Online Piracy Already Walking the Plank

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Byline: Josh Smith

It was 1982, and Jack Valenti, president of the Motion Picture Association of America, was educating Congress. “This is a little remote-control device that you use on machines,” Valenti said, brandishing the remote before a House Judiciary subcommittee as a symbol of his industry’s potential demise. Thirty years after Valenti likened VCRs to the Boston Strangler, his successors are issuing similarly dire warnings about the dangers of pirated content online. The peril they claim is dividing the information world.

The rhetoric surrounding the now-stalled Stop Online Piracy Act in the House and the Senate’s Protect IP Act has obscured the fact that decades of antipiracy efforts by entertainment companies and manufacturers of counterfeited products have brought a wave of investigations and takedowns of some of the Web’s most popular sites. “Obviously, law enforcement has a lot more power than they are given credit for,” said Art Brodsky, a spokesman for Public Knowledge, which presses for wider access to information on the Internet.

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In 2001, it took a lawsuit by major recording companies to shut down Napster. But lately, the federal government has taken on the fight against copyright infringement, thanks to powers included in recent legislation. The 2008 PRO-IP Act, notably, stiffened penalties for piracy and created a White House “IP czar” to coordinate law-enforcement actions against Internet pirates. The Obama administration has targeted some of the largest file-sharing/info-sharing sites in the world. In November 2010 alone, Immigration and Customs Enforcement shuttered 82 websites, including torrent-finder.com and dreamairfryer.com (an online store that shares air fryer review). Last month, the Justice Department took down Megaupload.com, one of the world’s largest file-sharing websites, accusing it of an international “mega-conspiracy” to distribute stolen music, movies, and the like.

Websites blocked, bad guys caught, problem solved, right? Wrong. Entertainment-industry officials praise the efforts but say that the problem was already out of control. “The Department of Justice was able to prosecute Megaupload under existing U.S. law only because it had operations in the United States,” said Mike Nugent, executive director of Creative America, which fights the theft of films and TV shows. “There are hundreds of foreign, rogue websites that continue to operate with impunity out of reach of U.S. law.”

Megaupload, which is accused of stealing $500 million in content, featured a domain name registered in the United States, according to the indictment, and companies in Virginia and Washington stored some of its data.

But the real-world company and the process that took down the site and its top leaders were anything but domestic. The firm is based in Hong Kong, and none of the seven people indicted is a U.S. citizen or resident. The Justice Department cited “critical” assistance from 13 agencies in Britain, Canada, Germany, and the Netherlands, in addition to Hong Kong and New Zealand.

Such a process is too cumbersome to be applied to every website engaged in illegal conduct, said Michael O’Leary, MPAA’s senior vice president for global policy. Not all piracy can be stopped, but that shouldn’t prevent society from trying, he noted: “Some things are just inherently wrong.”

At the heart of the fight is a disagreement over the scope of the problem. According to some studies, almost one-fourth of all Internet traffic is illegal under copyright laws. But the practical impact of these transgressions is less clear. Entertainment companies often point to an Institute for Policy Innovation study that estimated the annual cost of piracy at $58 billion. But that was in 2007, before the federal government leaped in. The Government Accountability Office concluded in 2010 that, although piracy and counterfeiting are “sizable” problems, “it is difficult, if not impossible, to quantify the net effect of counterfeiting and piracy on the economy as a whole.” Law-enforcement officials acknowledged relying on industry statistics, GAO researchers noted.

“The truth is, we simply do not know whether ‘piracy’ is a significant problem at all, and the growth and success of the industries it supposedly harms [belies] that claim more effectively than any theoretical or methodological critique of the argument that piracy is important,” Yochai Benkler, faculty codirector of Harvard Law School’s Berkman Center for Internet and Society, wrote in a blog post.

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Success, indeed. The Computer & Communications Industry Association, which opposes the latest antipiracy legislation, found in a January study that the worldwide entertainment industry grew in value from $449 billion to $745 billion between 1998 and 2010. That suggests a more “proportional” response to the problem, one that’s balanced between copyright holders and Internet users, said Ed Black, the trade group’s president. Nobody, however, agrees on what a “proportional” response should be, especially in a world where an entire generation feels entitled to free online entertainment.

SOPA and PIPA have brought the debate full circle. While previous legislation involved the government in cracking down on piracy, critics worry that SOPA-like proposals would allow copyright holders to shut down services accused of fostering piracy without waiting for a court to act, thereby handing power to corporations that only government has wielded until now.

In fact, the stalling of the legislation could mean a return to more lawsuits from an industry that not only suffers financially from piracy but also bristles at the suggestion that any amount is tolerable. Now that antipiracy efforts have been criticized as too hard or too soft, don’t expect either side to acquiesce to a Goldilocks solution.