Canada Placed on USTR Priority Watch List for Copyright Piracy

Edited for clarification purposes May 12, 2008

It has been announced that the United States has placed Canada on the Priority Watch List of the worst offenders of copyright piracy. This news may leave many developers wondering how this will effect how they conduct their business both in dealing with Canadian content providers and when distributing their products.

It is important to note what the Priority Watch List actually is. The watch list is created by a the US Trade Representative, who represents the US in international trade negotiations. The Priority Watch list includes countries that, while may not contain significant rates of piracy, do not have what the US believes are adequate IP protections. Thus, just because Canada is on the Watch List does not mean that it is in the same boat as Russia or China as far as the likelihood that a work will be pirated. What it specifically means is that, in the US governments opinion, the IP protections provided by Canada are insufficient compared to the protections provided by the United States. So, if a US developer is deeply concerned over the protections of his work in Canada and wishes the same protections offered in the US, he may wish to take a few measures.

Of course, if dealing with Canadian content providers, a US developer should check that the provider is reputable and willing to provide references. Further, the US developer should beef up any IP protection and indemnification clauses in the development contract and ensure the contract provides that any disputes under the contract will be brought under U.S. law. It is important to note, however, that just like dealing with providers in other Priority Watch List nations, it may be more difficult to enforce and collect any damages due under the contract due to the international nature of the agreement.

As far as prohibiting piracy after distribution, one of the glaring problems is that, unlike China or Russia, the Canadian and US markets are virtually one in the same due to the cultural, linguistic, and geographic proximity of both countries. This makes it much more difficult to strategically reduce Canada's access to a product by traditional methods, such as avoiding a marketing strategies that would target that particular region and not publishing the product in the regions native language.

One possible solution, if the developer distributes its products online, involves refusing to transact with purchasers with Canadian billing addresses. Or, alternatively, if distributing its product through a publisher, the developer can request to limit the geographic region of the development agreement such that the publisher may not distribute the product to Canada. Of course, the latter solution depends on the ability of the developer to negotiate the term in to the contract. But, such a request should not be considered unreasonable due to the fact that it is beneficial to both the developer and the publisher to reduce the effect of piracy in Canada.

However, by attempting to eliminate the Canadian market, the developer should be aware that this will also result in the loss of all sales in Canada. Ultimately the developer will need to weigh the costs and risks of loosing a game to piracy in Canada against the costs and risks of cutting Canada out of it distribution channels. In my opinion, nine times out of ten, the losses sustained by removing Canada from distribution channels will aways be more than what actual losses a developer will receive due to copyright infringement or piracy.