Financial Services News

The internet has revolutionised the way the world is consuming content.

Content Protection and Digital Piracy

Media companies have benefitted from increased access to worldwide audiences through multiple platforms; however, with online piracy rife throughout the world, these companies are having to grapple with how to protect their most important assets – their intellectual property.

PIRACY INTRODUCTION

Gone are the days of paying a couple of quid to a person shuffling around town with burnt disks and drawn-on covers. Nowadays, content can be easily pirated from the comfort and convenience of nearly any home. It is thought that 432 million internet users regularly pirate content.

As internet usage continues to grow, illegal copying of licensed and copyrighted materials poses an ever-increasing threat to the creative and artistic industries. As technology gets faster, smaller and cheaper, the opportunity to illegally download, share or stream content increases.

It is thought that the cost of digitally pirated music, films and software is $75 billion per year. The most common form of digital piracy present today are found in Bit Torrent sites. A Bit Torrent (also known as peer-to-peer (P2P)) is an illegal, digital file-sharing program operated from a centralized location, which grants access to its users to allow them to participate in the transfer, import, and export of intellectual property. Although 98% of data transferred using peer-to-peer networks is copyrighted, a minimal amount of this data is transferred with the requisite permissions.

WHAT IS BEING DONE TO ADDRESS PIRACY?

Legislators are working tirelessly to address the illegality of online piracy and copyright infringement. In the last three years, there have been developments to case law addressing the legal implications of making available hyperlinks to copyright works.

‘Hyperlinking’ is a generic term that covers various activities such as deep-linking, inline linking, embedded linking and framing. Although the Court of Justice for the European Union (CJEU) appears to have clarified circumstances in which providing hyperlinks may amount to a communication to the public (therefore, falling within the scope of the communication to the public (CTP) right under Article 3(1) of the InfoSoc Directive), it is yet to clarify whether providing hyperlinks to content uploaded without the owner’s consent will amount to infringement (as an unauthorised communication to the public).

Legislators have also sought to address piracy by allowing IP owners to obtain blocking injunctions against internet service providers. However, there has been a lack of consistency across Europe, and although the English Courts have generally favoured rights-holders, other European courts have been less enthusiastic and so further judicial clarification is required.

The issue of jurisdiction in online infringement cases also seems to have developed in a way favourable to rights holders with the CJEU making clear that the injured rights-holder may bring its case in any jurisdiction, provided that its content may be accessed from that jurisdiction. Although this gives copyright owners a fairly wide choice of jurisdictions in which they may enforce their rights, this should, however, be caveated with the need for careful consideration about where they will get maximum recovery.

HOW TO ENFORCE IP RIGHTS

Despite these legal developments, there still remains an issue with how IP owners can enforce their rights in practice. There are various solutions becoming available to copyright owners for monitoring, detecting and responding to piracy and related promotional activities, however, there is a high cost to litigation and these protection mechanisms.

Indeed, commentators have described this situation as ‘catch 22’ noting that increased investment in brand protections, mechanisms to counteract illegal streaming and the expense of litigation enforcing rights forces IP owners to increase the price to consume their content, which in turn leads to more people turning to illegal streams due to the increase in costs.

INTELLECTUAL PROPERTY INSURANCE

Another possible way to manage these costs is via intellectual property insurance. Although legal defence policies are commonplace in the media industry, intellectual property insurance is less common and historically expensive and difficult to arrange.

With the increased importance of IP assets, the insurance industry is, however, evolving to offering a larger range of affordable policies. There is now cover available to insure your intellectual property against the cost of enforcement and pursuing claims for infringement.

Additionally, there are now litigation funding options, which may provide an alternative approach especially for those needing cash flow support to conduct the proceedings or to deal with applications for security for costs.

Having recognised a gap in knowledge of available insurance solutions, the Intellectual Property Office has produced useful guidelines as to the various options available to rights holders. These can be summarised as follows:

Before-The-Event Insurance

Covers the possibility of costs arising from claims arising whose existence or threat are not yet known about at the time the policy is taken out. Many IP insurance policies applicable to individual rights are of this type. These policies include cover for legal defence as well as enforcement.

After-the-Event insurance

Covers the costs of litigation where insurance is taken out only after a specific legal dispute has come into being or its threat is known of. It covers the policyholder’s risk of ultimately losing the case, in respect of his own and the claimant’s costs, but will not fund the costs as the case proceeds.

Litigation Funding Agreements

Not an insurance policy but can work in a similar way for claimants and may have the advantage of providing the necessary cash-flow to fund the case, rather than only paying out at the end, as well as avoiding up-front premiums. However they can be very expensive options. Some providers seek assurances from claimants’ lawyers of a certain percentage prospect of success and as to the minimum likely multiple of damages over costs to be incurred which can be daunting. Under these agreements an investor funds the legal costs of an action in exchange for a share of any proceeds, often the costs expended plus a win/settlement bonus. These costs or the share of the proceeds may be capped. If the case is lost the investor picks up the full costs of the case. The share may vary according to the type of case and the upfront assessment of the risk.

A Conditional Fee Arrangement (CFA)

An agreement between a client and his legal advisors that some or all of the fees normally payable for provision of legal services will only be owed in certain circumstances, usually linked to a successful outcome in a piece of litigation.

CONCLUSION

Whilst the issue of digital piracy increases and the law struggles to keep up to date with the rapid technological advances facilitating/allowing new methods of piracy, media companies should consider all available methods of protecting their valuable IP assets which includes content management strategies and various insurance options.

Tina Lee, Willis Towers Watson, WillisTowersWatsonWire