Filed via www.regulations.gov, Docket No. USTR–2012–0011 Stanford K. McCoy, Esq. Assistant U.S.

Trade Representative for Intellectual Property and Innovation Office of the U.S. Trade Representative Washington, DC 20508 Re: RIAA Written Submission Re: 2012 Special 301 Out-ofCycle Review of Notorious Markets: Request for Public Comments, 77 Fed. Reg. 48583 (August 14, 2012)

Dear Mr. McCoy: Please find the submission of the Recording Industry Association of America (RIAA) in response to the federal register notice in the above-captioned matter. The Recording Industry Association of America (RIAA) is the trade organization that supports and promotes the creative and financial vitality of the major music companies. Our members are the music labels that comprise the most vibrant record industry in the world. RIAA members create, manufacture and/or distribute approximately 85% of all legitimate recorded music produced and sold in the United States. We greatly welcome this initiative designed to shine light on businesses who operate notorious markets for infringing materials, and who generally either directly profit from the sale or other distribution of infringing materials, or who profit from facilitating such theft—in many cases through the sale of advertising space. This submission identifies a broad range of online businesses involved in the distribution or making available of infringing materials, from sites dedicated to the pursuit of infringement—like the Pirate Bay, or Brazil’s De graça é mais Gostoso (in English: “Free is much better”), to sites operated by large wellfunded companies that believe that it is acceptable to fuel piracy to advance their own commercial interests, like Russia’s vKontakte, Ukraine’s ex.ua, and China’s Xunlei and Sohou/Sougou. In some sense, services such as vKontakte, ex.ua, Sougou and Xunlei are the most reprehensible of actors given that they want to appear as legitimate actors, and have functions unrelated to piracy, yet operate network services that include features that intentionally and effectively induce infringement. These services deliberately gain market share by providing access to infringing materials—launching music services without any form of licensing, and have demonstrated continued resolve to engage in conduct based upon misappropriation. We urge the US Government to use all of the tools at its disposal to ensure that these services are not permitted to undermine the development of potential legitimate online markets.

We want to take a moment to reflect on the fact that thanks in large part to the efforts of the US Government in highlighting illicit practices, some of the notorious markets that we identified in last year’s submission no longer feature in this filing. In particular, BTJunkie, Demonoid, Megaupload, Spain’s Vooxi and the Allofmp3.com Clones in Russia and 1

Ukraine. The action against Megaupload was particularly important in creating an awareness amongst the operators of so-called “cyberlockers” that they were vulnerable when they maintained services that effectively served as distribution hubs for infringing materials rather than as cloud storage, and led to a series of positive developments in that particular sector. Action by the Government of Ukraine against notorious actor Demonoid was also a breakthrough, and hopefully signals broader action in this country that is home to far too much open and notorious theft. And while the Russian and Ukrainian Governments have failed to take any action against the various illegal pay-per-download sites operating in their territories, or against the rogue societies that theoretically issue licenses which they have no authority to grant, cooperation with payment processors has effectively marginalized their reach. Of course, the fact that they persist at all is unacceptable. RIAA members are excited about the potential of the internet and other communication technologies to provide an efficient means of distribution to music lovers globally. Record companies and their licensed delivery partners continue to innovate and expand. At the start of 2011 the biggest digital music services were present in 23 markets. Now they are operating in 58 markets. As one example, iTunes opened for business in 28 new markets in 2011, including all members of the EU and 16 countries in Latin America. And it’s not limited to iTunes—companies like Deezer, Spotify, Music Unlimited, rara and countless others have greatly expanded their presence and created an explosion in legitimate ways to access music. And the market is expanding—we estimate that 3.6 billion downloads were purchased globally in 2011, an increase of 17 percent, and there are some markets, including the US, in which more than half of our revenues derive from digital channels. In total, globally there are nearly 2,000 licensed digital music services offering consumers legal access to 20 million music recordings. The music industry is also working on new industry-wide databases and royalty distribution systems to make royalty payment functions more efficient; and on licensing reform to update the statutory mechanism for the mechanical licensing system. But no matter how we innovate, we are operating in the shadow of a problem that dwarfs the legitimate sector. According to a recent Nielsen report, more than one in four internet users (28%) access unlicensed services on a monthly basis, undermining investment in innovative distribution services as well as the creation and distribution of original music. This infringement undercuts legitimate services, harms investors in content production, and cheats law-abiding consumers. Despite the marketplace efforts made by the creative industries to meet and anticipate consumer demand for digital services, and the vigorous efforts of the creative industries and the U.S. government to take legal action against copyright theft, many avenues remain that enable profiteering from infringement. As long as these avenues are open, America’s 2

economy and culture will be harmed. These avenues will not be closed without the commitment and cooperation of all responsible players in the online ecosystem. If all of the relevant players combine their efforts to combat the scourge of online infringement, we are confident that the legitimate marketplace for cultural products will thrive. Consumers increasingly have access to exciting and innovative new methods of enjoying recorded music. But if anything less than full cooperation remains the norm, our country risks a steady decline in investment in the cultural products for which it is celebrated throughout the world, and irreparable harm to the livelihoods of millions of Americans who work to produce, perfect, and disseminate these creative works. We hope that the information provided herein will be helpful in illuminating the practices of some of the worst actors in global markets, and that by addressing these markets, we can take a big step towards creating greater accountability that will expand opportunities for legitimate commerce. Quite simply, there is no place for open and notorious theft in a civilized world, regardless of how that theft is accomplished. Addressing the conduct of these notorious markets for piracy will go a long way towards promoting the rule of law, fueling creativity and innovation, and maintaining US economic competitiveness. Respectfully submitted,

Neil Turkewitz Executive Vice President, International Recording Industry Association of America

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Notorious Markets Report 2012 VKontakte: Russia The website at vww.vk.com, operated by VKontakte Ltd is the most popular online social network in Russia and is also available to a wider international audience in many languages including English. It has in excess of 80 million registered users and web monitoring companies report that 35 million unique Russian users visit the site every month. According to Alexa, the site is the 36th most popular site worldwide and the 3rd most popular site in Russia, Belarus and the Ukraine. VKontakte’s full ownership structure is not publicly known, but the London-listed Russian internet company, Mail.ru, holds 39.99% according to public filings. The site’s music functionality is specifically designed to enable members to upload music and video files, hundreds of thousands are unlicensed copyright works. Its dedicated content search engine enables all other members of VK to search for and instantly stream infringing content uploaded by any other user, giving VKontakte an unfair competitive edge over other social networks that do not offer free access to unlicensed material. In addition, third party software developers have distributed mobile “apps” i.e. software applications that enable non-VKontakte members, via their smartphones, to search for and download infringing content available on the site. VKontakte takes no measures to prevent copyright infringement on its service. Given the number of registered member accounts, the scale of damage to rights holders is staggering. A Russian record label, Gala records, has recently had some success in taking copyright infringement litigation against vKontakte Ltd in the St Petersburg Arbitrazh Court, which found that the site’s operators had failed to take active measures in response to notices from copyright owners, and ordered some limited compensation. Gala records has successfully defended two appeals from that decision by vKontakte, although at the time of writing there is still a final appeal stage available. Meanwhile the site has continued to infringe on a massive scale. Given that under Russian legal practice no effective injunctive relief is available to copyright owners against future infringement and the low level of compensation ordered, the site will continue to be a major source of piracy within the Russian Federation and beyond unless immediate action is taken by the Russian government to address this open and notorious theft.

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EX.UA: Ukraine Although this site has been subject to criminal action, it is now back up and running and the criminal case has been closed without explanation. A brief history and summary of events follows. The website www.ex.ua is a household name in the Ukraine and is hosted by Data Centre “Volia” (Kyiv, Ukraine). Ex.ua is a website that offers (user or service uploaded) for downloading and/or streaming a full range of content including music and videos, movies, TV series and programs, e-books, audiobooks and software. The service is accessible from the Ukraine, Russia and several CIS countries. The interface of the site enhances fast searching for infringing material (both via the “search” function and via directories according to the type of content, for example video and audio. The site is particularly appealing to a broad audience due to its “one-click” streaming function. The website is also easy to navigate, which increases the range of age groups who access the service. According to Alexa the site is the 11th most popular website in the Ukraine and has a global ranking of 2,071. There are approximately 1,160,000 visitors to the site every day and approximately 386,300 new uploads every day. The estimated income of the site every month is between $45,000 –$90,000 in advertising revenue. IFPI tried to operate the notice and take down system for the website for several months in 2011. However, it proved inefficient due to the fact that after an infringing link has been removed, the same infringing content re-appeared within days under a new link. It is also evident that the administration of the site encourages the uploading of the new content. In fact, it is believed that administrators themselves are uploading most of the content under the login details of “regular users.” The owners of the site have pledged on many occasions of their willingness to turn Ex.ua into a legitimate service. However, in reality they are using the “perpetual negotiations” with content owners as a strategy while the service continues generating revenue from advertising on a service predicated upon providing access to infringing materials. On 31 January 2012, the site was shut down by law enforcement agencies as part of the investigation opened on the initiative of the official representatives of the world's leading software companies Adobe Systems Inc., Microsoft Corporation and Graphisoft Inc. During the raid at the office and data center of Ex.ua a large amount of computer hardware and network equipment was seized including over 120 servers with a total content of more than 6,000 terabytes. Internet traffic in the Ukraine fell by 15% when the service went offline. However, on 2 February 2012, following protests and DDoS-attacks on government websites, the site went back on line. The sites of the President, the Cabinet of Ministers, the Interior Ministry, the Security Service of Ukraine and the Verkhovna Rada were all subject to DDoS attacks.

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On 15 June 2012, all 123 servers were returned to Ex.ua and the criminal case against the administration of the site was closed. Sohu / Sogou (China) Sohu, which is the parent company of Sogou, continues to operate an unlicensed deeplinking service called “Sogou MP3” (mp3.sogou.com). Sogou MP3 provides users with access to deep-links of music files from unauthorized sources for streaming and download. In January 2010, the Beijing No.1 Intermediate Court ruled in a first instance judgment that Sohu and Sogou’s unauthorised music search services were jointly liable for the infringement of music content owned by members of IFPI but Sogou has not taken meaningful steps to remedy the infringement. Sohu has a builtin Sogou search field in a prominent position on Sohu’s website. Users can also get access to Sogou MP3 search results from this search field and through other Sohu domains such as music.yule.sohu.com. Further, direct infringement of IFPI’s members’ contents can be found in Sohu’s platform, for example, many music videos owned by members of IFPI (including pre-releases) are made available via tv.sohu.com without authorization. Sogou is not a neutral and passive search engine as it manipulates its database of infringing music via its MP3 music search service. This service is divided into various categories including “Albums Top100”, “New Songs Top100”, “Songs Top100”, “New Single Pre-Release”, “US/Europe Chart”, “Japan/Korea Chart”, “UK Chart”, “US Billboard Chart” etc. Specialised categories include “Memory of the 80’s”, “Wedding Songs”, “DJ Dance Songs”, etc. Unlicensed music files can also be found on Sogou’s other online services including radio (fm.sogou.com), music box (mbox.sogou.com), video search site (v.sogou.com), WAP site (wap.sogou.com) and PC application. A list of 19 mobile applications specialising in mp3 downloads were found to have adapted Sogou’s music search box and are making available unlicensed music files. Due to the popularity of these infringing services amongst the Chinese-speaking community in various countries in Asia, including Hong Kong, Taiwan, Singapore, Malaysia, Macau, Thailand and Indonesia, they have caused substantial damage to the music markets there. Both Sohu and Sogou have improved their rankings on the Top China and Global site lists at Alexa.com. Sohu is now ranked 8th in China and 39th globally and Sogou is now ranked 17th in China and 92nd globally. Although Sohu distanced itself from Sogou during court proceedings in China, Sohu has never held back from highlighting the importance of the significant growth and potential of Sogou to Sohu as one of its member companies. According to Sohu’s 2012 half year results, Sogou revenues were US$30 million, up 123% year-on-year and 34% quarter-on-quarter. In June 2012, Sohu increased its ownership in Sogou by buying approximately 10% of Alibaba’s shares in Sogou.

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Many take down requests have been sent to Sohu and Sogou since July 2007. However, Sohu and Sogou have largely ignored the rightsholders’ notices and the take down rate by Sohu and Sogou remains extremely low at 1%. Although administrative complaints were filed against Sohu and Sogou, no sanction resulted and the Government authority has failed to provide an explanation for this. Legal actions were filed by the record companies against Sohu / Sogou at the Beijing No. 1 Intermediate People's Court in February 2008. A court hearing was held in October 2008 and the first instance judgment in favour of the record companies was issued on 22 January 2010. Sohu and Sogou were found jointly liable for a limited number of tracks in respect of which they did not take appropriate action to remove following take down requests. The judges found that Sohu and Sogou did not have the requisite knowledge to determine whether other linked sound recordings were infringing and consequently Sohu and Sogou were not held liable more generally in respect of its unauthorized music deep-linking service.1 The record companies appealed to the Beijing Higher People’s Court in February 2010 and the appeal hearing took place in October 2010. The appeal judgments are still pending. Regardless of repeated attempts by the recording industry to stop copyright infringement by Sohu/Sogou, both sites continue to adopt delaying tactics and profit from unlicensed copyrighted music content. Xunlei / Gougou (China) Xunlei (www.xunlei.com) continues operating various services which facilitate music infringement including an unlicensed P2P file sharing service called “Xunlei”, an offline downloading service called “Xunlei Lixian” (lixian.xunlei.com; lixian.vip.xunlei.com), a cyberlocker service called “Xunlei Kuai Chuan” (kuai.xunlei.com) and a cloud storage service featuring a social networking function called “Xunlei Fang Zhou” (f.xunlei.com). Xunlei is also operating a new unlicensed music video deeplinking service called “Xunlei Da Chuan” (dachuan.xunlei.com) and an unlicensed music video hosting service called “Xunlei Kankan” which directly hosts thousands of unauthorised music videos. Xunlei Kankan also allows users to search for music videos, stream, download and share unlicensed copyrighted music videos. Xunlei provides a software client called "Xunlei 7" which adopts a file indexing technology that facilitates and actively encourages users to connect to peers and links from unauthorized sources for the purpose of downloading infringing music tracks. Xunlei’s business model is reminiscent of the now defunct P2P file-sharing services of companies like Napster and Grokster, both of which were found liable for copyright infringement.
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In April 2012, the Supreme People’s Court in China published “Draft Judicial Rules on Several Issues concerning the application of Law in Hearing Civil Dispute Cases Involving Infringement of the Right to Network Dissemination of Information” (Draft JR). The Draft JR will complete the existing legal framework on the protection of information network dissemination rights provided for in the Copyright law and in a State Council Regulation. The new rules are useful as they provide clear guidance for courts as to how to deal with ISP liability in civil cases including ISPs who provide unauthorised search services (e.g. music deeplinking services) and information storage services.

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Although Xunlei claimed that it sold its stake in “Gougou”, an unlicensed deeplinking service (mp3.gougou.com), Xunlei still has a close connection with Gougou. Xunlei 7 client software can be equipped with a “Gougou” plug-in that allows easy access to Gougou’s deeplinking service. At the same time, the default music file downloading function is linked to Xunlei 7, Xunlei Lixian and Xunlei Fang Zhou. Gougou MP3 actively provides users with deeplinks to infringing music files and torrent links from unauthorized sources. Gougou also provides URLs deeplinked to infringing music files in the form of music categories such as “Recommended Albums”, “Hit Singles”, “New Songs Express”, “Popular Chinese”, “EU/US Gold Chart” etc. This illustrates that Gougou MP3 actively encourages and induces users to disseminate copyright sound recordings without rightholders’ authorisation. According to Alexa, Xunlei is ranked 35th in China and 186th globally in terms of internet traffic. Xunlei and Gougou’s infringing services are also popular amongst the Chinese speaking community throughout Asia, which causes significant damage to music markets outside mainland China. Membership of various payment schemes offered by Xunlei allow users to enjoy different levels of privileges such as off-line download, high speed channel, cloud storage, cloud streaming and a bonus points system. In addition to a subscription fee, Xunlei also derives revenue from online advertising revenue. The navigation website 155.com has been acquired by Xunlei which has added the online advertising revenue of 155.com to Xunlei in an amount of RMB 167.8 million (USD 26.5 million) in 2011. Although notices detailing infringing URLs have been sent to Xunlei and Gougou.com, Xunlei has failed to take prompt action following receipt of these notices with a takedown rate of below 30%. Legal actions were filed by the record companies against Xunlei at the Shenzhen Intermediate People's Court in June 2009. Court hearings were held before Shenzhen Intermediate Court in July 2010 and in July 2011. The judgments are still pending. Xiami (China) Xiami.com, a Zhejiang Province-based company, continues to operate its multiplatform infringing service in music portal, P2P application and mobile applications that actively induce users to search for infringing music files hosted on Xiami’s servers for streaming and download. At Xiami’s music portal, music is searchable and is categorized by language (e.g. Cantonese, Mandarin, English, Japanese, Korean, French and German), by origin (e.g. Mainland, HK-Taiwan, Korea-Japan, Europe-America, India and Thailand), by genre (e.g. Pop, Rock N' Roll, R & B, Folksongs and etc), and by mood (e.g. happy, lonely, romantic, fresh and peaceful). Users can browse and create a collection, music topics and/or choose a variety of radio channels. Xiami users can download more than 20 plug-ins and mobile applications from the music portal to gain access to infringing music. Xiami has recently improved its interface on the music portal to include a new unauthorised 8

service called "Loop" which allows users to become “Loopers” who can exploit illegal music in a virtual environment. Despite having received numerous infringement notices from rights holders, Xiami continues to encourage users to upload music files via its PC-based P2P application called “XiageShark”. An incentive program (i.e. virtual money) was set up by Xiami to encourage users to upload unauthorised music files and share the uploaded files via a one-click sharing function on various social network sites including Sina weibo, Tencent weibo, Sohu weibo, etc. Mobile applications of Xiami Music, Xiami FM and Xiami Live are available in various versions compatible with iOS and Android mobile devices. All of the music files which are made available by Xiami are hosted by Xiami’s servers and can be streamed, downloaded, bookmarked or shared via social networks. In addition to deriving revenue from advertisements on the music portal, Xiami also makes money from event promotions. Xiami's popularity amongst Chinese users continues to increase steadily. By the end of 2011, Xiami had more than 5.1 million unique visitors in China according to ComScore.com. In September 2012, Xiami increased its Alexa ranking in China from 207th in 2011 to 179th. Since February 2009, take down notices have been sent to Xiami but Xiami has refused to take down any unauthorized music files. In March 2011, an administrative complaint was filed with the Copyright Bureau of Zhejiang Province, but no sanction was issued against the operator of Xiami despite repeated demands from copyright owners. BitTorrent Indexing and Tracker Sites An estimated 75% of P2P file sharing of music globally is accomplished using BitTorrent, a P2P file-sharing protocol. In some markets, BitTorrent accounts for as much as 98% of all file sharing. BitTorrent indexing sites are therefore high priority pirate markets. The following popular sites are the most egregious, based on: (i) the extent of the infringement problem found, such as the number of users visiting the site to infringe and the number of different sound recordings that are available; and (ii) the site’s failure to take steps to address the massive piracy problem across its network. When referring to BitTorrent sites, typically sites are referred to as Indexing or tracker sites. Indexing sites provide a searchable index of links to content which can be downloaded from subscribers running the appropriate client software. Trackers help facilitate the download of content from the subscriber’s computers but do not have any form of graphical user interface (GUI) or other user-focused interface.

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Indexing services can, and usually do, generate revenue from one or more of the following: advertising, user donations and suspected arrangements with ISPs whereby reduced fees are offered in return for increased traffic on the sites. The particular financial model, structure and approach vary from site to site. In other cases, in addition to any profit motive, there may be an ideological motive, such as in the case of The Pirate Bay. Some of these BitTorrent indexing services, although not all, will respond to notices from copyright owners requesting infringing material to be taken down from the site. However, in practice, these take down requests are of little use in addressing the problem of piracy, and in some cases the site’s operators appear to be seeking to rely on the takedown process simply to mask the otherwise infringing character of the site. One of the principal problems with the use of take down notices for BitTorrent indexing sites is that the same infringing material can easily be, and usually is, very quickly reposted to the site. Further, as site operators usually require the take down notice to contain the specific URL link where the content was identified, and there are typically many thousands of other URL links for the same content, it is impossible for the copyright owners to have all of the links taken down at the same time. As a result, copyright owners are forced into a endless “cat and mouse” game, which requires considerable resources to be devoted to chasing infringing content, only for that same infringing content to continually reappear. For that reason, BitTorrent site operators should take proactive measures to stop indexing torrents. The Pirate Bay The Pirate Bay is a BitTorrent indexing site with a truly global scope that the Swedish Court has condemned as criminal. On 1 February 2012, the Swedish Supreme Court refused to grant permission to appeal in the criminal proceedings against the operators of The Pirate Bay. This judgment marked the end of the criminal proceedings and resulted in final criminal convictions against the four individuals responsible for the operation of the site for aiding and abetting copyright infringements, and compensation awards for the music industry. One of the individuals has served his prison sentence, a second individual has recently been arrested in Cambodia and has been deported to Sweden, and a third individual has made a final plea for pardon to the Swedish authorities. Two of the individuals filed applications to the European Court of Human Rights, which could take 4 to 5 years to be determined. Despite the final criminal convictions and successful civil litigation in Sweden, the site is still active and thought to be the most popular BitTorrent site in the world, with nearly 6 million registered users uploading and making content available to over 26 million users. The world’s most popular films and music can be instantly downloaded via the service. Having exhausted criminal and civil remedies in Sweden, rights holders have been forced to turn to ISPs for co-operation and have so far obtained blocking orders through the courts in Denmark, Italy, Ireland, Finland, Belgium, the Netherlands and the UK, to have ISPs block their subscribers’ access to the site.

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The true operators of the site are unknown. The convicted individuals claim the site is now owned by a company based in the Seychelles, although no evidence has been provided. In August 2012, it was reported that The Pirate Bay had launched a new adsupported VPN service, PrivitizeVPN, the purpose of which is to enable users to “cloak” their IP address when using file sharing services to make enforcement more difficult. This service is in its early stage and usage is being monitored.

IsoHunt.com IsoHunt is one of the world’s most popular BitTorrent indexing sites, and is operated from Canada. The site has millions of users monthly and makes torrent files available for most of the world’s most popular music and films. The site currently has over 9 million active torrents and over 66 million peers. In December 2009, the US District Court for the Central District of California upheld a summary judgment application brought by US film companies, finding the site liable for massive copyright infringement, and noting that its “business model depends on massive infringing use”. The US court cited unrebutted evidence that 95% of the files traded through IsoHunt's sites are likely to be infringing. The site’s operator has not properly complied with the injunctions ordered by the Court and a motion for contempt is pending. In addition Isohunt has filed an appeal to the US Court of Appeal for the Ninth Circuit, which is still pending. In 2010, following the commencement of the US case, the site’s operator took preemptive action in Canada against rights owners by filing proceedings seeking a declaration that the site does not infringe copyright under Canadian law. Canadian and international record labels have filed a defence and have also filed a claim for copyright infringement, and both sets of proceedings in Canada are continuing. In June 2012, the Copyright Modernization Act became law in Canada and is expected to receive royal assent in September 2012. The Act contains a number of amendments to the copyright law including a new “enablement” cause of action, which allows copyright owners to sue any person that provides a service primarily for the purposes of enabling acts of copyright infringement. It is anticipated that this section will strengthen the ability of copyright owners to take action against sites like Isohunt. Torrentz.eu (formerly Torrentz.com) Torrentz.eu is one of the most popular BitTorrent indexing sites globally and has been operating for over 8 years. Rather than a conventional BitTorrent indexing site, Torrentz.eu is a “meta search engine” (i.e. an aggregator) of over 34 third party BitTorrent sites, including The Pirate Bay, Kickasstorrents, Extratorrent and Torrentdownloads. The site boasts indexing of over 20 million active torrents from 11

over 80,000,000 pages on 34 domains. The site is currently ranked 121 globally by Alexa. The site derives revenue from advertising placed on the site. No details are provided on the site as to the identity of those controlling the service or where it is physically located. It has been operating on up to four different IP addresses simultaneously, spread across a range of hosting providers, we assume in order to make enforcement action difficult as well as any technical specification benefit derived from hosting the site in this way. The site is currently hosted by Canadian providers. The site complies with take down notices by removing the torrents identified in those notices which provide access to infringing files. The site can take up to several days to remove infringing files following a request by right holders. Kickasstorrents (kat.ph) Kickasstorrents is a relatively new BitTorrent indexing site, launching in 2008 and relaunching in mid 2010 with a new interface, gaining popularity very quickly. The site is currently ranked 158 globally by Alexa. The site indexes over 4 million torrents. The site derives revenue from advertising placed on the site. As with the other sites, no details are provided on the site as to the identity of those controlling the service or where it is physically located, so rights holders have had to seek alternative remedies. In 2012, right holders in Italy, through cooperation with the fiscal police (GDF), were successful in getting the site blocked by all local ISPs. The site is currently operating on five different IP addresses simultaneously, spread across a range of hosting providers. Bitsnoop Bitsnoop which launched in 2008 is one of the largest BitTorrent indexing sites for music, games, TV programmes and software. The site indexes over 17 million torrents from over 360 sites. Once again no details are provided on the site regarding the operator or where the site is physically located. The site is currently hosted by Swiss providers. As with other BitTorrent sites, Bitsnoop derives revenue from advertising on its site. Sumotorrent Sumotorrent a BitTorrent indexing site and self-confessed “directory” for music, movies, TV series, games and applications. The site was hosted by XS Networks until the end of January 2012 when XS Networks shut down. The site is currently hosted in the Ukraine and launched in 2007. The site is very popular in Europe and the US and is available in several languages including English, French, Italian, Spanish and German. The site notes that it has 3,599,824 torrents and the majority of the content on the site is international. The site claims to have 4.5 million unique visitors every month and 15 million page views. Its Google page rank is 4. There are no details on the site regarding the operator or where the site is physically located. The site derives revenue from advertising placed on the site. Sumotorrent is under investigation in multiple countries including Argentina.

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Torrenthound.com Torrenthound is a BitTorrent indexing site for music, games and films, which is currently hosted in Sweden. The site states that is has over 5 million torrents and is indexing content from over 8,000 trackers. There are no details on the site regarding the operator or where the site is physically located. The site also derives revenue from advertising placed on the site. Other popular BitTorrent indexing sites (and host countries) BTmon.com (Ukraine) ExtraTorrent.com (Ukraine) Fenopy.eu (Canada) Limetorrents.com (Sweden) Mnova.eu (Canada) Torrentreactor.net (Netherlands)

Blubster Blubster is a music-dedicated P2P service run out of Spain. The service was created by Pablo Soto, a young Spanish programmer whose express intention was to create a network for 'sharing' music. A statistical analysis confirmed that the vast majority of music being shared on the service is infringing. Blubster has a decentralised structure and no central indexing server, but it is operated by a group of companies and is not open source. The operators generate income through advertising and through sales of advertising-free client software. Spanish record companies brought proceedings in April 2008 against the operators of the service. The principal aim of the proceedings was to stop infringements occurring, either by having the network shut down or otherwise preventing infringement (e.g. via filtering). Damages of €13m, based on the estimated extent of infringement, were also claimed. An application for an interim injunction was subsequently made in October 2008, which was heard in December 2008. The case suffered lengthy delays and difficulties due to a scandal involving the judge appointed to hear it. In April 2010, the judge was suspended from the judiciary as a result of his delays in delivering decisions. That suspension was lifted in October 2010, only for him to take extended sick leave. In February 2011, the parties were informed that the judge was retiring and would not be rendering any decisions in relation to his outstanding cases. The parties then agreed, at the Court’s request, to have a new judge decide the case without having presided at the hearing. The new judge finally delivered judgment in November 2011 dismissing the Spanish music industry group’s claim in its entirety. An appeal was filed in January 2012 and the defendants have filed their response. The court’s decision is awaited.

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Cyberlockers So-called “cyberlocker” services enable users to upload and store files embodying copyright protected content on a dedicated storage infrastructure on the internet which is controlled, managed and maintained by the cyberlocker’s operator, from where they can be subsequently downloaded by the original uploader or others. Although many cyberlocker services state that their intended use is as private storage space, many of the services allow widespread sharing on the internet via links published on third party sites, blogs or search engines, and do not employ any password protection or other security restrictions to prevent the widespread sharing and general publication of files. The services listed here are directly engaged in the storage and distribution of infringing materials without having employed reasonably available tools or practices to limit their role in such infringing activity. For many of these services, there would be no economic viability in the absence of engaging in piracy. Moreover, certain cyberlockers directly encourage the sharing of files and thus the resultant infringements of copyright, by offering “reward schemes” for users whose files are accessed a large number of times. Most cyberlocker services generate revenue through advertising and rely on the sharing of popular content (e.g. music, film, games) to bring traffic to the site, allowing service providers to command higher prices for advertising space. Some cyberlockers offer paid-for premium accounts to users, featuring faster download speeds; a feature which is of particular interest to users who want to download large files such as films and games. Cyberlocker providers therefore profit directly from the infringing use made of their services, and thus may more properly be understood as being un-locked, and as serving as illegal distribution hubs. Music piracy on cyberlocker services is extensive and is on the increase. They are the most common source of music content that is leaked prior to its release date. To a limited extent, rights holders can begin to tackle these infringements through take down notices sent to the locker service provider. However, rights holders cannot locate content stored on a locker service unless and until it is made available to the public – which is done via a third party link. This means rights holders have to monitor multiple third party link resources – blogs, forum sites and search engines – to locate the information that is needed to notify locker service providers of infringements occurring on their own services. The locker service itself would clearly be better placed to locate infringing content on its own servers (there are technologies available that would assist) and to take appropriate action. Some cyberlocker services, for example Hulkshare, have employed this technology. 4shared 4shared.com is a popular cyberlocker site, with a current Alexa ranking of 100. It is operated by a company based in the British Virgin Islands. Each user is able to store a maximum of 15GB of files for free. Users are also able to pay for premium access, which enables a maximum of 100GB of concurrent data storage per user. 4shared provides a search facility that enables anyone visiting the site to search for files which have been uploaded by users. A user can search by type of content e.g. by video, music, book and game. There is also a mobile phone app which allows a 14

user to download directly onto their mobile phone. This functionality is a complete contradiction to any claims that the service is designed for private “locker” use. The site includes a dedicated “music” section. 4shared derives revenue from advertising placed on the site and through the offering of “premium accounts” which enable users to download files without having to wait or view advertising, as well as being able to download multiple files at once and have increased upload storage space. Depositfiles Depositfiles.com is an additional popular cyberlocker site, with a current Alexa ranking of 185. The domain registrant for the site, Kalmet Investments Limited is based in the Seychelles but the true identity of its operators is unknown. Each user is able to store a maximum of 10GB of files for free. As with 4shared, Depositfiles generates revenue from advertising and by offering “premium accounts.” Users are also able to pay for premium access allowing them to download files more quickly and further to download up to 250 files simultaneously. The site also offers bonus or affiliate programs rewarding users whose friends download their files. The site claims to pay the highest rates of $25 for 1000 downloads. The site also offers 4 loyalty programs aimed to encourage users to the site. The programs include U-Points, D-Points, GOLD Day and Actions with prizes. A user receives U-points for each unique download of their file per day. A user also receives a D-Point every time they download a file larger than 20 MB. Once a user has collected 100 D- points they are entitled to a gold key which grants them access to a free Gold account for a week. Users are also encouraged to look for a gold coin and calendar icon which will allow them to order a Gold Day. The site states that every day it provides users with a chance to get Gold status for free. Actions with prizes includes for example a promotion run at Christmas where users who participate in the loyalty programs receive an increased tariff for downloads. These schemes directly reward sharing of copyright material. Depositfiles has recently settled a million dollar lawsuit which adult magazine publisher Perfect 10 brought against them. Perfect 10 accused the site of mass copyright infringement and demanded a minimum of $5million in damages. Zippyshare This cyberlocker has a global Alexa ranking of 821. Each user can upload files up to a limit of 200MB for free. The Zippyshare website is hosted in France by the internet service provider, OVH SAS. The site appears to obtain revenue from paid advertising which is displayed when a user downloads a file from the site. Rapidgator This is a new cyberlocker, which launched in October 2011. The site has a global Alexa ranking of 365. A user can upload files up to 500 MB and download files up to 500 MB for free. Free user’s files will be stored for 30 days. The site is hosted in Russia following enforcement action in the UK where the site was originally hosted. As with 4shared and Depositfiles, the site generates revenue by offering “premium 15

accounts.” Rapidgator also offers a reward scheme allowing users to earn money on a pay per download, pay per sale basis, referral programme and also by a special offer from webmasters where a user gains up to 15% of sales made from their website. Turbobit The site has a global Alexa ranking of 444. The site has a global audience but is particularly popular in Russia and Turkey. Turbobit also offers a reward scheme, which has recently been changed. The site currently only has a pay per sale reward programme available but notes that it is developing a pay per download scheme. The site also offers an additional bonus programme called “Gold Partners” allowing users to receive a bonus of up to 25% of their current earnings. The site also generates revenue from the sale of “premium accounts”, which it describes as Turbo access. Cyberlockers in the Czech Republic There are a number of cyberlocker services in the Czech Republic that are widely used for infringement. These include: i) Ulozto.cz which is the most popular with an Alexa ranking of 17 in the Czech Republic. The operator of the server is the company Nodus Technologies s.r.o. This server contains over 23,000,000 files, which contain mostly illegal content (music and video files). Ulotzo also provides a search engine. There are three sections for users “unregistered user,” “registered user” and “VIP user.” Registered and VIP users pay for faster downloading (paid-for accounts). For registration a user has to send 1 text message / 99 CZK (£3.15). The music industry in the Czech Republic started negotiations with Ulozto about the elimination of the illegal content and the possibility of future cooperation regarding legal services but these negotiations have not produced any concrete results. Other popular cyberlockers include i) CZ Share. The domain czshare.com is operated by the company Enix Technologies s.r.o; ii) Hell Spy which started in April 2009 and is operated by Hellspy SE; iii) Hell Share hosted by I&Q GROUP, spol. s.r.o; iv) Share-Rapid which is operated by ShareRapid Inc and the company ShareRapid a.s. is the owner of the website. Other popular Cyberlockers (and host countries) Rapidshare.com (Germany) Filegag.com (Netherlands) Freakshare.com (Netherlands) Bitshare.com (USA & Hong Kong) Uploading.com (Hong Kong) Extabit.com (Netherlands)

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Non-P2P Piracy -Linking Sites and Hosted Content Filestube.com (www.filestube.com) This site indexes over 462 million one-click download links for music, films, games and software, the vast majority of which is infringing content and is ranked in the world’s top 200 most visited sites by Alexa. The site’s motto is “Download Everything!” Users access the content by conducting searches which display results based on the search term. The site indexes links from other sites but also offers mirror links (identical copies of the file) hosted on cyberlocker services which can only be found on filestube.com. Due to the large volume of links indexed by the site, there are typically hundreds of copies for each album or song title available via this cyberlocker link search engine. The terms and conditions on their site provide that they have a unique approach to crawling, allowing them to find files shared on uploading sites that other crawlers miss. Industry report links to infringing materials to the site operator, but any action by the operator is ineffective as the speed of the takedowns cannot match the speed at which new links are added. Each set of results contains advertisements which are the main source of revenue for the site. Brazil De graça é mais Gostoso (http://degracaemaisgostoso.org) (linking site based on cyberlocker infringing links) This Brazilian blog site in operation since October 2007 is dedicated to distributing infringing music content. It is only available in Portuguese and is very popular in Brazil for infringing downloads. The site has an Alexa ranking of 244 in Brazil and 9,359 globally. The English translation of the name of the site is “Free is much better” a slogan employed liberally by the site in connection with its core business of promoting the distribution of infringing music. The site is dedicated to international and local repertoire as well as books, movies and music concerts, and is updated daily with new links. It contains approximately 5000 infringing music posts for full albums. The site operator has moved to hosting the service from the US after receiving a copyright notice from local anti-piracy body, APCM Brazil. The contact information regarding the owner is protected by Domains By Proxy. Notices to remove infringing content are ignored by the site administrator and infringing music links are usually uploaded using multiple cyberlocker services and techniques to avoid their removal. The most used cyberlocker services are Uploaded and Uploadjet.

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Baixe de Tudo (http://baixedetudo.net) (linking site based on cyberlocker infringing links) This Brazilian blog site in operation since 2008 is dedicated to distributing infringing music content. It is only available in Portuguese and is very popular in Brazil for infringing downloads. The site has an Alexa ranking of 800 in Brazil and 21,512 globally. The English translation of the name of the site is “Download everything” and the site is dedicated to trying to achieve this vision while profiting from advertisements for its role in facilitating copyright theft. The site is currently hosted from Sweden. The details regarding the owner of the site are protected in order to avoid any legal actions in Brazil. The site does not respond to notifications to remove infringing content. Like De graça é mais Gostoso, Baixe de Tudo uses multiple cyberlockers to ensure the availability of infringing content.

Clube do Download (http://clubedodownload.info) (linking site based on cyberlocker infringing links) This is a Brazilian blog site in operation since March 2009, which is dedicated to distributing infringing music content. It is only available in Portuguese and is very popular in Brazil. The site has an Alexa ranking of 1,684 in Brazil and 46,804 globally. The site has international and local repertoire including books, movies and music concerts and is updated daily with new links. It is estimated that 1,000 links are made available just for audio files. The site generates revenue through advertisements on the site. Like many of the other large websites in Brazil, information regarding the operator of the site is protected by WhoisGuard. The site uses multiple cyberlockers to ensure the availability of infringing content. The website is currently hosted in Sweden. Baixando Legal (http://baixandolegal.org) (linking site based on cyberlocker infringing links) This is a Brazilian blog site dedicated to distributing infringing music content. It is only available in Portuguese and is very popular in Brazil. The site has an Alexa ranking of 1,836 in Brazil and 42,574 globally. The site has international and local repertoire as well as books, movies and concerts and is updated daily with new links. It contains almost 1,000 infringing music posts for complete albums.

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As with many other sites, details regarding Baixando Legal’s operator are protected by a third party privacy protection company called PrivacyProtect based in Australia. Currently the website is hosted in the USA by Interserver Inc. The site is currently being investigated by the São Paulo police authorities. Additional search engines for illegal Mp3 music files include Mp3 databáza which started in May 2009 and contains illegal Mp3 files which can be downloaded and NajHudba created in 2009, which requires users to register. Further, Mp3Zone is a Slovakian search engine related to the website VideoZONE.sk. VideoZONE.sk provides streaming of video clips and downloading of illegal Mp3 files. Spain Bajui (http://www.bajui.com) This website is part of grupoet.com which operates unlicensed services including music, movies and porn. The site has been popular for the last 3 years and release and prerelease music repertoire can be found on the site for direct download. There are currently 9,967 music titles on the site. The site is supported by revenue generated by advertising on the site. Apart from the importance of the repertoire, two further issues include:  The webmaster only shows the links that are up (uploading them again once we take them down), so it seems the web site operator has scripts to monitor the status of links: so once links are removed the operator adds new links to make sure the content is available to the end user. For the most popular titles there will be multiple postings to ensure the download is available. This site also uses techniques to avoid links being removed. The inlay of the album is also available on the site.

More than a hundred albums are available every week for direct download (some are new and others are links already reported days before). The Law on Sustainable Economy (“Sinde Law”) came into effect in Spain on 1 March 2012. The Sinde Law provides for an expedited procedure for the removal of illegal content from websites, or for blocking access to illegal services. The aim of this law is to ensure a faster and more effective process in Spain where, due to the incorrect implementation of the E-Commerce Directive, the processes for ‘notice and take down’ of illegal content have been ineffective. The Spanish music industry (Promusicae) submitted a complaint to the Intellectual Property Commission regarding this site following which the IP Commission asked the site to remove the infringing content. However, Bajui have failed to comply with this request arguing that linking sites are not “responsible” in accordance with many civil and criminal judgements and following Supreme Court judgments effective knowledge must be extended to future links.

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WAWA-MANIA.CC This website hosted by ZEN Network Technologies in the UK. Its servers regularly move from one country to another and the extension of the domain name also changes, for example from wawa-mania.eu to wawa-mania.ws to wawa-mania.cc. Users need to register as members in order to see and download content. The site currently has over 2 million members. The site provides infringing links to its members to download music, movies, games, software and (the music section includes albums, singles, discography, concerts, clips). The site has nearly 10,000 music files. The content is, by default, in French but members can choose the English language option. Many of the pages on the site display advertising banners which generates revenue for the site. This site has an Alexa ranking of 191 in France and 4,658 globally. The French music industry lodged a complaint in 2009 following which a judicial enquiry was opened. One of the creators and administrators of this website has been implicated but, in the meantime, the website is under the control of other individuals and the investigation continues.

Goear (http://www.goear.com/) This is an illegal streaming website which offers hundreds of thousands of music files (it is also possible to download the tracks). This site is very important not just for Spanish, but also for Latin American users. The Alexa ranking is 7,088 globally and 834 in Spain. Many of the pages on the site display advertising banners which generate revenue for the site. In addition to making a profit from advertisement, goear also provides streaming of unauthorized music files (with its own servers) via mobile applications operating on Facebook2 and Android platforms.3 (The option via app is not currently available). To use this website a user simply needs to type in the artist or album they want to listen to in the search box following which they are then redirected to the URL where they click on the play button. Right holders have submitted take down requests but any action taken is ineffective and slow. As with Bajui, Promusicae submitted a complaint to the IP Commission regarding this site and is awaiting a decision by the Commission regarding this site.

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http://apps.facebook.com/goearmusic/?installed=1#_=_ https://market.android.com/details?id=com.goear.activities

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Mexico Digitalz (www.digitalz.org/foro/) The direct download site which has been active since 2004 allows users to download different music files, films, TV series and e-books via external links to cyberlockers. There is sometimes a requirement for a user to register their email address to access the cyberlocker. The site is currently ranked as 2,052 in Mexico and 106,279 globally by Alexa, having over 60% of its visitors from Mexico. There are over 152,000 posts in the music section alone. In the music section you can find albums representing the artist’s whole career, complete albums of all kinds of genres. This category has the biggest audience, in the film section there are 3,783 posts. In 2006 its registration passed to the current administrators, who refuse to answer notifications sent by right holders for the removal of content. The identity of the operators is not known and the hosting provider is the US based Godaddy.] Ba-k (Ba-k.com) Ba-k.com has become the most visited site by Mexican users. The site has an Alexa ranking of 115 in Mexico and 3,377 globally. The sites popularity is due to the large volume of content made available by the administrator and users, accounting for 1,992,650. The site derives revenue from advertisements. The forum makes contents available via external connections to cyberlockers. Its categories are the following: PC programs with 84, 587 posts; cell phones with 10, 952 posts, iPod/iPhone/iPad (mp4 movies) 5,805 posts; Android 5,405 posts; Games and Emulators 81,957 posts; Comics/Manga/Anime 12,651 posts; TV Series 63,757 posts; Films 212,447 posts; Music 102,020 posts (organized by genre); e-books 43,060 posts; and Mac/Hackintosh 6,237 posts. There is also pornography here. The following 3 domains are all registered to the anonymous service Websupport.sk. The sites are running on servers located in Slovakia. Cease and desist letters are sent on a weekly basis to the operators and the sites do respond by regularly removing the infringing content. Greece Music Bazaar (www.music-bazaar.com; www.music-bazaar.su) Music Bazaar offers for download music in mp3 and flac format. The music is organised into the categories Greek, Latin, Italian, Turkish and World and is indexed by artist name. The site is hosted from Russia. The majority of the visitors to the site are from Greece, Lithuania and Germany. In May 2012, the Athens First Instance court ordered Greek ISPs to block this site at IP level. Following this decision, the site moved to a different IP address and further created the mirror domain music-bazaar.su. 21

Vietnam Zing.vn Zing.vn is an online portal service operated by VNG Corporation in Vietnam. Zing provides various online services including an unauthorised online music and video portal, social networking, search engine and instant messaging. The unauthorised music portal site mp3.zing.vn draws over 60% of the internet traffic within all the subdomains of Zing.com according to Alexa. Further, Zing claimed that 77.6% of Vietnamese internet users visited Zing in which over 80% of them used mp3.zing.vn. Zing MP3 operates a music deeplinking service similar to Sohu/Sogou’s MP3. Zing MP3 actively encourages and induces users to listen to infringing sound recordings and music videos online (streaming) and download the infringing sound recording/music video files. Although Zing MP3 appears to be a music deeplinking service, most of the infringing music contents found via Zing MP3 come from the same domain vcdn.vn which is owned by VNG Corporation. Users can stream and download Vietnamese, Chinese, Korean and international repertoire via the music search function or by clicking on the music charts (e.g. “Hot Vietnamese Music”, “Hot European and American Music”, “Hot Korean Music”, “Hot Japanese Music”, “Love Songs”, “Movie Clips”, “Zing Collection” etc), which are designed to facilitate mass scale copyright infringement. In addition, the Zing MP3 services have been extended in many other platforms, including WAP services, Android and Apple mobile phone applications for streaming infringing music files hosted on a fixed server. As the operation of mp3.zing.vn is increasing, it is attracting many advertisements and sponsorship from international brands such as Coca Cola and Honda. Since January 2008, cease and desist notices have been sent to Zing by rights holders but these have been largely ignored and the take down rate has been less than 1%. Administrative complaints against Zing were filed with MCST and COV in March 2010 and October 2011, respectively. No enforcement action has been taken to date and a large quantity of music files infringing RIAA members’ rights are still available at multi-platforms operated by Zing. WEB-hosting services Exmasters (http://www.exmasters.com) Founded in 2001, Exmasters is a web hosting company and is one of the biggest providers of services to BitTorrent trackers/indexing sites. The Exmasters’ domain was registered through GoDaddy in June 2001 by Milos Kalerta. All of Exmasters’ servers are located in the Czech Republic and they appear to have administrative control of more than 150 foreign websites whose primary function is to facilitate the 22

download of illegal content. The domain names for these websites are registered in India, Pakistan and Asia which is an indication of Exmasters’ global reputation. Although Exmaster’s representative has removed infringing torrent files in response to right holders’ requests, this action is clearly ineffective as infringing files continue to keep reappearing on the site. Physical Piracy In addition to the losses caused by internet piracy, the sale of pirated discs both at conventional retail outlets and through online platforms continues to be a major problem in many countries around the world. Pirate disc sales outstrip legitimate sales in several markets, while in some the physical piracy rate exceeds 90%. Recordable disc piracy continues to account for most of the physical pirate product found worldwide, however worryingly “pressed disc” industrial-scale piracy is now reported as being on a sharp rise, especially in the form of high quality counterfeit discs seemingly manufactured primarily in China and Russia and infiltrating legitimate distribution channels in the world’s major markets. Without doubt these discs represent a one to one lost sale, where the consumer that clearly wishes to purchase a genuine disc is deceived and no revenue whatsoever is returned to those responsible for the musical creation. In last year’s report we highlighted the several almost exclusively pirate markets in Poland along the border with Germany as an example where organised crime has been operating a profitable network of outlets offering mainly pirated music, film and TV content on recordable CDs and DVDs. The markets in Osinow Dolny, Kostrzyn, Slubice, Gubin, Leknica and Sieniawka unfortunately continue to operate, albeit with fewer stalls, providing both the local community and tourists, primarily Germans crossing the border, with easy access to pirated material at very low prices. Furthermore, the “electronic markets” in Wroclaw and Krakow are also still in operation, offering pirated copies of music, films/TV series and computer games. It appears that no notable enforcement or other action has been undertaken by Law Enforcement in this area. In this year’s filing we are turning the spotlight to Mexico, a major market where organised crime controlled physical piracy, almost exclusively in the form of recordable discs, is severely impacting legitimate sales. By far the most notorious piracy hotspot in Mexico is the Tepito market in Mexico City (Federal District), an area known to be under the control of organised crime for numerous illegal activities in addition to music piracy, such as human trafficking and the sale of weapons and drugs. Despite numerous raids and significant seizures made by the authorities over the years, this market continues to serve as the main source of music piracy in Mexico, being the place where huge quantities of blank discs are burned, stored and then distributed both to the stalls of the market itself and to numerous other cities and markets around Mexico.

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Other significant pirate markets in Mexico include the market in San Juan De Dios, the oldest market in the Jalisco State, where pirate music discs are burned and distributed to the city of Guadalajara as well as other smaller markets in the Jalisco state; the La Cuchilla market in the state of Puebla, a major source of music piracy for all southeast Mexico, where piracy production is controlled by organised crime groups; the markets Plaza Lido, Degollado and Zona Rosa in the Morelos state, also controlled by organised crime, where music piracy is particularly prevalent and is also under the control of organised crime; and the Pulga Rio, Mitras and Guadalupe markets in Monterrey City, where up to recently 80 premises had been engaged in piracy but recent Law Enforcement actions succeeded in bringing this number down to about 10% of their former size.

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