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Commentary By Sammy Kunitz-Levy

America Finally Takes on an IP Criminal

Economics Regulatory Policy

Several weeks ago, the U.S. government demonstrated that it was capable of striking back against people who make a living off of facilitating the exchange of stolen intellectual property.

On July 20, U.S. authorities arrested Artem Vaulin, the owner of Kickass Torrents (KAT), in Poland. The Department of Justice (DOJ) filed a criminal complaint for counts of copyright infringement and conspiracy to commit copyright infringement and money laundering.

KAT, founded in 2008, is a website that facilitates illegal downloads of movies, music, and games at no cost via a peer-to-peer file sharing system. KAT’s business is worth $54 million and generates $17 million in revenue annually, mostly on advertisements, making it the largest BitTorrent site in the world.

Law-abiding citizens may not have heard of BitTorrent, but the practice has an international following. BitTorrent is the process of sharing files on a peer-to-peer basis over vast networks online. BitTorrent sites ignore intellectual property rights (IPR), cut into entertainment industry profits, and diminish domestic incentives to produce entertainment.

According to global web traffic rankings published by Alexa, KAT was the 68th most popular site worldwide as of July 19 – right below Google Turkey and right above Craigslist.

People use KAT because the alternative is paying market price for the same product, such as going to a theater and spending $8.43 on average for a movie ticket. KAT’s services are illegal for good reason. According to Assistant Attorney General Leslie Caldwell, KAT has stolen over $1 billion from the American entertainment industry.

The United States Trade Representative, a government office that oversees international trade, commodities, investment policy, and negotiations, has watched KAT from afar for years. Every year, USTR publishes its Special 301 Report and Out-of-Cycle Review of Notorious Markets.

The Special 301 Report includes a “Watch List” and “Priority Watch List” of countries that commit significant IPR violations. KAT was mentioned in USTR’s 2016 Special 301 Report as one of the reasons that Costa Rica made it on the Watch List – KAT’s previous top-level domain was Costa Rican. USTR wrote, “The United States urges Costa Rica to take effective action against any notorious online markets within its jurisdiction…”

USTR’s Out-of-Cycle Review of Notorious Markets lists companies that severely and continuously damage U.S. industries by enabling illegal online activity. KAT has been on this list for the last six years. In the 2016 report, there were 14 online companies considered notorious markets. Out of the 14, KAT has the highest volume of Internet traffic, with over 25 million visitors per month.

International cooperation is crucial to effectively protect intellectual property worldwide. Although the Department of Justice did not partner with Costa Rica to take down KAT, it did work with Poland’s Border Guard and National Prosecutor’s Office to capture Artem Vaulin.

One reason why international cooperation is necessary to restrict online markets such as KAT is because, unlike brick-and-mortar businesses, online markets can quickly relocate all over the world. KAT’s top-level domain was cancelled by corresponding registries in Trinidad and Tobago in 2013, Somalia in February 2015, the Isle of Man in April 2015 (hours after its arrival), and relocated to Costa Rica ( until two weeks ago.

In spite of U.S. action against Artem Vaulin, however, KAT is already up and running again in the Democratic Republic of Congo. Though some see this as evidence that the mission to protect intellectual property rights online is quixotic, Vaulin’s arrest is important because it sends a message that the United States can still bring executives of such sites to justice.

Vaulin is a criminal who has managed the theft of over $1 billion from the American entertainment industry and the charges leveled against him by the DOJ let other online markets know that the United States is not “all bark, no bite” online. Going forward, the U.S. government needs to take a harsher stance on major online IPR violators and continue its crackdown.

Sammy Kunitz-Levy is an E21 contributor.

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