As a media company dedicated to the financial sector, John J. Lothian & Company would not ordinarily comment on proposed legislation unrelated to the financial industry.  However, as a media company and one that is a particular fan of the First Amendment, we feel this issue is of import not only to us but to all our readers, as the potential effects of this proposed legislation will easily reach into all our lives and businesses.

On January 18, a number of websites including Wikipedia, Reddit and BoingBoing will be going “dark” in protest of the Stop Online Piracy Act (SOPA) and Protect IP Act (PIPA) currently being considered in congress (House and Senate respectively and largely the same with some minor differences).

The legislation, on the face of it, seems reasonable.  These bills are meant to give copyright holders a means to thwart those who would steal their work via the internet.  There is no difference, in character, from downloading an album illegally and walking into a store and shoplifting that same album.

When one looks more closely, however, one can see that this legislation is deeply flawed.  Lawrence Tribe, University Professor of Constitutional Law at Harvard, has this to say (emphasis mine):

The notice-and-termination procedure of Section 103(a) runs afoul of the “prior restraint” doctrine, because it delegates to a private party the power to suppress speech without prior notice and a judicial hearing. This provision of the bill would give complaining parties the power to stop online advertisers and credit card processors from doing business with a website, merely by filing a unilateral notice accusing the site of being “dedicated to theft of U.S. property” – even if no court has actually found any infringement. The immunity provisions in the bill create an overwhelming incentive for advertisers and payment processors to comply with such a request immediately upon receipt.

In short, if someone makes a complaint against you or your website, you can find your website blocked outright and payments to you (if you collect money via your website) suspended.  You can fight it of course, but that can take weeks.  Again, there is no judicial order here or fact finding.  Merely an accusation is enough.

So, you might think, my website is not “dedicated to theft of U.S. property” so I should be in the clear.  Tribe answers this too:

Section 103(a) is also constitutionally infirm because it contains a vague and sweeping definition of a website “dedicated to theft of U.S. property.” A site would qualify under the statutory definition if it “enables or facilitates” infringement by a third party, whether or not such activity meets the requirements for secondary liability under existing law. The deliberate departure from established concepts of copyright law deprives parties of adequate guidelines or criteria to interpret the Section 103 definition.

Under these guidelines sites such as YouTube would almost certainly be shut down.  Google could likewise be held accountable because it can provide links to infringing material.  Other sites such as Wikipedia and Reddit would also face potential sanction.

It gets worse.  The act includes provisions for up to five years in prison for uploading a copyrighted song.  You may think that since you never do that it’s no big deal, but you might well have done it without knowing it.  If you video tape your daughter’s birthday party and you sing “Happy Birthday to You” and upload it to YouTube, you have violated a copyright.  Yes, that song is under copyright . And yes, YouTube would be deemed a “public performance” of that song.  If your children decide to post a video of them dancing to the latest Justin Bieber song playing in the background and upload that, they are guilty of infringement and could face criminal charges (not to mention civil ones).

Surely, you might think, the copyright holders would never come after little kids.  They only want to go after the real, big time infringers.  Unfortunately, history does not bear this out.  The Recording Industry Association of America (RIAA) and the Motion Picture Association of America (MPAA) have sued thousands of people in recent years.  The RIAA was notorious for suing a 12-year-old, a 10-year-old (who infringed when she was 7), a hospitalized teen, a 71-year-old grandfather, a dead person and some laser printers (to name a few).  Remember these lawsuits can potentially claim $150,000 per infringement (each and every song or movie uploaded/downloaded).  If you think they only go for small fish, there is a lawsuit being brought against the country of Ireland for not passing a SOPA-like law quickly enough (forget all that democracy stuff).

The entertainment industry claims they need this legislation to “save jobs.”  This claim is dubious.  Certainly media companies lose money to piracy.  How much they lose is less clear.  The RIAA claims $12.5 billion is lost annually along with 70,000 jobs.  The reality is much more difficult to determine.  The Government Accountability Office (GAO) looked in to this question and could not produce a reliable number:

While experts and literature we reviewed provided different examples of effects on the U.S. economy, most observed that despite significant efforts, it is difficult, if not impossible, to quantify the net effect of counterfeiting and piracy on the economy as a whole. For example, as previously discussed, OECD attempted to develop an estimate of the economic impact of counterfeiting and concluded that an acceptable overall estimate of counterfeit goods could not be developed. OECD further stated that information that can be obtained, such as data on enforcement and information developed through surveys, “has significant limitations, however, and falls far short of what is needed to develop a robust overall estimate.” One expert characterized the attempt to quantify the overall economic impact of counterfeiting as “fruitless,” while another stated that any estimate is highly suspect since this is covert trade and the numbers are all “guesstimates.”

What we do know is the tech industry is bigger than the entertainment industry.  While media companies may see some bump in profitability if this legislation passes, the chilling effect on the Internet and tech industry would almost certainly outweigh net gains elsewhere.  The chilling effect would extend further as any company running a website would need to take measures to police what content is on there.

Even if we assume a best case scenario for all the above, that this legislation would not be abused, the fact remains it is trivial for copyright infringers to sidestep these new restrictions.  The Internet is nothing if not a creative place and the crowd is smarter than the few.  Repeatedly Internet denizens have foiled ever increasing attempts to restrain them.  Attempts by industry to stop pirates has perversely managed to see them punish paying customers via restrictive mechanisms while having little to no impact on the people they are trying to stop.  Already ways of circumventing SOPA/PIPA are being considered such as dark nets, alternative DNS, or even noting that simply typing in an IP address rather than a website’s name would circumvent their efforts.

John J. Lothian & Company will not be “going dark” although we do support the intentions of the sites choosing to do this in order to bring more light to this subject.  We certainly do not condone piracy or copyright infringement and would like to see reasonable means to rein in this problem.  We merely feel the best answer to this is not a heavy handed police state but rather clever models to succeed that encourage and reward people to pay for what they want to consume.  There is ample evidence this works.  Louis C.K. recently put out a self-financed, stand-up comedy routine he did.  He sold it for $5 and it was in no way copy protected.  He simply asked people to pay for it and they did…in droves and it was a smashing success for him.  John J. Lothian & Company is also an example of a media company that is successful and growing in an environment where most media companies are struggling.

Creative solutions and more freedom are the answer.  Not Big Brother.

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