MasterCard Reportedly Backs COICA

WASHINGTON, D.C.—Similar to the way online payment facilitators have been drafted into the fight against online child pornography, they also are joining the fight against websites that traffic in pirated digital content. CNET has reported that MasterCard has not only signaled its willingness to end the ability of such sites to use its cards, it has also apparently told trade groups that it supports the Combating Online Infringement and Counterfeits Act (COICA), a bill introduced last November that would give the Justice Department broad new powers to take such sites offline.

“Backed by Sen. Patrick Leahy (D-Vt.), chairman of the Senate Judiciary Committee, and committee member Sen. Orin Hatch (R-Utah), the bill would authorize the Department of Justice to shut down domain names of U.S.-based websites judged to be dealing in pirated content and also have the power to order internet service providers, payment processors, and online ad networks in the United States to cease doing business with overseas pirates sites,” wrote Greg Sandoval for CNET. “Opponents of the law say it will give the government sweeping powers to censor U.S. citizens.”

CNET’s sources said the new openness by MasterCard to join the anti-piracy crusade came in talks late last year with the Recording Industry Association of America (RIAA) and other entertainment industry trade groups, which have sought out payment services, ad networks and ISPs to help them “discourage as many people as possible from doing business with pirate sites.”

The new strategy by the entertainment guilds is intended to refine the previous strategy of going after site operators and end users in court. The music industry in particular has steered away from its early John Doe end user lawsuits in favor of these more effective and sophisticated tactics. The only downside is that they can only succeed if the service providers and payment services are cooperative.

To that end, the statement in December by Mitch Glazier, RIAA executive vice president of government and industry relations, was surely directed not only to MasterCard, but also to other providers such as Visa, American Express and PayPal.

"MasterCard in particular deserves credit for its proactive approach to addressing rogue websites that dupe consumers," Glazier said. "They have reached out to us and others in the entertainment community to forge what we think will be a productive and effective partnership."

Not everyone is happy with MasterCard’s reported embrace of COICA, however. The blog for the Electronic Frontier Foundation today had a post titled “MasterCard’s Support for COICA Threatens a Free and Open Internet.”

“We had hoped that credit card and other financial services would resist efforts to pressure them to stop processing payments to controversial websites,” wrote Julie Samuels. “So we were dismayed to hear that not only does MasterCard support the passage of [COICA], but that it also appears to be signaling a willingness to voluntarily stop processing payments made to sites that allegedly offer “pirated” or other copyrighted content. Keep in mind that courts have ruled that credit card companies do not face liability for potentially infringing activities on site for which they merely process payments.”

The ruling in question is, of course, Perfect 10 v. Visa, which people in the adult entertainment industry will remember was tossed by a federal judge in 2004. In that case, Perfect 10 had sued both Visa and MasterCard, alleging that the companies had offered "crucial transactional support services" for websites selling millions of stolen images and film clips "worth billions of dollars that belong to Perfect 10 and third parties," according to a filing in the case.

Despite that ruling, MasterCard now seems willing to not only support the controversial COICA bill, but also to take a more proactive and voluntary approach. EFF cited a New York Times editorial that expressed concern about “What would happen if a clutch of big banks decided that a particularly irksome blogger or other organization was ‘too risky’? What if they decided—one by one—to shut down financial access to a newspaper that was about to reveal irksome truths about their operations? This decision should not be left solely up to business-as-usual among the banks.”

Samuels added another possible scenario. “For example, MasterCard might decide to stop processing payments to popular hosting sites such as RapidShare, even though at least one court has ruled that RapidShare likely is not guilty of infringement. Given the importance of a consistent revenue streams to emerging companies, blocking payments might effectively mean putting them out of business.”

For many people in the adult entertainment industry, such a scenario is precisely one they would like to see happen. The harm done to the industry by the global explosion in illegally uploaded and shared copyrighted content is too deep and destructive, they believe, that even the possibility that innocent websites would be caught up in a tsunami of shuttered sites is worth the risk.

Others believe that, as the EFF puts it, “The internet only remains open, accessible and vibrant when the entire chain of providers operates together: financial transaction providers, service providers, hosting providers, content providers, and all of the other companies that keep sites online and accessible.”

Currently, that idealized scenario in which the chain of providers operates together does not seem to be the order of the day; the pirates still appear to have the upper hand. The question is whether new international laws and domestic solutions such as COICA will fix the problem or swing the pendulum too far the other way, and not only threaten but destroy our free and open internet.