China isn’t our only intellectual piracy problem

From The Deseret News:

The U.S. economy runs on startups. For all of America’s brand-name mega-corporations, it’s young firms that create most of our new jobs during periods of economic growth.

Those startups, in turn, depend on America’s famously strong laws protecting their patented inventions and other intellectual property. The only way someone with a big idea but minimal resources can outcompete established firms is through proper government protection of their innovations.

Today, we are failing in that responsibility. Instead, our laxity is empowering predators foreign and domestic — endangering not only the next Apple, Microsoft, or Facebook, but our entire economy.

For years, the greatest threat to American intellectual property has been China. As our economy became more globalized and digitized, Chinese IP piracy became endemic — totaling an estimated $600 billion in costs to the U.S. economy per year. In 2019, a CNBC survey of American corporations found that nearly one-third of respondents had experienced IP theft by Chinese pirates in the past decade. Testifying before Congress in 2020, Facebook CEO Mark Zuckerberg said, “I think it’s well documented that the Chinese government steals technology from American companies.”

More telling than Zuckerberg’s acknowledgment, however, was the strange but unmistakable equivocation by the other Big Tech executives at the hearing. When asked the same question, the CEOs of Apple, Amazon and Google — individuals famous for their breadth of knowledge and laser focus on their businesses — all shrugged and testified only that they hadn’t personally seen any Chinese IP piracy.

While many, including the U.S. Attorney General, slammed them for “kowtowing” to Beijing, there is another reason those firms might not want to shine too bright a light on IP theft: it’s become a valuable part of their own business models.

. . . .

Early this month, the U.S. International Trade Commission issued a final ruling finding that Google infringed on five patents belonging to Sonos, a company that makes smart speakers. The story is a worst-case scenario for a startup innovator. Over a decade ago, Sonos developed one of the most advanced wireless audio systems in the market — a product so impressive that Google wanted to partner with the company on it. Sonos alleges that early in the partnership, Google lifted Sonos-patented technology for Google’s own audio equipment — and continued doing so for future products despite Sonos calling the tech giant out for infringement.

Sonos’s experience was no fluke. Google faced 48 patent infringement lawsuits in 2021.

That’s more than any other company, but Google is certainly not the only alleged perpetrator.

Sonos has accused Amazon of stealing the same technologies for use in its Echo audio systems. Additionally, in 2020, a federal jury ordered Amazon to pay $5 million to Texas-based Vocalife for infringing on its patents to make Echo. Meanwhile, Apple was recently ordered to pay $300 million in damages to Optis Wireless Technology for patent infringement.

It’s no accident, then, that the number of IP lawsuits rose in 2020 for the first time since 2015, and court awards rose to $4.67 billion from just $1.5 billion in 2019.

It also makes holding China to account much harder. After all, if the richest and most powerful businesses in America are ignoring our intellectual property laws — supposedly some of the strongest in the world — why shouldn’t our global adversaries?

The real issue here isn’t complicated: When laws against theft aren’t vigorously enforced, thieves are going to steal. That’s true as much for sophisticated IP infringement as it is for the wave of organized shoplifting in California today. With billions of dollars at stake, slaps on the wrist or gentle nudges aren’t going to deter highly motivated pickpockets in Beijing, Silicon Valley, or anywhere else. Congress has to tighten up our IP laws and stiffen penalties, and the Justice Department needs to ramp up enforcement while there are still innovative American startups left to save.

Link to the rest at The Deseret News

PG says authors shouldn’t rest easy because the OP talks about patents instead of copyrights. Ebook piracy is at a significant level. Overpricing of ebooks by traditional publishing is certainly a motivation, but pirates aren’t known for staying away from indie authors as well.

When a friend talks about a great new website where all sorts of ebooks are marked way down from the prices Amazon charges, don’t hesitate to explain that it’s likely a pirate site. In addition to preventing authors from being paid for their works, piracy destinations are also known as great places to get your computer or tablet infected with malware. Then, it’s possible your friend will share the malware with all of her friends as well.

If you have to trash a computer or even a hard drive due to malware, a new one will cost you much more than any number of ebooks would have on Amazon. If you have to hire someone to come in to remove the malware, that’s also going to cost a lot of money. If you lose all your tax information or your manuscripts, that’s another potentially expensive consequence. If your friends get infected from your computer and have to spend money cleaning up their problems, you may not get invited out to lunch in the future.

And if you find a copy of a NYT bestseller that usually costs $19.95 that only costs 99 cents, conveniently payable by credit card, you may find your life gets a lot more complicated as well. Think of how your significant other will respond to $5,000 in new charges on your joint credit card.

Yes, you may be able to get some or all charges reversed, but, depending on the circumstances, you may not. At a minimum, you’re going to have to spend a lot of time explaining to some suspicious credit card employees how you were so stupid as to fall for a well-known scam.

To be clear, PG isn’t saying that every pirate site for free ebooks is infected with malware, but enough are that it’s a good idea to stay away from all of them because the potential for an expensive loss is greater than any money you might save in the short run. Besides, cheating authors whose books you like is really low.

Pulling back to a longer philosophic perspective, PG has learned that life will be more pleasant and easier for a person who doesn’t act like a jerk.

5 thoughts on “China isn’t our only intellectual piracy problem”

  1. I’m not always sold on IP war stories as the intent isn’t simply “protect your assets” but also to create a system of licensing with the market being able to allow for new inventions to be disseminated with appropriate mechanisms to pay the inventor. Except many of these referenced inventions rip off a hundred years of previous innovations that they don’t pay, and some of the “improvements” they claim in their patents are often obvious innovations and shouldn’t be patentable at all. But before I digress completely, my reaction is often that the stories often reveal a smaller firm who refused to negotiate with a larger firm, the larger firm gave up and moved on, and lets the court determine the price because they couldn’t.

    However, I’m really uncomfortable with the segue to the world of Ebooks as it is comparing Apples and oranges. The stolen IP is being used to grow other businesses, not merely “consumed”. It would be closer to plagiarism in my view, than ebook piracy.

    On ebook piracy itself, I click on just about any link talking about it to see their methodology of how they’re calculating the size of the “loss”. In 90% of the articles, it is the most simplistic calculation possible and one that economists and mathematicians know is blatantly false by a factor of 10-20x at a minimum. For example, if you are trying to calculate the Cost of Ebook Piracy, it likely includes some manifestation of:

    CoEP = a * DD * P = the potential lost sales from regular channels

    The proponents believe that every ebook shared = 1 unit not sold, and thus DD (decreased demand) has a coefficient of a = 1 and P being the full price of a non-discounted ebook.

    However, anyone happening to look at a pirate’s hoard would notice that they often have upwards in excess of 100K books, way more than they will EVER read. Would they have bought 100K? Nope. So when they DLed it and added to their collection, they had no intention of ever reading it. But that DL = a lost sale by the above calculation. People say, “Well, yes, but they share with others”, which is true but those other DLs are counted separately. You can’t count the first one with a coefficient as 1, because it isn’t a lost sale. They just took it because it was free. That’s incredibly true for the mass pirate with a coefficient somewhere less than .01 on volume, with some estimates that if they were paying retail, they would buy less than 1000 in their lifetime, but hoarding would put this at closer to .001 to .0005. For the small pirate looking for the latest John Grisham, the coefficient depends more on the price of the ebook and paperback, volumetrics if the ebook is delayed, hardback vs. paperback availability, which country they’re in, etc. So you immediately get “a*DD*P” for hoarders/traders and a separate “b*DD*P2” for the occasional pirate.

    Some academics have gone even further and used the example of the author a few years ago who uploaded his book to the pirate sites (Locke?) to see if it boosted his sales, and it did. Having them show up on pirate sites increased word of mouth so there is an element that some of the people who read pirated books talk to people who are not capable easily of piracy (ethically or technically) who go on to buy one at a store. “Purchase influencers” if you will who want to read the book as soon as it’s out, are totally comfortable doing full piracy, but then they talk to EVERYONE they know about the book leading to a range of legit purchases that otherwise wouldn’t have happened. It’s the ARC effect for piracy, basically.

    The last truly good analysis I saw was about four years ago by an academic who was trying to calculate all the coefficients for I think six or seven up/down effects (risk, law, malware, techno challenges, shipping, local store availability, country culture, age, techno user power, etc.), and was unable to get very far on four of them with limited data nor anything at all on about 10 other variables.

    Yet for all the hoopla, there remains one incredibly simple, malware free source of ebooks for new releases by major outlets. The public library. ALmost all public libraries have ebooks for loan now, and yes there are some basic DRM tools to protect the content and prevent copying. But almost all of them are EASILY circumvented, even for legitimate-ish use. I have an old Kindle, it can’t run Overdrive or Adobe tools. Yet if I sign something out from the library, I can DL it to my desktop and use other software to transfer it directly to my Kindle as an ebook. Could I keep it past the loan period? Sure. Easy peasy lemon squeezy. I might have to wait for a hot title, but backlist? My browser has the browser tool installed that when I’m on Amazon or Indigo, it shows me **ON THE SAME SCREEN** whether the title I’m considering buying is available for free at the local library. Legitimate use or hidden piracy?

    The models and estimates don’t say. On an ethical and legal basis, piracy is always wrong. So is most royalty accounting across most of the entertainment industry. Personally, I think authors have been screwed more by the industry than they will ever be by the obvious pirates.

    We also don’t question when someone has a friend over to watch a movie at their house or buys a video and shows it at a school gathering or club event. Except all of them are for PERSONAL USE ONLY, not authorized for SHOWING to audiences of any sort / size. Also piracy but nudge, nudge, wink, wink, we LIKE that piracy, says the industry.

    In the end, the only variable in the long equation that I think is REALLY interesting is the one tied to price. Napster was King until iTunes offered music easily and cheaply. Publishers haven’t learned that lesson.


    • Indies have. 😀

      As for pirate hoarding habits, back in 2011, a CNET writer was “complaining” about his book getting pirated into a 2500 title torrent. He even listed the torrent’s name to make it easy to find. In those days google still surface torrents in search results so everybody who read his piece could find it in seconds:

      At an average of 100 books a year, it would take even an avid, non-discriminating pirate reader 25 years to consume that 30-second download. Out in the real world, a non hoarder might read a dozen of the books. And, considering the biggest segment of content piracy is college students, few of those would actually pay for anything.

      Finally: Dr Who used to be the most widely pirated video content on the planet. Then the BBC put it out day-and-date globally and piracy dropped by several orders of magnitude.

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