"The NET Act [sends a] warning to would-be Internet pirates--the days of avoiding prosecution, simply because no money changes hands in the distribution of illegal software, will soon be over," said Ken Wasch, president of the Software Publishers Association

The open age of piracy appears to be over. Although no one seemed to appreciate it, up till now anyone could courier or release anything they wanted as long as they didn't make any money doing it. The No Electronic Theft (NET), bill h2265, is going to change all that. The bill has been passed by the US House and Senate, so once it has the President's signature it will become law. It's an American law, but it will set a precedent that will certainly effect electronic copyright laws in other countries in the very near future.

Background on what the law tries to do

Copyright law would have been rewritten eventually, but it was the inability to prosecute people who didn't profit from their crimes that was the driving force behind the NET act. The precedent was set back in 1994 in United States v. LaMacchia when the court ruled that the defendant (David LaMacchia, alias GRIMJACK, who ran Cynosure) could not be tried for conspiring to commit wire fraud. Grimjack ran a site on two computers at MIT which attracted so many users that the authorities became aware of its presence. LaMacchia's lawyers tried to get the judge to dismiss the case "for failure to state an offense" and after oral arguments with the prosecution, the judge granted the dismissal noting that "the indictment does not allege that LaMacchia sought or derived any personal benefit from the scheme to defraud" and that "the government had improperly resorted to the wire fraud statute as a copyright enforcement tool." The LaMacchia loophole was born, and it became impossible to prosecute someone for piracy without evidence that they had benefited financially from it. Cyberstrike was a good example of the government's impotence. Last January the FBI made over a dozen arrests, after spending 8 months gathering evidence. The media made a big deal about it, but not one arrest resulted in a conviction. Not one. The arrests were covered in every major newspaper and news site, but I was unable to find a single article on how effective Cyberstrike actually was. For the government, it's still embarrassing to spend 8 months and millions of dollars to come up with nothing but news articles gloating about how the FBI had entered cyberspace to do battle with the hackers.

Enter the NET act, a piece of legislation that probably should have passed congress long before, had it not been for a busy schedule and a poor track record with internet legislation. The NET act is designed to make it easier for law enforcement officials to prosecute pirates, and also to modernize copyright laws that went through their last major renovations in the age of Pong. Software publishers were major supporters of the NET act, but so was the entertainment industry. With DVD and ever increasing hard drives Hollywood is right to be concerned about film pirating. Current production of video tapes is expensive enough that nobody does it without expecting to make money, but eventually films may be traded just like software is today, if not by us then by our kids.

It's not pretty. The most significant thing for people in the warez scene is that it closes the LaMacchia loophole by allowing the government to define "financial gain" as the "receipt of anything of value, including the receipt of other copyrighted works." Pirates of software can now be prosecuted just like people who copy and sell movies, music, or Rolexes. Below is a summary of what the net act does and what this means for us.

Revises Federal copyright laws to provide for a fine and up to five years' imprisonment for infringing a copyright for purposes of commercial advantage or private financial gain, by reproducing or distributing, including by electronic means, during any 180-day period, at least ten copies or phonorecords of one or more copyrighted works which have a total retail value of more than $2,500.
So if you courier more than $2,500 worth of copyrighted software during a period of 180 days you can be convicted under the new law.

Extends the statute of limitations for criminal copyright infringement from three to five years.
That means if you break the law (see above) in 97 and they find out about it in 2001, then can still prosecute your sorry ass.

Provides for: (1) up to three years' imprisonment and fines in infringement cases described above (exclusive of commercial gain intent considerations); (2) up to six years' imprisonment and a fine for a second or subsequent felony offense under (1); and (3) up to one year's imprisonment and a fine for the reproduction or distribution of one or more copies or phonorecords of one or more copyrighted works with a total retail value of more than $1,000.
These are the maximum penalties that can be given for breaking the law, but who knows what judges will actually end up awarding. Prosecutors usually try to convince judges that pirates aren't the juveniles they appear, and judges may end up trying to set examples early on, but we'll all have to wait and see how the first couple unlucky ones fare.

Requires… that victims of the offense be permitted to submit… a victim impact statement that identifies the victim and the extent and scope of the victim's injury and loss, including the estimated economic impact of the offense on that victim.
This means that the victim, ie the software company, will be encouraged to submit a report that estimates the economic loss they have suffered as a result.

Directs the U.S. Sentencing Commission to ensure that the applicable guideline range for a defendant convicted of a crime against intellectual property is sufficiently stringent to deter such a crime and adequately reflects consideration of the retail value and quantity of items with respect to which the crime against intellectual property was committed.
This last part means that the government wants to make sure that people know it's serious about prosecuting piracy. Sentences (see above) should be harsh enough that it serves as a warning for others.

There's no way of knowing for sure, but it seems almost certain that the law will have a major impact on how groups in the warez scene operate. Some people are definitely going to be arrested, and some people are definitely going to narc, and the FBI is definitely going to devote more time to tracking pirates down. It seems almost equally certain that the scene will persist in some fashion, even if it becomes much smaller and much less active. Everyone is going to be more conscious of security, but whether the scene will return to its underground roots remains to be seen. Things are going to be different, and that's about all we can say for sure.

Stay tuned to scenelink for special features concerning the NET act including…
An analysis of the WIPO Copyright Treaty designed to outlaw cracking
A guide to pgp and other ways groups can tighten security

ARTICLES IN THE MEDIA
Banning Web's Robin 11/6
http://www.abcnews.com/sections/scitech/house1106/index.html

Stricter E-theft laws take shape 11/5
http://www5.zdnet.com/zdnn/content/inwo/1105/206340.html

Congress approves copyright bill
http://www.news.com/News/Item/0,4,16550,00.html

SCARE TATCTICS, HOW CORPORATIONS STRETCH THE TRUTH

The Damages And Potential Legal Consequences Of Software Piracy
http://www.newstream.com/97-389.shtml
Annually, software piracy costs the U.S. economy 130-thousand jobs and 11.3-billion-dollars in lost sales

from the video
http://www.newstream.com/rm/97-389.ram
"piracy poses huge risks to the user… they run the risk of viruses, uh… which are most commonly transmitted via shared disk. A virus or bug in the software program could easily destroy all the data in your system, something businesses especially should be scared of.

BSA PRESIDENT ROBERT HOLLEYMAN PRAISES SENATE PASSAGE OF "NET ACT"
http://www.bsa.org/pressrel/971114.html
The Business Software Alliance commends the Senate for joining the House of Representatives in its passage of the 'No Electronic Theft Act', affirming that the 'cop is on the beat' on the Internet.

American Intellectual Property Law Association
http://www.aipla.org/

GOVERNEMT SOURCES

The bill itself
ftp://ftp.loc.gov/pub/thomas/c105/h2265.eh.txt

Status of the bill
http://thomas.loc.gov/cgi-bin/bdquery/z?d105:HR02265:@@@L

Presentation to the Subcommittee on Courts and Intellectual Property Committee 11/97
http://www.house.gov/judiciary/41105.htm

No Electronic Theft Act Passes House 11/6
http://www.govtech.net/services/news/Nov6news.shtm

Testimony of Sandra A. Sellers, Software Publishers Association, Hearings on Electronic Copyright Piracy and the No Electronic Theft Act 9/11
http://www.spa.org/gvmnt/tos/piracyfull.htm
The most pervasive form of piracy continues to be softlifting of entire computer programs, usually of business application software, for business purposes.

Statement of the Register of Copyrights on H.R. 2265 11/11/97
http://lcweb.loc.gov/copyright/cpypub/2265_stat.html
When Congress last revised criminal penalties for copyright infringement, the legislative reports made clear that de minimis copying would not be subject to the new criminal penalties... At that time, the House Judiciary Committee stated that the new felony provisions would not apply to "children making copies for friends as well as other incidental copying of copyrighted works having a relatively low retail value." We believe a similar distinction is appropriate here.

Testimony of the Chief Executive Officer SciTech Software on the WIPO Copyright Treaties Implementation Act (H.R. 2281)
http://www.spa.org/gvmnt/tos/wipo.htm
For a company like SciTech, which channels nearly 100 percent of their profits into creating new software, piracy does not simply represent lost sales, it represents lost investments, lost research, and lost jobs. …my company received threats from an e-mail user who threatened to publish on the Internet the instructions to disable the timer for SciTech Display Doctor….

THE SPA

Spa's definitions of piracy
http://www.spa.org/piracy/risk.htm

Spa's synopsis of relevant copyright law
http://www.spa.org/piracy/usc.htm

Spa's Seven Warning Signs of Piracy
http://www.spa.org/piracy/seven.htm

Open Letter to FTP Server Operators from Vice President of Intellectual Property Education and Enforcement of the SPA
http://www.spa.org/piracy/ftpltr.htm
Pirate activity violates the integrity of the Internet

OTHER

David LaMacchia Case Chronology
http://www-swiss.ai.mit.edu:8000/dldf/chronology.html