“The majority of all internet traffic is file sharing, which is why nothing other than the new IPRED law can explain this major drop in traffic,” Anti-piracy Agency lawyer Henrik Pontén told Metro. “This sends a very strong signal that the legislation works.” Christian Engstrom, vice chairman of the Pirate Party, a group seeking copyright law reform, agreed, but said the decline is likely to be only temporary. Once the public realizes that the odds of being busted for file-sharing are low, Internet traffic will return to normal levels again. “Today, there is a very drastic reduction in internet traffic,” Engstrom told The BBC. “But experience from other countries suggests that while file-sharing drops on the day a law is passed, it starts climbing again. One of the reasons is that it takes people a few weeks to figure out how to change their security settings so that can share files anonymously. We estimate there are two million file-sharing [computers] in Sweden, so even if they prosecuted a 1,000 people to make an example of them, for an individual user it is still a very small risk.”

[Image credit: Chart courtesy Royal Pingdom]

It’s not the fault of the ISPs, never mind that they are, according to McGuinness, “destroying the recorded music industry” by failing to tackle piracy. Nor is it the fault of Apple (AAPL) and the makers of other digital media players who are wrongly profiting from their “burglary kits.” Nor can it be blamed solely on Silicon Valley and its “entrepreneurial, hippie values,” which in McGuinness’s opinion have bred a deep disregard for the true value of music.

No, it appears there’s no one to blame for this particular cock-up but Universal Music, which mistakenly put the album up for sale earlier this week at getmusic.com.au. It was only available there for a brief period, but there was time enough for fans to buy it legally. Not surprisingly, copies of the record began showing up on torrent indexes a short while later.

An embarrassing turn of events for a band that had gone to extraordinary lengths to prevent exactly this situation from happening. Still, as TechDirt’s Mike Masnick notes, there’s a lesson to be learned here. “At some point, folks in the music industry are going to (finally) recognize a rather simple fact: it just takes one digital copy of a song/movie/whatever to get out there, and it’s everywhere. You can’t stop it. No matter how annoying it is. No matter what laws it violates. It will happen.”

“[Microsoft is] the biggest hacker in China with its intrusion into users’ computer systems without their agreement or any judicial authority,” said attorney Dong Zhengwei, who filed a complaint against the company with the Ministry of Public Security. “Microsoft’s measure will cause serious functional damage to users’ computers and, according to China’s Criminal Law, the company can stand accused of breaching and hacking into computer systems of Chinese. I respect the right of Microsoft to protect its intellectual property, but it is taking on the wrong target with wrong measures.”

So what are the “right” measures, then? Offering Microsoft (MSFT) software for free in China? Sounds like it. According to a survey of 574,923 PC users on Chinese portal QQ.com, 73.33 percent of respondents said they were using pirated versions of Windows XP, and 51.58 percent said they intend to continue using pirated versions. Just 15.55 percent said they plan to buy a licensed copy of the software.

Piracy helped the young generation discover computers. It set off the development of the IT industry in Romania. It helped Romanians improve their creative capacity in the IT industry, which has become famous around the world. … Ten years ago, it was an investment in Romania’s friendship with Microsoft and with Bill Gates.”

– Romanian President Traian Basescu to Microsoft Chairman Bill Gates in remarks delivered at the opening of Microsoft’s Global Technology Support Center in Bucharest, Feb. 1, 2007

Like consumer OS adoption rates, piracy rates for Windows XP are much higher than for Windows Vista. And with XP scheduled to be discontinued once and for all next year, Microsoft is stepping up efforts to stem its spread through piracy. To that end, the company has declared Tuesday Oct. 21 Global Anti-Piracy Day. And to celebrate it, the company is launching a series of education and enforcement actions in 49 countries on six continents around the world. A broad initiative. So broad, in fact, that Microsoft has actually created an interactive piracy map that describes its efforts in particular countries.

That said, Microsoft (MSFT) is realistic in its goals. “Are we able to solve absolutely every problem?” asked Microsoft Director of Intellectual Property, Vanessa Hutley. “No … there are some people who will always not want to pay for something, and there are always people who will want to exploit.”

The MPAA “RealNetworks’ RealDVD should be called StealDVD,” said MPAA Executive Vice President and General Counsel Greg Goeckner in a statement. “RealNetworks knows its product violates the law and undermines the hard-won trust that has been growing between America’s movie makers and the technology community. The major motion picture studios have been making major investments in technologies that allow people to access entertainment in a variety of new and legal ways. This includes online video-on-demand, download-to-own, as well as legitimate digital copies for storage and use on computers and portable devices that are increasingly being made available on or with DVDs. Our industry will continue on this path because it gives consumers greater choices than ever. However, we will vigorously defend our right to stop companies from bringing products to market that mislead consumers and clearly violate the law.”

“RealNetworks took this legal action to protect consumers’ ability to exercise their fair-use rights for their purchased DVDs,” the company said in a statement. “We are disappointed that the movie industry is following in the footsteps of the music industry and trying to shut down advances in technology rather than embracing changes that provide consumers with more value and flexibility for their purchases. For nearly 15 years RealNetworks has created innovative products that are fully legal, great for consumers, and respectful of the legitimate interests of content creators and rights holders. RealDVD follows in that tradition. We expect to successfully defend our right to make RealDVD available to consumers and consumers’ rights to use it.”

We’ll see, I guess. Clearly the silly little “RealDVD is for saving a DVD you own” disclaimer attached to the software isn’t going to cut it with Hollywood. I imagine we’ll be hearing from the Motion Picture Association of America before the day is out.

Obviously, it will be a boon to Google (GOOG) as well. The company’s arch rival in China, Baidu.com has long dominated the country’s search market, thanks in large part to the access it offers to free, unlicensed music downloads–access with which the global recording industry has repeatedly taken issue. Today, Baidu controls about 65 percent of China’s Internet search market. Google controls just 26 percent. But that might change very quickly if Google’s free, legal, music industry-supported service wins over users.

RIAA Sues Radio Stations for Giving Away Free Music

–Headline from satirical newspaper The Onion, Oct. 2, 2002

Talk about life imitating The Onion …

Apparently the recording industry’s institutional memory is about as solid as its crumbling business model. As recently as 2007, it was paying radio stations to play its music. Today, it’s accusing them of pirating it. Yersterday, the ironically named recording industry group musicFIRST demanded that broadcasters pay royalties for the music they play over the radio, dismissing as a red herring their claims that radio airplay is a form of free promotion.

And to illustrate that point, the group sent the National Association of Broadcasters a can of herring and a dictionary. Some clever folks over there at musicFIRST.

“[AM-FM broadcasting is] a form of piracy, if you will, but not in the classic sense as we think of it,” Martin Machowsky, a musicFirst spokesman told Wired. “Today we gifted them a can of herring, about their argument that they provide promotional value. We think that’s a red herring. Nobody listens to the radio for the commercials.”

Well, he got that much right. Nobody does listen to the radio for the commercials. They listen for the music. And there was a time when record labels paid broadcasters to play it. They even coined a word for the practice: payola.

At least that’s what China’s State Intellectual Property Office is claiming, anyway. This morning SIPO denied reports that it’s investigating Microsoft’s (MSFT) market position in the country. “The [State Intellectual Property] Office believes these reports are not real,” SIPO said in a statement. “The Office is authorized by the relevant government agencies to investigate and research domestic piracy issues. … The Office has never undertaken any market monopoly investigation, and has no plan to do so.”

A vehement denial. But one perhaps worth questioning, considering that a SIPO official confirmed the investigation to Agence France-Presse this morning: “Our departments are carrying out the investigation,” the official said. “We will release the findings later.”

At the Music Matters confab in Hong Kong, McGuinness slagged broadband Internet service providers, accusing them of aiding and abetting music piracy while CD sales and royalty payments to musicians plunge. “The recorded music industry is in a crisis, and there is crucial help available but not being provided by companies who should be providing that help–not just because it is morally right, but because it is in their commercial interest,” said McGuinness, adding that Internet service providers have been “turning their heads” away from the music industry’s troubles. “One way or another, ISPs and mobile operators are the business partners of the future for the recorded-music business. But they are going to have to share the money in a way that reflects what music is doing for their business. The music business once had to bear the accusation that it was full of dinosaurs who looked back to an old business model rather than embracing a new one,” McGuinness said. “Today, though, it is the music business that is charting the way to the future. If there are dinosaurs around today, I think they are the Internet free-thinkers of the past who believe that copyright is the great obstacle to progress, that the distributors of content should enjoy profits without responsibilities and that the creators and producers of music should simply subordinate their rights to the rights of everyone else.”

By Internet free-thinkers, McGuinness presumably means those crazy longhairs in Silicon Valley whom he accused of destroying the recorded music industry in another keynote address back in January. “Embedded deep down in the brilliance of those entrepreneurial, hippy values seems to be a disregard for the true value of music,” he said at the time. “I suggest we shift the focus of moral pressure away from the individual P2P file thief and on to the multibillion dollar industries that benefit from these countless tiny crimes: the ISPs [internet service providers] the telcos [telecom companies], the device-makers. … We must shame them into wanting to help us. Their snouts have been at our trough feeding free for too long.”

Out of the car, longhair …

In remarks at the Wedbush Morgan Securities annual Management Access Conference this week, Bushnell heralded the Trusted Platform Module as the gaming industry’s long-awaited solution to piracy. “There is a stealth encryption chip called a TPM that is going on the motherboards of most of the computers that are coming out now,” claimed Bushnell. “What that says is that in the games business we will be able to encrypt with an absolutely verifiable private key in the encryption world–which is uncrackable by people on the Internet and by giving away passwords–which will allow for a huge market to develop in some of the areas where piracy has been a real problem. … The TPM will, in fact, absolutely stop piracy of gameplay. … As soon as the installed base of the TPM hardware chip gets large enough, we will start to see revenues coming from Asia and India at a time when before it didn’t make sense.”

Thing is TPM is not exactly a “stealth” chip. It’s been around for years. Conceived by The Trusted Computing Group–whose members include Microsoft (MSFT), IBM (IBM), Intel (INTC), HP (HPQ) and AMD (AMD)–TPM’s purpose is to secure commercial software at the hardware level. As Ross Anderson, Professor of Security Engineering at Cambridge University’s Computer Laboratory explains, it essentially “transfers the ultimate control of your PC from you to whoever wrote the software it happens to be running.“

At least it does in theory.

Anyway, point is, TPM is a relatively well-known technology that’s been shipping in machines from Dell (DELL), HP, IBM, Toshiba, et al. for years. So presumably the “installed base” to which Bushnell refers is already quite large. Yet, we’re not exactly seeing those increased revenues from abroad. In fact, we’re seeing increased losses. Software piracy cost global businesses $47.8 billion in lost revenue last year, up 20% from 2006.

So what’s Bushnell going on about?

Who knows. But it might have something to do with this: In addition to being the inventor of Pong, and founder of Atari and Chuck E. Cheese Pizza Time restaurants, Bushnell also serves on the board of directors of Wave Systems (WAVX). And Wave Systems is a leading–but apparently struggling, provider of hardware-based digital security based around–you guessed it–the Trusted Platform Module.

This week members of the House Judiciary Committee passed the Prioritizing Resources and Organization for Intellectual Property (called “PRO IP” groan…) Act of 2007, legislation that would create an “anti-piracy czar” at the White House level, a separate IP-enforcement division at the Justice Department and ratchet up already high civil penalties for copyright infringement.

The measure is backed by many of the most powerful politicians on the House Judiciary Committee, including John Conyers (D., Mich.), Lamar Smith (R., Texas) and “Hollywood” Howard Berman (D., Calif.), the content cartel and, of course, Zucker, who likes to tell everyone that it dramatically advances the cause of protecting innovation, technological invention and creativity.

Said Zucker, “This is such an important step in combating this incredibly serious piracy and counterfeiting problem that’s getting worse, not better.”

In Zucker’s eyes, maybe. But not in the eyes of consumer folks like Google Senior Copyright Counsel William Patry who calls Pro IP “the most outrageously gluttonous IP bill ever introduced in the U.S.” and consumer advocacy group Public Knowledge which feels it is in sore need of adjustment.:

This bill takes already extraordinary copyright damages and increases them, expanding the threat of litigation intended to stifle competition and innovation. … Increasing penalties is one of the least necessary, and quite possibly counterproductive, actions the committee could take, particularly when current law is adequate to deal with most infringement issues and because the higher penalties serve only to force faster and larger settlements potentially from innovators. … Instead of following the course of this bill, the committee should look to the future, to a more realistic and rational copyright regime that can adapt pre-VCR copyright laws to a post-YouTube world.”

Produced with a chemical coating that renders them unreadable after 48 hours or so, the company’s Einmal (German for “once”) discs posit a play-once-and-toss model that, at a reasonably low price-point, could be a piracy-limiting means of distribution (the discs include no DRM, but why bother ripping them if they’re so cheap).

So it’s an interesting idea (though not a new one; Flexplay and SpectraDisc both tried something similar a few years back). Certainly the prospect of not ever having to worry about returning your latest Netflix (NFLX) or Inmotion Pictures airport rental could be quite appealing to some. But isn’t that an annoyance that video-on-demand is already doing away with? And really, who wants to increase their carbon footprint like this anyway?