Piracy of intellectual property refers to the unauthorized use, reproduction, and/or distribution of protected material such as computer software, video games, music, or movies. Piracy has become an increasing concern in recent years because of the rise of the Internet and the speed with which copyrighted material can be distributed globally to a large number of people.
What is labeled piracy is literally the infringement of intellectual property rights—that is, copyright, patent, and/or trademark infringement. Piracy literally refers to robbery and other crimes committed at sea, where prey are more vulnerable in the absence of conventional law enforcement mechanisms. The term piracy is used in connection with intellectual property infringement, particularly with regard to electronic and audiovisual materials, because of the similar difficulty in detecting and preventing this sort of inappropriate behavior and the mass scale on which it can occur.
The use of the term piracy is, however, controversial. Unlike theft on the open seas, accompanied often by violence, loss of life, and permanent loss of property, intellectual property infringement does not have the same sort of victims. Whereas it can be argued that the piracy of intellectual property devalues the protected intellectual property (by making it more readily available) and deprives the owners of potential sales, it does not inherently involve violent crime or complete theft. Holders of patents, copyrights, and trademarks still retain their rights; they just lose the exclusivity of those rights.
The harm imposed by intellectual property piracy actually extends beyond the emotional and financial damages to the holders of patents, copyrights, and trademarks. In fact, piracy threatens the system of protected rights that encourages individuals and organizations to invest in the development and distribution of intellectual property. Furthermore, it jeopardizes the marketplace trust that attaches meaning to recognized expressions of ideas.
Intellectual property infringement has been a concern as long as intellectual property rights have been protected. In fact, instances of patent infringement were documented in the 19th century during the Industrial Revolution, when American law did not grant reciprocity to intellectual property developed in other countries. Early manufacturing in the United States was based on technology patented in Britain, without any compensation being paid to the legitimate foreign patent holders. At the time, this was condoned by the government in the United States.
Patents are granted to protect the opportunity of individuals and organizations to recoup their investment in inventions. Patent infringement occurs when the creator or user of an invention refuses to acknowledge the priority of the patent holder. The high cost of enforcing patents deters many holders from pursuing legal action, and many pirates take advantage of this.
Trademark infringement occurs when products are manufactured or sold under the trademark of another company without that company’s permission. The widespread distribution of counterfeit products—fake purses, knockoff watches, and so on—has turned this into a serious problem. Trademark infringement began about 20 years ago, with the men on 5th Avenue in New York standing around with suitcases full of knockoff Rolex watches that they sold for $10 apiece and the storefronts in Chinatown openly selling counterfeit handbags by Coach, Louis Vuitton, and so on, for a fraction of the retail value of the originals. In fact, vendors were so bold and the supply was so great that many would hand customers catalogs from which to choose their purchase.
The counterfeiters remain in business today, but several things have changed. First, the vendors are no longer as bold. Many of the transactions take place behind closed doors, in unmarked buildings in unadorned rooms, and potential customers are scrutinized before they are invited to consider purchases. Second, the product line has expanded. Luxury purses and watches are no longer the extent of counterfeit merchandise available. All sorts of luxury items and clothing are still available, along with fake medicine, fake automobile parts, and fake electronics. Third, the marketplace has grown beyond New York, and the merchandise is traveling not just to the United States but from the United States and other Western countries as well. In 2004, 800,000 doses of counterfeit medicine were seized at the borders of countries in the European Union. Most of those fake drugs were on their way to countries among the poorest in the world. Fourth, many of these items are now exchanged in e-commerce to unsuspecting customers, and this is undermining the brand names that have become staples in the global economy.
The recent emergence of China as a player in the global economy has exacerbated rampant intellectual property infringement. In addition to the counterfeit goods exported from China (and other parts of Asia) are the fake items sold in China to tourists and to China’s enormous population. China is replete with factories to which all sorts of electronics and other products are outsourced. There is thus a large amount of intellectual property available for pirates to steal. In addition, the hoards of available workers enable factories to churn out both legitimate and counterfeit merchandise at lightning speed.
The result is significant confusion regarding brand legitimacy. LG, for example, experienced this firsthand as it attempted to introduce a local version of its Chocolate phone. Sluggish in launching its Chinese version, LG found that copies were available in China before the originals. By the time legitimate LG phones were ready for sale in China, the fake phones were so prevalent in the market that the LG phones were viewed as the counterfeits.
China remains a sort of “attractive nuisance” to pirates. There is so much intellectual property available to be copied, and the costs are so low and the profits so great, that the practices continue, and trademark infringement remains a significant concern.
During the past decade, copyright infringement has also mushroomed. In earlier years, the main concern of copyright holders was “bootlegged” copies of songs, movies, and so on. The bootlegged versions were not exact replicas but were, instead, generally separately recorded, second-rate copies. As technology has advanced, concerns about copyright protection have also advanced, because of both the increased magnitude of the harm and the enhanced quality of the counterfeit copies.
In 1999, the birth of Napster added the considerable challenge of peer-to-peer file sharing to the list of threats to copyright protection. Peer-to-peer file sharing occurs as individuals make exact copies and share original computer files of protected material, such as music in the MP3 format, video in AVI and MPG formats, and computer software in all sorts of formats. Napster was the first known entity to facilitate the sharing of files via the Internet through a system of linked servers and users. Other decentralized programs have since been introduced, such as Kazaa, Livewire, BearShare, and, more recently, BitTorrent.
At its peak in 2001, Napster claimed 26.4 million users—that is, 26.4 million people who were sharing pirated intellectual property. Since that time, authorities have clamped down on these practices. The Recording Industry Association of America has reacted strongly against Napster, which was eventually shut down in response to the legal action taken against it for its participation in rampant copyright infringement. Today, Napster exists under new ownership as a fee-based music subscription service.
The downfall of Napster created significant barriers to Internet-based file sharing as a vehicle for the distribution of copyrighted material, but it has not put an end to it—it has just made it more difficult.
“Warez” is the name that has been given to copyrighted material being pirated (i.e., being exchanged in violation of copyright law). It refers primarily, but not exclusively, to software. There are various subgroups of warez, including appz (retail versions of computer applications) and gamez (computer-based games and video games). In spite of the fall of Napster, users continue to share warez via the Internet.
Laws in the United States, as well as in many other countries, recognize the value and importance of intellectual property and grant exclusive, defined rights to the holders of patents, copyrights, and trademarks. Furthermore, they provide legal remedies to victims of intellectual property infringement. The problem is that detection can be tricky and enforcement is difficult and often costly.
Furthermore, the presence of international actors, not all of whom are constrained by the same sorts of laws and norms that govern the United States, further complicates the situation. A poignant example pertains to the Russian online company AllofMP3. AllofMP3, an online music store based in Moscow, has the appropriate licensing agreements with the Russian Organization for Multimedia and Digital Systems, which is the organization responsible for regulating licensing in Russia. These documents are similar to the arrangements that the Russian radio stations have with the organization. Under this agreement, AllofMP3, per Russian law, has the right legally to distribute the music from all artists and all labels, without consideration of the copyright infringement laws of other countries, such as the United States.
While in the past, online companies have been able to evade expulsion by organizing in countries that do not safeguard intellectual property rights in the same way as the United States, the tide appears to be changing. The threat by the United States to withhold Russia’s membership in the World Trade Organization forced the Russian government to adopt intellectual property laws that overlap or mimic those of the United States. It was anticipated that early in 2007, this would put an end to AllofMP3. Already, credit card companies such as Visa and Mastercard had withdrawn their business from the Web site.
This is becoming less of an impediment, however, as more and more countries are passing local legislation that respects the rights of intellectual property holders and recognizes reciprocity with other countries. In addition, international treaties continue to call for reciprocity with regard to the recognition of intellectual property rights.
As legislation and litigation tend to be the favored responses to alleged intellectual property infringement, there are very strong arguments against continued regulation of intellectual property pertaining to music, mathematical formulas, and so on. The ease with which individuals can infringe on the rights of the creators of protected material has been fueled by the rise of the Internet. The question remains, Who is truly being harmed?
This battle between the corporations and the individuals who pirate the protected intellectual material is often portrayed as a battle between the corporation and the individual, with the belief that the artist is also being harmed by the alleged infringement. This belief appears somewhat misguided, however, in that many artists argue that swapping of music and movies, even though prohibited by laws, does not threaten their livelihood. In fact, artists have argued that the Internet and file sharing have enhanced their profitability as a result of their increased exposure. Many musicians, for example, assert that existing regulation protects the labels to the exclusion of the artists; they contend that free, single-track sharing creates much more exposure for the artists (and perhaps even profits for the labels) since more money comes from concert tickets and sales of compact disks.
There are also significant questions and challenges to “ownership” as it pertains to intellectual property. People do not own their ideas to the exclusion of others; on the contrary, they share their ideas with others. What is protected are the rights to claim credit, both reputationally and financially, for the ideas.
The very phrase intellectual property is somewhat misleading in that it suggests exclusive ownership, whereas that is not what it actually means. The entitlements associated with copyrights, patents, and trademarks are linked primarily to the right to the financial benefits that accrue from the use of the intellectual property.
Piracy of intellectual property remains a prevalent concern in the United States and abroad. Detection remains difficult (and is often not attributable to the source), and enforcement continues to be costly.
Piracy is tempting for many reasons, not the least of which is the ease with which it can take place. In addition, many people do not consider it theft since it does not involve obvious victims—owners of intellectual property are deprived only of the exclusivity of their rights, not of the rights themselves.
What pirates need to remember is that it is the system itself that creates the value of the intellectual property they steal. In other words, the value of copyrights, trademarks, and patents relies on the system of providing exclusive rights in exchange for investments in intellectual property. While the practices of these pirates do not constitute theft in the traditional sense, their actions do have significant financial consequences and do serve to undermine the system of intellectual property rights in general.
Copyrights; Intellectual Property; Internet and Computing Legislation; Patents; Trademarks
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