Protests Might Remove Acquirers From the Online Piracy Fray

The Internet revolt over bills in the U.S. House and Senate aimed at thwarting online piracy might have a welcome side effect for merchant acquirers in possibly getting them out of an unwanted role as deputies charged with enforcing public policy.

The online encyclopedia Wikipedia captured international headlines Wednesday when it took its English-language version offline for 24 hours to protest bills aimed at preventing the distribution of copyrighted material on unauthorized Web sites. The bills have strong support in Hollywood and in the music and related industries angered by rampant, authorized distribution of their material by foreign Web sites. But Wikipedia’s go-dark tactic drew moral support from Google Inc., Mozilla, provider of the Firefox browser, and many others in the online world who fear the bills if enacted into law could lead to censorship.

The merchant-acquiring industry has been dragged into the fray because proposals call for payment processors to refuse transactions from foreign Web sites engaged in the distribution of copyrighted material held by American individuals or companies without permission. The proposals would empower the U.S. attorney general or even private individuals claiming their copyrights were violated to seek court orders that would shut off an offending Web site’s payment service. Mary Weaver Bennett, director of government and industry relations at the Electronic Transactions Association, calls it “the follow the money approach.”

The bills are the Stop Online Piracy Act (SOPA) in the House and the Protect Intellectual Property Act (also called The Protect IP Act or PIPA), in the Senate. The House Judiciary Committee marked up SOPA, H.R. 3261, on Dec. 16. PIPA, S.968, was assigned to the Senate Judiciary Committee after being introduced last May and as of last week was scheduled for a test floor vote Jan. 24, according to Bennett.

The bill very well could fail that test should it even be held. Media reports from Washington on Wednesday afternoon said that members of Congress were withdrawing their initial support for the proposals. The Obama Administration, while generally friendly to the entertainment industry and its concerns about copyright violations, also was backing away from the bills in the wake of the protests.

Changes made to SOPA in the December mark-up removed provisions involving payment processors, according to Bennett. “We at the ETA are pretty much satisfied with the House bill,” she says.

The ETA sent a letter to House Judiciary Committee leaders in November calling aspects of the bill “vague, overbroad, and unreasonably burdensome.” For example, the ETA said the bill could engender demands from U.S. copyright holders for termination of a Web site’s payment service if even one page of out of thousands on the site allegedly infringed on a copyright.

While the provisions of most concern to the ETA have been removed from SOPA, the Washington, D.C.-based acquiring industry trade group is still watching the Senate’s Protect IP Act, where language involving processors still remains.

If an anti-online-piracy bill survives the furor and is enacted into law with provisions that would require U.S. acquirers not to provide payment services to alleged copyright violators, such a law would be following in the footsteps of the Unlawful Internet Gambling Enforcement Act, or UIGEA. That controversial law, which took effect in 2007, bans U.S. processors from providing payment services to online gambling sites. In a spectacular case last year, the FBI shut down the U.S. sites of three Internet poker sites based offshore and the U.S. attorney in Manhattan charged 11 persons with UIGEA violations.

But just two days before Christmas, the U.S. Justice Department released an opinion that appears to put the federal government’s imprimatur on intrastate online betting. The opinion could give a green light to cash-strapped states looking to increase revenues by taking their lotteries online, but it also could lessen the legal dangers for acquirers seeking new transaction sources through online betting.

nn