A couple of weeks ago, Pat Choate published a blistering attack on product piracy in China – The Pirate Kingdom – New York Times, based on his new book, Hot Property: The Stealing of Ideas in an Age of Globalization:
China is the global epicenter of pirating and counterfeiting. By its government’s own estimate, China’s domestic trade in bogus goods accounts for $19 billion to $24 billion annually. That is undoubtedly a significant understatement, and it doesn’t even include the stolen technologies and phony brands China exports to the rest of the world. Since welcoming China into the World Trade Organization in 2001, the United States has had a historic opportunity to stop the Chinese piracy trade. So far, the Bush administration has failed to seize it.
Turns out that China, while a current problem, may be a simple problem compared to what is coming in the future with Russia. As the Wall Street Journal (In Russia, Politicians Protect Movie and Music Pirates) pointed out:
Russia has emerged as the front line in Hollywood’s global war against piracy. China may still be the world’s top producer of illegal computer software, CDs and DVDs, but authorities there are getting serious about cracking down. In Russia, the Kremlin has been promising to deal with the problem for years, but industry officials say under President Vladimir Putin it’s gotten worse, not better.
A key reason is that Russia’s pirates, who cost U.S. businesses an estimated $1.7 billion in losses last year, have cultivated increasingly cozy links to the government that’s supposed to police them. Counterfeiters are lining up political patrons and locating factories inside secret military facilities where law-enforcement agencies can’t touch them.
Last week, the House Judiciary Committee held two days of hearings on the protection of Intellectual Property Rights in China and Russia.
But the problem isn’t just with “lawless” China and Russia. According to the International Herald Tribune, law-abiding Sweden is a major movie pirate (In Sweden, paradise for the movie pirates):
In a nondescript computer hall on the outskirts of Gothenburg, Sweden, stands the movie industry’s latest, and worst, nightmare.
Not only is this particular stack of servers, known as the Pirate Bay, the home of the world’s busiest BitTorrent tracker – the most popular file-sharing protocol for movies and other large files – but it is also the most telltale sign of how otherwise law-abiding citizens in only a couple of years can turn into some of the biggest infringers, at least, on a per capita basis, of copyright laws in the world.
If Sweden is leading the world in movie pirating, the issue is a lot different from product counterfeiting that is at the heart of the concern over Russia and China.
Once again, the movie and music business need to look at new business models to stem the perception that digital entertainment should be free. I am highly skeptical that tighter and tighter restrictions are the answer. As I noted in an earlier posting, we may be coming to the point where “intellectual property rights” are stifling innovation rather than promoting it (see an earlier posting from a paper by Adam Jaffe of Brandeis University and Josh Lerner of Harvard University, “Innovation and its Discontents“:
In the last two decades, however, the role of patents in the U.S. innovation system has changed from fuel for the engine to sand in the gears).
As Glenn Pudelka writes in his review of Choate’s book in the Christian Science Monitor (‘Gentlemen do not steal the ideas of others.’ Oh yeah?)
Ultimately, he [Choate] warns, piracy will discourage inventors and ideamakers from innovating. Yet he offers no support for such conclusions.
Product counterfeiting is an important problem. But in crafting a solution we need to keep in mind that “intellectual property rights” are a social construction. Patents are not a “natural right” but are a state-granted monopoly right. More on this later.