The newspapers in Chile show a young college student in T-shirt and khakis being led away from his college campus in handcuffs by police officers. And now, all over Latin America, the story appears to be the long arm of HBO - which the newspapers have to remind their readers is an American cable TV film producer - reaching into their young people's dormitories and extracting suspected pirates. Is anyone safe, some publications portray, from the tentacles of American content providers?

Chile has a cybercrime brigade, and one reason is to demonstrate the country's commitment to the terms of a free-trade agreement (FTA) signed with the United States in 2004. Chile also has - up until yesterday, that is - a powerhouse film site called Cuevana.tv that somehow showed first-run movies, including some produced by HBO, for free. One reason, it would appear, is so one Cristian Alvarez Rojas - the student in the khakis and handcuffs - could demonstrate a loophole in his country's latest intellectual property law, which took effect in the spring of 2010.

It sounds like the subject of any one of thousands of spam e-mails you may receive every month, "Watch Free TV on Your Computer Without Paying the Cable Guys!" In the case of Cuevana.tv, this was actually quite accurate. Its founder was in Chile, its webmasters were in Argentina, and its portal servers were in Canada, though the hosts of its free first-run movies and TV shows were all over the planet. As shown in the homemade video above - produced when Cuevana.tv was operational - one of those hosts was Megaupload, which is said to have paid services that linked to it. In fact, the ad shown just before the HBO video launches - ironically, an American public service ad - may have been served by Megaupload.

"I'm Not Getting Anything From This"

This morning, the Chilean online news service La Tercera reports that Rojas was freed early in the day after posting bail. He stands charged with the violation of an intellectual property law passed in April 2010. If found guilty, Rojas may not be heavily fined though he could receive jail time that's relatively severe compared to other countries.

Rojas made a brief statement to reporters this morning saying the Cuevana.tv was just a little side venture of free expression - that he did not profit from it, he didn't mean to hurt anyone, and that folks could check the books at his school to see how well he's doing with paying for college.

Piracy of American and European movies is rampant in Latin America, and up until recently has gone almost unchecked. Counterfeit copies of shows, many of considerably inferior quality compared to the original, are sold on the streets more often than online. It took six years after the U.S. and Chile signed the FTA for the government there to pass the 2010 bill known by the austere name "Intellectual Property Law No. 17,336." That law tried to strike a balance between the interests of copyright holders and those of ISPs.

According to an assessment of 17,736 at the time of its passage by global IP law firm ReedSmith, the law does give Chilean authorities the right to block citizens' access to specific Web addresses under court order - essentially what the SOPA and PIPA bills sought in the U.S. In exchange, ISPs are granted safe harbor from prosecution if they can prove they're taking reasonable measures to thwart piracy.

CLARIFICATION: The producers union for many films distributed in Chile, though headquartered in Argentina is called La Unión Argentina de Videoeditores, and its president is Daniel Parise. In a speech last June to a forum of union leaders, Parise alleged that on-the-street video pirates download their inferior master copies from pirate Web sites. As his specific example, he cited Cuevana.tv.

That speech may very well have been an open invitation to American copyright holders to please, please file the complaint that triggers the first great test of 17,736. Yesterday, Chilean press sources quoted Cuevana.tv's Rojas as defending his site's distribution methods - relying entirely upon resources outside Chile. If Rojas' defense is valid, he may be illuminating a loophole in his country's law: Chilean authorities may have only had the right to act in cases where the resources - the servers where the pirated movies are being hosted - reside within Chilean boundaries.

Our Loss is No One's Gain

Havocscope, which computes the market value of black market activities worldwide, computes the annual market value of movie piracy in Chile as the equivalent of USD$10 million (with an "m," not a "b"), compared to USD$349 million every year in pirated software sales. This suggests Rojas might have a point: Although U.S. content providers may be losing money, Latin American pirates aren't taking it from them. It's money lost to the wind.

The Latin American commentary blog GringoLandiaSantiago suggests that American producers would have better luck plugging their losses due to piracy if they would only open their markets more to Latin American viewers. The blog cites the Fox Network show House (exported worldwide as Dr. House) as one of the most popular shows of any kind in the region, although its unavailable for viewing on-demand from any source. Hulu, among other sites, is blocked in Chile.

"Illegal immigrants from Peru sell [pirated videos] in the street markets. The carabineros come and chase them away with their motorcycles, but the real loss of revenue to American producers is not the thousands of pirated DVDs - it is their refusal to deliver content on line or sell DVDs at a price which people can afford. No one here is going to pay $20 for a DVD when you can download it for free," writes GringoLandiaSantiago, before posting a link to a Web site where you really can download it for free.



A clarification about the film producer's union was added at the urging of one of our readers. The Chilean producer's union is El Asociación de Productores de Cine y Televisión.