OFFICE OF TRADE NEGOTIATIONS

for trade matters

SPECIAL OTN Update

February 9, 2012

SOP A Put on H ol d
A congressional vote on the anti-piracy bill SOPA, the Stop Online Piracy Act (SOPA) was shelved on January 16. This headed off the threats made by a number of major websites such as Wikipedia, Reddit, Mozilla, WordPress and Tucows to institute a blackout on January 18 in protest of the proposed bill.1 The proponents of SOPA have decided to re-examine and possibly refine the bills language to ensure that it is more palatable for the myriad of technology companies and interest groups that have vehemently opposed its principles. Opponents of the bill fear that it will negatively impact the openness of the Internet which is increasingly central to innovation. On the other hand supporters of the bill believe it will protect US innovation, revenues and jobs. SOPA has its origins in Hollywood where the major film and music industry executives conceptualised the provisions of SOPA and lobbied it to Congress for its enactment. These proponents are of the view that the US loses millions through internet piracy of protected content such as music, videos and movies. Furthermore, there is a public health and safety concern regarding the trafficking of inherently dangerous goods and services such as counterfeit prescription medication and those intended for use in a military and a national security application.2
OTN UPDATE is the flagship electronic trade newsletter of the Office of Trade Negotiations (OTN), formerly the Caribbean Regional Negotiating Machinery (CRNM). Published in English, it is a rich source of probing research on and detailed analyses of international trade policy issues and developments germane to the Caribbean. Prepared by the Information Unit of the OTN, the newsletter focuses on the OTN, trade negotiation issues within its mandate and related activities. Its intention is to provide impetus for feedback by and awareness amongst a variety of stakeholders, as regards trade policy developments of currency and importance to the Caribbean. http://www.crnm.org

SOPA was crafted to be wide in scope as it endeavours to protect US interests at home and abroad. It recognises the importance of Intellectual Property (IP) to the US economy as it relates to revenue, jobs and in particular the entertainment industry. The bill also facilitates the possibility of preventing foreign infringers of US Intellectual Property Rights from accessing or raising US capital for business ventures whether through US capital markets or through US investors. Section 107 of SOPA requires the Intellectual Property Enforcement Coordinator (IPEC) working in conjunction with other agencies to identify and conduct an analysis of

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notorious foreign infringers whose activities cause significant harm to holders of intellectual property rights in the United States. In carrying out this duty, the Bill further indicates that the IPEC shall provide a Report to Congress that includes, inter alia, 1. an examination of whether notorious foreign infringers have attempted to or succeeded in accessing capital markets in the United States for funding or public offerings, and
2.

A discussion of specific policy recommendations to deter the activities of notorious foreign infringers and encourage the foreign businesses to adopt industry norms that promotes the protection of intellectual property globally.

Domain Names (websites) or Domain Names Servers from translating Domain Names to unique IP addresses, a core function and the very foundation of the internet. However, there is a concern that the DNS-blocking mechanism violates the First Amendment of the U.S. Constitution with respect to freedom of speech5. DNS-blocking prevents access to an entire domain name, not just a specific URL and could therefore block all content, both infringing and non-infringing. The DNS-blocking mechanism is proposed as a key provision of the bill in the fight against online piracy, but will be scrapped until the U.S. House Judiciary can further examine the issues surrounding this provision. The White House has also commented on SOPA and a similar bill called Preventing Real Online Threats to Economic Creativity and Theft of Intellectual Property Act (PROTECT IP Act or PIPA). These bills have been receiving wide support within the US legislature and from major copyright and trademark owners, particularly those in the film, music, pharmaceutical and book publishing industries. The White House has made it clear however that the US President could veto any bill that reduces freedom of expression, increases cybersecurity risk, or undermines the dynamic, innovative global Internet. 6

The recommendations would further examine whether notorious infringers that engage in significant infringing activity should be prohibited by the laws of the United States from seeking to raise capital in the United States and would also examine whether the United States Government should initiate a process to identify and designate foreign entities from a list of notorious foreign infringers that would be prohibited from raising capital in the United States. In the US there already exists a number of copyright and IP laws including the Digital Millennium Copyright Act of 1998 (DMCA).3 The DMCA prohibits persons from gaining unauthorised access to a copyrighted work by circumventing technological protection measures put in place by the copyright owner designed to control access to the copyrighted material. If it is determined that a technological device was used for circumvention and violates the DMCA, the device can be seized and or forfeited by U.S. Customs and Border Protection (CBP).4 Advocates of SOPA are adamant that the existing IP laws do not go far enough to protect US IP interest, in particular from foreign entities, and do not have the reach to actively discourage or prosecute these entities. The enactment of SOPA was halted only days after it was announced that the controversial Domain Name System (DNS) blocking mechanism was thought to be violating U.S. Constitutional rights.

SOPA Provisions
The key provisions of SOPA can be summarised as follows: i. It authorises the US Attorney General to seek court orders against foreign Infringing Internet websites that conduct business in the United States or are accessed by US residents that are committing or facilitating online piracy, to cease all activities constituting Intellectual Property (IP) offences. Internet Service Providers (ISPs) and Domain Name System (DNS) providers would be required to apply the (DNS) blocking methods described above to its subscribers attempting to access any foreign infringing site that is accused of copyright infringement. The ISPs and DNS providers must take action within 5 days after being served with a court order to shut down the infringing site. Online advertising networks, payment facilitators, search engines and ISPs, complying with a court order from the US Attorney General to enforce the

ii.

iii. The DNS provision in Section 102 requires US Internet Service Providers (ISPs) to block their subscribers from accessing

OTN UPDATE is the flagship electronic trade newsletter of the Office of Trade Negotiations (OTN), formerly the Caribbean Regional Negotiating Machinery (CRNM). Published in English, it is a rich source of probing research on and detailed analyses of international trade policy issues and developments germane to the Caribbean. Prepared by the Information Unit of the OTN, the newsletter focuses on the OTN, trade negotiation issues within its mandate and related activities. Its intention is to provide impetus for feedback by and awareness amongst a variety of stakeholders, as regards trade policy developments of currency and importance to the Caribbean. http://www.crnm.org

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provisions in the bill, will have immunity from suit and liability from entities facing prosecution. Furthermore, should one of these complying businesses, of their own initiative, and without a court order, decide to cease doing business with an entity that is allegedly committing or facilitating IPR violations, it will also have immunity from suit. The bill also absolves service providers of any liability once they have complied with a court order to discontinue service to an entity which is circumventing or using by passing tactics. iv. Provisions allow for any Internet service provider to accept good faith complaints by IP owners once the necessary proof is provided as required by the Bill to take action against an infringing entity before the issuance of a court order. The bill provides for a reversal or vacation of a court order by the accused entity once proof is presented of no wrong doing. A petition must be made in the US court system to reverse the court order. xi. vi. For websites accused of copyright infringement through a court order, the Attorney General (AG) can order payment providers such as: PayPal, Visa and Mastercard; online advertising networks, search engines such as Google, Microsoft and Yahoo; ISPs, and domain name registrars to stop doing business with those alleged offending websites. For the service providers to manage the notification process, the bill requires that each service provider designates an agent and register him or her with their local copy right office. This person will act as the liaison and company representative between the US AG office, IP owners, its customers and their company. The Bill also facilitates the possibility of ensuring that foreign infringers of US Intellectual Property Rights dont succeed in accessing US capital for business venture whether through the US capital markets or US investors. The Bill in Sec. 202 seeks to amend Section 2320 of title 18, United States Code by criminalising the trafficking, import, export, distribution and production of counterfeit drugs such that the offender may be fined not more than $2,000,000 or imprisoned not more than 10 years or both. A repeat offender may be fined not more than $5,000,000 or imprisoned not more than 20 years or both. ix. To protect public health SOPA makes illegal the online distribution of counterfeit drugs. It also makes illegal the trafficking of false or misleading labels on goods or packaging of any nature. To protect US businesses from Foreign espionage the provisions in the Bill amends the US Code on Foreign and Economic Espionage to incur more severe penalties for individuals and companies. The theft of trade secrets or economic espionage now gets an individual 20 years instead of 15 and a fine between $1,000,000 and $5,000,000 instead of not more than $500,000. Companies will now be fined not more than the greater of $10,000,000 or 3 times the value of the stolen trade secret, instead of $10,000,000. It empowers copyright owners whose IP rights have been breached to sue both US and foreign websites that are in direct violation of US IP laws and regulations. Finally, persons can be subject to criminal prosecution for streaming copyrighted works without permission over the Internet. For a first offence of streaming 10 pieces of music or movies within a six-month period, can result in up to five years imprisonment. To ensure compliance, the Attorney General can bring action against any entity that knowingly and wilfully provides or offers to provide a product or services designed or marketed for the circumvention or bypassing of measures used to prevent access by US subscribers to foreign infringing sites.

x.

v.

xii.

vii.

Dangers of SOPA
Although SOPA is designed to combat online piracy its detractors emphasize that inherent in its provisions are various forms of online censorship and the openness of the Internet must be safeguarded for innovation to thrive. Freedom of expression and innovation are closely linked and it is argued that SOPA threatens to introduce legislation that would severely affect both.

viii.

OTN UPDATE is the flagship electronic trade newsletter of the Office of Trade Negotiations (OTN), formerly the Caribbean Regional Negotiating Machinery (CRNM). Published in English, it is a rich source of probing research on and detailed analyses of international trade policy issues and developments germane to the Caribbean. Prepared by the Information Unit of the OTN, the newsletter focuses on the OTN, trade negotiation issues within its mandate and related activities. Its intention is to provide impetus for feedback by and awareness amongst a variety of stakeholders, as regards trade policy developments of currency and importance to the Caribbean. http://www.crnm.org

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to seek, as a first resort, some sort of diplomatic solution rather than pursue prosecution. As an example, Google continues to be forced by the Chinese Government to adhere to its censorship laws particularly on filtering search results for certain subject matter despite the companys principles on freedom of expression and the free flow of information. Caribbean businesses which utilise website hosting services in the US would be subject to SOPA if the Bill is passed into law and could result in loss of web presence and proprietary information and data resident on US servers. The only recourse for Caribbean firms would be to challenge the action in the US courts which has major financial implications as it relates to legal fees, loss of use and lack of access to important company information. Caribbean content providers and users would be severely constrained by SOPA in accessing and distributing US content and ideas, which can aid in generating new innovative ideas in the Caribbean. Sadly, in the region there is a culture of online piracy and a general lack of respect for IPR. Bootleg copies of the latest movies and music are displayed publicly for sale in almost every Caribbean capital. Our countries are already compelled like other developed counterparts to enforce International IPR agreements. SOPA would serve to increase the legislative requirements with which the region has to comply. There will have to be a paradigm shift in the Caribbeans attitude towards IPR to avoid the negative repercussions of not respecting the IPR of others. Caribbean firms with an existing business model that is heavily dependent on US content would now have to acquire it legitimately, which could result in increased operating cost. SOPA attempts to protect the creator of the content and determines how that content can be used to create additional content, and therefore impacts how foreign entities can profit.

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Detractors of SOPA are further convinced that the bill raises serious concerns regarding Internet security especially as it relates to Domain Name Systems (DNS) filtering. They believe that DNS filtering will be ineffective for that purpose and will interfere with cross-border exchanges of data and services which is a critical element for innovation and social development in an information society. Opponents of SOPA further state that technology start-ups and online companies may seek greener pastures and relocate outside the US as SOPA could create a more onerous environment for them to operate.

Possible Impact on the Caribbean

To the extent that there is validity in the arguments presented by SOPA detractors, SOPA could have a similar effect regarding the stifling of innovation and social development in the Caribbean as in the US. It could also negatively impact trade in cross-border data and services as argued in Googles May 2008 Congressional testimony on freedom of expression.7 In its testimony, Google stated that digital barriers to the free flow of information are equivalent to traditional trade barriers which are illegal under WTO rules. When the flow of information is blocked innovation suffers. Caribbean firms operating internet sites or portions of internet sites which provide online business services to residents of the US that commit offences as defined under SOPA could face the threat of prosecution by the US. Given the Caribbeans heavy dependence on US goods and services, and the significance of the USs geo-political influence on the Caribbean, the threat of prosecution for Caribbean firms could be comparatively higher than for Chinese businesses guilty of the same offences. Chinas status and importance in the world economy could compel the US government or US companies

Opportunities
The passing of SOPA into law could benefit the Caribbean and its firms as it may result in an exodus of US online companies to the Caribbean due to the Caribbeans similar time zone, similar language requirements and satisfactory IT infrastructure. This could lead to technology, skills and knowledge transfer while providing business opportunities for Caribbean firms and ICT professionals. Caribbean firms, such as Lime and Fujitsu, which have

OTN UPDATE is the flagship electronic trade newsletter of the Office of Trade Negotiations (OTN), formerly the Caribbean Regional Negotiating Machinery (CRNM). Published in English, it is a rich source of probing research on and detailed analyses of international trade policy issues and developments germane to the Caribbean. Prepared by the Information Unit of the OTN, the newsletter focuses on the OTN, trade negotiation issues within its mandate and related activities. Its intention is to provide impetus for feedback by and awareness amongst a variety of stakeholders, as regards trade policy developments of currency and importance to the Caribbean. http://www.crnm.org

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The influence of the US online businesses will likely continue to influence the debate on SOPA. Hopefully, what will emerge will safeguard against any perceived or real negative implications whilst preserving the valid interest of intellectual property protection.

Analysis done by Derek E. Browne, IT Specialist, Office of Trade Negotiations (OTN), CARICOM Secretariat.
ENDNOTES:

recently launched their Cloud services operations with server farms located in the region, stand to benefit tremendously as they can offer web, data and other online services to US firms looking to escape the onerous environment of the US. Some US firms have already started moving their Cloud services, particularly their data centre services off shore, or seeking foreign companies that provide like services. Currently, there are two major reasons for this exodus the US PATRIOT Act, and data privacy laws which are less protective of consumer and company data than legislation found in other jurisdictions.8 The US PATRIOT Act empowers US Home land security agencies by dramatically reducing restrictions on law enforcement agencies' ability to search telephone, e-mail communications, medical, financial, and other records which is a major concern for companies that provide online services. These companies would like to avoid facing legal issues regarding the sovereignty of data retained in data centres for example when information is created in one jurisdiction and stored in another. SOPA, if passed, can be the third reason for the continued exodus of US companies seeking Cloud services off shore, which can provide new opportunities for Caribbean firms. SOPA can be an opportunity for the Caribbean to focus on developing and using its own original content or even using content originating from outside of the US. The Caribbean Cultural industries can be an immediate beneficiary of such a thrust which could provide the impetus for the much needed investment in the Caribbean Cultural industries. The Caribbean can become a major player in the world as a supplier of meaningful knowledge by contributing valued local content online. The Caribbeans knowledge of various plants and their medicinal properties, as well as herbal remedies immediately comes to mind.

. On January 18, 2011 Wikipedia did however move its Englishlanguage content offline in protest of SOPA for a 24 hour period. . Section 202 of the SOPA bill seeks to address internet trafficking of dangerous goods and services through the amendment of Section 2320 of title 18, United States Code.
3 2

. The Digital Millennium Copyright Act, 1998: http://www.copyright.gov/legislation/dmca.pdf . US Customs and Border Protection, (2009, October, p 12, para.5, 1-10). What Every Member of the Trade Community Should Know About: CBP Enforcement of Intellectual Property Rights. Retrieved February 12, 2012, from: http://www.cbp.gov . Mack, Lauren. 2011. DNS Filtering to fight Internet Piracy violates the First Amendment, JURIST. http://jurist.org/dateline/2012/01/lauren-mack-DNS-filtering.php Retrieved on January 13, 2011 . U.S. White House response on SOPA. Retrieved February 15, 2012, from: https://wwws.whitehouse.gov/petitiontool/response/combating-online-piracy-while-protecting-openand-innovative-internet
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. Google's May 2008 Congressional testimony on Promoting Free Expression on the Internet. Retrieved February 15, 2012, from: http://googlepublicpolicy.blogspot.com/2008/05/promoting-freeexpression-on-internet.html
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. United States Patriot Act. Retrieved February 15, 2012, from: http://www.fincen.gov/statutes_regs/patriot/index.html

OTN UPDATE is the flagship electronic trade newsletter of the Office of Trade Negotiations (OTN), formerly the Caribbean Regional Negotiating Machinery (CRNM). Published in English, it is a rich source of probing research on and detailed analyses of international trade policy issues and developments germane to the Caribbean. Prepared by the Information Unit of the OTN, the newsletter focuses on the OTN, trade negotiation issues within its mandate and related activities. Its intention is to provide impetus for feedback by and awareness amongst a variety of stakeholders, as regards trade policy developments of currency and importance to the Caribbean. http://www.crnm.org