BRIA 23 4 b Digital Piracy in the 21st Century

 CONSTITUTIONAL RIGHTS FOUNDATION
Bill of Rights in Action
WINTER 2008 (Volume 23, No. 4)

Intellectual Property

The Origins of Patent and Copyright Law Digital Piracy  |   Patenting Life  |  The Cheating Problem   

Digital Piracy in the 21st Century

Copyright law protects intellectual property such as music, movies, and video games. Today's digital media, however, makes copying these products easy. Digital pirates illegally copy and sell or even distribute for free these popular items. This piracy has serious consequences for the American economy.

All U.S. copyright law flows from Article I, Section 8, of the Constitution. This provision grants Congress the power "To promote the Progress of Science and useful Arts, by securing for limited Times to Authors and Inventors the exclusive Right to their respective Writings and Discoveries." The writers of the Constitution wanted to encourage and reward authors, inventors, and other innovators for their creative work that would eventually become freely available to everyone.

Congress enacted the nation's first copyright law in 1790. It gave authors the exclusive right to copy and sell their written works for a limited time. The 1790 law granted this right of exclusive ownership (actually a form of monopoly) for up to 28 years. After that, books and other published materials went into the public domain, available for anyone to use and copy.

Since 1790, U.S. laws have added copyright protection to such things as plays, works of art, photographs, sheet music, recorded music, movies, TV shows, software programs, and video games. In 1909, the use of copyright-protected intellectual property without payment or permission became a crime, a form of theft.

U.S. law, however, recognizes the "fair use" of copyrighted works by the public. This is an ill-defined and controversial area of the law, mainly developed in court decisions. Fair use generally allows the free copying and use of at least some portion of copyrighted works for criticism and comment, news reporting, scholarship, and teaching.

In 1984, the U.S. Supreme Court extended fair use to include home VCR recording of TV programs for personal use, but not for distribution to others or for public showings. VCR recordings were analog, not digital. They were not high quality and degraded with further duplication.

Then in the 1990s, new technology allowed people to make high-quality digital copies of copyrighted music on a computer and distribute them free over the Internet. The age of digital piracy began.

Who Are the Digital Pirates?

Introduced in the late 1980s, the MP3 computer file compressed data for images and music. This made the downloading and copying of music files on a computer and CD "burner" much easier. Soon, individuals were putting pirated music on their Internet web sites for anyone who found them to download, a form of file sharing.

The real explosion in illegal music downloads, however, began in 1999. A college student developed an efficient way for finding and downloading MP3 music files over the Internet. This was the Napster "peer-to-peer" file sharing method.

Napster maintained computer servers that stored a database of music files. Users could download desired songs free of charge from the database, organize the songs, and burn their own CD music albums. Napster quickly grew popular, especially among young people. The phrase "rip, mix, burn" entered the vocabulary of these young Napster users.

By 2001, Napster had 70 million users worldwide, downloading nearly 300 billion songs a year. The music industry sued Napster in federal court. The court found that the downloading constituted copyright infringement, and Napster shut down its servers and went out of business in 2002. (Napster was reborn in 2003 as a legitimate download-for-pay service.)

Alternative peer-to-peer file sharing sites like KaZaA quickly took Napster's place. These sites differed from Napster. They eliminated centralized servers in favor of connecting users' computers directly with one another. Thus, every user's computer automatically became a source for uploading music files to others. A survey in 2003 found that 52 percent of Internet users between the ages 18**29 had downloaded music, most in violation of the copyright laws.

The illegal file sharing of movies developed later than music file sharing. Movies require the transfer of huge computer files, which initially limited illegal downloading. But broadband high-speed Internet connections have led to a boom in online movie piracy.

Highly organized "warez" (pronounced, "wears") group members compete with each other to be the first to illegally post a new movie on the Internet, sometimes even before the film's release in theaters. Warez members do not seek monetary gain but may be motivated by a desire for fame and glory among their peers.

File sharers are only part of the digital piracy problem. A lucrative worldwide criminal black market has arisen, specializing in the duplication and sale of bootlegged CDs, DVDs, software programs, and video games. Some law enforcement authorities say that black-market digital piracy is even more profitable than drug trafficking.

The sale of illegal copies of DVDs plagues the movie industry. Black-market bootleggers sometimes obtain copies of movies before their release in theaters. They buy them from industry employees or even film reviewers.

Once a movie is in the theaters, pirates secretly use a camcorder to record it directly from the screen. These pirates then burn DVD masters on their home computers and sell them to bootleg factories. The factories use high-speed burners to produce thousands of illegal DVDs and package them with counterfeit cover art.

From the factories, bootleg movies go to the black-market for sale. Legitimate retail stores occasionally purchase bootleg copies of DVDs for resale. More frequently, smalltime dealers purchase them to sell at swap meets, Internet sites, and on the streets for as little as a dollar.

According to 2007 estimates, thousands of bootleg movie DVD and music CD factories crank out over 30 billion counterfeit discs a year throughout the world. While some of these factories are in the United States, most are in countries with little or no copyright law or enforcement such as China, Russia, Thailand, Indonesia, and Nigeria.

What Harm Do Digital Pirates Cause?

Digital piracy first harms the original copyright holders: the songwriters, music artists, moviemakers, game developers, software innovators, and other creators of new digital media products. They lose money to those who sell pirated copies cheaply. The theft of their work also discourages them from doing further creative work, defeating the fundamental purpose of the Constitution's copyright provision.

Estimated Economic Impact of Global Digital Piracy on the U.S. Economy Annually

Lost output of U.S. digital media industries and retail 2005 (of digital media industries, supplier companies, and retail), $25.6 billion

Lost U.S. jobs 2005 (in digital media industries, supplier companies, and retail), 373,375

Lost wages of U.S. workers (in digital media industries supplier companies, and retail), $16.3 billion

Lost taxes at federal, state, and local levels (Income, sales, and other business taxes), $2.6 billion

Source: Siwek, Stephen E. "The True Cost of Copyright Industry Piracy to the U.S. Economy." Institute for Policy Innovation. Oct. 2007. URL: http://www.ipi.org

Today, most original authors of digital media sell their work along with its copyright to large music, movie, and other media companies. These companies take on the financial risk of producing, marketing, and selling the digital products, which cost more to make and sell than just the fifty-cent blank plastic disc.

The economic impact is difficult to measure. But clearly billions of unlawful copies have had a significant negative economic impact on the United States.

In October 2007, the Institute for Policy Innovation (IPI), a non-profit public policy organization, released its first report on the overall effect of digital copyright violation on the U.S. economy. Using industry and government sources, the report made a conservative estimate of the economic harm caused by pirated sound recordings, movies, video games, and software.

The IPI report revealed digital piracy on a global scale leads to major losses in U.S. media industry output, jobs, and wages. The study also estimated the additional "cascading effect" on industry suppliers, retail distributors, and government tax revenue. Listed in the chart below are key findings from the IPI study. Figures are based on research studies done between 2005 and 2007.

Beyond the damage to the U.S. economy, some social observers worry about the "scofflaw effect" among the young. The ease of "rip, mix, and burn," say these observers, is resulting in a generation of young criminals who disregard the intellectual property of others.

The young file-sharing downloaders, however, do not see themselves as criminals. They believe they have the right to take music, movies, and other media off the Internet without paying for them. Their justifications include:

• Greedy corporations overprice music CDs.

• CD albums may only have one or two songs worth getting.

• File sharing allows for sampling a new release before purchasing it.

• Music companies rip off the artists who make their money on concert tours anyway.

• It is not like stealing a CD from a music store.

Fighting the Digital Pirates

Big media companies with huge investments in music, movies, television, and software turned to the federal government in the late 1990s to strengthen copyright laws. The No Electronic Theft Act of 1997 makes it illegal to distribute unlawful copies of music CDs, films, DVDs and other copyrighted digital media even if no financial gain is involved.

Since 1790, the limited time the law allowed for copyright protection gradually increased from the original maximum of 28 years. If an individual author owns the copyright, it lasts for the author's lifetime plus 70 years following the author's death.

In 1998, in an attempt to catch up with fast-developing changes in technology, Congress passed the Digital Millennium Copyright Act. This wide-ranging law gave authority to owners of copyrighted digital media to sue those who illegally copied, distributed, or decoded encrypted products. This act also authorized copyright owners to compel Internet service providers to remove online material if the owners claim it infringes on their copyright.

In September 2003 (just as school began), the Recording Industry Association of America (RIAA), representing most of the music recording business, changed its strategy of attack. The RIAA shifted from suing peer-to-peer file sharing web sites like Napster to going after individuals illegally copying and sharing copyrighted songs.

The RIAA got the names of suspected pirates from Internet providers (including universities). RIAA anti-piracy teams also monitored KaZaA's network to find other violators. Using this information, the RIAA has coordinated over 25,000 lawsuits against individuals since 2003.

The RIAA meant for its lawsuit campaign to frighten downloaders from grabbing copyrighted music off the Internet. But a backlash occurred when news stories revealed lawsuits against young children and cases of mistaken identity. Some questioned the fairness and logic of suing music lovers who are, after all, the industry's prime customer target group.

In 2007, a civil jury found a young mother of two in violation of the copyright laws for sharing 24 songs over the KaZaA network. The jury awarded music companies damages of $222,000 or $9,250 per song.

U.S. Copyright law allows damages of $750**$150,000 per pirated song. Even so, online piracy of music, movies, and other digital media persists on a massive scale in the United States and throughout the world.

Thus far, the music, movie, and software industries have used lawsuits as their main weapon against the not-for-profit peer-to-peer file sharing digital pirates. The U.S. Department of Justice has focused on investigating and prosecuting criminal black-market operations that duplicate and sell bootleg digital products.

The Federal Bureau of Investigation cooperates with other U.S. and foreign law enforcement agencies to bring down those profiting from digital theft. For example, in 2004, a federal court sentenced one man to over a year in prison plus a $120,000 fine for illegally copying and selling 11,000 video and audio recordings of live musical acts. The number of such criminal prosecutions, however, is still relatively small.

In much of the rest of the world where intellectual property is often not even recognized, over a third of all music recordings sold is pirated. In China, about 90 percent of the music CDs and movie DVDs sold are bootlegged copies. Recently, the U.S. government filed a formal complaint with the World Trade Organization, accusing China of failing to enforce international copyright laws.

What Should We Do About Digital Piracy?

Listed below are some major anti-piracy strategies currently being debated.

1. Keep going after the online pirates and the file-sharing networks that enable them. Suing end users of peer-to-peer file-sharing networks is the current strategy of the big media companies. They manage to sue only a small fraction of these downloaders of copyrighted music and other media. But the publicity may make others think twice before taking a chance that they may end up having to pay thousands of dollars for "free" music and movies. Defeating file sharing networks like KaZaA is a challenge since they often operate from foreign countries.

2. Increase efforts to prosecute criminals making and selling bootleg copies of digital media. Congress should fund more U.S. Department of Justice investigation and prosecution units to take down black-market digital counterfeiters. Congress should also increase prison penalties and fines for profiting from digital theft. Prosecuting digital bootleggers abroad is often difficult since many countries do not have the same copyright protections for intellectual property as the United States.

3. Use technology to block illegal access, copying, and distribution of copyrighted digital media. Media companies have attempted to guard their products with various forms of encryption, copy-protection locks, and other technical solutions. MySpace recently agreed to use filters to block unauthorized postings of music and videos. These technical fixes work, but the digital pirates always seem to find ways around them.

4. Educate the public, especially young people, about the ethical and legal use of copyrighted digital media. A new FBI anti-piracy warning about unauthorized copying now appears on packaging for music recordings, movies, software, and video games. Some call for instruction of students on the value of intellectual property and consequences for violating copyright laws. Studies have shown that the attitudes of peers (real and virtual), siblings, parents, and teachers all influence how likely a young person will became a digital pirate.

5. Big media companies should adopt file-sharing technology to make it easier and cheaper for consumers to buy the products they want. The music, movie, and other digital media industries have been reluctant to abandon their tried and true marketing systems. But Apple's iTunes Store and similar online enterprises are now selling music directly to customers over the Internet at reduced prices. The movie industry, however, has been slow to go this route, fearing the lack of online security.

6. Speed up the time when copyrighted material will become freely available and expand "fair use." The writers of the Constitution never wanted copyrights to last forever. Over the years, however, copyright holders have successfully lobbied Congress to extend the term of exclusive ownership to the author's lifetime plus 70 years. Critics argue that copyrighted material should enter the public domain much more quickly. This would vastly accelerate free access to books, songs, movies, and other intellectual property for the benefit of all. The critics also say that Congress should write rules for non-profit "fair use" of media still under copyright.

For Discussion and Writing

1. Do you agree or disagree with the justifications young file-sharing downloaders give for taking copyrighted songs and other media off the Internet without paying for them? Why?

2. The U.S. Constitution gives Congress the power to set "for limited Times to Authors and Inventors the exclusive Right to their respective Writings and Discoveries . . . ." What do you think is a reasonable term for copyright protection of songs, movies, video games, and software? Defend your answer.

3. What do you think the "fair use" of copyrighted songs, movies, video games, and software should include? Why?

For Further Reading

Albanese, Jay S. Intellectual Property Theft and Fraud, Combating Piracy. New Brunswick, N.J.: Transaction Publishers, 2007.

Gantz, John and Rochester, Jack B. Pirates of the Digital Millennium. Upper Saddle River, N.J.: FT Prentice Hall, 2005.

A C T I V I T Y

What Should We Do About Digital Piracy?

Form six groups to each evaluate one of the anti-piracy strategies discussed at the end of the article. Group members should first make a list of pros and cons for their strategy and then decide whether to recommend it. Each group should report its decision and reasons to the rest of the class. After the presentations, the class should vote on the best strategy.

 


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