Graduated response economics don't stack up: lawyer

An intellectual property lawyer has questioned the economic case behind graduated response regimes established to reduce copyright infringement and educate users.

Mark Vincent, director of New Zealand firm Shelston IP, told a Sydney seminar this week that his country's version of the regime was yet to see significant uptake.

The only rights holder organisation to utilise the law, the Recording Industry Association of NZ (RIANZ), had sent out 2766 notices to users since the law was introduced last year.

Users are warned three times under the regime, after which repeat infringers could face the Copyright Tribunal and damage claims of up to $NZ15,000 ($A11,838).

But Vincent noted the low number of notices sent so far showed rights holders wanted to spend little money in combatting the issue, despite claims copyright infringement displaced sales by up to 20 percent in the country's $2.7 billion industry.

"Pursuing only 2766 infringements in a six month period is an inexplicably limited use of the system, with RIANZ being the only user," Vincent said.

RIANZ claimed in recent submissions to the Ministry of Economic Development's review of the $25 processing fee rights holders have to pay per notice sent out to subscribers, that 780,000 unique Kiwis per month used peer-to-peer services to access material that infringes on copyright.

The total cost of sending out those notices equates to $105,150 in notice and other internal costs to rights holders, Vincent said.

But he questioned that, given the claimed scale of infringement and effect on industry, "why is there no compelling case to issue a greater number of notices even at NZ$25 to pursue a regime of education for customers?"

RIANZ has lobbied to lower the per-notice fee to $2, allowing it to send out 5000 per month. The claim, Vincent argued, suggested that the music industry organisation's budget to combat peer-to-peer file sharing was capped at approximately $120,000 a year.

The New Zealand regime has been costly for ISPs too. A recent cabinet paper released by commerce minister Craig Foss noted that the scheme has cost the country's main ISPs $919,000 ($A717,100) to implement.

The $25 processing fee does not cover ISPs' cost for sending out notices, according to the cabinet paper, meeting only between 24 to 81 percent of providers' expenditure.

Poor use of the New Zealand system has also possibly diminished the regime's intended effect on deterring users from further infringement, Vincent said.

However, the Copyright Tribunal's judgments against three users who have received three notices to date may create some further deterrent effect, hesaid.

Former justice minister Simon Power suggested last year that reimbursing rights holders the $275 application fee to the tribunal and "appropriate compensation" would be a sufficient deterrent, rather than the threatened $15,000 fee.

Graduated response regimes are in place or under consideration in South Korea, Taiwan, the UK, France, Ireland and New Zealand, Vincent said.

Australia is presently considering a six-notice scheme similar to the US model, which is about to be introduced this year.

In the UK, Vincent said telco regulator Ofcom was currently consulting on the proposed per-notice cost for rights holders, under a similar process to the New Zealand regime.

Ofcom has suggested copyright owners should pay £17 ($A26.30) per notice, under estimates ISPs would receive 16,300 per month.

But France, one of the first countries to introduce a graduated response system in 2010, is currently reviewing its regime and cutting its budget with immediate effect.

There are no fees payable by rights holders in France to use the HADOPI system, which costs the government €12 million ($A14.94 million) a year to run, with a staff of 60 sending out a million emails a year.

A total 18 million allegations of infringement had been made in France as of July 2011, of which 800,000 resulted in first notices, 68,000 in second warnings and 168 at the third notice stage.

No internet accounts have been suspended as a result of the regime, however. Vincent argued that the new French government considered HADOPI a waste of money that should be shut down as there is no evidence of reduced infringement, or credible evidence of increased sales from legitimate sources.

So far, only one person has been convicted of illicit file sharing under the HADOPI regime and fined €150 ($A187). Alain Provost's wife downloaded two tracks by Rihanna but, as the account holder for the broadband connection, the French man was found guilty of copyright infringement.