evidence that organized
 criminal groups have moved into IP crime and that they are using the profits
 generated from these crimes to facilitate other illegal activities. There
 are a number of reasons for the dramatic increase in IP crime in recent
 years. First, many forms of IP can be produced with minimal start-up costs
 making IP crimes accessible to large numbers of people; second international
 enforcement of IP laws is virtually nonexistent; and finally, domestic
 enforcement of IP laws has been inadequate and consequently the level of
 deterrence has been inadequate.”

The link between piracy and organized crime has been widely accepted by the
European Commission, which recently organized a forum to address the
 prevention of organized crime and included a discussion of piracy and
 counterfeiting. Interpol has also acknowledged the link with organized crime
 and established the Interpol Intellectual Property Crime Action Group. Many
 national enforcement authorities, from the United Kingdom to Australia have
 recognized that piracy and organized crime go hand in hand.

The Secretary of State for Northern Ireland, the Rt. Hon. Dr. John REID, last
year announced the Serious & Organised Crime Threat Assessment & Strategy. He
identified as immediate priority areas of criminality: (1) Armed Robbery; (2)
Counterfeit Goods – Intellectual Property Crime; (3) Tobacco and fuel
 smuggling; and (4) Drug Dealing.

Case Examples of Organized Crime
Pirate factories go to great lengths to conceal and harden their operations.
 One raid in October 2001, near Bangkok, revealed an underground tunnel
 linking a factory to a residential house. Pirate products were moved out of
 the factory on a meter-wide, specially installed electric rail system that
 ended under the kitchen sink of a near-by home. The products were trucked
 away from the back of the house, effectively hiding the movement of pirated
 goods out of the factory.

The pirates employ sophisticated security systems, such as hardened front
 doors and surveillance cameras, to delay entry by enforcement officials into
 the factories. These security devices give the pirates the 10-15 minutes
 they need to destroy the evidence of their crimes in vats of acid kept
 specifically for this purpose. Local police have been forced to adopt
 equally sophisticated responses. In the raid on a factory in Thailand the
 police, accompanied by our anti-piracy enforcement team, broke through the
 roof of the factory and rappelled down ropes in order to maintain the
 element of surprise.


Sophisticated Smuggling

The pirates also use highly sophisticated smuggling methods. Macau Marine
Police, working with Hong Kong Customs, intercepted two submerged,
 un-powered, purpose-built “submarines” in two, separate raids in April and
 May 1999. These submarines were towed behind fishing boats and had ballast
 and compressed air tanks that enabled the sub to be raised and lowered. If
 enforcement officials intercepted the fishing vessel, the tow line could be
 cut, the barge’s location marked with GPS positioning, and later recovered
 when the coast was clear. In these cases, however, the authorities, relying
 on sophisticated intelligence, knew what they were looking for and were able
 to recover 174,000 pirate optical discs in one seizure and 73,000 in the
 second. These cases demonstrate the scale and level of sophistication that
 criminal syndicates employ to evade detection. Traditionally, such methods
 have been reserved for the smuggling of drugs and other contraband,
 including firearms.

Pirates use other ingenious methods to smuggle their products. The
 International Federation of the Phonographic Industries, in a raid with
 Polish Customs last year, intercepted a car suspected of transporting pirate
 CDs from Russia. When the authorities removed the car’s fender, they found a
 hidden compartment full of pirated CDs. MPA has found hidden compartments in
 shipping containers, stacks of DVDs concealed in bags of asphalt, and
 ingenious concealed cavities in what appeared to be stacks of flattened
 cardboard boxes.

Sometimes the pirates try to ship pirated products by disguising them as
 legal products. A law enforcement official in Australia thought he had a
 shipment of blank DVDs – until he pealed back the label on one of the copies
 – and uncovered a shipment of pirated copies of the film “Ali.”

With the cooperation of major express mail delivery services, we have made
progress in cutting down the shipment of pirated DVDs from Malaysia. In a
 major raid last July in Penang, Malaysia, we discovered 418 separate parcels
 containing about 10,000 pirate DVDS destined for Australia, the Middle East,
 Europe and even the United States.

Violence and Intimidation
Pirates also employ violence and intimidation. A raid on a street market in
Malaysia last summer turned into a riot. A vehicle driven by the pirates
 rammed the van transporting the Malaysian enforcement officials and MPA’s
 anti-piracy investigators to the raid. Bat wielding pirates attacked the
 enforcement team. Only after the Malaysian enforcement officials fired their
 weapons into the air did the crowd disperse.

Pirates have directly threatened Government leaders. Last year, the President
 of the Municipal Council in a city in Malaysia received a personal death
 threat along with a threat that his daughter would be raped if the crackdown
 on illegal VCD traders continued. The Minister of Domestic Trade and
 Consumer Affairs in Malaysia also received a personal death threat.

In the Netherlands two years ago, our local program helped smash a
 sophisticated and violent criminal organization that was distributing
 compilation pirate optical discs under the HiteXplosion and MovieBox labels.
  The discs contained monthly compilations of interactive games, movies and
 music. Two of the pirates had organized the torture of two associates for
 under-reporting their sales of pirated CDs and DVDs. The two were
 subsequently sentenced to four and a half year prison terms on charges of
 extortion and accessory to kidnapping and attempted assault.

In the UK, there is increasing evidence that Chinese crime gangs control much
 of the pirate DVD business in London and the South East. Illegal immigrants
 have, it appears, been pressed into selling pirate DVDs by Chinese human
 traffickers (known as Snakeheads) to pay off family debts to the gangs.

Governments Note Links to Terrorism

Mr. Chairman, let me commend to your attention an article by Kathleen Millar
 in the November 2002 issue of US Customs Today entitled “Financing Terror:
 Profits from Counterfeit Goods Pay for Attacks.” With your permission, I
 would like to enter this article into the record. The article outlines the
 “close connections between transnational crime and terrorism.” It states
 that the participants at the 1st International Conference on IPR hosted by
 Interpol in Lyon, France in 2001 “all agreed the evidence was indisputable:
 a lucrative trafficking in counterfeit and pirate products – music, movies,
 seed patents, software, tee-shirts, Nikes, knock-off CDs and ‘fake drugs’
 accounts for much of the money the international terrorist network depends
 on to feed its operations.” The article concludes that “The new link between
 commercial-scale piracy and counterfeiting has redirected public attention
 in 2002, and law enforcement agencies like Customs and Interpol are going
 after the organized crime syndicates in charge of what was too often viewed
 as a “victimless crime.” September 11 changed the way Americans look at the
 world. It also changed the way American law enforcement looks at
 Intellectual Property crimes.”

The Police Service of Northern Ireland’s (PSNI) Anti-Counterfeiting and
Racketeering Unit also reports that paramilitary organizations in Northern
Ireland regard counterfeiting as their preferred fund-raising option.
 According to the PSNI, these paramilitary groups last year made specific
 threats against officers involved in anti-piracy raids at Newtownards Market
 after PSNI officers had seized over £50,000 worth of counterfeit goods,
 including DVDs.

An Appeal for Assistance

To deal with this kind of organized crime, MPAA and our fellow copyright
associations, need the help of governments – both here and abroad. It is
 simply not possible for a private sector organization to penetrate this kind
 of organized, criminal endeavor without the help of governments. Governments
 need to dedicate the same kinds of legal tools to fighting piracy that they
 bring to other kinds of organized crime: money laundering statutes,
 surveillance techniques, and organized crime laws.

We also need your help to let foreign government officials whom you meet here
 or when you are abroad, know that inaction is not an option in the fight
 against piracy. The continued vitality of the copyright industries, one of
 America’s signature industries, is at stake.

We need our enforcement agencies to help train and work with foreign
 enforcement agencies to stem the flow of piracy across borders.

We also need the continued assistance of all the agencies that make up the
“country team” at American embassies abroad. Ambassadors and their staff from
State and Commerce have done outstanding jobs in offices from Moscow to
 Taipei in helping press for better laws and better enforcement. They help
 deliver the message that failure to address these high levels of crime has
 consequences for our bilateral relationships. The traditional enforcement
 agencies – Customs and legal attaches – are also playing an important role
 in some countries in engaging their counterparts in dialogue, in improving
 coordination among enforcement agencies around the world, and in training
 foreign law enforcement in all aspects of fighting organized crime –
 including copyright theft.

Recently negotiated trade agreements are playing a crucial role in raising
 the standards of copyright law and enforcement around the world. The Office
 of the US Trade Representative has done an excellent job in the newly
 negotiated FTAs with Chile and Singapore incorporating provisions that raise
 the standards for copyright protection to the level of US laws and help
 provide the tools we need to combat this menace. The agreements also help
 open markets – and the more open the market, the less the incentive for
 piracy. I hope I can encourage you to support these Free Trade Agreements
 when they come before Congress later this year.

Entertainment Industry Coalition for Free Trade

I’m pleased to announce that in recognition and support of the value of trade
agreements in helping to move our international agenda forward, we will be
launching at noon today an Entertainment Industry Coalition for Free Trade.
 This coalition brings together a wide range of entertainment industries and
 associations – films, music, entertainment software, theater owners, and
 television programmers. We hope that many of you can join us at noon today
 as we launch this Coalition whose main objective is to spread the word that
 trade matters to our industries.

In Conclusion

Large, violent, highly organized criminal groups are getting rich from the
 theft of America’s copyrighted products. Only when governments around the
 world effectively bring to bear the full powers of the state against these
 criminals can we expect to make progress. Only when industry and governments
 join forces to fight these organized groups will we succeed in protecting
 one of the jewels in America’s trade crown. A singular truth exists in the
 movie industry: “If you can’t protect what you own, you don’t own anything.”




--
Sunil Abraham, CEO
MAHITI Infotech Pvt. Ltd.
'Reducing the cost and complexity of ICTs'
314/1, 7th Cross, Domlur
Bangalore - 560 071 Karnataka, INDIA
Ph/Fax: +91 80 4150580. Mobile: 98441 01150
sunil at mahiti.org http://www.mahiti.org





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