PROTECT IP and the Venture Capitalists

by Michael O'Leary 06/24/2011 14:44 (UTC-08:00) Pacific Time (US & Canada)

Yesterday, as you may have seen, a group of venture capitalists sent Congress a letter about the PROTECT IP Act.  Part of the letter repeated arguments we’ve heard before suggesting that the bill would somehow undermine the architecture of the Internet – many of which have been debunked here and here.  It’s clear that this bill would have no negative impact on the Internet.

But the writers of this letter raised another point that we wanted to address.  They wrote:

The bill is ripe for abuse, as it allows rights-holders to require third-parties to block access to and take away revenues sources for online services, with limited oversight and due process.

Revenues sources?  Here’s the thing: the bill doesn’t address any revenues that would be relevant for the ventures these investors support. 

Let’s take a step back.  The PROTECT IP Act is meant to put a stop to rampant theft of American-made movies, TV shows, and other content by foreign illegal websites, in two basic ways.  First, the bill would make it so that U.S. consumers can’t access those illegal sites in the first place, which in some cases not only stops theft, but protects those consumers who might otherwise fall victim to identity theft or fraud online.  Second, PROTECT IP would shut down the financing that lets those illegal sites stay in business, by getting the U.S. companies that provide rogue sites with advertising services and plumbing like payment processing to stop doing business with them. 

Obviously the rogue sites themselves profit from U.S. consumers – either by charging a fee for stolen content or for hosting advertising for other companies – but the only “revenues sources” the bill covers come from transactions with criminal sites.  Put another way, the bill would only kick in if a U.S. company is providing financial services to an illegal site, and a court asks it to stop.  So our question is this: when the writers of this letter say PROTECT IP would “require third parties to … take away revenues sources for online services,” are they saying businesses like Facebook and Twitter depend on these illegal sites for revenues? 

That doesn’t make sense. 

This bill simply won’t apply to the writers of this letter, or to the ventures they’re backing.  It applies only to sites whose sole purpose is criminal activity, and if American companies are making money by facilitating that criminal activity, it asks them to stop. 

In the end, theft is theft, and it hurts all of us.  What if a criminal had stolen and duplicated the code that runs Facebook?  So you can imagine the harm that comes when the work of a small filmmaker, who poured her life savings and that of her family, is stolen just after release and sold around the world, with all the returns lining criminals’ pockets instead of going back to the filmmaker to repay her investors and fund future projects.  We can’t stand by as criminals profit from the hard work of the millions of American men and women of the creative and entertainment industry. 

The fundamental issue here is this: the writers of this letter, like so many others, think we have to choose between technological innovation and creative expression.  That’s a false choice.  Technology and creativity are inextricably intertwined, and work in concert, not opposition.   But it shouldn’t be too much to ask the innovators to play by the rules.  That’s all the PROTECT IP Act does – it’s a smart, narrowly-crafted bill whose purpose is stopping theft, not slowing innovation.

The letter cited a number of exciting, successful businesses representing partnerships between creators and technology companies to make content available legally.  We couldn’t agree more – Netflix, Rhapsody and Pandora are exciting partnerships and have proven that these legitimate models can work.  Everybody can get behind that kind of innovation.

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