on the legal protection of electronic pay services - Report from the Commission to the Council, the European Parliament and the European Economic and Social Committee on the implementation of Directive 98/84/EC of the European Parliament and of the Council of 20 November 1998 on the legal protection of services based on, and consisting of, conditional access
Date: 2003-04-24
Institutions: European Commission
Subjects: access to information, activity report, application of EU law, audiovisual piracy, computer piracy, pay television, right to justice

COMMISSION OF THE EUROPEAN COMMUNITIES

Brussels, 24.04.2003
COM(2003) 198 final

ON THE LEGAL PROTECTION OF ELECTRONIC PAY SERVICES

Report from the Commission to the Council, the European Parliament and
the European Economic and Social Committee

on the implementation of Directive 98/84/EC of the European Parliament and of the
Council of 20 November 1998 on the legal protection of services based on, and consisting
of, conditional access

Executive Summary

This first report  from the Commission  on  the implementation of  Directive  98/84/EC,  which
aims  to  provide  a  minimum  level  of  legal  protection  within  the  EU  of  electronic  pay
services  (pay  TV,  radio  and  Internet  services)  against  piracy,  is  part  of  the  Commission’s
comprehensive  Internal  Market  strategy  to  remove  barriers  to  services.  It  describes  and
analyses the salient  facts relating to the key  provisions  of  the  Directive,  looks  at  how  these
provisions  are  implemented  and  enforced  by  Member  States  and  Candidate  Countries,  and
highlights  current  trends  in  piracy.  It  covers  the  period  from  adoption  of  the  Directive  in
November 1998 through to the end of 2002.

The report finds that the knowledge-based economies of the 21st century are expected to rely
increasingly  on  pervasive  electronic  pay  services  and  that  piracy  will  have  the  same
detrimental effects in the knowledge society as white-collar crime and counterfeiting of goods
in  the  20th  century.  Legal  protection  against  piracy  of  electronic  pay  services  will  make  a
major  contribution  to  achieving  the  Union’s  ambitious  target  of  becoming  the  most
dynamic and competitive economy by 2010.

The  report  highlights  the  piracy  resulting  from  the  impossibility  of  accessing  protected
satellite TV channels originating from other Member States. It notes that EU citizens fail
to  understand  why,  within  the  internal  market,  they  cannot  obtain  legitimate  access  to
protected pay-TV services, even if they are prepared to pay. The report therefore calls upon
the market parties to actively seek contractual solutions and states that the Commission will
contribute  to  this  process  in  its  review  of  the  Directive  concerning  copyright  related  to
satellite broadcasting and cable retransmission.

The report shows that implementation of the Directive has not yet been fully achieved within
the enlarged Union, that enforcement at national level has to be consolidated and that joint
efforts are instrumental in fighting piracy effectively. Only if pirates do not find safe havens
in Europe will  it  be possible  to combat  piracy. Therefore,  the  Commission will continue its
co-operation  with  other  European  countries  and  relevant  international  organisations  in  an
effort to create a coherent pan-European legal framework against the piracy of electronic
pay services, in particular through rapid entry into force of Council of Europe Convention No
178.

The report observes that pirating electronic pay services is considered to be a cyber crime.
It concludes that it would be premature to propose amendments to the Directive, but that
the  consultations  and  assessment  undertaken  in  the  context  of  the  Report  have  enabled  the
Commission  already  to  identify  several  issues  which  deserve  further  reflection  in  close  co-
operation with the Member States and industry. These issues include the need for a balanced
and coherent enforcement framework applicable  to  all  kinds  of  piracy  and  counterfeiting
and  agreed  at  Community  level  and  the  distribution  of  keys  and  illicit  devices  via  the
Internet.

2

TABLE OF CONTENTS

Introduction.................................................................................................................. 4
1.
Background and content of the Directive..................................................................... 4
2.
Background .................................................................................................................. 4
2.1.
2.2.
Key provisions of the Directive ................................................................................... 6
2.2.1. Definitions.................................................................................................................... 6
Infringing activities ...................................................................................................... 8
2.2.2.
Sanctions and remedies ................................................................................................ 8
2.2.3.
2.3.
Questions raised during the adoption of the Directive................................................. 9
2.3.1. Use of conditional access for other reasons than the remuneration of the service

provider ........................................................................................................................ 9
2.3.2. Commercial versus private purposes ......................................................................... 10
Implementation of the Directive ................................................................................ 10
3.
Notification of implementation measures .................................................................. 10
3.1.
Current state of implementation by Member States................................................... 11
3.2.
National provisions beyond the requirements of the Directive.................................. 13
3.3.
Enlargement ............................................................................................................... 13
3.4.
Market developments and application of the Directive ............................................. 14
4.
Consultation of the market parties ............................................................................. 14
4.1.
Combating pir@cy – a moving target ........................................................................ 15
4.2.
Enforcement ............................................................................................................... 19
4.3.
Piracy-prone business practices ................................................................................. 21
4.4.
Other legal developments affecting the provision of conditional access services ..... 22
5.
The adoption of Directive 2001/29/EC on copyright in the information society ...... 22
5.1.
The adoption of a new electronic communications services regulatory framework.. 23
5.2.
The implementation of Directive 2000/31/EC on electronic commerce ................... 24
5.3.
The proposal for a Council Framework Decision on attacks against information
5.4.
systems ....................................................................................................................... 25
Combating piracy – a pan-European effort................................................................ 26
Recommendation No R(91)14 on the legal protection of encrypted television
services....................................................................................................................... 26
European Convention ETS No 178 on the legal protection of services based on, or
consisting of, conditional access ................................................................................ 27
The legal situation in the other European countries................................................... 27
European Convention ETS No 185 on cybercrime.................................................... 28
Final conclusions and next steps................................................................................ 28
Electronic pay services are important for a maturing knowledge economy .............. 28
Consolidating current legal protection – action to be taken....................................... 29
Enhancing legal protection – what next? ................................................................... 30

6.3.
6.4.
7.
7.1.
7.2.
7.3.

6.
6.1.

6.2.

3

1.

INTRODUCTION

This  document  contains  the  first  report  from  the  Commission  to  the  European
Parliament,  the  Council  and  the  European  Economic  and  Social  Committee  on  the
implementation of Directive 98/84/EC1 on the legal protection of services based on,
or consisting of, conditional access (referred to below as ’the Directive’).

This Directive aims to provide a minimum level of legal protection within the EU of
electronic pay services against piracy by prohibiting all commercial  manufacturing,
distribution and marketing activities  related  to  pirate  smart  cards  and  other  devices
circumventing the access protection of pay TV, radio and Internet services.

Article 7 of the Directive provides that, not later than three years after the entry into
force of the Directive,2 and every two years thereafter, the Commission has to submit
a  report  to  the  European  Parliament,  the  Council  and  the  Economic  and  Social
Committee  concerning  the  implementation  of  the  Directive  accompanied,  where
appropriate, by proposals, in particular as regards the definitions under Article 2, for
adapting  it  in  the  light  of  technical  and  economic  developments  and  of  the
consultations carried out by the Commission.

This  report  deals  with  the  implementation  of  the  Directive  since  its  adoption  in
November 1998 through to the end of 2002.

The report describes  and analyses the salient facts relating to  the  key provisions of
the Directive and their implementation in national legislation. The report is based on
the  transposition  information  provided  by  Member  States,  the  views  expressed  by
market  players,  in  particular  on  the  development  of  piracy  and  enforcement  by
national  authorities,  and  the  Commission’s  own  views  and  analysis.  It  also  takes
account of the results of an independent study commissioned in 1999 on the use of
conditional access for reasons other than the protection of remuneration.

Furthermore, this report is part of the Commission’s comprehensive Internal Market
strategy to remove barriers to services.3

2.

BACKGROUND AND CONTENT OF THE DIRECTIVE

2.1.

Background

Technological  progress,  liberalisation  and  harmonisation  of  the  legal  framework
resulted in rapid expansion of broadcasting channels and information society services
in Europe during the last decade of the 20th century. These new services are mainly
offered by commercial companies and financed either from advertising revenues and
sponsoring  or  by  the  payment  of  fees  and  subscriptions.  Typical  examples  of  this

1

2

3

OJ L320, 28.11.1998, p. 54; see:
http://europa.eu.int/comm/internal_market/en/media/condac/dir/index.htm
28.11.1998.
COM(2000) 888 final of 29.12.2000 “An Internal Market Strategy for Services”;
see http://europa.eu.int/comm/internal_market/en/services/services/index.htm

4

                                                
development are satellite-based pay TV stations offering premium content channels
(movies) or thematic channels on sports, lifestyle or travel.

In  order  to  ensure  that  they  are  paid  for  their  services,  providers  deploy  so-called
conditional access technologies, which make it impossible in principle to access the
service in an intelligible form without the prior authorisation of the provider. While
the service protected by conditional access may be widely receivable, it can only be
viewed or listened to if the viewer/listener uses a special decoder, often together with
a  smart  card4  bought  from  the  service  provider.  This  method  is  highly  effective  in
terms of ensuring payment, provided that only those members of the public who have
paid  for  the  device  and  whom  the  provider  therefore  seeks  to  reach  are  capable  of
decoding the service.

Today,  there  are  about  126  TV  channels  transmitted  by  satellite.  Half  of  these
channels are encrypted by 12 different conditional access systems.

Satellite

Astra

Astra

Astra

Astra

Astra

Astra

Astra

Astra

Eutelsat

Eutelsat

Eutelsat

Eutelsat

Eutelsat

Eutelsat

Eutelsat

Eutelsat

Hispasat

Hispasat

Sirius

Thor

Platform

BSkyB

Canal Satélite Digital

CanalSatellite

CanalDigitaal

Première World

Wizja TV

UPC Direct

UPC Direct

Conditional Access System

Main Market

Videoguard

Mediaguard

Mediaguard; Viaccess

Irdeto; Mediaguard

Betacrypt

Cryptoworks

Cryptoworks

Cryptoworks

United Kingdom, Ireland

Spain

France

The Netherlands

Germany, Austria

Poland

Hungary

Czech Republic; Slovakia

Tele+ Digitale

Mediaguard; Videoguard

Italy

Absat

TPS

Stream

Alpha Digital

Nova

Cyfra+

Polsat

TV Cabo

Via Digital

Viasat

Canal Digital

Viaccess

France, Belgium, Luxembourg

Mediaguard; Viaccess

Mediaguard; Videoguard

Nagravision

Irdeto

Mediaguard

Nagravision

Nagravision

Nagravision

Viaccess

Conax

France

Italy

Greece; Cyprus

Greece; Cyprus

Poland

Poland

Portugal

Spain

Scandinavia

Scandinavia

Table 1: Main satellite pay TV providers in Europe (2002)

Conditional  access  is  a  set  of  technologies  which  can  be  used,  and  in  practice  are
used, for several different purposes. In addition to remuneration of the service itself,
conditional access is also used, often in parallel, to restrict the potential audience to a
particular  territory,  for  example,  for  copyright  reasons,  or  to  a  particular  class  of
users, for example, by excluding minors.

The advent of pay television has also heralded the start of a flourishing commercial
piracy industry. Illicit access to a service protected by conditional access has several
adverse  effects  on  the  service  provider  concerned.  By  depriving  providers  of
remuneration,  piracy  poses  a  direct  threat  to  the  economic  viability  of  the  service

4

Smart  cards  or  “chip  cards”  are  plastic  cards  of  the  size  of  a  bank  card,  embedded  with  a
microprocessor and memory, which are able to process data. Basically, smart cards are small, portable
and often secure computers.

5

                                                
providers concerned, to the competition between them and, hence, to the diversity of
services offered to the public.

Technology alone cannot provide the full answer to the piracy problem.5 In order to
combat piracy, some Member States have introduced new legislation, in parallel with
the technical countermeasures put in place by service providers. Others have tried to
apply existing provisions of criminal law, unfair  competition law or tort law. Some
Member  States  had  no  legal  protection  at  all.  A  Commission  survey  during  19956
showed  substantial  differences  in  legal  protection  between  the  Member  States  in
terms of scope, prohibitions and sanctions. After a wide-ranging consultation process
the  Commission  proposed  harmonising  the  legal  protection  of  all  electronically
provided services using any form of conditional access to ensure the remuneration of
the service. At the end 1998 Directive 98/84/EC7 was adopted.

2.2.

Key provisions of the Directive

The  Directive  aims  to  combat  piracy  against  “protected  services”  by  prohibiting
commercial activities related to “illicit devices”. This legal protection is based on the
concept of curbing the illegal “upstream” commercial decoder market, i.e. preventing
illegal  decoders  and  related  devices  from  becoming  available  to  end-users.  This
approach  works  well  if  the  specialised  technology  and  knowledge  to  manufacture
illegal decoders and smart cards are not available to interested end-users.

The  Directive  also  consolidates  the  functioning  of  the  internal  market  by  denying
Member States the possibility of restricting the free movement of conditional access
devices  or  the  free  circulation  of  pay  services  for  reasons  related  to  the  infringing
piracy activities specified by the Directive.

2.2.1. Definitions

Protected service

The  Directive  covers  not  only  conventional  television  and  radio  broadcasting
services,  but  also  all  kinds  of  interactive  online  services  (information  society
services)8.  Services  have  to  be  understood  within  the  meaning  of  Article  50  of  the
Treaty  (ex  Article  60),9  as  interpreted  by  the  Court  of  Justice.10  The  Directive

5

6

7

8

9

Back in 1991 the Council of Europe already concluded that it was necessary to complement technical
protection by appropriate legal measures; see Recommendation R(91)14 of the Committee of Ministers
on the legal protection of encrypted television services; http://cm.coe.int/ta/rec/1991/91r14.htm
COM(96)76  final  of  06.03.1996  –  Green  Paper  on  the  legal  protection  of  encrypted  services  in  the
internal market; see http://europa.eu.int/comm/internal_market/en/media/condac/dir/legproc_en.htm
Directive 98/84/EC only ensures the legal protection of conditional access services. The provision itself
of  these  services  as  well  as  the  technical  requirements  for  legitimate  conditional  access  devices  are
covered by other Community Directives, e.g. Directive 2002/19/EC (Access Directive) and 2002/22/EC
(Universal Service Directive); OJ L108, 24.04.2002;
http://europa.eu.int/information_society/topics/telecoms/regulatory/new_rf/index_en.htm
Information  society  services  are  defined  in  Article  1(2)  of  Directive  98/48/EC  of  the  European
Parliament and of the Council of 20 July 1998 amending Directive 98/34/EC laying down a procedure
for  the  provision  of  information  in  the  field  of  technical  standards  and  regulations;  OJ  L217  of
05.08.1998, p. 18.
Services shall be considered to be “services” within the meaning of this Treaty where they are normally
provided for remuneration, insofar as they are not governed by the provisions relating to the freedom of
movement for goods, capital and persons.

6

                                                
protects  “content”  services  irrespective  of  the  technical  characteristics  of  the
transmission method used. The Directive is the first Community Directive to apply to
both  broadcasting  and  interactive  services.  It  can  be  considered  as  the  first
occurrence of “legal convergence”11 in Community legislation.

However,  in  order  to  benefit  from  the  protection  provided  for  in  the  Directive,  the
services  need  to  use  some  form  of  conditional  access  for  the  purpose  of  obtaining
remuneration for the service provider concerned. Remuneration can be in the form of
a  subscription  (for  example,  for  viewing  the  complete  offer  of  a  particular  channel
during  an  agreed  period)  or  the  payment  of  a  fee  (for  example,  for  viewing  one
particular movie). These payments directly to the service provider seek to ensure the
economic viability of the service.12 Business models whereby a particular service is
provided  against  payment  by  the  recipient,  but  whereby  ancillary  services  are
provided as well without direct payment but with conditional access protection, are
also  covered  (for  example,  “bonus  tracks”  to  be  downloaded  from  the  Internet  for
legitimate  owners  of  the  original  audio  CD).  Without  such  a  link  between
remuneration  and a  conditional access protected service, no legal protection  can  be
granted under the Directive.

The  provision  of  conditional  access  to  radio,  TV  and  information  society  services,
referred  to  in  the  Directive  as  a  service  in  its  own  right,  is  also  covered  by  the
concept of “protected service”. While the provider of such a service does not have a
direct economic interest in the “content” services its conditional access is protecting,
it  has  an  immediate  economic  interest  in  protecting  the  security  offered  by  its
conditional  access  technology.  Successful  piracy  against  its  protection  technology
directly undermines the confidence of its clients in the protection capabilities of the
service concerned and, consequently, its economic viability.

Conditional access

The Directive is formulated in a technology-neutral way. By not making reference to
a particular technology, but by using high-level functional definitions, the Directive
becomes more  “future-proof” and less “maintenance  prone”,  as  well as providing a
more stable legal framework and therefore optimal legal security.

Not only typical conditional access technologies based on cryptography, such as used
in pay TV, are covered, but also any other technology denying access to the service
without the prior approval of the service provider, such as user-ID/password schemes
often used by pay services provided over the Internet.

10

11

12

In accordance with the case law of the Court of Justice the concept of a service “normally provided for
remuneration” does not make reference to specific means of financing. “Article 60 (now Article 50 EC)
does not require the service to be paid for by those for whom it is performed – Case C-352/85 Bond van
Adverteerders [1988] ECR 2085 §16 – but to the existence of a consideration for the service in question
– Case C-109/92 Wirth [1993] ECR I-6447 §15.
Communications  and  information  technologies  are  progressively  using  the  same,  or  at  least  similar,
types of (digital) technology. This “technological convergence” increasingly affects markets and service
provision  in  the  field  of  broadcasting,  interactive  services  and  electronic  communications,  and
consequently  the  related  regulation.  In  such  an  environment  where  boundaries  tend  to  blur,  “legal
convergence”  by  means  of  merging  legal  instruments  on  the  basis  of  a  common  technology-neutral
approach is often considered the best regulatory response.
See Recital 6 of the Directive.

7

                                                                                                                                                        
Illicit devices

Illicit devices have to be designed or adapted to give intelligible access to a protected
service without the authorisation of the service provider. Typical examples of illicit
devices are special purpose hardware devices or software programmes built to bypass
the  conditional  access  protection.  Due  to  developments  in  smart  card-related
technologies, fully functional smart cards in the form of modified original cards, or
duplicates  of  original  cards,  or  specially  produced  completely  new  pirate  cards  are
currently the most often used illicit devices. However, blank smart cards or standard
smart card programmers13 do not as such qualify as illicit devices.

2.2.2.

Infringing activities

Contrary  to  other  parts  of  the  Directive,  the  provisions  on  infringing  activities  are
very prescriptive.  A detailed  catalogue  of  activities  to  be  prohibited  covers  the  full
business chain of activities from the initial production to the after-sales maintenance
and repair of illicit devices, including all forms of commercial communications.14

The  Directive  imposes  sanctions  only  on  commercial  activities15  favouring
unauthorised reception, not on unauthorised reception as such. It clearly reflects the
approach to stop piracy “upstream”, i.e. activities enabling illegal access.

2.2.3.

Sanctions and remedies

The Directive does not oblige Member States to impose specific sanctions, but limits
itself to stipulating that sanctions have to be effective, dissuasive and proportionate.16
The  Directive  neither  fixes  the  level  or  the  type17  of  the  penalties,  and  nor  does  it
prejudice the application of certain provisions of national criminal law.18

Member States have to make a set of appropriate remedies available to providers of
“protected services”, including, as a minimum, an action for damages, an injunction
or  other  preventive  measure  as  well  as  the  possibility,  where  appropriate,  of
disposing of illicit devices outside commercial channels.

13

14

15

16

17

18

A smart card programmer is a hardware device connected to and controlled by a PC capable of loading
data into the memory of the smart card.
Recital  14  explains  what  has  to  be  understood  by  this  concept,  which,  at  the  time  of  adoption  of  the
Directive, did not yet exist in Community law.
Recital  13  of  the  Directive  clarifies  the  concept  of  “for  commercial  purposes”  by  making  explicit
reference to “direct and indirect financial gain”.
This  approach  is  commonly  used  in  internal  market-related  legislation.  It  is  enshrined  in  the
Commission  Communication  on  the  role  of  penalties  in  implementing  Community  legislation  –
COM(95) 162 and was applied for the first time by the Court of Justice in its judgment in Case 68/88,
Commission vs. Greece [1989] ECR-2965.
Recital 23 clarifies that Member States are not obliged to impose criminal sanctions.
Recital 22  allows,  for  example,  a  “knowledge  test”  for  infringing  activities.  Recital  23  allows,  for
example, the seizure of illicit devices.

8

                                                
2.3.

Questions raised during the adoption of the Directive

2.3.1. Use  of  conditional  access  for  other  reasons  than  the  remuneration  of  the  service

provider

Conditional  access  technologies  control  and  secure  access  to  electronically
transmitted “content” services. These technologies allow their users to determine the
precise conditions under which access is granted.

The Directive exclusively protects service providers using conditional access for the
purposes  of  ensuring  that  they  are  paid.  However,  conditional  access  may,  and  in
practice does, serve many other purposes. Most conditional access systems used by
satellite  pay  TV  operators  not  only  ensure  payment  but  also  aim  to  restrict  the
potential audience of  the broadcast to a particular territory (often a Member State),
mostly  for  copyright  reasons.  Conditional  access  is  also  used  to  protect  minors
against offensive adult content.

During the adoption process of the Directive there was broad discussion on the need
and wisdom of extending the scope of the legal protection offered by the Directive to
the use of conditional access for copyright reasons. Such an extension would entitle
copyright  holders,  in  parallel  with  and  independent  of  the  providers  of  protected
services, to bring an  action against and seek  compensation for damages  from illicit
device manufacturers and merchants.

Eventually, it was decided not to bring copyright protection under the umbrella of the
Directive. One of the main reasons was that as Community law stood at that point in
time producing and selling illicit devices could not be qualified as an infringement of
copyright.19  Another  reason  was  to  be  found  in  the  ongoing  negotiation  of  a  draft
Directive  on  copyright  in  the  Information  Society,  which  contained  provisions  on
technical  protection  measures  and  anti-circumvention  and  was  considered
complementary to the Conditional Access Directive.20

The  Commission  agreed  to  call  for  a  study  to  examine  the  legal  and  economic
implications of the use of conditional access for reasons other than the protection of
remuneration.21  The  study,  which  was  finalised  in  April  2000,  focused  on  those
“interests which are not directed upon the provision of any  form  of direct  financial
payment by the receiver in return for the provision of a service by the service/content
provider”.

The  study  identified  a  variety  of  such  interests,  ranging  from  compliance  with
contractual and statutory obligations to marketing and advertising strategies, security
aspects, and  indirect remuneration.  In all cases  the study found that the decision to
use conditional access was based on valid economic and legal considerations. Some
of these interests were  more  often  found  with  broadcasters,  others  more  often  with
information society service providers. It shows that conditional access is often used

19

20

21

Recital  21  of  the  Directive  clarifies  that  the  Conditional  Access  Directive  is  without  prejudice  to  the
application of Community rules concerning intellectual property rights.
See COM(97) 628 final of 10.12.1997, p. 33.
This study  was awarded to the Institute  for Information  Law (IVIR) of the University of  Amsterdam.
The final report, dated April 2000, is available at http://www.ivir.nl/publications/other/ca-report.htm or
at http://europa.eu.int/comm/internal_market/en/media/condac/backgrnd/index.htm

9

                                                
for  more  than  one  reason  at  the  same  time.  Apparently,  the  requirements  from  the
content  industry  (copyright)  and  the  use  of  wide-area  transmission  techniques
(satellite) are the main driving  forces  behind the use of  conditional access for  non-
remuneration reasons.

The study forecasts that the use of  conditional access for non-remuneration reasons
will grow, but that it is still too early to predict seriously and reliably how the market
will develop and what the impact of the increased use of conditional access will be.
The  study  indicates  that  the  risk  of  exposure  to  piracy  will  be  similar  for  both
remunerated and non-remunerated cases.

2.3.2. Commercial versus private purposes

The list of infringing activities set out in the Directive is mainly based on the list of
unlawful  activities  laid  down  in  Recommendation  R(91)14  of  the  Council  of
Europe.22  This  Directive  and  the  Recommendation  as  its  conceptual  predecessor
consider  that  the  most  effective  way  of  thwarting  piracy  is  to  concentrate  on
commercial activities enabling illegal access.

However,  at  the  time  of  the  negotiation  of  the  Directive  a  few  Member  States  had
made  certain  private  acts,  such  as  private  possession  of  an  illicit  device  and/or
unauthorised  private  reception  itself,  punishable.  During  the  negotiation  of  the
Directive  different  views  existed  among  the  Member  States  and  the  Community
Institutions as to the need and wisdom of extending the harmonisation of infringing
activities  beyond  commercial  activities.  In  the  end  it  was  agreed  that  the  Directive
would only cover commercial activities, but that it was possible for Member States to
prohibit the private possession of illicit devices under national law.23

Similar discussions also took place during the adoption process of the Copyright in
the Information Society Directive, resulting in a more or less comparable solution.24

3.

IMPLEMENTATION OF THE DIRECTIVE

3.1.

Notification of implementation measures

The Directive granted Member States a period of one and a half years to implement
its  provisions.  By  the  deadline  for  transposition,  i.e.  28  May  2000,  only  very  few
Member States had notified implementation legislation to the Commission.

In accordance with the procedure laid down in Article 226 of the Treaty (ex Article
169) for non-notification of national implementing measures, letters of formal notice
were sent out to the Member States that had failed to do so. Following these letters, a
large majority of Member States duly notified their implementing measures.

22

23

24

For more information see Chapter 6 of this Report.
See Recital 21 of the Directive.
For  more  details  see  Directive  2001/29/EC,  Articles  6.1,  6.2  and  6.3,  and  Recital  49;  OJ  L167  of
22.06.2001, p. 10.

10

                                                
As  at  the  date  of  this  Communication  the  Commission  has  been  obliged  to  refer
several  Member  States  (Greece  and  Spain)  to  the  European  Court  of  Justice  for
failure to notify.25

Several notifications do not include all the information needed for the Commission to
assess  the  completeness  of  national  implementation  and  its  compatibility  with
Community law.  In order to clarify this situation, bilateral discussions are currently
taking  place  between  the  Commission  and  the  Member  States  concerned.  If
necessary,  the  Commission  will  commence  infringement  proceedings  under  Article
226  against  those  Member  States  which,  in  the  view  of  the  Commission,  do  not
implement the Directive with the required specificity, precision and clarity.26

3.2.

Current state of implementation by Member States

Quite a long period of time elapsed between the entry into force of the Directive and
the  promulgation  of  national  legislation  implementing  it.  Most  of  the  legislation
entered into force from the second half of the year 2000 onwards.

 Year

Member State

<1998

France – The Netherlands

 1999

 2000

 2001

 2002

Austria – Ireland – Italy – Sweden – United Kingdom

Denmark – Finland – Portugal

Germany – Luxembourg – Greece

 future

Belgium– Spain

Table 2: Year of entry into force

A continuously updated overview of the implementation of the Directive by the EU
and EEA Member States and the Candidate Countries, including extensive references
to national law accompanied by informal translations into English, is available on the
EUROPA website.27

As  was  to  be  expected,  Member  States  have  implemented  the  Directive  in  many
different ways in their national legislation. Some have chosen to cover conventional
radio  and  TV  services  in  media  legislation  and  information  society  services  and
conditional  access  services  in  their  own  right  in  cybercrime  or  related  legislation.
Other  Member  States  have  preferred  a  single  (set  of)  provision(s)  covering  all
services in either the criminal code or a special law.

By and large, the national implementing measures notified to the Commission meet
the  requirements  of  the  Directive.  In  the  majority  of  Member  States  all  protected
services  are  adequately  covered,  although  it  is  unclear  in  a  few  Member  States
whether  conditional  access  services  in  their  own  right  are  indeed  protected.  Some
minor  points  of  clarification are  still  being  discussed  between  the  Commission  and
the Member State concerned.

25

26

27

Spain:  Case  C-58/02;  Greece:  Case  C-219/02;  Commission  Press  Release  IP/02/455  of  22.03.2002;
http://europa.eu.int/comm/internal_market/en/media/infr/02-455.htm
Case C-197/96, paragraphs 14 and 15.
http://europa.eu.int/comm/internal_market/en/media/condac/natimp/index.htm

11

                                                
A  similar  situation  exists  with  regard  to  the  set  of  infringing  activities  to  be
prohibited  pursuant  to  Article  4  of  the  Directive.  In  a  few  cases  a  particular
infringing activity is not explicitly prohibited, because it is presumed to be covered
by a more generic term or by an existing general clause of the national criminal law.
In  order  to  ensure  legal  certainty  for  citizens  and  business  the  Commission  is
discussing these cases with the Member State concerned.

While the Directive  does not oblige Member  States  to  impose  criminal  sanctions,28
all  Member  States  but  two  (Italy  and  Portugal)  do  impose  sanctions  for  what  they
consider  the  main  infringing  activities  (manufacture  and  sale),  with  imprisonment
and/or fines. Obviously, some divergence exists in how the individual Member States
interpret  the  infringing  nature  of  the  prohibited  activities  and  the  necessary
deterrence.

5

4,5

4

3,5

3

2,5

2

1,5

1

0,5

0

BE DK DE GR ES FR IE

IT

LU NL

AT PT SE

FI UK

Chart 1:Maximum term of imprisonment in years for the main infringing activities

A  few  Member  States  have  introduced  a  system  of  modulated  sanctions.  By
integrating  prohibitions  and  sanctions  into  criminal  law,  the  classical  range  of
secondary  criminal  offences  (complicity,  instigation,  aiding  and  abetting)  and
criminal procedures (search and seizure, forfeiture) are also available.

In  a  few  Member  States  (Austria,  Germany  and  Italy),  where  existing  legal
provisions  could  already  be  used  to  prosecute  certain  forms  of  piracy,  the
introduction of specific, but less severe sanctions for the infringing activities defined
by  the  Directive  has  resulted  in  a  de  facto  reduction  of  legal  protection  in  those
Member States.29

In  most  Member  States  appropriate  remedies  are  available  to  injured  service
providers.  In  the  few  cases  where  it  is  not  completely  clear  whether  all  remedies
required  by  the  Directive  have  been  made  available,  the  Commission  is  seeking
clarification from the Member State concerned.

The  Commission  concludes  that  implementation  of  the  Directive  in  national
legislation  does  not  yet  appear  to  have  been  fully  achieved  by  all  Member  States.
Two  Member  States  still  have  to  complete  their  national  implementation  process,
while  there  is  some  uncertainty  in  several  others  as  to  their  completeness  and
compatibility.  The  Commission  will  continue  to  examine  the  national  measures  in
question and vigorously pursue its efforts to have the Directive fully implemented.

28

29

Recital 23, second sentence, of the Directive.
Lex specialis derogat generali.

12

                                                
3.3.

National provisions beyond the requirements of the Directive

The Directive introduces only a minimum level of legal protection against piracy and
grants Member States a lot of flexibility and discretion in tailoring their national anti-
piracy regime to their own needs and policies. Several Member States have used this
prerogative  and  extended  the  definition  of  protected  services  as  well  as  infringing
activities, sanctions and remedies.

A  substantial  number  of  Member  States  neither  explicitly  require  the  use  of
conditional access nor focus only on remuneration of the service provider, but grant
protection of all services against unauthorised access or access without permission.

Similarly,  a  minority  of  Member  States  prohibits  personal  use  and/or  private
possession of illicit devices.

Some Member States have made explicit provision for specific sanctions (publication
of  judgements,  forfeiture  of  profits)  and  remedies  (compensation  of  lost  profits,
transfer of profits made).

In  a  few  Member  States  a  National  Supervisory  Authority  (sometimes  the
telecommunications  authority,  sometimes  a  special  service)  has  been  charged  with
the monitoring and surveillance of the market and (partial) enforcement of the law.

3.4.

Enlargement

The  Candidate  Countries  have  to  implement  the  Directive  as  part  of  the  acquis
communautaire. Timely implementation accompanied by effective enforcement is of
vital  importance  in  the  fight  against  piracy  within  the  Union  as  well  as  within
prospective member states. In parallel with  enhancing  protection  in the EU,  acts of
piracy  related  to  pay  TV  and  Internet  services  are  tending  increasingly  to  shift
towards central Europe.

Enlargement  is  one  of  the  Commission’s  top  priorities  in  200230  and  2003.31  The
Commission is actively monitoring implementation and assists  as much as  possible
the  Candidate  Countries  with  the  drafting  and  subsequent  practical  implementation
of the relevant national legislation transposing the Directive.

While  much  effort  is  still  required,  progress  so  far  has  been  encouraging.  Four
countries  have  already  put  the  major  part  of  the  necessary  legislation  in  place.
Several  other  Candidate  Countries  are  currently  preparing  their  draft  implementing
legislation and envisage final adoption by the end of 2003. The remaining countries
have  confirmed  that  they  intend  to  adopt  the  necessary  measures  by  the  date  of
accession in 2004 at the latest.

As  already  emphasised  in  the  previous  chapter  of  this  report,  application  of  the
legislation in force is the primary duty of the national authorities. In order to be ready
to apply the legislation once it has entered into force, the enforcement authorities of
the Candidate Countries have to be trained.

30

31

COM(2001) 620 final of 05.12.2001, p. 14.
see Press Release IP/02/338 (Annual Policy Strategy for 2003).

13

                                                
Candidate  Countries  are  showing  encouraging  progress  with  the  implementation  of
the Directive, although much effort still has to be made.

The  Commission  will  continue  to  work  together  with  all  Candidate  Countries
towards  an  adequate  level  of  administrative  and  judicial  capacity  by  the  time  of
accession.32 With the  help of  specialised industry players, special training  seminars
for the police and judicial authorities can be planned.33

4.

MARKET DEVELOPMENTS AND APPLICATION OF THE DIRECTIVE

4.1.

Consultation of the market parties

In  preparation  of  this  report  the  Commission  consulted  the  main  industry
stakeholders affected by the piracy  of  conditional access  protected  services  and the
related legal countermeasures. In line with the commitment taken in its White Paper
on  European  Governance34  and  its  recent  proposals  on  better  lawmaking,35  the
Commission undertook this consultation in order to encourage an open dialogue on
the piracy problems encountered on the market and to help collect and analyse new
and existing information in the technically and legally advanced field covered by the
Directive.  The  Commission  did  not  undertake  a  full-blown  impact  assessment36
because the Directive was still being transposed into national legislation during  the
reporting period.

The results of the consultation provided significant input into the preparation of this
report  and  its  possible  follow-up.37 Obviously,  market  players  are  very  reluctant  to
discuss  the  details  of  piracy  and  how  it  affects  their  business.  Too  much  openness
might prove to be counterproductive due to the potential impact on the confidence of
customers  in  the  quality  of  the  protection  offered,  the  competitive  position  on  the
market  and  shareholder  value.  Industry  associations  like  AEPOC,38  STOP39  or  the
ICRT40  have  proven  to  be  very  instrumental  in  conveying  the  concerns  and
illustrating the problems met by the members they represent. Whilst understandable,
this  protective  attitude  complicates  efforts  to  get  a  clear  picture  of  the  size  and
impact of the problem as well as identifying effective and efficient solutions.

32

33

34

35

36

37

38

39

40

COM(2002) 256 final of 05.06.2002.
See also chapter 4.3 on enforcement.
COM(2001) 428 final of 25.07.2001; http://europa.eu.int/comm/governance/index_en.htm
COM(2002) 275 final and COM(2002) 277 final of 05.06.2002.
COM(2002) 276 final of 05.06.2002.
The  Commission  has  received  written  submissions  from  AEPOC,  EBU,  AER,  ACT,  MPA,  ACTI,
ACCeS, DVD, STOP Sweden, STOP Denmark, STOP Norway, ICRT and the KirchGruppe. In addition
more informal, bilateral meetings were held with several market players.
AEPOC,  the  European  Association  for  the  Protection  of  Encrypted  Works  and  Services,  represents
Betaresearch,  BskyB,  Canal+,  Canal+Polska,  Canal+  technologies,  Conax,  Eutelsat,  IrdetoAccess,
Motorola, NDS, NTV-Plus, Pace, Philips Digital Networks, Première, Rai, SCM Microsystems, Société
Européenne  des  Satellites,  Sogecable,  Stream,  Tele+,  Thompson,  TPS,  UPC  and  Viaccess-France
Telecom; see http://www.aepoc.org/
STOP,  the  Scandinavian  TV  Organisations  against  Piracy,  exists  in  Finland,  Sweden,  Norway  and
Denmark (http://www.stop.dk)
ICRT,  the  International  Communications  Round  Table,  represents  American  Express,  AOL  Time
Warner, Springer, Bertelsmann, British Telecom, Coface, EDS, IBM, Kirch, Philips, KPN, Lagardère,
Microsoft, NCR, News Int, NewsCorp, Reed-Elsevier, Reuters, Siemens, Sony, Walt Disney, UPC, von
Holtzbrinck, Vivendi, VNU, Yahoo (www.icrt.org)

14

                                                
In return, and in line with its efforts to communicate more actively with the general
public on European issues, the Commission has completely refurbished its web pages
on EUROPA relating to the Directive and its implementation.41

4.2.

Combating pir@cy – a moving target

Audio-visual  piracy  and  particularly  piracy  related  to  pay  services  is  developing
along the same lines as the services it tries to exploit. Initially, it was possible to hack
encrypted  analogue pay  TV channels by means of  modified  decoders.  This  kind  of
piracy required specialised knowledge of analogue TV technology and electronics as
well as special manufacturing skills.

Services targeted by pirates

digital 

inter  alia 

Digitalisation  led  to  an  enormous  upsurge  in  distribution  channels  and  supply  of
in  a  fast
content,  resulting 
pay  TV  market.
developing 
grown
revenues 
Subscription 
Recent
since 
exponentially 
that
studies 
Commission 
in
subscriptions  are  gradually  gaining 
importance.  Digital  TV 
subscription
revenues  grew  from  less  than  25%  of
industry  revenues  in  1995  to  approximately
35% in 2000.

have 
1996. 
indicate 

With  the  migration  to  digital  of  analogue
cable  networks  and  terrestrial  television,
digital  pay  TV  services  are  progressively
being  provided  via  these  new  distribution
channels  (for  details  see  Table  3).  Recent
statistics more or less confirm this trend and indicate that by 2008 digital TV will be
present in 73% of European homes (122 million households).42

Chart 2: digital TV subscription revenues since
1996 (in M€)

Source: IDATE and 7th Implementation Report Telecom

The  proliferation  of  digital  TV  will  result  in  wide  deployment  of  digital  decoders,
either in hardware  form (set-top boxes and intelligent TV sets) or in software form
(specialised software on a PC with a DVB card43).

The downside of this technical convergence is that current digital satellite TV piracy
will spread into new areas like digital terrestrial television and digital cable television
and become increasingly more widespread.

41

42

43

http://europa.eu.int/comm/internal_market/en/media/condac/index.htm
Strategy Analytics, 28 May 2002; http://www.strategyanalytics.com/press/prsk012.htm
A DVB card  is  computer  hardware  designed  for  receiving,  decoding  and  displaying  digital  television
conforming to the European DVB standards on a standard Personal Computer.

15

                                                
Digital TV households

1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005

Satellite

Digital Satellite TV Households (M)

0.0

0.4

1.9

4.1

8.3

14.3

19.2

24.0

28.2

32.3

35.9

Cable

Digital Cable TV Households (M)

0.0

0.0

0.1

0.8

1.7

3.2

6.1

10.7

16.3

22.5

28.8

Terrestrial

Digital Terrestrial TV Households (M)

TOTAL DIGITAL TV HOUSEHOLDS (M)

0.0

0.0

0.0

0.4

0.0

2.0

0.0

5.0

0.5

1.3

2.1

3.5

5.1

7.1

8.8

10.5

18.7

27.4

37.8

48.7

60.1

70.8

Source: Strategy Analytics, Feb 2001 and 7th Implementation Report Telecom

Table 3: Digital TV households in the EU (plus Norway and Switzerland), trend and forecast

National digital television markets are at very different stages of development in the
Member States. Differences in penetration between the different digital TV delivery
mechanisms will influence the level of piracy in each Member State (for details see
Chart 3).

Unlike pay TV, pay radio services have so far not been widely deployed in Europe.
Radio in Europe is mainly  based on free-to-air  business  models.44 A  few  pay  radio
stations are operational in the USA, but only on the basis of proprietary receiver and
conditional access technology. These stations promote their pay services by stressing
the high audio quality, coast-to-coast coverage and the large variety in commercial-
free music, sports and news programming. Nothing similar has yet been experienced
in  Europe,  although  through  digital  radio  pay  radio  services  are  expected  in  the
future, for example, in combination with other technologies like mobile telephony.

Source: prepared by EC services from Strategy Analytics data

DTV:
DCATV:
SDTV:
DTTV:

Digital TV
DTV by cable
DTV by satellite
Digital Terrestrial TV

Chart 3: Digital TV EU household penetration in 2001, by Member State and delivery
mechanism (percentage of households)

With  the  downturn  in  the  Internet  economy  and  the  weak  advertising  market,
providers of information society services are launching premium services for a fee in
order to generate alternative revenue sources and to create lasting relationships with
their  customers  supporting  their  digital  lifestyle.  These  subscription-based  Internet
services  are  mainly  protected  by  username/password  mechanisms  and  vary  from

44

Occasionally, thematic radio channels are only made available to subscribers of premium packages; for
an example see http://www4.telepiu.it/v4_intrattenimento/multimusica/multimusica.asp

16

                                                
online  games,  advanced  document  searches,  full  editorial  offerings  of  online
newspapers and specialised journals to music downloads and on-demand movies. A
flourishing  category  of  pay  services  are  the  online  update  services  available  to  the
owners of the original software programs, whereby the serial number of the original
CD  acts  as  access  authorisation.  Market  players  and  legislators  are  currently
watching with great interest and  expectation these  first and  probably still  immature
attempts to generate income from online content offerings.

Piracy methods and tools

Most of today’s piracy of digital pay TV takes place at the level of the smart card or
the decoder software. An exquisite range of websites and message boards provide in-
depth background information on the  different conditional  access  systems,  tutorials
on how to (re-)program smart cards as well as references to where to “find” essential
key  material.  Smart  card  technology  has  entered  the  main  stream  of  business
applications.  The  hardware  and  software  tools  to  program  these  cards  are  widely
available,  because  smart  cards  and  their  programmers  are  also  used  for  legitimate
purposes.  It  is  obvious  that  user-friendliness  of  the  necessary  tools  and  the
availability of knowledge and information via the Internet have facilitated piracy of
digital systems considerably.

Pirate  smart  cards  are  often  based  on  the  original  smart  cards  issued  by  pay-TV
operators. Disabled cards, or cards only  giving  access to the basic service offering,
are  modified  (so-called  MOSCs45)  and  turned  into  cards  giving  full  access  to  the
whole package of services. Digital pirate smart cards, often called DPSCs, are either
functionally identical “clones” of original cards or newly programmed smart cards.

Professional  pirates  are  well-equipped  and  produce  large  quantities  of  MOSCs  and
DPSCs.  The  quasi-industrial  production  and  distribution  of  these  pirate  cards
requires  highly  “professional”  business-type  working  methods,  often  involving
organised crime.

Less  industrial,  but  nevertheless  no  less  damaging,  is  the  “local’  production  on  a
much  smaller  scale  of  pirate  cards  on  the  basis  of  publicly  available  empty  smart
cards.  This  kind  of  pirating  uses  “do-it-yourself”  hardware  and  information  mainly
available via the Internet. Profits are made from selling blank cards and programmers
or  complete  satellite  reception  installations,  including  a  counterfeit  access  card46  at
attractive  prices.  These  pirates  are  also  used  by  organised  crime  as  a  distribution
channel for the pirate cards produced by professional pirates. Often the commercial
nature of this form of piracy is difficult to establish because calculating perpetrators
reduce their “penal” exposure to the maximum.

Private  individuals  also  take  part  in  this  “cottage-industry”  form  of  piracy.  As
“casual pirates” they use the same hardware and information and are offering “self-
made” cards as a small service to friends, neighbours or colleagues at work, often in
exchange  for  cash  or  other  valuables  like  pirate  copies  of  software,  music  CDs  or
DVDs.

45

46

Modified Original Smart Card.
The marginal costs to produce such a card are insignificant (less than 1%) in comparison to the real cost
of the subscription.

17

                                                
Increasingly,  technically  savvy  viewers  themselves  are  producing  pirate  cards  for
their own private use. All they need to do is to acquire the necessary know-how from
hacker sites and to make a one-time modest investment in the basic hardware.

Two  relatively  new  and  extremely  dangerous  forms  of  piracy  are  developing  very
quickly at present. The first is based on the use of ordinary PCs equipped with DVB
TV cards and software decoders. These powerful software decoders, which emulate
the conditional access hardware module and the smart card, are distributed over the
Internet.  The  second  form  centres  on  the  possibility  of  modifying  commercially
available  common  interface  conditional  access  modules  (CAMs)  by  applying
specialised  software  “patches”,  with  the  result  that  a  valid  smart  card  is  no  longer
necessary  (so-called  FreeCams).  Both  forms  rely  on  ultra  user  friendly  distribution
over the Internet, which make them the potential piracy killer application.

All pirates, except maybe the most professional ones, depend for the  availability of
keys,  circumvention  tools  and  instructions,  etc.,  on  private  hacker  websites.  These
websites  are  the  essential  link  in  the  piracy  business  chain  because  they  are  the
source of the necessary material. Therefore, they are also the Achilles heel of a major
part of the piracy business. Many of these hacker sites present themselves as private
initiatives without any economic backing from commercial partners. While this may
be  true  for  some  of  them,  others  use  banner  advertising  or  recommend  particular
product  brands,  suggesting  some  form  of  commercial  relationship.  Websites  need
hosting computers and Internet connections, which are never for free.

Damage caused by piracy

Audio-visual piracy  is  not  a  “victimless”  crime.  Most  pay-TV  broadcasters  operate
within  narrow  financial  margins.  The  difference  between  commercial  success  and
bankruptcy  is  usually  very  small  in  emerging  industries  of  this  kind  and  often
depends on a progressively expanding paying audience and ARPU.47 The number of
pirate viewers watching without payment can make the difference.

Piracy  does  not  only  deprive  operators  of  their  revenues,  it  also  increases  the
operating costs as well as the need for additional investment. Industry sources claim
that the replacement of one smart card in a major  card swap-out costs  about  €11.48
One  major  pay-TV  operator  claimed  to  have  spent  over  €35  million  to  develop  its
widely used set-top box middleware and conditional access system.49

Piracy also has a negative impact on the revenues of the national treasury. Pirates do
not pay taxes on their services; and legitimate providers pay less VAT and company
taxes due to lower turnover and lesser profits.

Law-abiding consumers can easily be misled about the origin of decoders and smart
cards.  They  are  the  first  to  bear  the  consequences  of  the  fraudulent  behaviour  of
pirates  when  the  operator  disables  their  pirate  smart  card  or  takes  other
countermeasures.

47

48

49

Average Revenue Per User.
New Media Markets – 31.05.2002, p. 6.
New Media Markets – 15.03.2002, p. 5.

18

                                                
Indirectly, piracy also distorts other audio-visual markets. It not only affects the retail
market of set-top boxes and subscriptions, it also has a potentially detrimental effect
on  the  cinema  sector  and  the  rental  of  video  cassettes  and  DVDs  due  to  the
availability of premium material via illegal access to electronic pay services.

Information  provided  by  AEPOC,50 the  European  Association  for  the  Protection  of
Encrypted  Works  and  Services,  showed  that  lost  revenue  from  piracy  in  Europe
exceeded €200 million in 1996. AEPOC estimates that, due to the increased annual
legal turnover of pay-TV operators, the illegal turnover connected to piracy is in the
order  of  €1  billion  yearly.  Recently,  ITV  Digital  estimated  its  lost  revenues  from
smart card piracy to be over £100 million.51

Apart  from  the  economic  damage  it  produces,  the  act  of  piracy  itself  also  causes
“societal” damage. Burglary and theft are per definition unacceptable in any civilised
society because they attack the heart of our system of values. The cyber equivalents
of  these  offences  and  the  damage  done  to  the  public  interest  should  be  seen  in  the
same light.

Countermeasures

Pay-TV operators have a long tradition of fighting off piracy. In the early days of pay
TV, operators avoided legal actions in order not to make the general public aware of
the vulnerability of their services. Therefore, traditionally the first answer to piracy is
technical countermeasures.  Today, operators  exploit  all  countermeasure  capabilities
of  their  current  operational  system,  including  key  updates  and  blocking  of  known
pirate smart cards.

Operators  are  also  continuously  and  routinely  monitoring  the  piracy  market  and
analysing new pirate devices and methods in order to keep abreast of piracy and to
strike  back  with  counterattacks.  They  reduce  the  vulnerability  of  their  systems  by
upgrading  the  encryption  and  enhancing  the  key  schemes  used  to  identify
(individual)  users.  Recently,  several  major  operators  have  started  replacing  all
legitimate smart cards with more secure ones. This swap-out of millions of cards is a
major  logistic  challenge  for  these  operators,  the  cost  of  which  illustrates  their
determination to combat piracy.

There  are,  however,  practical  limits  to  these  efforts  due  to  the  costs  involved,  the
inconvenience  for  legitimate  viewers  and  the  technical  possibilities  of  the  system
concerned. At that point effective enforcement of legal protection becomes the next
line of defence.

4.3.

Enforcement

Most  Member  States  have  only  recently  brought  their  national  legislation  into  line
with  the  Directive.  Therefore,  it  is  still  rather  early  to  get  a  complete  and
comprehensive picture of the practical effects of this new legislation on piracy  and
the fight against it. National enforcement authorities as well as the industry players
concerned have to become accustomed to the new legal framework and how to make
the most of its possibilities.

50

51

http://www.aepoc.org/
New Media Markets – 15.03.2002, p. 5.

19

                                                
Several market players responding to the Commission’s consultations expressed their
concern with the patchy implementation of the Directive and the reluctant attitude of
the  national  enforcement  authorities  to  investigate  and  prosecute  suspected
perpetrators. They draw attention to the fact that audio-visual piracy is a technically
and  legally  complicated  offence  and  highlight  the  need  and  their  readiness  to  co-
operate, assist and where necessary educate national authorities on the basis of joint
efforts. Several examples of successful partnerships against pirates have shown that
such an approach  can  work  and  should encourage authorities  and  service  providers
not  yet  participating  to  embrace  this  mutually  beneficial  approach.  Practical  co-
operation  should  be  obtained  through  training  seminars,  the  creation  of  dynamic
webs of persons and authorities involved in the fight against this kind of piracy, plus
exchanges of best practices and information throughout the enlarged Union52.

Most  respondents  emphasise  the  radical  changes  in  piracy  due  to  the  Internet  and
their  concern  that  the  current  legal  framework  was  not  designed  with  this  kind  of
threat in mind. The commercial nature of hacker sites is often difficult to establish.
The necessary key material is readily available on the Internet, allowing individuals
to  render  pirate  services  to  friends,  most  of  the  time  without  any  commercial
purpose. They complain that blank cards and programmers qualify  as illicit devices
only  in  very  specific  circumstances.  Calculating  perpetrators  are  aware  of  the
deficiencies of the law  and adapt their  working  methods in  order  to  remain outside
illegality as long as possible.

Sometimes some authorities seem to be inclined to refrain from enforcement on the
basis of penal law and urge service providers to defend themselves in first instance
by  seeking  civil  remedies  through  court  actions.  While  in  certain  cases  acceptable,
such  a  policy  does  not  encourage  service  providers  to  publicly  report  piracy  cases
and may deny them the protection offered by criminal law. It makes them vulnerable
to  counterclaims  for  damages  and  negative  publicity.  Reluctance  on  both  sides
results  in  a  lack  of  reliable  data  on  the  intensity  and  type  of  piracy,  which  further
complicates policy-making and enforcement.

All market players  ask for  at  least the private  possession and  personal  use  of illicit
devices to be included in the definition of infringing activity. In the Nordic countries
this approach seems to have been quite successful in repressing piracy.

While  recognising  the  difference  in  scope  of  protection,  quite  a  few  respondents
highlighted  the  similarity  between  enforcement  measures,  the  procedures  to  be
followed  and  the  national  enforcement  authorities  relating  to  conditional  access
piracy,  on  the  one  hand,  and  the  measures  relating  to  counterfeiting  and  copyright
piracy, on the other.

52

A  typical  example  of  this  kind  of  joint  effort  is  the  e-S.PA.C.E.  Dublin  2001  project,  implemented
under  the  EU  Falcone  programme,  under  which  the  Irish  Garda  National  Bureau  of  Criminal
Investigation  and  Microsoft  teamed  together  and  produced  a  training  CD  on  software  piracy  and
counterfeiting.

20

                                                
The  Commission  urges  Member  States  and  Candidate  Countries  to  step  up
enforcement and to give providers of pay services adequate protection against pirates
enriching themselves at their expense.

The Commission will continue to consult Member States and Candidate Countries on
any  remaining  enforcement  difficulties  in  an  attempt  to  identify  and  combat
loopholes in the legislation.

Industry and enforcement authorities should continue to develop joint efforts to curb
piracy.

The  Commission  will  continue  supporting  these  developments  as  much  as  possible
both  from  its  funding  programmes,  including  the  AGIS  Framework  Programme  on
police and judicial co-operation in criminal matters53and from the resources available
for assisting Candidate Countries to boost their administrative and judicial capacity.

4.4.

Piracy-prone business practices

The  Commission's  attention  is  regularly  drawn  to  the  fact  that  citizens  are  not
allowed to access protected satellite TV broadcasts originating from a Member State
other than the one in which they are residing and readily accessible at moderate cost
via  satellite  dishes,54  despite  the  fact  that  they  are  willing  to  pay  for  such  access.
Service  providers  often  argue  that  they  do  not  hold  the  rights  for  the  country  of
residence and that they are obliged to use conditional access technologies as a means
of limiting access and protecting copyright. Citizens fail to understand that within the
internal  market  they  cannot  obtain  legitimate  access  to  protected  pay-TV  services,
even when they are prepared to pay the subscription fees and the handling costs.

It is obvious that these practices provide a strong motivation for interested viewers,
for example, expatriates or professionals and students interested in other cultures and
societies,  to  circumvent  this  obstacle  by  having  recourse  to  illicit  devices.  The
revenues resulting from the sale of these illicit devices are diverted to the pirates and
not  to  the  broadcasters  and  the  right  holders.  Normal  anti-piracy  countermeasures
disabling pirate cards do not reduce piracy abroad, because non-residents using pirate
cards  cannot  procure  valid  smart  cards  by  legitimate  means  and  have  to  turn  to
pirates if they want to continue watching national television. These business models
stimulate the demand for illicit cards, foster piracy, provoke law-abiding citizens to
infringe the law, and deny the existence of the internal market.

The clearance of rights on a strictly national basis has also been the subject of work
in the context of Directive 93/83/EC on the co-ordination of certain rules concerning
copyright  and  rights  related  to  copyright  applicable  to  satellite  broadcasting  and
cable  retransmission.55  Pay-TV  services  are  just  the  simplest  case  of  cross-border
provision  of  satellite  TV.  Right  holders  negotiate  with  broadcasters  the  terms  and
conditions related to the broadcasting of their works. Remuneration is often related to

53

54

55

http://europa.eu.int/comm/justice_home/funding/agis/funding_agis_en.htm
Concerning  the  “right  to  use  a  satellite  dish”,  the  Commission  has  adopted  a  Communication  on  the
application of the general principles of free movement of goods and services – Articles 28 and 49 EC;
(COM(2001) 351 final of 27.06.2001);
http://europa.eu.int/comm/internal_market/en/media/satdish/index.htm
OJ L248 of 06.10.1993, p.15; see http://europa.eu.int/comm/internal_market/en/media/cabsat/index.htm

21

                                                
the  expected  audience.  By  using  conditional  access  technologies,  it  is  perfectly
possible to determine exactly what the audience is outside the original territory (the
service provider knows to whom – number and place of residence - he has sold his
cards)  and  to  collect  the  fees  from  the  viewers  (they  bought  a  card).  Conditional
access  allows  broadcasters  to  serve  non-resident  clients  and  to  compensate  right
holders.

Prevention and clever efforts to neutralise potential piracy opportunities lead not only
to  a  de  facto  reduction  in  piracy  but  also  increase  the  credibility  of  appeals  for
stronger legal protection against the remaining piracy.

The  Commission  has  already  publicly  announced  that  it  is  in  the  process  of
reviewing  the  different  aspects  of  this  problem  in  an  attempt  to  reconcile  in  a
transparent  and  balanced  way  the  different  interests,  including  the  right  to  fair
remuneration  of  right  holders,  the  business  practices  of  the  satellite  television
broadcasters and the fundamental freedoms of the Treaty.56

The Commission calls upon the providers of electronic pay services to actively seek
ways  to  prevent  and  reduce  piracy,  for  example,  by  developing  together  with  right
holders contractual solutions to provide legitimate non-resident subscribers access to
protected  electronic  pay  services  under  reasonable,  non-discriminatory  and
transparent  conditions  if  those  services  are  by  their  inherent  nature  available
throughout the internal market.

5.

OTHER  LEGAL  DEVELOPMENTS  AFFECTING  THE  PROVISION  OF  CONDITIONAL
ACCESS SERVICES

5.1.

The adoption of Directive 2001/29/EC on copyright in the information society

The adoption, after three years of thorough discussion, of Directive 2001/29/EC57 in
May 2001 marked a major milestone in the process of making the cross-border trade
in copyright-protected  goods  and services easier. This Directive, which is currently
being implemented by the Member States, complements the legal protection offered
by  the  Conditional  Access  Directive,  in  particular  by  providing  legal  protection  of
anti-copying devices and right management systems. It meets some of the concerns
expressed by right holders with regard to the lack of protection under the Conditional
Access Directive.

Irrespective  of  the  current  scope  of  application  of  Directive  2001/29/EC,  certain
recent  technical  developments  and  business  models  may  have  to  be  taken  into
account in the long term.

Initially, conditional access technologies protected only the signal as transmitted by
the service provider. The new  generation  of  in-home  digital  networks  and  personal
video recorders maintain the conditional protection in the subsequent stages of digital

56

57

The  recent  Commission  Report  on  the  application  of  the  Satellite  Broadcasting  and  Cable
Retransmission Directive (93/83/EC) concludes that the  freedom of reception and transmission of TV
programmes  from  other  Member  States  see  their  effect  diminished  if  the  difficulties  involved  in
transferring copyright and related rights are not resolved: COM(2002)430 final of 26.07.2002
OJ L167, 22.06.2001, p. 10.

22

                                                
consumption.58  Conditional  access  tends  to  become  part  of  a  larger  protection
scheme designed to provide end-to-end protection for  content in all processes  from
the point of initial  distribution through  to  the  point  of  viewing  and  listening  by  the
end-user.59  Conditional  access  and  digital  rights  management  may  use  the  same
encryption engine in the home multimedia centre.60

At the same time, business is seeking new ways of exploiting available technologies,
in  often  unexpected  and  innovative  ways,  in  an  attempt  to  offer  new  compelling
content  and  to  optimise  value  creation  and  revenues.61  These  new  business  models
are  often  experimental,  at  least  in  the  beginning,  and  ignore  the  applicable  legal
framework.

This technological convergence does not necessarily and automatically have to result
in legal convergence, such as merging several legal protection instruments into one
single instrument.62 However, market developments have to be monitored closely in
order  to  ensure  that  seamless,  complementary  protection  is  offered  by  the  law.
Conversely,  over-protection  has  to  be  avoided  in  order  not  to  stifle  innovation  and
economic development or unduly limit user rights, including fundamental rights such
as  the  freedom  of  expression  or  the  right  to  privacy  and  to  protection  of  personal
data.

In  the  light  of  these  legal,  market  and  technical  developments,  the  Commission
considers  it  is  not  the  right  time  to  propose  an  extension  of  the  scope  of  legal
protection  offered  by  the  Directive  to  the  use  of  conditional  access  for  copyright
reasons.

5.2.

The  adoption  of  a  new  electronic  communications  services  regulatory
framework

In  March  2002,  the  Council  and  the  European  Parliament  agreed  on  a  set  of
Directives and a Decision laying down the new regulatory framework for electronic
communications  services  and  networks.63  This  package  was  complemented  by  a
Directive on privacy and electronic communications adopted on 12 July 2002.64

This  package  is  a  major  overhaul  of  the  existing  Community  telecommunications
legislation,  which  further  liberalises  the  markets  concerned  while  adapting  rules  to

58

59

60

61

62

63

64

The new generation of digital video recorders no longer uses video tapes but records directly on hard
disk; recorded programmes can only be viewed with a valid smart card.
The  Digital  Video  Broadcasting  (DVB)  Project  is  currently  working  on  the  development  of  a  new
integral Content Protection and Copy Management (CPCM) system (www.dvb.org).
For  more  background  information  and  examples  see  Commission  Staff  Working  Paper  on  Digital
Rights; SEC(2002) 197 of 14.02.2002.
Emerging  online  music  services  like  Pressplay  (a  joint  venture  between  Vivendi  and  Sony)  are
protected  by  conditional  access,  but  also  include  rights  management  of  the  downloaded  or  streamed
audio tracks. Similar developments exist in video on demand, where premium movies are available on a
subscription  basis  for  downloading  via  the  Internet  and  controlled  subsequent  viewing,  including
online, real-time renewal of the subscription after the initial viewing period.
See also footnote 10.
IP/02/259  of  14.02.2002;  Directive  2002/19/EC 
(Access  Directive);  Directive  2002/20/EC
(Authorisation  Directive);  Directive  2002/21/EC  (Framework  Directive);  Directive  2002/22/EC
(Universal  Service  Directive),  Decision  676/2002/EC  (Radio  Spectrum  Decision);  OJ  L108,
24.04.2002.
Directive 2002/58/EC - OJ L 201, 31.07.2002.

23

                                                
technological  convergence.  It  covers  electronic  communications  networks  and
services,  including  networks  and  services  used  for  broadcasting,  and  associated
facilities.  The  specific  regime  for  conditional  access  systems  set  out  in  Directive
95/47/EC on the use of standards for the transmission of television signals65 is also
modified.

Under  the  new electronic communications framework “conditional  access  systems”
qualify  as  so-called  “associated  facilities”.66  The  requirement  to  offer  access  to
conditional  access  services  on  a  fair,  reasonable  and  non-discriminatory  basis  and
interoperability  requirements  for  conditional  access  that  were  first  set  out  in
Directive 95/47/EC67 have been carried over in the new framework, though subject to
amendment.68  In  particular,  conditional  access  to  digital  radio  services  is  now
covered  and  market  analysis  procedures  to  review  obligations  in  relation  to
conditional  access  to  digital  broadcasting  services  have  been  introduced,  which
notably allow Member States, under certain conditions, to modify or withdraw access
obligations  bearing  on  operators  with  no  significant  market  power.69  Conditional
access systems and services are not covered by the Authorisation Directive.70

Whilst not offering legal protection against piracy of conditional access services, this
pro-competitive  framework  governs  the  provision  of  electronic  communication
networks and services in general and conditional access systems in particular, and is
as  such  very  important  for  the  further  development  of  the  market  in  the  coming
years.

The Commission will closely monitor future developments on the conditional access
markets  under  the  new  regulatory  framework  for  electronic  communications  when
determining whether additional anti-piracy measures may be necessary.

5.3.

The implementation of Directive 2000/31/EC on electronic commerce

While  the  definition  of  information  society  services  has  already  existed  in
Community law since the adoption of Directive 98/48/EC,71 only with the emergence
of the  e-Commerce  Directive72 have Member States  become  obliged  to  introduce  a
substantial set of rules and regulations related to information society services.

65

66

67

68

69

70

71

72

OJ L 281, 23.11.1995, p. 51 (repealed as from 25.07.2003);
http://europa.eu.int/information_society/topics/telecoms/regulatory/new_rf/index_en.htm
Directive 2002/21/EC; OJ L 108, 24.04.2002, p. 33; Article 2(e) and (f)
Directive 95/47/EC mandated inter alia the use of the Common Scrambling Algorithm administered by
ETSI  (this  algorithm  specifies  how  the  decryption  engine  of  the  set-top  box  deciphers  the  protected
broadcast),  the  possibility  to  receive  free-to-air  transmissions  and  the  DVB  Common  Interface
connector  (this  is  a  standardised  interface  between  an  interchangeable  plug-in  conditional  access
module and the set-top box, permitting several different conditional access technologies to be used on
the same box).
Directive 2002/22/EC; OJ L 108, 24.04.2002, p. 51; Article 24 and Annex VI.
Directive 2002/19/EC; OJ L 108, 24.04.2002, p. 7; Articles 2(a), 6 and Annex I.
Directive 2002/20/EC; OJ L 108, 24.04.2002, p. 21; Recital 6.
Directive 98/48/EC of the European Parliament and of the Council of 20 July 1998 amending Directive
98/34/EC laying down a procedure for the provision of information in the field of technical standards
and regulations; OJ L 217, 05.08.1998, p. 18.
Directive 2000/31/EC on certain legal  aspects  of  information  society  services,  in  particular  electronic
commerce, in the Internal market (Directive on electronic commerce); OJ L 178, 17.07.2000, p. 1-16.

24

                                                
Implementation  of  the  e-Commerce  Directive  will  boost  legal  security  for  business
and  consumers  and  favour  the  rapid  development  of  all  kinds  of  new  interactive
services  over  the  Internet,  including  those  protected  by  conditional  access  and
provided against remuneration.

With  the  implementation  of  the  Conditional  Access  Directive  most  Member  States
have already introduced the concept of “information society services” into their legal
systems.  In  order  to  maintain  legal  certainty,  Member  States  should  not  introduce
different or conflicting definitions in their national legislation.

The e-Commerce Directive provides inter alia for a set of common rules limiting the
liability of certain intermediary service providers, such as, for example, providers of
hosting services.73 These rules cover liability for all types of illegal activities initiated
by third parties online, including the dissemination  of  piracy-related  information or
even illicit devices via web sites, news groups and message boards.74

The Commission will ensure that any further initiative relating to Conditional Access
will be consistent with the e-Commerce Directive.

5.4.

The proposal for a Council Framework Decision on attacks against information
systems

Recently, the Commission adopted a proposal for a Council Framework Decision on
attacks  against  information  systems.75  This  proposal  seeks  to  approximate  criminal
law across  the  EU  to  ensure  that  Europe's  law  enforcement  and  judicial  authorities
can  take  action  against  the  new  most  significant  forms  of  criminal  activity  against
information  systems  ,  ,  aims  to  supplement  what  has  already  been  achieved  in  the
field of  Community law  to protect  information  systems  and  is  without  prejudice  to
Community law.76

The  proposed  Framework  Decision  covers  inter  alia  the  unauthorised  access  to  a
computer  or  networks  of  computers,  including  the  access  to  services  protected  by
conditional access without payment. The proposal recognises that conditional access
devices,  such  as  digital  set-top  boxes  and  personal  video  recorders,  are  de  facto
“computers”  and  that  conditional  access-protected  services  are  provided  via  an
“information system”.

If  the  approach  proposed  by  the  Commission  will  be  retained  by  the  Council,
Member  States  shall  bring  into  force  the  necessary  measures  aimed  at  establishing
the  offence  of  illegal  access  to  information  systems,  if  committed  against  an
information system which is subject to specific protection measures (for example, a
satellite pay-TV service using conditional access), or with the intent to cause damage
(for example, to the provider of  conditional  access technology or services),  or  with

73

74

75

76

Article 14(1) of the e-Commerce Directive exonerates intermediary  service providers  storing  publicly
available information provided by their customers (so-called hosting) from liability for the information
stored if certain conditions have been met.
Particularly important are the procedures to ”take down” material once the ISP concerned has been put
on “notice” that it may be unlawful. The e-Commerce Directive does not regulate these “notice and take
down” procedures, but it does provide a framework for developing self-regulatory solutions.
COM(2002) 173 final of 19.04.2002.
See in particular Article 47 EU, Recital 18 of the draft Framework Decision and COM(2002) 173 §1.6.

25

                                                
6.

6.1.

the intent to result in economic benefit (for example, by making profits from selling
illicit devices).77 The proposal makes no distinction between committing this offence
for private or commercial purposes, and does not require that the service is provided
for remuneration. Nor does it require that the conditional access systems must always
have been bypassed for the offence to have been committed.

The proposed Framework Decision complements the legal protection offered by the
Conditional Access Directive and provides  an additional level of  protection  against
the piracy of conditional access-protected pay services.

COMBATING PIRACY – A PAN-EUROPEAN EFFORT

Recommendation  No  R(91)14  on  the  legal  protection  of  encrypted  television
services

Back in September 1991 the Council of  Europe adopted a  Recommendation  on the
legal  protection  of  encrypted  television  services.78  This  Recommendation  has  been
the source of inspiration for legislators in many European countries.79 It has provided
a  stepping  stone  towards  both  the  EU  Directive  and  its  counterpart,  the  European
Conditional Access Convention.

The Recommendation represents the first generation of legal protection. . It protects
exclusively television services using encryption techniques and does not distinguish
between pay and free services or between the different reasons for using encryption.

Interestingly,  the  Recommendation  notes  that  providers  of  encrypted  TV  services
have the responsibility to use the best available encryption techniques.

Under  the  Recommendation,  all  commercial  and  private  activities  related  to  the
manufacturing, import, distribution and commercial promotion of decoders enabling
access  outside  the  audience  determined  by  the  service  provider  are  considered
unlawful. Possession for commercial purposes is also considered unlawful, while the
unlawfulness  of  private  possession  is  left  to  the  discretion  of  individual  member
states.

The Recommendation insists on appropriate penal or administrative sanctions as well
as  on  the  forfeiture  of  seized  decoders  and  the  financial  profits  resulting  from  the
unlawful activities.

Time  has  shown  that  the  Council  of  Europe's  pioneering  efforts  to  complement
technical  protection  by  legal  protection  has  been  instrumental  in  the  consensus-
building among European countries on how to effectively tackle piracy.

77

78

79

Draft Framework Decision, Article 3.
http://cm.coe.int/ta/rec/1991/91r14.htm
On the basis of this Recommendation, legislation protecting encrypted TV services was enacted in the
early 1990s by a number of countries, such as Denmark, Finland, France, Ireland, the Netherlands and
the United Kingdom.

26

                                                
6.2.

European Convention ETS No 178 on the legal protection of services based on,
or consisting of, conditional access

In  response  to  increasing  piracy,  the  Member  States  of  the  Council  of  Europe
proceeded  in  parallel  with  the  adoption  of  the  Directive  with  negotiations  on  a
similar,  binding  instrument.  The  Commission  negotiated  this  Convention  on  behalf
of the Community and its Member States on the basis of a mandate provided by the
Council on 12 June 1999.

When  negotiating  the  Convention,  the  Commission  paid  particular  attention  to
keeping  the  Directive  and  the  Convention  as  closely  aligned  as  possible.  The
Convention covers more or less the same ground as the Directive and, makes explicit
provision for the European Community to accede to it..

Since the opening for signatures on 24 January 2001 the Convention has been signed
by three EU Member States and by three Candidate Countries.80 So far, Cyprus and
Romania  have  formally  ratified  the  Convention.  Other  Candidate  Countries  have
expressed their  intention to  accede to the Convention. The Convention requires  the
consent of three States in order to enter into force.

In order to provide for a coherent pan-European legal framework and an equal level
of protection  against piracy in  the  whole  of  Europe,  it  is  important  that  Council  of
Europe  Convention  No  178  should  enter  into  force  as  soon  as  possible.  The
Commission will work towards ratification of this Convention.

6.3.

The legal situation in the other European countries

Pursuant  to  the  provisions  of  the  Agreement  on  the  European  Economic  Area,  the
EEA Joint Committee decided on 28 February 200181 to incorporate the Directive in
Annexes X and XI to the Agreement. This Decision entered into force on 1 October
2001; practical implementation is governed by the EEA rules and procedures. Of the
three  participating  non-EU  states,  only  Liechtenstein  has  not  yet  adopted  any
implementation  legislation.  Norway  has  signed  Council  of  Europe  Convention  No
178 and has  amended  its  Penal  Code  accordingly.82 Iceland has  amended  its media
legislation.83

Switzerland  has  signed  Council  of  Europe  Convention  No  178  and  is  currently
preparing formal ratification and national implementation.

San  Marino,  Monaco  and  Andorra  have  no  specific  legislation  in  the  field  of  the
Directive. The lack of adequate legislation may result in holes in the pan-European
fabric  of  legal  protection  against  piracy  and  risks  undermining  legal  protection  by
creating safe havens for pirates.

80

81

82

83

For the full text of the Convention, the Explanatory Report and the most recent state of play concerning
signatures and ratification see:
http://conventions.coe.int/Treaty/EN/WhatYouWant.asp?NT=178&CM=8&DF=
Decision No 17/2001 of 28.02.2001; OJ L 117 of 26.04.2001, p. 21.
Norwegian Penal Code, Article 262 in force since 01.08.2001.
Broadcasting Act No 53 of 17.05.2000.

27

                                                
The  Commission  encourages  countries  which  will  not  be  members  of  the  enlarged
European Union to join the Community efforts towards an equal level of protection
against piracy for the whole of Europe..

6.4.

European Convention ETS No 185 on cybercrime

In  order  to  pursue  a  common  fight  against  cybercrime,  the  Council  of  Europe
prepared  a  Convention  on  cybercrime,  which  has  been  open  for  signature  since  23
November 2001.84 At the date of this report, this Convention has been signed by 13
EU  Member  States  and  several  Candidate  Countries  as  well  as  a  number  of  other
states.

The  Convention  obliges  acceding  countries,  inter  alia,  to  make  the  illegal  access
(hacking)  to  information  systems  and,  more  importantly,  the  misuse  of  devices  a
criminal offence under their domestic laws. The provisions on the misuse of devices,
as  laid  down  in  Article  6  of  this  Convention,  prohibit  the  conventional  range  of
activities (e.g. manufacturing, sale, distribution, possession, etc.) related to devices as
well  as  computer  passwords  and  access  codes,  and  are  of  particular  interest  due  to
their scope and generic nature as well as their potential for stopping Internet-related
piracy.

The  participation  of  non-European  countries  holds  out  the  promise  of  global
solutions,  which  is  particularly  important  for  combating  Internet-related  infringing
activities. Transatlantic co-operation  on  the  implementation  and  the  enforcement  of
the  conditional  access-related  anti-piracy  provisions  of  the  Convention  should  be
further explored and if possible extended to other forums.

While the Community cannot accede to this Convention, its solutions in conditional
access-related matters should be taken into account and possibly used as a model for
further anti-piracy developments within the EU.

7.

FINAL CONCLUSIONS AND NEXT STEPS

7.1.

Electronic pay services are important for a maturing knowledge economy

Today, electronic pay services exist predominantly in the field of digital pay TV. A
massive  proliferation  of  all  sorts  of  new  electronic  pay  services  provided  over  all
possible  distribution  networks  is  generally  expected  to  happen  during  this  decade.
The  first  examples  of  subscription-based  information  society  services  delivering
premium content over the Internet have recently emerged. The digitalisation of cable
networks  as  well  as  the  introduction  of  digital  terrestrial  television,  3rd  generation
mobile communications and advanced transport-related services will result, in the not
too distant future, in large-scale deployment of intelligent appliances able to handle
pay  services.  New  consumer  electronics,  such  as  integrated  home  entertainment
centres  and  personal  video  recorders,  will  be  designed  to  enhance  listening  and
viewing experiences even if conditional access technologies are used and full access
is only possible with payment.

84

For the full text of the Convention, the Explanatory Report and the most recent state of play concerning
signatures and ratification see:
http://conventions.coe.int/Treaty/EN/WhatYouWant.asp?NT=185&CM=8&DF=

28

                                                
The  knowledge-based  economies  of  the  21st  century  are  expected  to  rely
progressively on pervasive electronic pay services. Consequently, the economic and
societal relevance of these services will grow over time. Fraud and piracy related to
pay  services will  tend to develop at the  same  speed as  the  pay  services  themselves
unless  adequate  legal  protection  and  effective  enforcement  is  ensured.  Piracy  of
electronic pay services has the same detrimental effects in the knowledge society as
white-collar crime and counterfeiting of goods in the 20th century. This development
has  to  be  taken  into  account  if  the  Union  wants  to  meet  its  ambitious  target  of
becoming the most dynamic and competitive economy by 2010.85

It is therefore important to give a clear signal to business and citizens indicating that
the Community and its Member States cannot accept that the Union's economic and
societal  development  being  severely  hindered  by  acts  of  piracy  and  have  to  take
action  in  the  public  interest.  An  early  and  powerful  signal  may  prevent  a  level  of
tolerated  and  socially  accepted  piracy,  as  is  currently  noticed  in  the  field  of  digital
music.

The Commission considers electronic pay services to be a pivotal building block of
the  emerging  knowledge-based  economy.  Legal  protection  against  piracy  of
electronic pay services is an essential condition for the development of such services
and a prerequisite for future growth and prosperity for the citizens of the Union.

7.2.

Consolidating current legal protection – action to be taken

In  its  current  form  the  Directive  already  provides  a  substantial  level  of  legal
protection  against  the  piracy  of  electronic  pay  services  protected  by  conditional
access. However, as shown by this report, there still is room for improvement in the
actual legal protection without amending the Directive itself.

Implementation  has  not  yet  been  fully  achieved  within  the  enlarged  Union  and
enforcement  at  national  level  has  to  be  consolidated.  Industry  and  enforcement
authorities  should  continue  to  develop  their  public-private  partnerships  in  a
combined effort to curb piracy, possibly supported by EU resources.

Successfully  combating  piracy  also  includes  active  prevention  and  pre-emptive
efforts to reduce grey areas where piracy may flourish. Access to protected satellite
pay TV by non-resident paying viewers should be made possible.

Only  if  pirates  do  not  find  safe  havens  in  Europe  will  it  be  possible  to  effectively
combat piracy. Rapid entry into force of Council of Europe Convention No 178 will
contribute significantly to achieving this objective.

85

Lisbon European Council, 23-24 March 2000; Presidency Conclusions, section 5.

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Summarising,  the  following  action  can  be  taken  to  strengthen  the  effect  of  the
Directive:

(cid:1)  The  Commission  will  vigorously  pursue  its  efforts  to  have  the  Directive  fully
implemented. It will work together with Member States and Candidate Countries
to  ensure  full  implementation  of  the  Directive  and  to  clarify  all  remaining  legal
uncertainties.  If  necessary,  the  Commission  will  commence  infringement
proceedings.

(cid:1)  The  Commission  will  consult  Member  States  on  the  practical  difficulties  they
encounter when enforcing the national provisions to implement the Directive.

(cid:1)  The  Commission  will  encourage  industry  and  national  authorities  to  engage  in

joint efforts to fight piracy as efficiently and effectively as possible.

(cid:1)  The  Commission  will  continue  to  co-operate  with  other  European  countries  and
the respective international organisations in order to enforce coherent application
of European rules against the piracy of electronic pay-services.

(cid:1)  The Commission recommends right holders and service providers to actively seek
contractual  solutions  to  provide  legitimate  non-resident  subscribers  access  to
protected  electronic  pay  services  under  reasonable,  non-discriminatory  and
transparent  conditions  throughout  the  internal  market.  The  Commission  will
contribute to this process in the context of its review of Directive 93/83/EC.

7.3.

Enhancing legal protection – what next?

The piracy of electronic pay services protected by conditional access is a cyber crime
which  has  changed  significantly  in  recent  years.  While  current  legal  protection  is
quite  effective  against  conventional  forms  of  piracy,  protection  may  have  to  be
enhanced in order to be able to cope with the new categories of offenders, the effects
of the Internet and some remaining enforcement issues.

Given the estimated protection potential of additional measures based up the current
Directive,  the  Commission  holds  the  view  that  it  would  be  premature  to  propose
amendments  to  the  Directive  on  the  basis  of  this  Report,  but  that  a  revision  of  the
Directive  might  be  considered  in  the  context  of  a  coherent  set  of  legal  measures
against all possible forms of piracy.

However, the consultations and assessment undertaken in the context of this Report
have enabled the Commission already to identify the following issues, which deserve
further reflection in close co-operation with the Member States and industry:

(cid:1)  Industrial  forms  of  piracy  are  clearly  commercial  and  therefore  already  covered
by  the  Conditional  Access  directive.  This  type  of  piracy  is  very  similar  to  the
counterfeiting  of  goods  or  copyright-related  piracy.  A  balanced  and  coherent
enforcement  framework  applicable  to  all  kinds  of  piracy  and  counterfeiting  and
agreed at Community level would bolster the effectiveness of the legal protection
of electronic pay services.

(cid:1)  Arguments have been advanced that casual pirates and individuals pirating solely
for  their  own  purposes  could  be  prosecuted,  including  for  infringing  activities

30

which  are  not  undertaken  for  commercial  purposes  and/or  for  the  private
possession  of  illicit  devices.  However,  an  extension  to  the  Conditional  Access
directive  along  these  lines  would  imply  a  fundamental  change  in  Community
policy and may have an impact on adjacent legislation.

(cid:1)  The  current  Directive  is  not  very  effective  against  those  forms  of  piracy  which
have emerged as a result of the Internet. One way of fighting these forms of piracy
is to prohibit the direct and indirect distribution of keys and illicit devices via the
Internet,  backed  up  by  a  notice  and  take  down  remedy  for  affected  service
providers. Such a prohibition/remedy targets the principal source of many piracy
acts and may avoid other measures that are more invasive to private individuals.
Article 6 of the Council of Europe Convention on Cybercrime already presents a
model for such a measure. In this context the Commission does not envisage any
measure  restricting  the  dissemination  of  detailed  technical  information  on
conditional  access  systems,  because  this  would  unduly  limit  the  freedom  of
expression and stifle innovation.

The Commission will continue its examination of the application of the Conditional
Access  directive  and  its  relationship  with  other  provisions  of  Community  law,
including whether or not there is a need  to  amend the  Directive.  It  invites Member
States, Candidate Countries and other interested parties to contribute to this exercise.

31