The EU Court of Justice in Luxembourg ruled today that national courts can order an online marketplace like EBay to stop infringements if it “played an active role” that would “give it knowledge of or control over the data relating to the offers for sale.”
The case was brought by cosmetics giant L'Oreal, who has been consistently victimized by counterfeit items in recent years.
The ruling means that courts throughout the EU may order companies like eBay to take steps to prevent counterfeits from being sold online. This has been l'Oreal position for some time. As Laurence Balmayer, a L’Oreal spokeswoman put it: “National courts must be able to order companies operating Internet marketplaces to take measures to prevent the sales” of fakes, products outside their original packaging, not-for-sale items and goods imported without the rights-owner’s consent."
There has not been clarity in the EU on whether the courts had such power. Some similar cases in 2009 were rejected by courts, while a French court slapped eBay with a $63M fine. This has led some opponents of legal action against counterfeiting, like the site TechDirt, to picture the ruling as out of step and exceptional. In fact, the courts written rulings have cired out for clarity--not advocated inaction--and the leading court in the U.S. has given to them. But this ruling is definitive and puts some teeth in anticounterfeiting measures aimed at the internet, which has been a critical driver in the recent explostion of worldwide counterfeiting. The U.S. would do well to implement a similar policy.
An eBay spokesman was dismissive of the ruling. "We’ve moved on -- we fulfill most of these conditions now anyways,” said Stefan Krawczyk, EBay’s European government-relations director.
Regular eBay users would doubtlessly beg to differ. A quick glance over the site shows uncountable, obviously faked products like "Mer de la Mer," an obvious knockoff of Estee Lauder 's upscale facial cream "Creme de la Mer."
These sites could easily require proof of production authentication, but such a step has never even been publicly considered by eBay or others.
In an historic, multi-country operation, thirteen persons were arrested for their part in the extremely popular German movie portal kino.to according to the web site torrentfreak.com. More than 250 police and seventeen computer technicians descended on residences and data centers supporting the kino.to site, which attracts four million visitors a day.
Kino.to does not host or stream movies itself, but acts as a “yellow pages” for other sites that do. In Germany the site is fully as popular as Netflix is in the U.S. In Germany it has a traffic rank of 90 as rated by the widely accepted site Alexis By comparison, the movie site Netflix has an Alexis rating of 94.
The site itself was shut down. Users who reach its url are greeted with this message:
“The domain of the site you are trying to access was closed on suspicion of forming a criminal organization to commit professional copyright infringement.”
“Several operators of KINO.TO were arrested.”
“Internet users who illegally pirated or distributed copies of films may be subjected to a criminal prosecution.”
In a statement on the raids the German Federation Against Copyright Theft (GVU) asserted that Kino.to generated “significant revenue” through a “parasitic business model.” The GVU says that kino.to worked closely with the sites it indexed and made available to users.
In the U.S. the move has great importance as a model for the PROTECT IP Act, which recently cleared the Senate Judiciary committee. The bill is strongly supported by movie industry association Motion Picture Association of America, who say the bill will fight “foreign based rogue websites that are stealing America’s creative works and selling them for profit…”
The arrests also differ from recent moves against digital piracy here, which are almost always targeted at closing down pirate websites, but rarely result in arrests. They demonstrate the teeth in EU anti-counterfeiting and anti-piracy laws, teeth which are largely lacking in the U.s.
The Harvard Business Review from April 26, is showing an intriguing and painful video, interviewing film-maker Ellen Seidler. A journalist as well as film maker, Seidler spent a quarter million dollars out of pocket, on a comedy called "And Then Came Lola." The indy production was shown at over one hundred festivals and was critically well received. It earned her no money. Zero. Seidler believes the revenue-producing deals were short-circuited by, as the HBR puts it, an advertising-supported ecosystem of piracy, with legitimate internet companies 'looking the other way.'"
"It's not about free speech, it's about theft," as Seidler puts it in the video.
Cyber warfare is in the news. Graduating—in the public perception--from the realm of xBox and Playstation, it has become suddenly obvious that warfare using hyper-advanced electronics is deadly serious business. News of “kill switches,” military-grade computer viruses like the “Stars” virus attacks in Iran of the last few days, and other exotic-sounding electronic weapons are all over the internet.
A series of events, in other words, have conspired to spotlight this issue But what is emerging is a single, and scary realization: military electronic systems, using components which may already be in our supply chain, could be deliberately sabotaged in future cyber warfare attacks against this country.
“American defense officials have long worried about foreign countries finding a “backdoor” into the Pentagon's sensitive weapons systems.” As Agence France Press reporter Dan De Luce put it last week.
If, outside the military, this sounds like the stuff of science fiction, or utter paranoia…it isn’t. Cyber warfare was highly developed during the Cold War period. It has been highly refined over several decades. However, the asymmetrical wars of the last ten years or so, such as that in Afganistan, have not been about dueling with high-technology, and as a result, cyber warfare has been far from the public’s eye.
But one event in the Middle East has in a blink, re-awakened the world to real digital combat: because that event was, in every expert’s opinion, itself an act of cyber warfare, and a spectacular success at that. The event was the series of attacks of Stuxnet virus against nuclear facilities in Iran.
(As we write, this attack is apparently being followed on by a destructive virus called Stars, which is attacking Iranian government computers.)
“Stuxnet heralds a paradigm shift in cyber warfare…” says the Swedish FOI, a Ministry of Defense research institute, in a report by cyber warfare expert David Lindahl. “It has changed the way we think about cyber warfare conditions in one fell swoop. What has previously purely been the subject of speculation is now a fact.”
But let’s move back in time and get the bigger picture.
On a day, sometime around June, 2009, Iranian technicians at the controversial nuclear facility at Natanz were routinely checking computers reporting on plant operations. The reports showed that all processes were normal. The presence of a heavily fortified ring of military protection around the plant gave, as usual, the added comfort that the plant was physically shielded.
What the technicians did not know was that the plant was in fact at that very minute partially self-destructing under their eyes. At other nuclear facilities the same operational suicide may have taken place over a period of months. At each, the critical controllers, at the heart of each facility, began spinning up the reactors’ centrifuge erratically and wildly, until the plant became essentially inoperable or was purposely shut down.
It’s estimated that one-fifth of Iran’s nuclear capacity was disabled in three waves of Stuxnet attacks between June 2009, and May, 2010 according to the anti-virus firm Symantec.
Early this year, the New York Times and other publications began to piece together the whole of what had happened. In an article in January 2011, the paper revealed that a new, mysterious computer virus, Stuxnet, had been loosed on the nuclear plants, designed to spin up the controllers just as occurred. Meanwhile, according to expert Ralph Langner, the Stuxnet virus code had secretly recorded computer reports of normal operations and fooled the Iranian plant operators by playing the recording back to them. Result: the controllers seemed to be running normally even while they spun to their own destruction. The virus also sent back information recording the success and other data about its attacks.
No one openly admits to being the creator of the virus, but in any case, expert Langner states, “Code analysis makes it clear that Stuxnet is not about sending a message or proving a concept. It is about destroying its targets with utmost determination in military style.” In this regard, the attack was conducted with brilliant precision.
The key point is that, by every account, the creators of the virus knew the vulnerabilities — the backdoor — of the centrifuge controllers well in advance. Without those vulnerabilities, and knowledge of them, no virus could have been created.
Supply chain defense critical: DNA marking the key
Just how the Natanz backdoor became known is unclear, to say the least. No one, so far as we know, is saying that a backdoor was deliberately introduced into the ill-fated controllers there. But the threat is that in the future, backdoors could be smuggled into critical U.S. electronic systems and could indeed lay the ground for future sabotage.
Supply chain insecurity opens the door to those threats. And clearly supply chain protection is the key to defending against them. That points to the critical importance of programs based on Applied DNA Sciences DNA marking: these provide the premier defense against infiltration of our supply chains
There is increasing pressure in Congress to put an end to the promotion of search engine results and advertising promoting piracy and counterfeiting.This week Google came under scrutiny in hearings held by a House Judiciary subcommittee on anti-piracy efforts. Criticism of search engines for the promotion of sites enabling illegal downloads of music and videos has spread to questions about search results yielding information about how and where to obtain counterfeit goods.
Google responded to the pressure last month by announcing some anti-counterfeiting measures, namely that it had shut 50,000 ad accounts in the latter half of 2010, identifying them as sellers of counterfeit goods. And even the huge Chinese search engine, Baidu. characterized by a U.S study as a "notorious market" for counterfeit sales, claims that it is taking steps to better screen advertisers.
But Congress is clearly not impressed with the results of these steps. Meanwhile, other major search sites and online guides offer access to sites trafficking in counterfeit goods as well as the places you can go to buy them. According to one study by the Alliance for Safe Online Pharmaceuticals (ASOP), 95% of online pharmacies are unlicensed or traffic in counterfeit drugs.
Our company can't sell you anything that protects against digital piracy. The wizardry of Applied DNA Sciences so far protects--invincibly--physical products and the intellectual property that makes them possible, not pirated music, movies, or software. DNA authentication, I'll admit, has tough sledding in this area (I'll walk over to the lab and see if they're working on it though!).
So why do we bring it to your attention?
1.2 million job lost by 2015
For one thing, as inhabitants of the planet, we are shocked to learn that 1.2 million jobs annually will be lost to this form of counterfeiting by 2015 in Europe alone. (see below)
More specific to our customers is the fact that the same internet black market which purveys these stolen digital goods also is used to sell and even wholesale physical goods, from clothing to microchips.
Supply chain infiltration
It is also, no doubt, the same internet which facilitates supply chain infiltration, where counterfeiters act much like economic terrorists. And it is probably is used surreptitiously to move large-scale counterfeit product--black market B2B.
Lastly, digital piracy, like the sale of some counterfeit luxury items, is marked by buyer's acceptance. In this way, it is part of what Applied DNA Sciences CEO James Hayward calls a "perfect storm" that is right now stirring a global counterfeiting crisis. It is a crisis, as James Hayward explains, driven by a confluence in the rise of the internet, globalization, an economic meltdown, and a change in social mores all at once.
In all these ways, what is bad for the digital economy is bad for the economy, period.
Pleading for definitive action
That is why we note the warning raised last week by a new study by the International Chamber of Commerce’s BASCAP (Business Action to Stop Counterfeiting and Piracy) initiative predicts that job loss within Europe’s creative industries will increase from 185,000 in 2008 to 1.2 million in 2015. The staggering growth in anticipated job loss has caught the attention of leaders from the film, t.v., and music industries, who are pleading for swift and definitive action to protect the creative industries which employ 6.5% of the total European workforce and contribute 6.9% to total European GDP (approximately €860 billion). “14 million people work in the creative industries in Europe, and at a time of economic and financial crisis it offers growth potential. We have a responsibility to ensure we safeguard jobs and stand up for this workforce." said Arlene McCarthy, MEP.
Proclamations of intent aside, one wonders how Europe can effectively stem the tide of piracy and preserve the jobs and economic value these industries provide. Jeffrey Hardy, ICC BASCAP Coordinator recently stated, “Digital piracy is sweeping through global markets for music, motion pictures and video, television programming, literature and software. In its wake, these creative industries suffer devastating economic losses and an assault on their ability to compensate artists and furnish legitimate employment opportunities. “These dire consequences call for an urgent response by policymakers, consumers and the creative industry itself”.
But holding out hope for sea change in consumer behaviour doesn’t appear to be an effective anti-piracy strategy. That leaves only the route of mandated standards, which are, as in other industries, urgent.
The Paris-based International Chamber of Commerce (ICC) has raised a resounding wake-up call. In one February report, it calls the worldwide explosion of counterfeiting, including intellectual property crimes, “alarming,” and says that the trend upward is “leading many to question whether the global economy can continue to absorb the massive losses that result from IP theft, counterfeiting and piracy.”
The clear implication: anti-counterfeiting measures by business and government are urgent and cannot wait.
A second ICC report flatly predicts that global counterfeiting losses will go to $1.7 trillion by 2015, the first update of a widely cited report in 2008, pegging global losses at $600 billion. That report, by the Organisation for Economic Co-operation and Development (OECD), also in Paris, was based on mid-2000s data, when the world, and especially the internet, was a different place.
This is a crisis, and not one increasing by stages…it is exploding right in our faces, and is increasingly compelling businesses and governments to take action to face the threat.
Counterfeiting trends: the perfect storm
The ICC looks past the sometimes dry-sounding numbers to the social cost of world-scale counterfeiting. In addition to losses for individual businesses, the ICC paints the picture of a global drain on governments, jobs, and economies. Its data shows that counterfeiting deprives governments of tax revenue, destroys millions of jobs, and exposes consumers, companies, and the military to dangerous and defective products. No wonder President Obama in his 2011 State of the Union message, tied anti-counterfeiting measures to economic recovery.
The ICC especially targets the growth of the internet as the force behind an oncoming counterfeiting tsunami, most visibly in piracy of software, music and movies. Our view is rather that we are living through the consequences of a perfect storm: the rise of the internet, the economic meltdown, technologies that empower near-perfect copies, globalization, and a shift in social mores. This is a moment in history where businesses, and government, urgently need to take action.
Anti-counterfeiting and the internet
This is not to downplay the powerful role of the internet. In fact, more than the channel for pirated software, music, and movies that it is, the world wide web has become a global black market in fake goods of all sorts. Last Thursday, Google announced that in the last six months of 2010 alone it had shut down 50,000 advertising accounts for sales of fakes. (see our blog post). This comes on the heels of the U.S. government citing Baidu, China’s largest search engine and thirty-two other web sites as "notorious markets" for fake goods.
Still unknown is the role of the internet in facilitating supply chain infiltration and large-scale movement of counterfeit product.
High time to mandate anti-counterfeiting measures
The ICC study adds statistical weight to what is already being placed front and center by governments and industry. Just last week Senator John McCain announced Senate hearings on counterfeiting, especially in electronics. Vice President Biden chaired a White House conference on the crisis last month. We believe these are the first steps to mandating anti-counterfeiting technologies, like those produced by Applied DNA Sciences. It’s high time.
In a March 15 blog, Google announced a new anti-counterfeit campaign targeting those purveying fakes in Google ads. Kent Walker, company General Counsel, also revealed that 50,000 Google Adwords accounts had been shut down in the last six months of 2010 alone for sales of counterfeit products.
The anti-counterfeiting measures include a new center for reporting counterfeits, and could lay the groundwork by victimized businesses to take further actions. The need for product authentication would loom large in any such actions.
Walker’s announcement follows a U.S. government report labeling China’s largest search engine, Baidu, and thirty-two other web sites “"notorious markets" linked to sales of pirated and fake goods.” And it comes on the heels of a February warning by the Paris-based International Chamber of Commerce that the growth of counterfeit goods has become “alarming,” citing the internet as the major driver in the near future.
The Google campaign was described this way by Walker:
“We’ll act on reliable AdWords counterfeit complaints within 24 hours. In 2009, we announced a new complaint form to make it fast and easy for brand owners to notify us of misuse. For brand owners who use this form responsibly, we’ll reduce our average response time to 24 hours or less.
“We will improve our AdSense anti-counterfeit reviews. We have always prohibited our AdSense partners from placing Google ads on sites that include or link to sales of counterfeit goods. We will work more closely with brand owners to identify infringers and, when appropriate, expel them from the AdSense programme.
“We’ve introduced a new help center page for reporting counterfeits. That way, we aim to make it easier for users and brand owners to find forms to report abuse.”