Ludwig von Mises Institute

Copyright infringement

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Generally, a copyright infringement occurs when a copyrighted work is reproduced, distributed, performed, publicly displayed, or made into a derivative work without the permission of the copyright owner.[1]

Copyright infringement is also frequently labeled as piracy.

Counterfeiting and piracy[edit]

"Pirated copyright goods" refer to any goods that are copies made without the consent of the right holder or person duly authorized by the right holder.

"Counterfeit goods" refer to any goods, including packaging or bearing without authorization, a trademark that is identical to a trademark validly registered for those goods, or that cannot be distinguished in its essential aspects from such a trademark, and that, thereby, infringes the rights of the owner of the trademark in question.[2]

Effects of piracy[edit]

A 2010 study by United States Government Accountability Office summed up the opinions of experts that it is difficult, if not impossible, to quantify the net effect of counterfeiting and piracy on the U.S. economy as a whole. Few studies have been conducted on positive effects, and little is known about their impact on the economy. Although some literature and experts suggested that negative effects may be overstated, in general, literature and experts indicated the negative effects of counterfeiting and piracy on the U.S. economy outweigh the positive effects. Since there was an absence of data concerning these potential effects, the net effect could not be determined with any certainty.[2]

A May, 2011 study for the UK Prime Minister urged that "all IP policy be based upon a rigorous evaluation of evidence and that the UK’s stance in international negotiations be visibly evidence-based." It also notes:[3]

"No one doubts that a great deal of copyright piracy is taking place, but reliable data about scale and trends is surprisingly scarce. Estimates of the scale of illegal digital downloads in the UK ranges between 13 per cent and 65 per cent in two studies published last year. A detailed survey of UK and international data finds that very little of it is supported by transparent research criteria. Meanwhile sales and profitability levels in most creative business sectors appear to be holding up reasonably well. We conclude that many creative businesses are experiencing turbulence from digital copyright infringement, but that at the level of the whole economy, measurable impacts are not as stark as is sometimes suggested."

Piracy in emerging countries[edit]

A 2011 study called "Media Piracy in Emerging Economies" focused on countries, where media piracy is rampant, like Brazil, India, Russia, South Africa, Mexico and Bolivia. The report argues that efforts to enforce copyright law have largely failed, and that the problem of piracy is better conceived as a failure of affordable access to media in legal markets.

The major findings in the report:

  • Prices are too high. High prices for media goods, low incomes, and cheap digital technologies are the main ingredients of global media piracy. Relative to local incomes in Brazil, Russia, or South Africa, the retail price of a CD, DVD, or copy of MS Office is five to ten times higher than in the US or Europe. Legal media markets are correspondingly tiny and underdeveloped.
  • Competition is good. The chief predictor of low prices in legal media markets is the presence of strong domestic companies that compete for local audiences and consumers. In the developing world, where global film, music, and software companies dominate the market, such conditions are largely absent.
  • Antipiracy education has failed. The authors find no significant stigma attached to piracy in any of the countries examined. Rather, piracy is part of the daily media practices of large and growing portions of the population.
  • Changing the law is easy. Changing the practice is hard. Industry lobbies have been very successful at changing laws to criminalize these practices, but largely unsuccessful at getting governments to apply them. There is, the authors argue, no realistic way to reconcile mass enforcement and due process, especially in countries with severely overburdened legal systems.
  • Criminals can’t compete with free. The study finds no systematic links between media piracy and organized crime or terrorism in any of the countries examined. Today, commercial pirates and transnational smugglers face the same dilemma as the legal industry: how to compete with free.
  • Enforcement hasn’t worked. After a decade of ramped up enforcement, the authors can find no impact on the overall supply of pirated goods.[4]

History of piracy[edit]

Music sheets[edit]

At the turn of nineteenth century, the music industry was different from the one we are familiar with today. No CDs, no mass concerts, and no radio and TV. The core source of revenue was the sale of printed sheet music, which was carried out worldwide and on a very large scale. For example, in Britain alone about twenty million copies were printed annually. The firms carrying out this business were not large multinationals as today, but family owned companies, such as Ricordi in Milano, which, nevertheless, managed to reach also foreign countries. Apparently these "majors" managed to collude quite efficiently among themselves. The records show that the average script sold in the U.K. for about a fourteen pence. Then piracy arrived, as a consequence of two changes: the development of photolithography, and the spread of "piano mania", which increased the demand for musical scripts by orders of magnitude. Pirated copies were sold at two pence each.

Naturally the "authorized publishers" had a hard time defending their monopoly power against the pirates, enforcement costs were high and the demand for cheap music books was large and hard to monitor. Music publishers reacted by organizing raids on pirate houses aimed at seizing and destroying the pirated copies. This started a systematic and illegal "hit and destroy" private war. Hit squads of the authorized publishers burned down entire warehouses filled with "pirated" copies of sheet music. The war lead, in 1902, to the approval of a new copyright law. The latter made violation of copyrights a matter for the penal code, putting the police in charge of enforcing what, until then, was protected only by the civil code.

At least in the case of sheet music, the police campaign did not work. After a few months, police stations were filled with tons of paper on which various musical pieces were printed. Being unable to bring to court what was a de-facto army of "illegal" music reproducers, the police itself stopped enforcing the copyright law.

The eventual outcome? The fight continued for a while, with "regular" music producers keen on defending their monopoly and restricted sales strategy, and "pirates" printing and distributing cheap music at low prices and very large quantities. Eventually, in 1905, the king of the pirates, James Frederick Willett, was convicted for conspiracy. The leader of one of the music publishers associations, and the man who had invented the raids, launched the Francis, Day & Hunter’s new sixpenny music series. Expensive sheet music never returned.

Birth of Hollywood[edit]

A fact not heavily advertised by the Motion Picture Association of America (MPAA) is that the Hollywood film industry was built by pirates escaping the heavy hand of intellectual monopoly. After a long period of competitive fighting, in 1908 the major producers of film and movie equipment – including the Edison Film Manufacturing Company and the Biograph company – formed a cartel in the form of the Motion Picture Patents Company (MPCC). Through this instrument, they demanded licensing fees from all film producers, distributors, and exhibitors. They vigorously prosecuted "independent" filmmakers who refused to pay royalties. In 1909 a subsidiary of the MPPC, the General Film Company, tried to confiscate equipment used by the unlicensed companies, disrupting their operations.

To avoid the legal battles and royalties payments, the independents responded by moving from New York to California.

California was remote enough from Edison's reach that filmmakers like Fox and Paramount could move there and, without fear of the law, pirate his inventions. Hollywood grew quickly, and enforcement of federal law eventually spread west. But because patents granted their holders a truly "limited" monopoly of just 17 years (at that time), the patents had expired by the time enough federal marshals appeared. A new industry had been founded, in part from the piracy of Edison's creative property.

Recording industry[edit]

The recording industry grew out of a similar kind of piracy as the movie industry. In fact, the 1909 legislation that gave the MPCC the right to charge licensing fees to all moviemakers also began regulating the recording industry by introducing statutory licensing for recorded music. By doing so, Congress struck a compromise between composers, who wanted complete monopoly over the performance of their pieces, and recording artists, whose trade had grown briskly and competitively during the previous two or three decades. Between 1878, when Edison’s first tinfoil phonograph was patented, and 1889, when The Columbia Phonograph Co. started to market a treadle-powered graphophone, recording music to be sold for commercial purposes became possible. The development, following Henry Fourneaux's prototype, of the player piano also greatly facilitated recording of music that would, otherwise, require an expensive ensemble to be performed. Although composers had exclusive rights to control sheet music and public performances, there was no clear right to control over recordings of music – something that had not previously existed. This ended in 1909 when Congress extended copyright to recordings but imposed statutory licensing; the recording industry grew – largely on the basis of recordings "pirated" from composers.

It is notable that Thomas Edison was sitting on both sides of the fence in this period. When it came to movies, because he was holding strong patents on the main tools used to tape and show movies, Edison had to favor a strong enforcement of intellectual property. At the same time, though, his interests in the recorded music industry argued against an extension of copyright protection. Demand for Edison’s phonograph obviously increased as cheaper and more abundant recordings of music became available, which was facilitated by a weak enforcement of the composers’ monopoly power.[5]

References[edit]

  1. 2.0 2.1 "Observations on Efforts to Quantify the Economic Effects of Counterfeit and Pirated Goods" (pdf), United States Government Accountability Office, April 12, 2010. Referenced 2011-10-23.
  2. Ian Hargreaves. "Digital Opportunity: A Review of Intellectual Property and Growth" (pdf), May 2011, referenced 2011-10-23.
  3. The study's results were summed up in Media Piracy: "better described as a global pricing problem" by Israel Curtis, March 15, 2011. See the complete study: "Media Piracy in Emerging Economies" (chapters; full pdf), Social Science Research Council, referenced 2011-10-27.
  4. Michele Boldrin and David K. Levine. Against Intellectual Monopoly, Chapter 2, p. 35-37.

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