Internet Payment Blockades

Abstract

Internet payment blockades are the fruits of a long-term, evolving strategy on the part of corporate copyright and trademark owners to leave no intermediary behind when it comes to online intellectual property enforcement. Where judicial and legislative efforts failed to yield any binding public law requiring payment processors like MasterCard and Visa to act as intellectual property enforcers, “non-regulatory” intervention from the executive branch secured their cooperation as a matter of private ordering. The resulting voluntary best practices agreement prescribes a notice-and-termination protocol that extends the reach of U.S. intellectual property law into cyberspace, to merchants operating websites from servers and physical facilities located abroad. It also removes adjudications of infringement claims from the courts to the private sector, which raises issues of fairness and institutional competence. Like other forms of regulation by online intermediaries, payment blockades can be circumvented with the aid of disintermediating technologies. True to the Internet’s founding purpose of redirecting data flows around blocked or damaged channels, P2P virtual currencies like Bitcoin are empowering online merchants and their customers, at least for the time being, to run payment blockades.This article addresses the use and efficacy of Internet payment blockades, or “follow the money” enforcement, for anti-counterfeiting and anti-piracy purposes. It focuses on the voluntary best practices agreement adopted in 2011 by payment processors, including American Express, Discover, MasterCard, PayPal, and Visa. Part I discusses the regulatory environment that gave rise to the agreement. Part II describes the agreement itself, including the merchant termination protocol it specifies and the implementation of that protocol. Part III explores some normative concerns associated with the use of payment blockades as an anti-piracy and anti-counterfeiting strategy. Part IV considers the efficacy of payment blockades, taking into account the ease with which they can be circumvented using alternative methods of payment.