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Dust-Up: Should the entertainment industry accept piracy as a cost of doing business? [Round 2]

March 16, 2011 |  7:00 am

Piracy-ComputerIn the first installment of our piracy Dust-Up, Harold Feld, legal director of Public Knowledge, and Andrew Keen, advisor to Arts and Labs, debated how big a risk piracy poses to the entertainment industry. Voicing the opinion of many Internet users and online entrepreneurs, Feld said it was time for the industry to adapt. Keen disagreed and argued for more legal protection,  not just for Hollywood but for the independent filmmakers and copyright holders who'll be driven away if piracy continues.

Today they face off on whether piracy should be accepted as a cost of doing business.

Says Feld:

[L]earning to accept some losses as a cost of doing business, just as retailers do with shoplifting, opens up doors to billions of dollars in new sales. Crushing Napster didn’t help the music industry, but embracing iTunes did.

Says Keen:

No, nothing -- especially complex legislation over a subject as controversial as online intellectual property -- is ever perfect. But, as a legal scholar, Harold knows better than me that man-made laws are, by definition, imperfect. Yet that shouldn't mean that we surrender to the online thieves by treating piracy as a "cost of doing business" and simply write off the billions of dollars lost every year to the American entertainment industry as an unavoidable misfortune, like a plague of locusts or that proverbial bolt of lightning from the heavens.

Continue reading round 2 of their debate after the jump.

In case you missed it: How big a risk does piracy pose to the entertainment industry? [Round 1]

Check back Thursday: What's the true impact of illegal downloading on jobs and the arts? [Round 3]

--Alexandra Le Tellier

Photo: Fernando Capristan and Elena Campillo use links through websites at Emule and RapidShare to download movies in Spain. Credit: Angel Navarrete

Point:

Anyone who has had the misfortune to have their home or apartment burgled will understand Andrew's demand from Tuesday's first installment of Dust-Up. It boils down to: "But why doesn’t somebody do something? Where are the police? Why don’t we have tougher laws or security cameras all over the place?" And though no one likes to hear in response, "Well, we try our best, but you ought to consider getting a better lock and a burglar alarm," sometimes that is the best answer, or at least part of the answer.

In 1998 we adopted a law called the Digital Millennium Copyright Act, or DMCA, to deal with illegal downloads and illegal file swapping. Mind you, that’s in addition to the Copyright Act, which already makes illegal copying a crime subject to $150,000 in damages per violation. The DMCA imposes a number of duties on those operating websites or providing internet access service to help copyright holders. It's not a perfect system from anybody's perspective. Critics note that it imposes substantial costs on honest service providers, that unscrupulous businesses use the law to suppress critics with bogus claims of copyright or trademark infringement, and that a cottage industry has developed among bounty-hunting law firms to threaten questionable lawsuits as a means of extorting "settlements" that are little better than shakedowns. At the same time, it has hardly put an end to illegal downloads. Nevertheless, for all its flaws, the DMCA provides a workable framework that gives copyright holders tools to work with while giving those accused of illegal downloads a chance to defend themselves.

So, as with real-world shoplifting, we have a workable legal framework. It's not perfect, but it recognizes the difference between the online world and the physical world and tries to create a balanced response. Though it's not surprising that those who see their movies or music illegally downloaded want more -- no one likes being robbed -- we need to consider very carefully both how much changes in the law cost everybody else and just how effective the changes will really be. In the mid-1990s, Californians outraged by high-profile violent crimes passed a "three strikes" law to give felons life sentences after a third felony conviction. Proponents of the law dismissed concerns about how the state would pay for the increase in the prison population as being "soft on crime." As California lawmakers now struggle with cutting education programs and state services to fund its ever-growing and graying prison population, it's fair to ask whether critics concerned about the cost were soft on crime or right on the money.

People often have the same problem recognizing the cost of increased copyright enforcement online. For example, last year when Britain adopted a copyright "three strikes" policy of the kind Hollywood has urged we adopt here, the government estimated it would cost Internet service providers 500 million pounds ($801 million) in new costs that they would pass on directly to subscribers. Closer to home, as a result of a law passed in 2008, cash-strapped colleges and universities are now spending tens of thousands of dollars every year trying to stop students from illegally trading music and movies -- all without noticeable effect.

That these costs are hidden make them no less real. It’s easy to understand 9 million illegal downloads of "The Social Network," and hard to understand how the new regulations Sony wants will raise the price of your broadband subscription and your iPod while keeping you from doing cool things on your iPhone.  As the crowning insult, there is no evidence that these new rules would actually make a dent in the illegal downloading problem, or that marginally reducing illegal downloads would translate into an increase in legal sales. What evidence there is seems to indicate the opposite. All that these new government regulations and associated costs end up doing is making it harder for honest people to buy movies legally.

On the other hand, learning to accept some losses as a cost of doing business, just as retailers do with shoplifting, opens up doors to billions of dollars in new sales. Crushing Napster didn’t help the music industry, but embracing iTunes did. "The Social Network" was illegally downloaded 9 million times, but it still made Sony more than $200 million at the box office. It is not somehow insulting or justifying theft to ask: "Do you and I really need to pay more for broadband to solve this problem? Isn’t it as much a cost of doing business as shoplifting?"

No one robbed likes to hear "get a burglar alarm"; no one who runs a store likes losing money to "the five fingered discount"; and no one seeing their work illegally downloaded likes to hear "some illegal downloading is a cost of doing business." But at the same time, we cannot keep financing "the war on digital piracy" with higher prices on broadband and electronic goods because "something must be done."

--Harold Feld

Harold Feld is legal director of Public Knowledge, a Washington-based digital rights advocacy group.

Counterpoint:

Excuses, excuses. Harold acknowledges that online theft is a "misfortune" but argues that any policing solution is worse than the problem itself.

You see, for every initiative to stem piracy, Harold seems to have a convenient excuse. The Digital Millennium Copyright Act has, supposedly, imposed costs on Internet service providers that have, in turn, driven up the price of the Internet for all of us. Or the British-style three-strikes policy will, he says, drive up the price of college and undermine innovation in American media companies. While the new regulations against online theft favored by Sony will, Harold warns, add to the price of the iPod and diminish the iPhone experience. And then, he tells us, absurdity of absurdities, that government regulations against online theft will make it "harder for honest people to buy movies legally."

Excuses, excuses. I wonder if, had Harold been around in the early 19th century, he might have argued against financing a professional police force or public jails because they would increase taxes and, horror of horrors, "cost" the consumer some added expense.

When, I wonder, will Harold think about the online consumer as a citizen and begin to imagine Internet laws in terms of civic responsibilities rather than just the right to cheap services? Rather than worrying about doing "cool things on our iPod," shouldn’t we instead be trying to craft legislation guaranteeing that 21st century artists have the opportunity to make a living selling their books, their recorded music and their movies?

No, nothing -- especially complex legislation over a subject as controversial as online intellectual property -- is ever perfect. But, as a legal scholar, Harold knows better than me that man-made laws are, by definition, imperfect. Yet that shouldn't mean that we surrender to the online thieves by treating piracy as a "cost of doing business" and simply write off the billions of dollars lost every year to the American entertainment industry as an unavoidable misfortune, like a plague of locusts or that proverbial bolt of lightning from the heavens.

Using Harold’s negative logic, could we also turn a blind eye to online financial fraud or breaches of online privacy as "costs of doing business"? Yes, I’m exaggerating, of course. But I want to press Howard on positive solutions rather than just excuses for why things won't work. I want to know if he is against all new laws to confront online theft or just some laws.

Harold, what kind of anti-piracy legislation could you conceivably support?

I'm curious, for example, about your opinion of Sens. Orrin Hatch and Patrick Leahy’s Combating Online Infringement and Counterfeits Act, or COICA -- a bill that enables government to shut down websites if copyright theft is deemed "central to the activity" of the site. Rather than going after little old ladies "guilty" of shoplifting the odd song with excessive fines, COICA seeks to shutter businesses designed exclusively around the illegal distribution of intellectual content. COICA, it seems to me, could act as our collective burglar alarm against online theft.

COICA, you see, goes after companies whose whole business model is based on what you call the "five fingered discount." These are the bad guys, the peer-to-peer networks and the illegal streaming sites whose very raison d’être, their whole purpose of being, is to aid and abet the illegal exchange of other people's intellectual property.

So, Harold, what's not to like about COICA?

--Andrew Keen

Andrew Keen is the author of the upcoming "Digital Vertigo: An Anti-Social Manifesto." He is also an advisor to Arts and Labs, a coalition of entertainment and technology companies. 

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