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Monetizing Piracy

15 December 2012

From Kevin Smith, Scholarly Communications Officer at Duke University:

I have to start by saying that I am not an economist, and I know just enough to understand that economic analysis is never simple or straightforward.  And yet, when these two different news items came to my attention in a short time frame, the link between the two of them still seemed pretty obvious.

Yesterday, Reuters news service ran an article about a rating of eleven countries based on their enforcement of intellectual property rights.  The index was prepared at the behest of the U.S. Chamber of Commerce by a group called The Global Intellectual Property Center, and it ranks the U.S. at the top of the list in terms of strong IP protection (23.73 points on a scale from 0 – 25).  But what is interesting is who scored lowest (out of the eleven countries that were ranked).  The four “worst” countries for providing the strong IP protection important to the Chamber of Commerce were the four countries known as BRIC — Brazil, India, Russia and China.

. . . .

So the four countries driving economic growth are also the four countries with the weakest IP protection regimes, amongst those 11 rated by the Chamber of Commerce report.  Doesn’t the conclusion seem simple, that weaker IP enforcement is part of the picture for economic growth?

. . . .

Correlations can be tricky things, but I think some modest conclusions are justified.  First, obviously, ratcheting up IP protection is no guarantee of economic prosperity.  As we will discuss further in a moment, it is very possible for nations, industries and even individual creators to thrive without relying on a strong government-created monopoly over the products of the human intellect.  Second, I think it is also clear that there is a point where IP protections can be too rigorously enforced, to the extent that they impede economic progress.  Indeed, it seems likely that the US, with its high score on the survey described above, has reached that point; at a recent forum sponsored by Federal Trade Commission, Professor Collen Chien of Santa Clara University pointed out that for the first time in 2012, a majority of patent lawsuits were brought by so-called “patent trolls” — companies that do not invent or create anything but exist simply to buy up patents and then demand licensing fees from companies that are trying to create and invent.  These licensing fees can reach the point where they are nothing more than a government-enforced tax on innovation. The situation developing in the US with patent “thickets” and patent trolling is a painful example of how broad grants and strict enforcement of IP rights can inhibit economic development.

. . . .

Consider the example of the Nigerian film industry, often referred to at Nollywood.  The Nigerian film industry has boomed over the past two decades, largely by becoming one of the world’s leading producers of digital video films.  And they have done this in a environment that “has not historically had robust intellectual property enforcement.“  As this research paper from the University of California, Irvine Law School suggests, IP protection is, at least a double edged sword.  Piracy can reduce revenues, but it also helps to create distribution channels and grow markets.  So creative industries seeking to grow in the digital economy need to do more than try, futilely, to eradicate piracy, they need to seek ways to shape their markets and their marketing to exploit the audiences that it can create.

. . . .

Finally, if we want a very current, individual example, we need look no further than the Korean pop star Psy, whose “Gangnam Style” video is now the most watched YouTube video in history and who stands to make $8.1 million dollars from the fame that he has gained by not enforcing his copyright.  Very few of us had probably heard of Psy before the Gangnam Style video became the subject of the many parodies and remakes that flooded YouTube, blogs, college campuses, etc.  He took no action to prevent those “knock offs,” as many artists and production companies would have done.  Instead, his fame grew to the point where he could license his song and his image for commercial uses at levels he could only have dreamed off if he enforced his copyright rigorously.  In short, he found a way to monetize “piracy.”

Link to the rest at Scholarly Communications @ Duke and thanks to Matthew for the tip.

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Copyright/Intellectual Property, Non-US

12 Comments to “Monetizing Piracy”

  1. P.G.

    Isn’t that interesting?

    Patent Thickets, LOL. Americans are so good at creating expression in language that fit the zeitgeist.

    He points out Psy, and that would appear a more obvious lesson, but I wonder if the BRIC countries economic growth isn’t at least as interesting, and arguable.

    The film companies are the most rigorous and enforcing of their copyright, yet their history is hardly without sin.

    Similarly, MS and Apple both miserable copyright enforcers, have a murky history from the early years.

    Hmmm, arguable but very interesting theory. Good luck with getting it past the lege, which is infested with lobbyists funded up to the ocksters.

    When elected world emperor, I shall give the lobbyists one day to get outta town, then the hangings will begin of those who dare to remain.

    brendan

  2. So the four countries driving economic growth are also the four countries with the weakest IP protection regimes, amongst those 11 rated by the Chamber of Commerce report. Doesn’t the conclusion seem simple, that weaker IP enforcement is part of the picture for economic growth?

    This is one of the most idiotic things I’ve ever read. It’s like saying someone who steals money will get rich quicker than someone who earns it by working.

  3. So the four countries driving economic growth are also the four countries with the weakest IP protection regimes, amongst those 11 rated by the Chamber of Commerce report. Doesn’t the conclusion seem simple, that weaker IP enforcement is part of the picture for economic growth?

    This is one of the most idiotic things I’ve ever read. It’s like saying someone who steals money will get rich quicker than someone who earns it by working.

  4. I’ll stoop to this article’s level of intellect just long enough to say that people, let alone whole countries, are far too complicated to pick out two similar factors between them and say that they must be linked.

    I can speak from personal experience about the IP rights enforcement in practice in China and Russia, and it has nothing to do with their economic growth or vice versa. Countries rebuilding from dirt and starvation have a lot more on their minds than whether rich American corporations get paid more. Once those countries get to a point where they’re producing IP that needs protection, their laws and enforcement will reflect it.

    As for Brazil and India I don’t have personal experience, but I’d bet they have a similar set of motivations.

    • Oh, and we’re not even flaming the guy about sample sizes yet.

      • Nor quibble over the fact that 2 of the BRIC nations still run on the ghostly remnants of communist ideology which does not recognize personal property, intellectual or otherwise…

        • Excellent point. Three of the four nations in question have, in recent decades, moved dramatically away from Socialist policies and toward at least some degree of IP protection. Could that be what has caused their economic growth during that period?

  5. You can read the full report here:

    http://www.theglobalipcenter.com/sites/default/files/reports/documents/gipcindex_measuring_momentum3.pdf

    The “measured” factors are a weird mismash. On this scale, having a minimum copyright term of 50 years loses a country 1/2 a point. Australia gets dinged a full point because they decided to force tobacco companies to use standard packaging on cigarettes. That is equivalent to having no minimum copyright term.

    I would describe the index as measuring the extent to which a country’s IP practices is congruent with the policy preferences of the U.S. Chamber of Commerce.

  6. A couple of things to add:

    -The US did to England and France in the 1800’s what China/BRICs/etc are doing to the US with commercial patents. It was the wild West and East here. There were English mechanics that memorized gear sizes and tooth counts to reconstruct textile machines in US from memory. At the time those two countries had border controls to prevent people with certain job classifications and engineering documents from migrating. Shoulders of giants.

    -The US patent system recently changed from first to invent to first to file. This will have big effects in the future. It cuts US patent office overhead but also may damage individual inventors vs big corporations. It was done to bring US patent law in line with global systems.

    -The original US patent system was set up for limited protection for the inventor, to encourage them to do something with a device and not horde it, meanwhile providing a method of getting the knowledge into the public.

  7. copyright doesn’t protect writers from being ripped off by pirates. Copyright protects writers from being ripped off by corporations.

    Well, unless the writers are crazy, stupid, or ignorant enough to sign their rights away to those corporations without checking the fine print.

  8. By the logic of the article, Laos should have a thriving economy because Laos has no IP protection.

    As a counterexample, until about 1990 Israel offered no substantive IP protection and pirated much. And they had no substantive electronic industries, either. After the Knesset enacted new IP laws, Israeli electronic industries inventions and sales mushroomed. Israeli firms now reaps significant profits from export sales of electronics.

    This article cannot even lie artfully with statistics.

  9. It would seem that ‘Psy’ aside, the Korean government doesn’t quite see it that way:

    14DEC2012 from IP-watch.org:

    http://www.ip-watch.org/2012/12/14/south-korea-bolsters-copyright-strategy-in-k-pop-crazy-states/

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