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Protecting Property on the Internet

Thursday, December 9, 2010

Free speech does not include the right to shout, ‘Fake goods here!’ in a crowded digital marketplace.

Late last month, the Senate Judiciary Committee voted 19–0 to approve S. 3804, Combating Online Infringement and Counterfeits Act (COICA), a result foreshadowed by the fact that 12 members of the committee, including Chairman Patrick Leahy of Vermont and ranking minority member Orrin Hatch of Utah, were among the bill’s 19 sponsors. The Internet, Left and Right, reacted with unusual unanimity: horror at this threat to “censor the Internet.”

Within a day, Senator Ron Wyden (D-Oregon) became the Internet hero du jour by putting a hold on the legislation, which killed any chance of zipping it through during the lame-duck session. The bill must be renewed next year, with uncertain prospects.

As a lesson in contemporary public policy, the episode is mesmerizing. It illustrates the hair-trigger paranoia of current political discourse, the flash-mob nature of the Internet echo chamber, the speed with which hysteria can pre-empt serious discussion, the difficulty of attaining reasonable solutions to hard problems, and the rising bitter suspicion that the government and its servants are contemptuous of the Rule of Law.

The episode illustrates the hair-trigger paranoia of current political discourse and the flash-mob nature of the Internet echo chamber.

COICA is directed at two related problems. One is the proliferation of Internet sites dedicated to making available unauthorized digital copies of creative content of all sorts—music, movies, software, books, and pictures. These have evolved from amateur cooperative networks into full-fledged businesses, providing content for free to get an audience, selling advertising, and, perhaps, collecting information from participants that can be used for many purposes.

The other problem is the use of websites to peddle counterfeit physical goods—everything from medicines to Ugg boots. Counterfeiting has always existed, but it was limited by the need to set up a distribution chain, which required capital and exposure to lawyers and prosecutors. The efficiencies of Internet marketing have converted counterfeiting from furtive sales on street corners into big business. It is not just phony goods for fashionistas, either—the trade includes drugs and industrial products for which high quality is a life-and-death matter, and makes up an estimated $600 billion a year, or 5 percent to 7 percent of world trade.

Internet sites specializing in infringement and counterfeiting that are located in the United States are already subject to heavy-duty enforcement action—viz this Immigration and Customs Enforcement (ICE) press release: "Operation In Our Sites targets Internet movie pirates; ICE, Manhattan U.S. Attorney seize multiple Web sites for criminal copyright violations” (“seize” is the right word, too—under copyright and counterfeiting laws, property used for nefarious purposes is subject to forfeiture), and just last week in the Wall Street Journal: “Website Closures Escalate U.S. War on Piracy.”

Infringement and counterfeiting operations are also run by such delightful characters as the Russian mafia, with operations based offshore and immune to such inconveniences as U.S., or any other, law.

Existing provisions are effective against American-grown sites, but, in keeping with the general trend toward globalization, infringement and counterfeiting operations are also run by such delightful characters as the Russian mafia, with operations based offshore and immune to such inconveniences as U.S., or any other, law.

The basic purpose of COICA is to create an effective enforcement mechanism against these offshore sites. It starts by defining its targets, which are Internet sites “dedicated to infringing activities.” Such a site is defined as one that is “primarily designed, or has no demonstrable commercially significant purposes or use other than, or is marketed by its operator” as offering infringing or counterfeit goods. In addition, the offending activities must be “the central activities” of the site.

If a site meets this definition, then the U.S. attorney general can sue for an injunction against any domain name used by the site. (Much of the bill is devoted to the technicalities of jurisdiction, adequate notice, and venue, and to ensuring that the target is indeed directing its actions into the United States; none of these is particularly noteworthy, since the principles of in rem— “against the thing” —jurisdiction are well-established in the law.)

If the injunction issues, and the domain name registrar or registry can be found in the United States, the Feds serve the order and the registrar or registry blocks the site. If neither is in the United States, then the Feds can serve it on other participants in the Internet ecosystem, including any internet service provider (ISP) or other domain name system server, financial transaction provider, or advertising service, which then must take “reasonable” measures to cut off the pirate.

These other participants are granted immunity for any act reasonably designed to comply with the cut-off order. They are also, except for ISPs, given immunity from liability for any voluntary action taken against a site that they “reasonably believe” is dedicated to infringement, even if no government action has been brought. ISPs are not included in this extended grant of immunity, out of concern that their incentives for blocking a content site might not be pure.

Outside of a small circle, neither general philosophical opposition to intellectual property nor the indignant claims of entitlement to free stuff by the me generation moves public opinion.

The original version of S.3804 was introduced on September 20 (the version voted out by Judiciary was a last-minute modification), and the opposition began soon after, peaking with the committee vote. The attacks come from three directions, one largely hidden and two overt.

The hidden factor is that many of those ginning up the outrage are hostile to intellectual property as an institution. This includes academic and tech libertarians and an eclectic group of institutions ranging from the Electronic Frontier Foundation to the Cato Institute and the Technology Liberation Front.

The IP skeptics community also includes some businesses—Google comes to mind—that profit from broad availability of creative content and have no desire to share the proceeds from searching or ad attachment. Indeed, many, though by no means all, tech companies are unsympathetic to protecting intellectual property—cheap and plentiful content helps sell tech toys—unless of course the IP takes the form of tech patents, which will be defended strenuously.

Because of this orientation, some of the objection to enforcement against Web domains is due precisely to its effectiveness in protecting intellectual property—see, for example, “U.S. Government Seizes BitTorrent Search Engine Domain and More,” from TorrentFreak, which objects to seizure of sites that have found clever ways to provide access to unauthorized content while gaming the system to stay (in their view) outside legal strictures.

Outside of a small circle, neither general philosophical opposition to intellectual property nor the indignant claims of entitlement to free stuff by the me generation moves public opinion, especially against the massed forces of corporate property interests when they are engaged in what is literally a battle for survival (and, in any case, it is hard to defend the Russian mafia’s right to sell fake antibiotics or shoddy auto replacement parts). So, in the current controversy, this hostility to intellectual property remains mostly covert. But it is an important underlying dynamic because it creates a receptive echo chamber for other lines of attack.

A support-free-speech argument is more cogent if made in the context of recognizing that the Internet is not a cyber-Brigadoon divorced from the daily world.

The two major arguments made openly are that S.3804 offends First Amendment principles of free speech, and that the bill would give the government authority to censor the Internet by shutting down websites with which officials disagree, on the pretense that they are engaged in illicit infringement.

The free speech concern was set forth most cogently in a letter drafted by the American Civil Liberties Union (ACLU). It argued that S.3804 would legitimize the principle that Internet sites that offend local law can and should be blocked or censored, and that this would conflict with U.S. efforts to protect the open Internet. “Once the U.S. sends the green light, the use of domain locking or ISP blocking to silence other kinds of content considered harmful in a given country—from criticism of the monarchy in Thailand to any speech that ‘harms the interests of the nation’ in China, could metastasize.”

This argument is a bit wispy. Other nations are already aware that sites can be blocked, and they will follow their perceived interest no matter what we do. Granted, they will happily justify their own actions by pointing to ours, but this will be cosmetic rather than determinative. The legitimate debate is over the proper limits of this reality, not over a pretentious abstraction that assigns an exaggerated influence to U.S. moral suasion.

In fact, a support-free-speech argument is more cogent if made in the context of recognizing that the Internet is not a cyber-Brigadoon divorced from the daily world. It is a tool, and just as crooks and pirates have learned to take advantage of every other tool developed in human history, they are learning how to use the Internet. To ignore this is silly, since free speech does not include the right to shout, “Fake goods here!” in a crowded marketplace.

Besides, free speech is not the only important human right at stake here. The right to the fruit of one’s labor ranks equally high, even if it has been some decades since the ACLU noticed the importance of economic empowerment and liberties. As the Supreme Court said 40 years ago:

The dichotomy between personal liberties and property rights is a false one. Property does not have rights. People have rights. The right to enjoy property without unlawful deprivation, no less than the right to speak or the right to travel, is, in truth, a "personal" right . . . In fact, a fundamental interdependence exists between the personal right to liberty and the personal right in property. Neither could have meaning without the other.

If the world’s struggling peasants were allowed to choose between a government that empowered their efforts to make a living while limiting free speech and one that took no action to protect their enjoyment of the fruits of their labor, but let them complain freely about politics, the former would win by a landslide. And the right to the fruits of labor includes intellectual labor—see “Nashville in Africa: Culture, Institutions, Entrepreneurship and Development,” a thoughtful analysis of what can be when intellectual property rights allow a people to tap their creativity. (A more detailed and academic account is available via SSRN.)

The right to the fruits of labor includes intellectual labor.

So I will see your free speech example and raise you an economic empowerment. It is not that I do not take free speech concerns seriously, but I demand that economic empowerments and liberties be treated with equal dignity, and that is something that none of the free-speech-based protesters do.

The second objection to S.3804 is that it would allow the government to censor the Internet, using the bill to suppress sites on the pretext that they infringed on intellectual property rights. This alarm was voiced not just by the usual participants in IP debates, such as Technology Liberation Front and EFF, but by leading conservative websites, such as Hot Air, Big Government, and American Thinker.

The drafters of S.3804 were careful to link the powers granted to the government to take action against sites dedicated to infringement and counterfeiting, not to any expression of opinion, but two factors seem to be at work: One is the current conservative disillusion with the Department of Justice over issues such as the enforcement of voting rights, the dispute over the interrogation memos, and the fear of selective enforcement.

The second is that the recent domain name seizures have been carried out by ICE, which is part of Homeland Security, the same department that controls the Transportation Security Administration, and these are the people who are grabbing your junk! Talk about administrative overreach!

There are legitimate fears here, because over-criminalization, and the prosecutorial discretion that it creates, is deeply unsettling, as is the propensity of the administrative state to take laws passed for one purpose and pervert them to the service of different objectives. (See, e.g., "Out of Bounds and Out of Control" and "The New 'Criminal' Classes: Legal Sanctions and Business Managers.")

ISPs do take down infringing material, though perhaps not as rapidly as rights holders would like, and they monitor for and block spam and viruses, for which we should all be thankful.

These problems are generalized, though, not specifically associated with issues of copyright infringement and counterfeiting, and it is a bit strange to become upset in this particular context while ignoring the big picture, especially because S.3804 is more carefully limited than most legislation. Yes, a Department of Justice that wanted to abuse its authority to attack speech by political opponents could use this bill to do it, but such a DOJ already has so many tools to use that shutting down your website would be the least of your concerns. Tax audits, forfeitures, jail terms, and bankruptcy through legal expenses would be more significant threats. At least S.3804 has a discernible standard that a judge can enforce.

Perhaps the most interesting part of S.3804 has been least commented on—the immunity for Internet actors that act voluntarily. One of the amusing aspects of discussions of infringement, or of net neutrality, or privacy, or many other current Internet topics, is that they seem oblivious of the extent to which the various Internet actors are already involved in policing the Net.

ISPs do take down infringing material, though perhaps not as rapidly as rights holders would like, and they monitor for and block spam and viruses, for which we should all be thankful. Google and other search engines run counter-games against those who game their algorithms. Financial transaction providers prevent fraud and theft, and have a big interest in cutting off bad sites, including counterfeit goods purveyors, because these produce expensive blowback against financial intermediaries when customers refuse to pay.

Beneath the radar of concern over government action is a developing infrastructure of private action, triggered by the common interest of most of the Internet world in suppressing piracy, counterfeiting, and other nefarious activities. This is all to the good, as long as the incentives are roughly aligned, because the participants in that world are all anxious to avoid offending their customers, which provides a check on unnecessary policing and allows the flexibility available to market-based organizations and not to governments.

On the whole, S.3804 seems like a reasonable approach, and the reaction seems overdone. In any event, the opponents should step up with their ideas on how they would deal with the problems of infringement and counterfeiting, setting out an affirmative agenda rather than just opposing whatever is suggested, and recognizing that creative content is an important form of property, as deserving of protection as the more familiar Blackacre of legal textbooks.

James V. DeLong is vice president and senior analyst of the Convergence Law Institute, and a visiting fellow at the Digital Society.

FURTHER READING: DeLong recently discussed protestors in “Tea Time for Vets,” intellectual property and law in “Googling the Book Settlement,” “Making Finance Easy to Fix, not Hard to Break,” the Supreme Court’s “Supreme Climate Folly,” and "Opening a Can of Worms: Government and Climate Change Data." Michael Barone explains the importance of property rights to Americans in “Americans Relate to Founders, Not Progressives,” and John Yoo discusses the Justice Department in “Finally, an End to Justice Dept. Investigation.”

Image by Darren Wamboldt/Bergman Group.

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