The War Against Piracy

    Where DRM fails, companies sue. That's the philosophy of the RIAA, MPAA, and now Activision, who recently filed an infringement action against James R. Strickland of New York for reproducing and distributing copies of CoD3. Not only is there a public suit, but like the RIAA, Activision has been quietly suing individuals for infringement for quite some time. The settlement agreements include a confidentiality provision prohibiting the defendant from discussing the matter.

    On the heels of this news comes the recent turnover of the only case the RIAA ever won against an individual file-sharer.

    A number of issues come up here. First, what can be gained from suing individual infringers?  Are these actions strike suits that only succeed in infuriating the general populous, or are they actually an effective deterrent? Finally, is there a less controversial way of dealing with the problem of piracy in the U.S.?

    The Problem

    In my last post I pointed to an article by Draginol of Stardock, a game (i.e., Sins of the Solar Empire) and desktop enhancement developer. In his assessment, blaming the lack of success in the PC games market on piracy isn't the most efficient way of managing one's business. His suggestion is to focus on making games and products that cater to the market of people who pay for those products.

    This is difficult in games and entertainment generally. Developers and publishers want to make fun games that cater to a large market. Trying to market those games exclusively to people who will pay for those games isn't always a practical answer. One problem is that many infringers do not view copyright infringement as criminal conduct. Another problem is that the suits brought against individuals aren't criminal prosecutions, they're civil actions brought by Big Business against The Little Guy. Most can accept government enforcement of criminal conduct as a social necessity. Yet many may not be comfortable with Big Business taking on this role. The RIAA, MPAA and now Activision have, as a result, earned some very negative press, and the gaming media is fairly vocal about expressing their discontent.

    Who is in the Right?

    Any copyright owner is entitled to and probably should enforce their copyright against infringers. The big content providers are within their rights to seek legal action against pirates who reproduce and distribute their works. The problem is that the primary contributors to piracy import and export come from large black markets in countries with lax or non-existent intellectual property laws and little to no enforcement. Yet according to Big Business, the "everyday" infringer sitting at home in New York burning and selling dozens of copies of cracked games is just as culpable for piracy as the black market criminal syndicates. In the eye of the copyright owner, the only distinction is jurisdictional (disclaimer: this is hypothetical. As yet, the facts surrounding Strickland's conduct have not been made public). Yet in the eye of the public, there are almost always varying degrees of wrong.

    So we have a pretty big disconnect as far as public perception. On the one hand the industries are frantically scrambling to get pirates out of the market. And piracy is a huge problem to content providers, including the little guys. On the other hand you have kids getting slammed with hundreds of thousands of dollars in judgments that no plaintiff can ever reasonably expect to see, and the kid isn't being charged with a crime, he's being sued by corporate thugs. Content providers are trying to remedy this by lobbying for legislation that allows the Department of Justice to bring civil suits against infringers on behalf of content providers. So far, the DoJ has refused to take on any such responsibility.

    Now content providers, who really are the victims as far as piracy goes, are viewed as the bad guys and the individual pirates are treated as martyrs. Big Business may legally be in the right when they bring these lawsuits, but at the end of the day, who cares? We are no closer to eliminating piracy, and now the creators of content are viewed as the obnoxious 5th grade bullies on the playground, stealing lunch money from kindergartners.

    Strike Suits

    Strike suits have a long and glorious history. They have been used by every major corporate entity and cult to intimidate, beleaguer, and abuse "troublemakers." Scientology's "Fair Game" legal tactics are the stuff of legend. To clarify, a strike suit is a lawsuit that is brought for the sole purpose of settlement. The plaintiff never intends on going to trial—the suit is a strategy to force the other party to settle on the principle that the cost of settlement will be less than the defendant's cost to litigate the matter. Often the suits themselves are meritless, but bringing that kind of lawsuit against someone who has no knowledge of the law and no legal representation practically guarantees that the plaintiff will at the least get a semi-decent settlement and at most a big fat default judgment in its favor. Your every-day Joe doesn't understand a concept like "sewer service," they aren't aware that they have legal rights at all, and as a result the defendant is intimidated by or oblivious to the lawsuit.

    Activision's silent litigation against individuals is a very good example of your average strike suit legal tactic. In truth, most companies do not want these cases to go to court. As demonstrated by the recent ruling in the RIAA file-sharing case, they don't want to create potentially damaging precedent to future cases. This is where major content providers hurt their case—you can't view someone who engages in this kind of Mafioso intimidation game as a victim.

    Finding a Better Way

    I strongly believe that business and law should only rarely interact, and that's primarily for the purpose of enforcing contracts and creating alienable property rights. I don't believe suing individuals should ever become a viable business model. However, I also know that piracy is a multi-billion dollar problem across all of the entertainment industries, and I don't believe that the public is entitled to free content. I'm sorry, but you're not. Companies spend millions producing films, music and games for your entertainment, and if it's not worth paying for you have no business enjoying it. So my suggestions to big business are three-fold, and two of them are reiterations of prior points:

    1. Develop a new business model that relies on selling access to content, not physical or digital "copies". Once you put "copies" into the business model, you introduce the possibility of piracy. Selling access to content as opposed to individual bits and bytes of content significantly handicaps pirates because it kills their market. The only ones who can actually provide access to the content is the content provider. Anyone can make a copy.

    2.
Reduce the cost to the consumer. Currently, it seems that the entertainment industries are passing along the cost of piracy directly to the consumer. I like this about as much as I like the idea of my taxes being used for the big Wall Street Bail Out. It's not the consumers who created this problem. Stop making it their problem. It only inflates the piracy market by creating a higher demand for less expensive product.

    3. Educate, Educate, Educate. Do not litigate, educate. Using strike suits and intimidation tactics only reinforces the belief that content providers are the bad guys, which is a very backwards view of the entire situation. Instead of paying your lawyers (and it desperately hurts me to say that), put your money where your mouth is and inform people of the problem, why it's a problem, and why it is illegal. Most people do not view file-sharing as wrong. They don't understand the cost of creation. It's important that your potential consumer base is made aware of the issue and realize that contributing to piracy will eventually mean less content for them.

Comments (8)

  1. Matthew Cohen

    Under “Finding a Better Way,” it is proposed that content providers should “[d]evelop a new business model that relies on selling access to content, not physical or digital ‘copies'”. In the music business, subscription services, such as Rhapsody, are such “access” based business models. Unfortunately, these “access” services are not succeeding to the point of viability right now. Research within the music business suggests that consumers still want “a copy,” something to actually own snd possess. This may not be the case in other entertainment businesses, but in the music business there are two competing camps: one trying to find viability for the “access” based subscription services and helping them penetrate the market and the other trying to find other means of combating piracy while allowing consumers to still own a copy of the music.

    Reply
  2. Mona Ibrahim

    When you’re operating with two competing business models, one involving “copies” which open the door to piracy and one that offers “access”, naturally people are going to want what they consider a “property” interest over mere access. It would require eventually phasing out the current model, and developing the kinds of technology that will enable interoperability on a multitude of platforms (both static and mobile). Rhapsody is a great service, but it’s competing against iTunes, where people are able to “buy” copies– this is a misnomer, because you’re not buying a copy. You’re buying limited access to a product, and you’re doing it as a one time purchase. I’m not saying iTunes is a horrible business model or anything, I’m just saying that competing markets are what they are.

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  3. Matthew Cohen

    Ah, yes, true indeed. But it will also take strategic marketing and education to build consumer awareness and capture the requisite marketshare in order to become a viable business model in the first place.

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  4. Mona Ibrahim

    Oh no! Not hard work!

    Reply
  5. ZippyDSMlee

    In one of my CP rants on the GP forums I came to the idea that CP itself infringes on the consumer in the modern age(altho not in as many words).
    The I believe the root of the problem is how CP is worded and implemented.
    Distribution should be change to distribution to gain illicit profit, what we have in these modern times is people using CP and even trademarks under the umbrella of news,parody and criticism these are our inalienable rights as US citizens which the media mafia wants complete control over.
    Of course the term “clip” needs to be defined, alot of sites let you post clips to talk about so 10% of the total video time or 50% of the total 10% time if a TV show(say you want to share 3 or 4 clips from the first 2 eps of a show you like but it goes over the 10% rule you can run up to 50% of the 10% of the total amount of the sere is itself) Doing it this way insures the commonwealth has clear rights and focus business on criminal activities and not things that fall under fair use.
    Now the only trouble with the access plan you mention (“Finding a Better Way,”)is that I the consumer own nothing and places an unreasonable amount of responsibility upon the CP owner to stream his good so that I might buy what I wish under heavily secured means… this whole process treats the consumer like a thief from the start….
    Do you really want to pay 50-80% less to never be able to simply go offline put in a video and watch it? It sounds like Maybe in 20-100 years the net will truly be everywhere and we can easily stream data from our general subscriber accounts but until then we still have issues that will be at the core of CP until it itself is fixed.
    Both industry and CP law itself is going to have to evolve to let the consumer have their fair use rights in a as precise as you can make it fashion regardless if the distribution methods change the core of the problem will be that consumers like to talk and show off about the stuff they like and this derails any plan that dose not allow evolved fair use use.

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  6. ZippyDSMlee

    Ack grammar errors left in 0-o LOL

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  7. Vincent Lee

    It seems like, at least in the music industry, the copy model is here to stay, with iTunes/Wal-Mart/Amazon now promoting (and charging extra for) DRM-free downloads. Even before this latest commitment to the copy-based model, it was ultimately an uphill battle for content providers hoping to push subscription services, fighting negatives that have become glaringly obvious as the economy has worsened and entertainment dollars have dried up. For one, consumers are now reminded constantly of the very real threat in an access-based model of a provider going out of business and having no way to use what they paid for (or what they would like to pay for) without at least some hassle. No time has this been more apparent in recent history than now, with generations-old institutions going out of business in today’s economy.
    However, that’s but one minor problem out of many for an access-based model. No matter the amount of education/strategic marketing involved, it is impossible to convert all of your customers over into an access-only world. There will always be a portion of your customer base that covets property rights for legitimate reasons, and just the existence of a copy-based product will undermine the access-based product significantly. The reasons for copies at this point in time are numerous, primarily due to the tremendous technological barriers in the way of such a model.
    Finally, the access-centered paradigm suffers from the growing awareness by providers that the problem of piracy, while large, is overstated. Certainly enforcement of IP rights is fundamental, but it no longer makes sense cost-benefit wise to do so (and I’m not sure that it ever did). Piracy doesn’t happen in a sneaker-net style very much anymore (perhaps the type of piracy DRM is most effective in combating) – instead providers are paying sophisticated hackers money to write software to combat an infinite number of equally sophisticated hackers. In addition, it carries costs in that it reduces the utility that your legitimate customers derive from the product. Once providers realize the effort is futile and not an efficient use of resources, what’s the resulting equilibrium? Game developers and bands and filmmakers making a bit less money from their content, yes, but by no means will it be an unprofitable endeavor. It’s why I feel that the overwhelming tendency now is for content creators to ensure that their subscription/anti-piracy measure is actually value added – whether it be Battle.Net, or going to a concert. I think therefore the shift is away from enforcement of IP rights between consumers and producers, and towards only enforcing IP rights between businesses.
    note: this is long to the point of rambling, so…sorry

    Reply
  8. Mona Ibrahim

    Excellent response, and I apologize for not posting it sooner. In a related note:
    http://online.wsj.com/article/SB122966038836021137.html
    The major questions presented across the industries, and what I consider perhaps the strongest argument in favor of an access model, is interoperability. How do we make entertainment available in a manner that allows users to transfer their music from one system to another without forcing users to purchase multiple copies of something they “own”? A perfect example is the new DRM-free model for iTunes– users have already purchased tracks, but to purchase the version they can play on their preferred player they need to pay an additional fee.
    Yes, people covet property rights– but property rights imply the right to use that property as one sees fit, and as we’ve seen in so many cases, that simply isn’t the case in the area of intellectual property law when you are the purchaser as opposed to the rights holder.
    I 100% agree with you concerning companies going out of business– but would you have that fear if it were Apple or Microsoft who worked on an access model, as opposed to financially unstable companies like RealNetworks?
    Technology changes and new models are adopted. Ten years ago no one would have guessed that something like iTunes could be competitive with brick and mortar CD sales. And I think that being able to download as much music as you want at a set monthly rate would be very attractive to a lot of people.

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