Pontificating on piracy and protecting intellectual property: If COICA and PROTECT IP are wrong, why not propose what’s right?

[Editor: Given the discussions swirling online today about artistic license, fair use, and protected intellectual property—specifically around a photo used in Andy Baio’s “Kind of Bloop” project—and the letter opposing PROTECT IP from 53 VCs, it seems only appropriate to post this guest post from Lynn Fredricks. ]

Recently I had a chance to discuss Senator Wyden’s opposition to COICA with Silicon Florist’s Rick Turoczy. Rick invited me to guest blog on the topic to represent an opposing view and how it impacts Oregonians. If you are a creative—musician, digital artist—you should read on.

The MPAA and RIAA are organizations that are hard to love. Compare stealing a CD with downloading a comparable volume of music. Misdemeanors generally have low penalties, $500 or less and jail sentences of 6 months or less. Theft 3 falls into the category (i.e., “shoplifting”). First timers who end up in community court in Portland can generally expect charges to get expunged.

Or your kid can download a CD of music, get identified to the RIAA and then get hit with massive $100,000+ lawsuit – more so the threat of the cost of having to defend yourself against such a lawsuit is worse than an actual Theft 3.

The MPAA and RIAA member companies are huge and focus entirely on consumer products. Their alleged losses are huge. The potential or alleged losses can be weighed against a huge potential market of future buyers. They can argue that they’ve lost a sale, but they can’t really argue that their IP has sustained a loss of long term economic value.

Not all intellectual property is the same as block buster movies and popular music. Many kinds of licensable IP are produced by small to medium sized companies—from single artists to small digital production houses. Collectively, they work much like the stock photography market. Unless a stock photo has some special historical value, the more a stock photograph is used, the less likely someone will want to license it for reuse. The number of potential customers are extremely limited, but the relatively short development costs of doing this makes it possible to generate ongoing revenue while the content is still relatively fresh.

Photographers aren’t alone in this. One example, not necessarily related to photography. Meshbox Design licenses 2D, 3D and audio content to other artists, digital production houses, game studios and more rarely, larger organizations. You might be thinking, “hey, there are a lot of artists, production houses and whatever.” Well, yes. However, the market is quite narrow—and it can benefit from the same sort of sales and marketing expertise as other businesses. Customers have to weigh what it would cost to produce these items in house vs licensing them, then the risk of incorporating something that someone else – such as competitor, may also license for the same purpose.

These same customers are interested in this kind of content because it is fresh and original looking. If you want your IP to be accessible to small budget enterprises, then it has to be priced accordingly- but if its free, then you lose originality quickly as more and more customers use it.

Here is another example. A vendor partner of ours makes an add-on for a relatively inexpensive $249 3D art software. You cannot use it unless you actually have that software. This $59 add-on is extremely specific in what it does—it is a one trick pony—but what it does, it does very well. This is much like the experience of writing and selling a Photoshop plugin. What is shocking about this is that on one pirate site, there was evidence that this one add-on was downloaded over 10,000 times—more than five times the previous versions sales. At the same time, and relative to the previous version, sales for this product plummeted to the point that the vendor considered stopping all work on it.

Free stuff is popular, and the pirates of today know it. Popularity today can also be turned easily into money at the expense of the artist, musician or developer.

Pirates can generate revenue through affiliate and online advertising. Many online ad companies won’t even consider a contractual relationship with sites without a minimum number of visitors per month – however this isn’t so hard for free IP download sites. Typically the actual downloadable content is stored on a free storage site such as Rapidshare, then the download URLs posted to one or more free websites, such as Blogger blogs. Word gets around.

Under the safe harbor provisions of the Digital Millenium Act, a host or provider is afforded practical immunity if they properly respond to DMCA takedown notices. That applies not only the storage host like Rapidshare, but also upstream network providers (like Google for Blogger) and the actual administrator of the website – the actual administrator may also be posting content to the site in the first place. Once a network provider receives a takedown notice and removes the infringed IP, there is nothing stopping them from reposting it at the first opportunity.

The extreme IP piracy happening today happens because there is money flowing from advertising companies and through merchant account providers to the pirates, not because these pirates want to share something they like with a couple of friends.

Under the Digital Millenium Act, Upstream network providers are not compelled to take action against repeat offenders. For example, we notified Google recently that a Blogger blog has posted and linked several of our products. Google responded under the DMCA and removed the links. Now the Blogger blog is very obviously filled with commercially available IP based products of other vendors—that is the only purpose of the blog. But Google or other upstream network providers are not required to take any proactive or punitive action at all, even though the process of following through with removal is a form of agreement that an IP violation has occurred.

When a solution like PROTECT IP comes along, it is easy to dislike because its clear that its a product of the lobbying efforts of the MPAA and RIAA. Given the scale of these organizations, they can push for extremely onerous technical conditions that are tailor made for their needs. I think its easy for Senator Wyden to shoot it down for the same reasons. That said, Senator Wyden can also develop or support alternatives that incorporate technical conditions, new safe harbor requirements and business restrictions that are possible today, but weren’t available when DMCA was first drafted.

You might be thinking that this form of protection is too much work for too little gain.

Consider well the continuous migration of manufacturing work and system automation out of the state, and that large corporations account for a very small number of businesses that operate in Oregon. Also consider the numbers of creative professionals that either spring up from within the state or relocate here because of the attraction to the Oregon lifestyle.

Protecting the intellectual property rights of individual artists and small and medium IP focused companies in Oregon should prompt Senator Wyden not to dismiss PROTECT IP but to create a replacement that serves the needs of Oregonians. For creatives with some internet skills, loss of a job doesn’t have to mean the end of income—so long as someone else isn’t stealing that income.

Lynn Fredricks is owner and president of Beaverton-based Mirye Software Publishing, a leading developer and title publisher of cross-platform titles for Mac OS X, Windows and Linux. Mirye specializes in cross-platform digital creation and development tools and professional content. These include best-of-class authoring and development tools that enable digital creators and developers to plan, build, enrich and ship solutions through every venue.

(Image courtesy Orbmiser. Used under Creative Commons, not pirated.)