ENFORCEMENT

Joint Strategic Plan on Intellectual Property Enforcement
SECTION 2
An effective enforcement strategy against
commercial-scale piracy and counterfeiting therefore,
must target and dry up the illicit revenue flow of the
actors engaged in commercial piracy online. 4 That
requires an examination of the revenue sources for
commercial-scale pirates. The operators of direct illict
download and streaming sites enjoy revenue through
membership subscriptions serviced by way of credit card
and similar payment-based transactions, as is the case
with the sale and purchase of counterfeit goods, while
the operators of torrent sites may rely more heavily on
advertising revenue as the primary source of income.
As a result, an effective “follow-the-money” approach
must include, at a minimum, the continued voluntary
engagement of third parties, including payment
processor networks, the online advertising ecosystem,
and the banking sector to minimize the flow of money to
website operators engaged in illicit activity.
1. Strengthen Payment Processor Networks’
Efforts to Curb Illicit Proceeds.
Illicit actors that engage in the commercial sale of
counterfeit goods, or provide online subscription
services for mass piracy websites, depend on payment
services provided by credit card companies and money
transfer entities (collectively, “payment processors”).
With the continued growth of global e-commerce and
streaming services, illicit actors may be able to reap
billions of dollars in illicit proceeds every year from
transactions made through payment processors. 5
All legitimate payment processors prohibit the use
of their services and platforms for unlawful conduct,
including IP-infringing activities. They do so by way
of policy and contract through terms of use and other
agreements applicable to their users (herein referred
to as “Terms of Service”). 6 Yet, notwithstanding these
prohibitions, payment processor platforms continue to
be exploited by illicit merchants of counterfeit products
and infringing content. Examples of the ways in which
illicit actors exploit legitimate payment processors
include, “(i) opening multiple accounts at the same
bank, (ii) opening multiple accounts at different banks,
and (iii) aggregation.” 7 Furthermore, sophisticated
actors have come to understand that investigative
transactions (i.e. trace messages) are conducted by law
enforcement and rights holders to glean merchantidentifying
information for targeting purposes, and
these actors have in turn implemented detection
systems to thwart these “test” transactions conducted
for investigatory purposes. 8
In addition, some credit card companies are “openloop”
payment networks, meaning that they do not
have direct contractual relationships with merchants;
instead, they rely on a third-party acquiring or issuing
bank to take action against a merchant should the
bank suspect wrongful activity by the merchant. 9 Since
termination of payment processing services happens
at the level of the individual consumer or merchant
account and without regard to the underlying business
(such as the offending website), the website may
continue to transact business after some of its payment
processing rights have been terminated.
Both legitimate payment processors and IP rights
holders have expressed concerns over these increasingly
sophisticated exploitative techniques, and they have
a shared desire to minimize the rate of illicit financial
transactions. Cutting the source of revenue to illicit
actors greatly reduces the commercial viability of
websites dedicated to counterfeit sales, piracy, and
related illegal activity. 10
Implementing an effective follow-the-money
approach requires a number of key members of the
online ecosystem—including rights holders, payment
processors, merchant banks, and others—to work in
concert to stem the money flow to illicit enterprises. 11
Several years ago, with IPEC’s leadership and support,
a number of leading payment processors adopted a set
of best practices to investigate complaints and withdraw
payment services from websites dedicated by their
operators to distributing counterfeit goods and engaging
in commercial piracy. 12 Building on this, third party
organizations have launched efforts that have helped
grow and implement the payment processors’ voluntary
best practices. 13 These voluntary and private-sector-driven
mechanisms demonstrate a growing recognition among
a wide spectrum of actors in the Internet ecosystem that
they have an opportunity to secure a legitimate and
safe online environment and deter illegal activity online,
including counterfeiting and infringement. 14
Opportunities exist for expanded collaboration
between all stakeholders to augment these voluntary
initiatives and stay ahead of the rapidly changing
tactics illicit actors employ to unlawfully exploit
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