Caught in the Dark Web

The dark web has, until now, been a haven for criminals and subversion. Now, increasingly legitimised use of the dark web has raised questions about its future. Michael Bednarek and Kristina Montanaro Schrader of Adams and Reese discuss

How are criminals using the dark web to trade in IP-infringing goods? What types of infringements occur?

You name it, and you can probably find it on the dark web. The dark web is the final frontier of the Internet, and it is still very much a Wild West-type environment. In addition to counterfeit goods, we have seen numerous stolen and/or gray market goods, various forms of illegal pharmaceuticals (ranging from the trademark- and patent-infringing versions, to simply unregulated, dubious generics), pirated digital products, and stolen trade secrets on the dark web. We have also seen a variety of ‘IP-adjacent’ illegal activities, such as sales of counterfeit identification documents, currency, and manufacturers’ coupons, corporate espionage, and identity theft. While these activities may not necessarily infringe IP rights, they are nonetheless concerning for IP rightsholders, as they represent lost sales and corporate security threats.

As the dark web becomes easier to use and more widely accessible, we might see increasing trade in knowledge-based content, including corporate or technical trade secrets. We could also see increased peer-to-peer commerce related to digital information or entertainment content.

Is the rise of cryptocurrencies making it harder to identify IP infringement? Is this having a widespread effect on enforcement activities?

The use of cryptocurrencies like Bitcoin makes IP enforcement more difficult for several reasons. By design, cryptocurrencies lend a veil of anonymity to both parties in a transaction, which makes it much more difficult to track down an infringer. This is exacerbated by the use of ‘coin tumblers’, which literally mix Bitcoins from various sources until they become untraceable. Additionally, dark web enforcement is made more difficult by virtue of the decentralised nature of cryptocurrencies. Whereas it is relatively easy to identify a responsible intermediary in most online enforcement matters—whether it be a standard payment processor or credit card network, or a legitimate online marketplace—there is typically no regulated entity for an IP owner to turn to for help in an infringing dark web transaction. The availability of an untraceable currency is one of the principal requirements of anonymous commerce.

Based on these difficulties in enforcement, many have chosen to ignore the dark web altogether. This approach is shortsighted, because the dark web and cryptocurrencies will continue to grow in popularity as consumers become more concerned with privacy in online transactions.

While it may require more investigative diligence and technical expertise than the average online infringement matter, dark web enforcement is not impossible. Even where the dark web is not considered an enforcement priority, at the very least, it provides opportunities for intelligence-gathering, as darknet forums can be havens for disgruntled and opportunistic employees looking to trade in corporate secrets.

How much of day-to-day consumer infringement, such as piracy through downloading and streaming, is conducted on the dark web?

The dark web would not be very dark if it could be measured easily, but it is clear that the dark web has become the preferred distribution channel for pirated digital content. Much of the IP infringement on the dark web currently consists of pirated or otherwise infringing digital products.

Sales of stolen product keys for software and account logins for streaming sites like Netflix are quite common on the dark web.

The prominence of these products over hard goods is likely due to the high value dark web users place in maintaining their anonymity.

Many dark web users recognise the inherent risk in shipping hard goods, as shipment requires the use of mailing addresses and delivery to physical locations.

Do VPNs have a big impact on enforcement? How much infringement goes on through programmes like Tor?

While the use of Tor and other programmes certainly makes it more difficult to locate bad actors, these programmes can also be valuable tools for investigators.

Many online infringers have learned to block IP addresses they suspect may be used by rights owners and law enforcement agents. Tor and similar programmes provide anonymity to investigators, allowing them to beat the infringers at their own game.

How will increasingly legitimate uses of the dark web make enforcement more difficult for IP owners?

Currently, counterfeit good sales on the dark web tend to be much more business-to-business focused, as the average consumer is still somewhat uncomfortable using cryptocurrency and other dark web features to purchase everyday items like handbags and mobile phones. 

As the dark web becomes more familiar to average consumers, we will see an increase in business-to-customer and customer-to-customer transactions for everyday items.

Rights owners will need to adapt their monitoring and enforcement programmes accordingly.

How much legitimate use already occurs on the dark web?

The dark web has legitimate roots, in fact, many don’t realise that Tor was originally designed by the US Naval Research Laboratory to be a secure network for intel-gathering.

At its core, the dark web provides a means for anonymous use of the internet, and criminals are not the only internet users who value anonymity. As consumers grow more concerned with online privacy, we will see increasing numbers switching to anonymising web browsers like Tor for everyday internet use.

A move to anonymous commerce presents a significant threat to the business model of Google, Facebook and other companies that derive much of their revenue from tracking users online and targeted advertising.

Will legitimate uses of the dark web lead to a muddying-the-waters situation, in which it becomes harder to tell the good from the bad?

Yes—we already see this scenario in the reverse on legitimate marketplaces like Amazon. Many consumers inherently trust Amazon as a source for legitimate products, even though counterfeits have become quite common on Amazon in recent years. As with Amazon, rightsholders should carefully consider the enforcement implications before launching their own legitimate presence on the dark web. There is also an open question as to the responsibility of Amazon and others in policing their sites.

We might be on the cusp of an expansion in the use of the dark web for online commerce. As you may know, the 1998 holiday season was the tipping point moment when online commerce went from a novelty for computer geeks to a viable alternative to traditional retail. The availability of improved computer interfaces, search engines and electronic payment systems were key factors in the mainstreaming of online commerce.

Two decades later, we may be approaching a similar tipping point when it comes to shopping on the dark web. The necessary computer infrastructure (Tor); interfaces (for example GitHub); Tor search engines; and cryptocurrencies, such as Bitcoin, for electronic payment are in place for increasingly anonymous online commerce. And, while the need for physical shipment and delivery presents a challenge with regard to tangible goods, this is not an issue for ‘virtual’ good such as software, digital entertainment and information content.

A remaining factor limiting use of the dark web to peddle infringing goods is the limited customer base. Until now, a comparatively small number of users knew how to ‘shop’ on the dark web. The current bitcoin mania sparked by the nearly 1000 percent rise in bitcoin value may result in broader interest in the deep web and dark web. It’s possible that technical breakthrough that would simplify access to the dark web without compromising anonymity could lead to an explosion in dark web commerce.

Regardless of how simple dark web commerce becomes, however, it’s hard to imagine it would ever supplant legitimate traditional online commerce. Dark web commerce is likely to remain primarily a tool for use by those who do not want to leave digital tracks for their sales and purchases. Even so, it would be foolish to underestimate the creativity of would-be IP infringers to leverage widespread access to the dark web.

Today, new would-be Amazons and eBays of the dark web are regularly appearing—consider Deep Market, Mobile Store and AppleTor CStore.

But, it remains to be seen whether any current or future crypto-markets will find a sustainable deep market model that withstands the type of scrutiny that shut down Silk Road.

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