European Union Parliament overwhelmingly defeated the Anti-Counterfeiting Trade Agreement (ACTA) on Wednesday. The American version of the bill, the Cyber Intelligence Sharing and Protection Act (CISPA) was passed by the House in April, but faces an uncertain future. President Obama, specifically has said he will veto the bill if it comes across his desk. Senate Republicans are now proposing the Strengthening and Enhancing Cybersecurity by Using Research, Education, Information, and Technology Act (SECURE IT). And then there is the Lieberman-Collins bill backed by Senate Democrats. The issue is expected to be taken up in Congress next week.
Head spinning, yet? So, what effects would SOPA, CISPA, ACTA and more have on a free market economy?
In order to understand the effect the bills will have on our economy we need to understand the effects pirating is thought to have on the economy.
According to the GAO, consumers suffer negative side effects of piracy because of low quality goods and risks when acquiring these illegal products. While on the streets this may mean health risks when acquiring pirated medicines, or low quality knock-off handbags, but negative side effects are just as real when translated to the internet. Negative side effects could be the freezing, crashing or even the getting of a virus on a consumer's computer. Low quality goods can translate into horribly recorded songs, or even mislabeled songs that aren’t what you thought you were downloading.
The Government Accountability Office states that industries are also negatively effected by piracy. These effects are lost sales and brand value as well as an increase in IP protection costs. According to other studies, such as the ICC world business organization, “more than $250 billion counterfeit and pirated gods move through international trade alone these include the value of digital piracy.”This is not just affecting America, however, as the study then goes on to say “the total global economic and social impacts of counterfeit and pirated products are as much as $775 billion every year. This includes impacts of lost tax revenue and higher government spending on law enforcement and health care.”
The World Intellectual Property Organization did a study on this topic as well. Their analysis focused more on the social losses, rather than distinct numbers. To summarize, WIPO found that online piracy leads to job losses, sale losses and tax losses. It also, however, leads to a decline in investments in countries as “manufacturers, both local and from abroad, lose trust in the market place if they realize that their IP rights are not respected an cannot effectively be enforced.”
Naturally, a decline in investment leads to a decline in real GDP, so this once again hurts the economy of nations affected, including the United States. WIPO also found that online piracy, or piracy of any kind, goes hand in hand with organized crime and that “profits made from illicit activities can be employed to fund other criminal activities.” Lastly, the GAO found that the US government and economy will both decline due to piracy as it will “increase enforcement costs, create risks to supply chains with national security or safety implications, decline trade with other countries” and, oddly enough, “lower growth and innovation.”
The irony in the former statement lies in the use of “lack of future growth and innovation” as a ground for disputing SOPA and the new bills, as many argue such harsh limitations will hinder our ability to grow, our entrepreneurial skills and our future as a small business country. Start-up companies and websites like Twitter, Facebook, Reddit and Tumblr, generate thousands of jobs around the country, according to an article by Forbes.com, but they would have never had the right to start under the bills due to the linking system the sites rely on for social sharing and traffic.
As the Center for Democracy and Technology says, “SOPA would chill the growth of social media and force sites to adopt a new roles as content police.” They argue that, “under SOPA, general-purpose social media sites with no bad intent could be argued to 'facilitate' infringement- and thus get tagged as theft sites- simply by virtue of providing the platforms for users content. To protect themselves, platforms of all kinds would be pressured to actively monitor and police user behavior. The new defacto duty to track and control user behavior would significantly chill innovation in social media and undermine social websites control in fostering free expression.”
The Forbes article continues, “considering what a huge role social media has played for activist movements just this past year, it would be a disaster to see such powerful mediums for expression ruined.”
These claims apply beyond SOPA, to PIPA, CISPA and ACTA too, and both articles argue other very interesting points such as the loss of “financial support at the whim of the most litigious rights holder, the evisceration of the predictable legal environment created by the DMCA, subjugating innovators to a new era of uncertainty and risk, the imposition of new responsibilities on IPs to scrutinize and screen all user traffic." This doesn't include the millions of jobs that could be lost due to the shut down of sites that would otherwise be innocent under the safe harbor provision as part of the DMCA of 1998.
As the CDT points out, “DNS-Filtering interferes with core Internet infrastructure and will have little effect on infringement. Altering of DNS results as required under the bill causes significant problems for cyber security: it is inconsistent with DNSSEC, a key cyber security initiative, and circumvention of filters will expose US users and networks to increased cyber security risk. At the same time, the filters will be trivial to circumvent, and will thus have a small and diminishing impact on infringement to justify the cyber security costs. Where DNS filtering does have an effect, for technical reasons its impact is likely to be overbroad and result in blocking lawful expression rather than infringement. Lastly, the adoption of technical tools that can be used for censorship sets a dangerous international precedent that conflicts with US foreign policy goals.”
In summary, what these articles argue is that the effects of SOPA would have had such little effect on actually stopping piracy, and such a large effect on shutting down what should be classified as innocent businesses, that SOPA would actually hurt our economy worse.
But if SOPA and PIPA and CISPA and ACTA aren’t the answer these intellectuals are looking for, how do they propose we combat piracy? Instead of focusing on how to prevent and combat internet piracy, Corynne McSherry, Director for the Electronics Frontier Foundation said, “I don’t think this is a problem that is going to be fixed by legislation.”
Instead, McSherry argues that, “it may be that we all have to accept that just as there is shoplifting in the world, there will be a certain amount of piracy. It’s the price of doing business.”
McSherry then goes on to argue that musicians and artists should focus on the positive affects of piracy, such as the larger fan base thanks to a larger access to music.
Others, such as John Baine, argue that “piracy is a service problem.” He claims that if consumers had a larger access to the music they want to buy in digital form, then maybe people wouldn’t pirate as much. As Baine says, “I’m not condoning piracy, I believe that if you give people a reason not to pirate, many won’t.” It appears his predictions are completely logical. Through the introduction of Rhapsody and iTunes, we have seen a decrease in the amount of online piracy over the years. Maybe if companies further embraced the digital format with open arms, the issue of piracy could be combated with legal alternatives.
The last, and possibly strongest argument made against the piracy bills is that the only ones benefiting from the new laws would be the movie and music industries. Those with copyrights, money and very good lawyers are the only ones who could effectively survive CISPA and others in the U.S. economy. Most of the articles do not even mention the negative effects this would have on entrepreneurs in the developing countries, or how social media so greatly influenced and aided the social rights uprisings in the Arab Spring of 2011. The closing remarks of the article by Forbes are especially fitting and inspiring for this last argument, “Good laws protect all people. [These] do not.”
