November 29, 2004
By James L. Gattuso and Norbert J. Michel, Ph.D.
The debate over
"moral values," first raised in the aftermath of Election Day,
continues. Now it's the appropriateness of risqué ads for
"Monday Night Football" and the popularity of TV's racy "Desperate
Housewives" that's causing the latest heartburn.
Yet the values issue
also was raised recently in a much different context: the fight
against the theft of intellectual property. Ironically, it is
Hollywood -- an industry rarely seen as a hotbed of traditional
morality -- that is leading the fight, filing lawsuits against
individuals found illegally trading movies over the Internet. While
the move is unlikely to win the movie studios any friends, it is a
justified, and perhaps necessary, step.
At issue is the
unauthorized downloading of copyrighted material without payment to
the owners. Typically, such downloading is done through
"peer-to-peer," or P2P, networks, such as "eDonkey." These networks
let users share files on their individual PCs with other network
users. In this way, music, movies and virtually any other digital
product can be distributed quickly to millions of other P2P users
at no cost. According to one estimate, as of June 2004, some eight
million users were on P2P networks at any given time, sharing 10
million gigabytes of data.
The result is a
massive theft of intellectual property, as users obtain works
without authorization from, or payment to, their creators. So far,
the main target of P2P downloading has been music, for the simple
reason that digitized songs are smaller than digitized movies and
can be downloaded more easily. But the rapid proliferation of
high-speed Internet access, combined with new technology to shrink
the size of movie files, has put the film industry at risk as well.
Video files accounted for more than 30 percent of all P2P files
transmitted in March 2004, up from 16 percent at the same time in
2003. As many as 150,000 movies may be being traded on the Internet
Starting last year,
the music industry -- through the Recording Industry Association of
America, its trade association -- has been filing suits against
individuals using P2P networks to share music files. The movie
industry, on the other hand, opted to focus on public-awareness
efforts and launched a broad campaign to educate consumers that
downloading copyrighted material without paying for it is
This did not solve
the problem, however, forcing the MPAA to go to court. Its first
civil lawsuits against individual offenders were filed on Nov. 16.
If found liable, offenders face fines of as much as $30,000 for
each movie copied or distributed over the Internet, or as much as
$150,000 if the infringement is found to be "willful."
Filing lawsuits is a
controversial strategy for Hollywood, and the demagoguery has
already begun, with one MPAA opponent saying "suing 13-year-olds
and taking their college money isn't the best approach." Yet few
question the legal liability of downloaders under copyright law.
And the stakes are high for the industry and consumers: the
billions in revenue lost through Internet downloading could mean
higher prices for law-abiding movie fans and could discourage
production of financially risky pictures.
legal action against infringers is far preferable to many of the
other approaches to the P2P download problem that have been
discussed in Washington. Many, for instance, have urged federal
regulation of PCs, DVDs and other devices that could be used to
copy movies and music, in order to make infringement more
difficult. Other proposals would extend legal liability to
manufacturers of these devices.
however, should be extremely wary of such a regulatory approach.
Any regulation of the fast-changing world of the Internet and
consumers electronics would likely hinder valuable innovation, as
well as increase costs to consumers.
Of course, lawsuits
by themselves are unlikely to solve the P2P download problem.
Continued education also needs to be pursued so that potential
file-swappers understand why the unauthorized downloading of
copyrighted material, like other forms of theft, is wrong. Another
part of the solution is likely to be development of new
technologies that allow copyright holders to make copying protected
works more difficult.
the tide of illegal downloading won't be easy. But going after the
worst offenders now, before movie downloads surpass music
downloads, could prove to be a wise choice. Protecting property
rights without imposing undue limits on private markets will
involve many difficult choices. Suing individuals engaged in theft
of intellectual property through file swapping, however, isn't one
James Gattuso is Research Fellow in
Regulatory Policy in the Thomas A. Roe Institute for Economic
Policy Studies, and Norbert Michel is Policy Analyst in the Center
for Data Analysis, at The Heritage Foundation.
First appeared on Knight-Ridder Tribune.
The debate over "moral values," first raised in the aftermath of Election Day, continues. Now it's the appropriateness of risqué ads for "Monday Night Football" and the popularity of TV's racy "Desperate Housewives" that's causing the latest heartburn.
James L. Gattuso
Senior Research Fellow in Regulatory Policy
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Norbert J. Michel, Ph.D.
Research Fellow in Financial Regulations
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