Standing Against Those Who Trumpet the Economic Value of Theft

by Howard Gantman 01/10/2012 13:28 (UTC-08:00) Pacific Time (US & Canada)

Julian Sanchez, a research fellow at CATO, recently wrote a post on Cato@Liberty, which once again offers tired arguments about why the theft of intellectual property is not such a bad thing.

In his post, Sanchez’s main argument is that theft has a negligible economic impact – only some inefficiency – because theft is beneficial: that is, the consumers who access stolen content can choose to use the money they “saved” to purchase other products. Extending this argument, shoplifting has no economic impact since shoplifters can spend the money they “saved” on other products, a perspective which runs counter to treatment of crime in other “costs of crime” studies

Or taken another way, credit card fraud against consumers has no economic impact on the general economy since the person or company committing the fraud can spend his/her profits elsewhere. To support this argument, Sanchez pointed to a flawed Government Accountability Office report, which cited anonymous “experts” who viewed counterfeiting and piracy as “mainly redistributions” of wealth and thus argued that “any positive effects of counterfeiting and piracy on the economy should be considered as well as the negative impacts.” The Progress & Freedom Foundation, already accurately deconstructed the fallacy of this “expert” assessment in:  “Punk’d:  GAO Celebrates the “Positive Economic Effects” of Counterfeiting and Other Criminal Racketeering.”

Sanchez also sought to challenge the use of economic multipliers to assess the effects of piracy and counterfeiting on industry suppliers and other downstream parties.  To support this argument, Sanchez again chose to quote a portion of the GAO report citing anonymous “experts,” leaving out text that contradicted his assertions (the part excluded is in bold):  “Most of the experts we interviewed were reluctant to use economic multipliers to calculate losses from counterfeiting because this methodology was developed to look at a one-time change in output and employment.  Nonetheless, the use of this methodology corroborates that the effect of counterfeiting and piracy goes beyond the infringed industry.  For example, when pirated movies are sold, it damages not only the motion picture industry, but all other industries linked to those sales.”

He neglected to point out that most of the economic cost of piracy studies estimate the one-time effects in one year, if copyright piracy was eliminated and that they do not generally include activity by people who would not have otherwise purchased legitimately.  He also neglected to point out the hundreds if not thousands of economic models using multipliers in a vast number of contexts.  If Sanchez is saying such models cannot be used for piracy, it’s not clear why it would then be valid to use them for measuring impacts of things like tourism, the arts, or terrorism.

In conclusion, Sanchez argued against Congressional passage of the Stop Online Piracy Act, basing his reasoning on his own faulty logic that content theft and counterfeiting don’t cause widespread economic pain.  And that’s where he is wrong – even the GAO concluded that “the problem is sizeable, which is of particular concern as many U.S. industries are leaders in the creation of intellectual property.”

The bottom line: SOPA, and related bipartisan legislation in the Senate, the PROTECT-IP Act, will help American businesses and American workers by making it more difficult for operators of rogue websites, often based overseas, to steal American intellectual property.  These bills are supported by hundreds of businesses, consumer advocacy groups, labor organizations and intellectual property coalitions.  The time has come for Congress to protect these workers and businesses and to put tired arguments like those being made by Sanchez to rest.

How Google profits from illegal advertising -- and keeps the money even after getting caught

by Ben Sheffner 01/10/2012 10:32 (UTC-08:00) Pacific Time (US & Canada)

The BBC has an interesting report highlighting the fact that Google’s advertising services distribute large numbers of ads for illegal services, in this case unauthorized brokers of tickets to the 2012 Olympics in London. The BBC piece notes that Google removes the ads upon requests from police (or when they’re informed by the BBC that they’re about to be the subject of an embarrassing news report) – but also that Google keeps “keeps any money it might make from companies advertising illegal services before such adverts are removed.”

A couple points relevant to the debate over SOPA and the PROTECT IP Act:

• Advertising by purveyors of illegal products and services is a huge problem. Even without the enhanced procedures contained in SOPA and PROTECT IP, Google says that “In 2010, we took action on our own initiative against nearly 12,000 sites for violating this policy” against advertising by “infringing sites.” And in 2011, it took action on 12,000 more. While it’s nice that Google removed these ads “on [its] own initiative,” this clearly hasn’t solved the problem, and more needs to be done.


• Google readily admits that it profits from advertising of illegal services. It keeps its ill-gotten advertising gains – even after being informed by the police of their tainted source. Google could easily choose to hand over these corrupt proceeds to law enforcement, or to other worthy causes devoted to combating illegal online activities. But apparently its commercial interests trump doing the right thing. (One would have thought that having to pay a $500 million settlement for “knowingly show[ing] illegal ads for fraudulent Canadian pharmacies” would have tempered Google’s willingness to serve and profit from ads for illegal services. Apparently not.)

This is all just a reminder that many of the opponents of SOPA and PROTECT IP, while they like to portray themselves as brave Internet freedom-fighters, are in reality doing little more than protecting their own business interests. They profit from illegal activities, and they will vigorously resist legislation that seeks to put this practice to an end.

Categories: Content Protection, Copyright, Policy

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Utah Leads the Way

by Gregory Joseph 01/09/2012 13:49 (UTC-08:00) Pacific Time (US & Canada)

Writing in the Salt Lake City Tribune, Utah Attorney General Mark L. Shurtleff effectively hammers the point that Google, Yahoo and others have spent millions trying to distort – that states which allow rogue websites to operate unfettered will experience massive revenue reduction and job loss. Calling operators of rogue websites by their real name; criminals, Shurtleff goes on to write that these criminals “unload unsafe products and malicious computer viruses, perpetrate identify theft and engage in wholesale theft of America’s most innovative products.”

Shurtleff rightly contends that  America cannot afford to lose one more job, let alone the shuttering of entire industries that can occur if online piracy continues unabated.

Yet, that’s exactly what failing to pass the PROTECT IP Act in the Senate, and the Stop Online Piracy Act in the House will allow. Industries that provide millions of dollars to local economies and thousands of jobs will be jeopardized. For example, in Utah the film and television industry is responsible for nearly 8,000 jobs and $385 million in wages. However, despite providing a tremendous economic benefit, Shurtleff points out “these industries and jobs are undermined by online counterfeiting and piracy.”

Hard-working Americans make great American products. We shouldn’t allow an international network of faceless criminals to seize or stifle this greatness.

Senator Dodd: Everyone Agrees Something Needs to Be Done about Foreign Criminal Websites

by Paul Hortenstine 01/05/2012 06:54 (UTC-08:00) Pacific Time (US & Canada)

Last night, Senator Chris Dodd, Chairman and CEO of the MPAA, spoke with Emily Chang on Bloomberg TV’s “Bloomberg West.”  He talked about the importance of Congress acting now to pass legislation to target foreign criminal websites that profit from stolen American goods and content at the cost of American jobs.

He stated that the future of commerce and content on the Internet will be guided by technology companies and the entertainment industry growing together: 

“The Internet has been an incredible asset for people all over the world, creating access to information that was unavailable even a few years ago.  This ought not to be a situation where you have to choose between technology and content. Content needs technology and technology needs content; and these two communities absolutely need each other for the future.”

Senator Dodd also said we should focus on the real problem of foreign criminal websites:

“When you have international criminals, foreign sites stealing the intellectual property, the copyright of businesses, not only the film and television industry but also other industries that have knockoff products being stolen, intellectual property being stolen from aerospace, from things such as bulletproof vests and equipment for firefighters.  This is a serious issue that deserves attention.  I will give the technology industry credit for this. No one is arguing about whether we ought to deal with these rogue criminal foreign sites that steal American jobs and products.  We all understand something needs to be done. We’re now arguing about how best to do this.  And that’s a major breakthrough.”

Categories: Content Protection, Copyright

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