Statement by EFFI to the Ministry of Trade and Industry on the proposed IPR enforcement directive

/ Yleinen / By /

[Finnish original 9th May 2003; translated into English on 27th May 2003.]

Links:

To the Ministry of Trade and Industry

Statement on the proposed IPR enforcement directive

Electronic Frontier Finland – EFFI ry

General remarks

EFFI considers the proposed directive mainly unnecessary since the
current legislation on intellectual property rights already requires that
sufficiently efficient judicial protections are incorporated
into national legislations (e.g. TRIPS). However, because it
seems apparent that the directive is really attempted to be made
into force we want to comment some parts of it.

We are especially concerned of digital products, which are compared in the directive
to e.g. medicines, alcohol, toys and car
parts. We naturally wish that piracy and counterfeits
are efficiently weeded out when it is a matter of
safety and health of individuals. However, we cannot agree with the
assumption that the same rules should apply
also to digital products.

Notably the “studies” behind the proposed directive are not about
safety or health but about digital products. The most used source
seems to be the statistics of the Business Software Alliance (BSA)
regarding the possible markets and employing effects of
computer software. Generally speaking, using material produced
by various interest groups indicates bad administrative
practice. EFFI thinks the commission should have first
conducted politically neutral background studies with impartial
research institutions.

The BSA statistics have among other things severe methodological
problems. For example, the alleged loss figures of software
and media industries are based on assumptions that one
pirated copy would correspond to one purchased copy and that
these imaginary profits would be used to hire new employees. In reality
the media industry also benefits significantly from piracy in
Eastern Europe e.g. because of network effects and brand
dispersion. On the other hand, the media industry does not
really employ directly others than administrative people and
lawyers lobbying new laws like this one. Moreover, alternative
business models for digital products that are not based on
license fees (e.g. open source computer software, various
marketing strategies) have not been taken into account when
calculating the alleged losses.

Law making cannot be a word play

The language used in the proposed directive is especially
worrying. The official documents are widely referenced and they
should therefore be written using appropriate language and
claims should be supported with references to neutral
studies. If the only available statistics and studies are from
various interest groups (for example because of a monopoly situation) one
should be especially careful with the source critique.

This directive does not fulfill these minimum requirements. The
strangest thought in this proposal is connecting piracy to
organized crime and terrorism. A word play like this is nothing
new to the media industry interest groups. The proposed
directive claims without any reference (p. 12) that e.g. “piracy
– – goes hand-in-hand with organized crime”, “…laundering
earnings”, “…are even said to have become more attractive
nowadays than drug trafficing” and “…factor in promoting
crime, including terrorism”. These allegiations have not been
accounted for in any way. We can only wonder the boldness of the
drafters of the proposed directive to rely so strongly on the
political rhetorics of only one party.

To exaggerate a bit, we could argue that one should have more severe
penalties for travelling without a valid ticket in public
transports since the current small penalties for free riding
encourage crime. Let us also remember that drug
trade and terrorism are crimes and see: travelling without
a ticket is connected to terrorism and drugs! With this kind of
reasoning it is of course easier to gain political support for the
legislative initiative. Of course, it was not mentioned that if the price
of the tickets is too high and if the penalties are unreasonable
a part of the passengers will walk or cycle – which might have
beneficial health effects for the society as a whole.

The choice of words creates impressions and impressions become in
time “truths” unless they are questioned. Even though
the language of the directive is in some parts quite humorous it
is still a serious and far reaching matter. Therefore EFFI thinks
that Finland should point out about the language and at least
suggest that the flagrancies in pages 12-13 are written anew.

Detailed comments

Punitive damages (article 17)

Finland and other EU countries have so called full compensation
principle. The occured damage is compensated fully, no more and
no less, unless there are special reasons to settle down the
compensation. For example in copyright violations the starting
point has been the normal licenced price of the product and the
damages have been settled down if the compensation would
have been unreasonably high (e.g. [Finnish] piracy BBS
cases). It is also important to remember that the copyright
holder benefits more from compensation than license sales since
in the case of compensation there has been no need
to pay the production costs or taxes.

The proposed directive diverges from this principle
significantly. According to article 17 the basis for
compensation should be two times the regular licensing fee. There is no
mentioning of any settling principles. Alternatively the article
proposes a compensation that would be based in addition to the
licensing fees to the incomes that would possibly have been
earned without the copyright violation. A proposal like this
would lead to the strange situation that opposing piracy could
become a profitable business. In this form article 17 would
“legalize” the calculations of BSA that could apparently be used
as such for the basis of compensation in legal judgements.

The idea of punitive damages is therefore not only unreasonable
but also possibly against the principles of the criminal law.
EFFI proposes the article to be written
totally anew.

Publication of judgements paid by defendant (article 19)

Article 19 introduces a questionable punitive method: the one who
infringes intellectual property rights should pay for the publication
of the judgement in a newspaper selected by the rights owner. As
a punitive method this conviction of shame is most likely against the
principles set in human rights treaties. The proposed article does
not define how severe the infringement must be and how expensive the
publication may be. Obviously the rights owner has the power to decide these
details. This cannot be said to be neither fair nor according to the
principles of the criminal law (it must be clear what kind of a penalty
follows from a particular crime)

Patented technical protection measures (article 21)

Article 21 would create without sufficient justification one more
legal protection layer to digital products. We don’t see any category
of digital works which would need this new protection layer. At the
moment copyright, technical measures (as in the copyright directive) and
patents cover digital products and computer programs. With the
proposed article 21 the circumvention of technical protection
systems could be intrepreted once again as criminal activity without
any defense options left to those who circumvent.

Obviously the legislator does not understand what technical protection
measures are. In practise e.g. different file formats (Microsoft Office)
and security algorithms (DVD and CD copy protections) include a number
of patents. There is a lively and ongoing EU-wide debate on e.g. when
a private person may circumvent technical protection if legal use of a work
is not possible otherwise. Copyright directive and national legislation has
currently defenses to hackers – though the legislator attempted
to include a similar trick to the national implementation of the copyright directive [which failed to pass the parliament]:
it is allowed to circumvent DVD- and CD-protections if it is not possible
to play the record legally in e.g cars and portable devices. It is also legal
to decompile a file format if the aim of decompilation
is for example interoperability. What happens to these important exemptions
if the proposed article 21 is accepted?

In essence, does article 21 mean that DVD- and CD-copy protections may not be
hacked just because they include patents? In that case article 21
would be in conflict with the basic principle that this directive
would have nothing to do with the contents of the patent and copyright laws.
EFFI thinks that Finland should first and foremost demand the dropping
of article 21. Second, and at the minimum, Finland should require the clarification of the criteria
for circumvention of patented technical protection for legal purposes.
In addition, we can only understand that particular uses of hacking devices
may be in some circumstances illegal but the possession and manufacturing
should be always allowed since they have also legal uses (compare
to guns and regarding copyright photocopying machines, videos and
peer-to-peer networks).

Summary

Finally, we stress that the directive proposal is extremely political
in spite of its technical harmonizing goals. Its implications are not limited
to “industry” but it also affects individuals, small and medium size firms and
all kinds of hobby activity.

It is hardly a coincidence that the directive proposal comes out
just before EU enlargement to Eastern Europe is completed. The requirements
set in this directive concern mostly the new member states, which have
not been negotiating on the contents of the directive. To compare, the beneficiaries
of the proposed directive are mostly multinational companies whose
domicile is either within the current EU or North America.

In the EU parliament the directive is unfortunately on the table of only
the committees of industrial and legal affairs. The draft by Janelly Fourtou,
chairman of the legal affairs committee, reflects quite to the point where
the directive aims at. Fourtou repeats media industry arguments
and concludes in her draft that the proposal would be “too soft to some
forms of piracy”. EFFI’s stand is exactly the opposite: the directive proposal
is first of all too strict and too inaccurate. Therefore it should be
dismissed. At the minimum we require that a substantial part of the proposal is
written anew without promoting any particular interest group.

Helsinki 9th May 2003

Mikko Välimäki
Chairman
Electronic Frontier Finland – EFFI ry
phone +358 50 598 0498
mikko.valimaki@effi.org
fax. +358 9 694 9768

Ville Oksanen
Vice-chairman
phone +358 40 536 8583
ville.oksanen@effi.org

Electronic Frontier Finland – EFFI ry was founded in 2001 to defend
active users and citizens of the Finnish society in the electronic frontier.
EFFI influences legislative proposals concerning e.g. personal privacy, freedom
of speech and fair use in copyright law. We make statements, press releases and
participate actively in actual public policy and legal discussions. EFFI has
been featured in the national media including TV, radio and leading newspapers.
EFFI also works in close cooperation with organizations sharing the same goals
and values in the Europe, United States and elsewhere. EFFI is a founding member
of the European Digital Rights and a member of Global Internet Liberty Campaign.
More information from EFFI’s home pages:
http://www.effi.org/.