Hollywood Profits v. Technological Progress

Printer friendly E-mail article Subscribe Order reprints

By DORON BEN-ATAR

This week the U.S. Supreme Court will hear arguments in MGM Studios Inc. v. Grokster Ltd., a suit by 28 of the world's largest entertainment companies against Grokster, StreamCast Networks, and KaZaA -- software companies that develop peer-to-peer (P2P) file-sharing programs. Film and music studios want the court to hold corporations that develop P2P software responsible for the violation of copyrights by end users. In a friend-of-the-court brief submitted by the office of the solicitor general, the Bush administration stated that the interests of the United States call for the Supreme Court to reverse the decision of the Ninth Circuit Court of Appeals, which cleared the defendants of secondary liability for copyright infringements.

On the face of it, the case for harmony of interests between the studios and the nation is clear. P2P technology allows individuals and organizations to reproduce unlicensed copies for personal viewing and even commercial sale here and abroad. Every pirated version downloaded by an American college student or sold for a couple of dollars at New Delhi's Palika Bazaar, according to this logic, is a net loss of the retail price for the studios and also adds to America's growing trade imbalance.

But that point of view is disingenuous and shortsighted. There is no denying that commercial use of copyrighted material is both illegal and immoral. Yet estimates of the cost of piracy are misleading. They don't account for the fact that piracy fuels demand for entertainment products: 2004 was a banner year for pirates; it was even better for the movie industry, where rentals and sales of DVD and VHS movies accounted for nearly $26-billion. When Hollywood cries poverty, as the victim of pilfering teenagers and workers who live on a couple of dollars a day, it is laughable. And the studios' suit could severely curtail P2P programs' development in America as a resource combining multiple databases, allowing real-time cooperation on a vast scale in science, business, and education.

A decision in favor of the movie and music studios will neither halt piracy nor stop the development of P2P software. History is full of examples of governments that tried to stem the outflow of knowledge and technology. Venice locked its glassmakers on the island of Murano. England kept its textile mills closed to visitors, imprisoned artisans who were trying to leave the country, and even forbade the export of steam engines for a short while. Medieval Venice and 18th-century Britain enjoyed great coercive powers over their citizens, and yet their efforts utterly failed. In our own time we acknowledge our failure to prevent nuclear know-how and bomb-making materials from reaching the worst regimes on the planet. Shouldn't we simply admit that all efforts to block access to technologies are a waste of precious resources?

Companies that try to suppress the development of P2P software are similar to the early 19th-century English Luddites, weavers who tried to save their jobs by smashing the machines. The plaintiffs' demand for monetary compensation is a ruse. P2P companies don't have the resources to pay the studios should the Supreme Court rule against them. The studios seek to destroy the P2P companies just as they did Napster in its previous incarnation. Our intellectual-property regime is their weapon of choice. A decision in favor of the plaintiffs would exclude American citizens and companies from taking part in developing and reaping the benefits of this promising technology. Other nations would quickly forge ahead in this cyberfrontier.

The neo-Luddite campaign of Hollywood studios is more than just a rear-guard action against vulnerable American-based companies. What allows the United States to remain the world's center of innovation is cultural experimentation and the free exchange of ideas. The solicitor general's brief betrays ignorance of the contradictory manner in which our own loose implementation of intellectual-property laws turned the United States from an underdeveloped confederation on the periphery of the Atlantic into the world's leading industrial power. The problems we face today are hardly new, and our conversation will be much enriched by a broader historical perspective.

The Constitution spelled out clearly America's commitment to intellectual property, granting Congress the power to "promote the progress of science and useful arts, by securing for limited times to authors and inventors the exclusive right to their respective writings and discoveries." Then the first Congress created an apparatus that spared authors and patentees the chore of having to secure grants in each of the individual states. And the American Patent Act of 1790 was the first intellectual-property legislation in the world that restricted patents exclusively to original inventors and established the principle that prior use anywhere on earth was grounds for invalidating a patent.

But the story behind the story is a little more complicated, and modern champions of intellectual property would be wise to look more closely at how the American system operated in its first 50 years. In theory the United States pioneered a new standard of intellectual property that set the highest possible requirements -- worldwide originality and novelty. In practice the country encouraged widespread intellectual piracy and industrial espionage. Piracy took place with the full knowledge and sometimes even the aggressive encouragement of government officials. Congress never protected the intellectual property of European authors and inventors; Americans did not pay for the reprinting of literary works and unlicensed use of patented inventions. The textile mills of Lowell, Mass., America's most famous industrial experiment, were founded on piracy. Charles Dickens was so incensed by the unlicensed reprinting of his books in the United States that he crossed the Atlantic in the 1840s in an effort to stop that practice. He failed, and expressed his resentment in his sardonic American Notes. He did, however, like Lowell.

What fueled the 19th-century American economic boom was a dual system: the principled commitment to an exacting intellectual-property regime, and the lack of commitment to enforcing those laws. That ambiguous order generated innovation by promising patent monopolies but, by declining to crack down on technology pirates, allowing for rapid dissemination of technology that made American products better and cheaper than those of other countries. The great American economic leap forward took place in the decades immediately after independence, when a culture of free international intellectual exchange turned the United States into an economic superpower.

Unable to go after actual violators of their intellectual property, the studios target P2P developers whose programs, among other things, facilitate some piracy. But it is impossible to contain the abuse of technology without undermining the free flow of knowledge that is the prerequisite for innovation. In order to prevent 12-year-olds from downloading their favorite movie, the plaintiffs and their allies in the Justice Department are threatening our most cherished economic assets -- the public sphere of knowledge and the conditions of intellectual exchange. Shutting down software companies that develop file-sharing technologies will only push programming into other national jurisdictions. The United States can stay ahead of its competitors only by remaining the world's leader in innovation and creative entrepreneurship. Protecting the culture of innovation and allowing P2P development to take place in the United States are in the true interest of the nation.

Doron Ben-Atar is a professor of history at Fordham University and author of Trade Secrets: Intellectual Piracy and the Origins of American Industrial Power (Yale University Press, 2004).