Trademark and copyright holders frequently characterize piracy as a
legal failure, arguing that tougher laws and increased enforcement are
needed to stem infringing activity. But my weekly technology law column
(Toronto
Star version, homepage
version) notes that a new global
study on piracy,
backed by Canada's International Development Research Centre, comes to
a different conclusion. Following several years of independent
investigation in six emerging economies, the report concludes that
piracy is chiefly a product of a market failure, not a legal one.
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Appeared
in the Toronto Star on March 20, 2011 as Canadian-backed report says
music, movie, and software piracy is a market failure, not a legal one
Trademark and copyright holders frequently characterize piracy as a
legal failure, arguing that tougher laws and increased enforcement are
needed to stem infringing activity. But a new global study on piracy,
backed by Canada's International Development Research Centre, comes to
a different conclusion. Following several years of independent
investigation in six emerging economies, the report concludes that
piracy is chiefly a product of a market failure, not a legal one.
The Social Science Research Council launched the study in 2006,
identifying partner institutions in South Africa, Russia, Brazil,
Mexico, Bolivia, and India to better understand the market for media
piracy such as music, movies, and software. The result is the most
comprehensive analysis of piracy to date.
The 440-page report challenges many of the oft-repeated claims about
piracy and how address it. For example, it finds that contrary to
repeated claims that there are strong links between piracy and
organized crime, no such link exists. Instead, the authors conclude
that “decades-old stories are recycled as proof of contemporary
terrorist connections, anecdotes stand in as evidence of wider systemic
linkages, and the threshold for what counts as organized crime is set
very low.”
Similarly, it finds no evidence that anti-piracy "education programs" -
some of which have been launched in Canada - have any discernable
impact on consumer behaviour. As of 2009, researchers identified over
300 anti-piracy education programs, yet were unable to find any
benchmarks or attempts to determine whether they actually work.
The report also rejects the conventional wisdom that tougher penalties
provide a strong deterrent to piracy activities. It notes that judges
frequently face overwhelming caseloads that involve violent crime such
as murder and assault. While the law may call for lengthy prison
terms for selling counterfeit DVDs, many local judges engage in a
"judicial triage" where economic harms to foreign rights holders take a
back seat to local criminal activity that poses threats to public
health and safety.
While setting the record straight on piracy myths is valuable, the
report’s most important contribution comes from chronicling how piracy
is primarily a function of market failure. In many developing
countries, there are few meaningful legal distribution channels for
media products. The report notes "the pirate market cannot be said to
compete with legal sales or generate losses for industry. At the low
end of the socioeconomic ladder where such distribution gaps are
common, piracy often simply is the market."
Even in those jurisdictions where there are legal distribution
channels, pricing renders many products unaffordable for the vast
majority of the population. Foreign rights holder are often more
concerned with preserving high prices in developed countries, rather
than actively trying to engage the local population with reasonably
priced access. These strategies may maximize profits globally,
but they also serve to facilitate pirate markets in many developed
countries.
The study concludes that local ownership makes a significant difference
in developing country markets, finding that "domestic firms are more
likely to leverage the fall in production and distribution costs to
expand markets beyond high-income segments of the population. The
domestic market is their primary market, and they will compete for it."
Although the study is limited to the six emerging economies, there are
important lessons for Canadian policy makers. Groups such as the
Business Software Alliance have acknowledged that Canada is a
low-piracy country, yet the lack of access to some content may lead
some Canadians to turn to unauthorized channels. Although the failure
to serve the Canadian market does not legitimize infringing activity,
as in the developing world, it does help explain it.
Michael Geist holds the Canada
Research Chair in Internet and E-commerce Law at the University of
Ottawa, Faculty of Law. He can reached at mgeist@uottawa.ca or online
at www.michaelgeist.ca.
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A new
paper
by Joel Waldfogel, an economist at the University of Minnesota and
NBER, finds no evidence that Napster and P2P have resulted in a
reduction in recorded music or new artists coming to market. The
study
also finds that independent music labels are playing an increasingly
important role in the release of new music.
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The London School of Economic Media Policy Project has released a new
study
that criticizes recent UK reforms for failing to strike the right
balance between copyright enforcement and innovation. The report finds
that P2P should be encouraged to promote innovative applications and
that offering user-friendly, fairly priced services is a more effective
strategy than a "heavy handed legislative and regulatory regime."
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