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Intellectual Property Piracy Harms Global Economy

JUST ONE WEEK after the unauthorized leak of News Corp.’s X-Men Origins: Wolverine on the Internet, U.S. lawmakers held a field hearing in California to discuss the increasing economic implications of intellectual property piracy. Witnesses from the entertainment industry suggested a range of possible solutions.

House Committee on Foreign Affairs Chairman Rep. Howard Berman (D-CA) cited the U.S. Chamber of Commerce estimate that trade in counterfeit goods is responsible for an annual loss of 750,000 jobs in the United States alone and emphasized that intellectual property theft harms other countries as well. India’s burgeoning entertainment industry, for example, suffers the same concerns that plague Hollywood, he said.

Berman pledged to introduce legislation that would elevate the attention given to intellectual property concerns. Given its potential to restore jobs, the congressman called intellectual property protection “an economic stimulus.”

Panelist Michael Miller, international vice president of the International Alliance of Theatrical Stage Employees, stressed the impact of piracy in the current global economic crisis. “Piracy is not a victimless crime,” he said. “Piracy is a devastating economic attack that in 2008 alone cost our [entertainment] industry $6 billion, and as large as that sum is, it’s only a fraction of the $250 billion that copyright piracy costs the U.S. economy every year,” he added.

Richard Cook, the chairman of Walt Disney Studios, highlighted the difficulties of combating the piracy problem with the example of the company’s 2008 movie Wall-E. The movie was released in the Ukraine on July 3 and a camcorder version recorded in Kiev was available on a Russian Internet site two days later. Within 10 days of the release, copies were available online in Russian, English, Spanish, Dutch, and Mandarin.

Cook noted that “anti-camcording” laws have been effective where enacted. He cited Canada’s passage of such a law in 2007, which has led to a 50 percent drop in the number of camcorder- recorded movies originating in that country.

Cook suggested that the U.S. government make the passage of similar laws in other countries a priority issue to be raised in diplomatic discussions and trade negotiations.

Canada came under criticism, however, for other aspects of how it has handled pirated goods. Lawmakers and industry executives criticized Canada for allowing large shipments of pirated movies and music to move across the border into the United States. Zach Horowitz, president and chief operating officer of Universal Music Group, said Canada lacks a “modern copyright law for the digital age.”

China, Russia, and India were also cited as countries where pirated goods are traded freely.

Some American businesses, it was pointed out, facilitate this commerce in illicit goods. Rep. Adam Schiff (D-CA) noted that U.S. companies are tacitly supporting piracy around the world by facilitating transactions and advertising on Web sites that offer pirated material. He pointed to a Ukrainian Web site that illegally offers pirated music downloads, which can be paid for with major U.S. credit cards.

“Not only is it problematic to facilitate these transactions, but their inclusion on the page can add a false perception of legitimacy to the Web site,” he said.

Academy Award-winning director Steven Soderbergh, who testified as the vice president of the Directors Guild of America, proposed that lawmakers allow the industry to “act swiftly on our own behalf” by “deputizing” the industry—giving it the legal authority to investigate abuses and punish those responsible for copyright infringement.

Soderbergh referred to a French initiative that has since become law. The legislation initially allowed Internet service providers (ISPs) to work with a newly created government agency to deny Internet access to copyright infringers after warnings. A French court recently ruled, however, that only a judge could terminate an offender’s Internet access.

The bigger issues for a similar proposal in the United States might be application and efficiency, says Daniel Gervais, director of Vanderbilt University Law School’s Technology and Entertainment Law Program. “Can it be done legally?” he posits. “Yes, probably. But I don’t know if that’s the ultimate question.”

Gervais says the initiative would be difficult for ISPs to implement. For example, one person in a household, college dormitory, or library might illegally download copyrighted material. Would the ISP revoke service for the entire household or organization?

In addition, preventing illegal music or film downloads may not result in more revenues for the entertainment industry, Gervais says. “They are probably making the assumption that if fewer people fileshare, more people will buy music for money,” he says, “but the experience in other countries and here does not necessarily support that view.”

Panelists at the hearing and lawmakers alike agreed that intellectual property protection has not been the national priority it needs to be. “As manufacturing jobs disappear, intellectual property is how our kids will earn their livelihood,” Horowitz said. “The stakes are incredibly high.”