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Paypal will cut funding to websites deemed 'illegal' by the music industry and the City of London Police, according to trade body the International Federation of the Phonographic Industry (IFPI).

The IFPI will identify sites that it believes are selling music without having the right to do so and has said in a statement that the City of London Police will pass the information to Paypal – which will then demand evidence that music that is sold has been licensed.

Paypal's Acceptable Use Policy says that it will not allow its services to be used to purchase "items that infringe or violate any copyright... or other proprietary right".

MasterCard and Visa agreed to withdraw their payment services from unlicensed download sites when the IFPI scheme launched in March.

Under the scheme, the trade body submits evidence of downloading from allegedly infringing websites to the City of London Police's Economic Crime Directorate. Once the police consider the evidence, they pass the information on to the payment providers who will take action accordingly.

"The work the City of London police is undertaking is at the cutting edge of tackling online copyright infringement, a serious problem that is eroding the ability of record companies to invest in a diverse range of artists with serious consequences for jobs, tax revenues and consumer choice," said Frances Moore, chief executive of the IFPI.

The ban is primarily targeted at sites based in Russia and the Ukraine, according to the IFPI.

Since March, 24 sites based there have already had payment services withdrawn, and the IFPI has submitted the details of another 38 sites "suspected of infringing copyright on a grand scale" to the police.

Kim Walker, media law expert with Pinsent Masons, pointed out that the announcement was more likely to be a PR exercise as the affected sites were not ever licensed to sell music in the UK.

"Paypal can decide to provide services or not provide services to whoever they want. Certainly from a PR perspective they will want to be seen as cooperating with the IFPI, but at the same time from the perspective of their customers generally they won't want to be seen to be withdrawing their services for no good reason. I imagine this is why they see the involvement of the City of London Police as important in rubber-stamping the withdrawal," he said.

"This announcement is another example of the music industry recognising that it is often unrealistic, even futile, to use the law against these overseas online businesses, and instead aiming to make life difficult for them on a practical level by removing access to services like PayPal so as to make the sites less attractive and convenient for their customers."

The announcement confirms PayPal's commitment to "fighting music piracy" said Carl Scheible, managing director of PayPal UK.

"We've always banned PayPal's use for the sale of content that infringes copyright, and the new system will make life even harder for illegal operators. Our partnership with the music industry helps rights holders make money from their own content while stopping the pirates in their tracks," he said.

See IFI's press release here.

Copyright © 2011, OUT-LAW.com

OUT-LAW.COM is part of international law firm Pinsent Masons.

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