As the international film industry gathers in Cannes this week, the French government is pushing through legislation to stop internet piracy with a bill that appears ill-conceived and could well backfire on the very industries it seeks to protect.

Few in Cannes need reminding of the scale of the piracy issue facing the industry. The Croisette is lined with giant billboards for upcoming releases — such as Quentin Tarantino’s Inglourious Basterds, Michael Mann’s Public Enemies and Pixar’s Up — that will all be targets for the pirates.

“If the film industry’s only significant response is simply a reliance on the heavy hand of the law, then it risks criminalising its own customers”

The most recent major study into the cost of piracy showed losses to the film industry of more than $6.3bn a year, with others suggesting the total loss to the legitimate economy was closer to $20bn a year. The posting of the unfinished X-Men Origins:Wolverine on the web last month was probably the biggest breach of security for a summer tentpole release so far.

The industry is agreed on one thing — that something must be done. But as is often the case when those words are uttered, it’s exactly what that “something” should be that causes the problems.

In France, president Nicolas Sarkozy believes he has the answer, and is behind the “three strikes and you’re out” approach to illegal downloading. The French legislation will see internet service providers take on the role of web police, identifying those customers who are illegally downloading film, movies or video games and sending them warnings to cease and desist. The first warning will be an e-mail, followed by a registered letter; then, if they carry on illegally downloading, they’ll be cut off. The move is backed by many of France’s creative community but has also sparked a debate about Big Brother government, and the inherent conflict between tackling piracy and protecting privacy.

Meanwhile across the channel in the UK, a similar move is under way with a coalition of content companies and organisations, including the Federation Against Copyright Theft, calling for more action from ISPs against illegal downloaders — again based around warning e-mails, letters and potential disconnection. It’s no surprise that the ISPs don’t want to play the role of content cops and have been arguing that it’s the job of the content companies to take action against offenders.

Of course, there is a place for the option of legal action to identify and stop persistent illegal downloaders, and content owners and ISPs must work closely together to ensure that proportionate action is taken where necessary. But this defensive position cannot be the industry’s major response to illegal file sharing and downloading of movies. The industry needs to apply its creative flair and boldness to thinking about its own distribution models — and what can be done to encourage young film fans to choose paid-for legal options instead of the free but illegal.

It won’t be an easy battle, and it will involve making some significant changes in the way the industry thinks about its content distribution and relationship with its audience. This must include looking at the price of different films, the windows between theatrical, DVD and on-demand, and further collapsing international release dates. Critically, it will mean bringing the audience in to interact with film in new and different ways.

If the film industry’s only significant response is simply a reliance on the heavy hand of the law, then it risks criminalising its own customers. This is a battle about hearts and minds, not just ISPs and web connections — and the film industry needs to do much more to ensure it wins on all levels.