“Manifestly ill-founded”: Pirate Bay Free Speech Argument Tossed

March 14, 2013 · · 3 comments

Last year, various individuals connected with the Pirate Bay reacted strongly to the refusal of the Swedish Supreme Court to hear their appeal in a copyright case against them. Peter Sunde exclaimed that the site, one of the most notorious and unapologetic facilitators of infringement in recent memory, “has been one of the most important movements in Sweden for freedom of speech” and those involved in running the site “have been mentioned as possible winners of the nobel peace prize.”

However, yesterday a unanimous chamber at the European Court of Human Rights held that the massive infringement the site enabled justified any interference with the site founders’ free expression rights. The Court, in fact, said that the founders’ appeal on free speech grounds was “manifestly ill-founded.”

Peter Sunde, of Finland, and Frederik Neij, of Sweden, were charged in 2008 with complicity to commit crimes in violation of Sweden’s Copyright Act for their role in operating the Pirate Bay. The District Court found both guilty in April 2009 and handed down a sentence that included prison time and fines. Both appealed the decision, and though the verdict was upheld, the appellate court reduced Neij’s sentence. This decision, in turn, was appealed to Sweden’s Supreme Court. The Court refused to hear the appeal in February 2012.

And so, Sunde and Neij appealed to the European Court of Human Rights, a supra-national court that has jurisdiction to hear cases where a violation of human rights, as defined by the European Convention on Human Rights, by a member nation are alleged. The Court issued its decision in Neij and Sunde Kolmisoppi v. Sweden (application no. 40397/12) yesterday.

The Pirate Bay founders claimed that their convictions interfered with their right to free expression. That right is enshrined in Article 10 of the European Convention on Human Rights, which states:

1. Everyone has the right to freedom of expression. This right shall include freedom to hold opinions and to receive and impart information and ideas without interference by public authority and regardless of frontiers. This Article shall not prevent States from requiring the licensing of broadcasting, television or cinema enterprises.

2. The exercise of these freedoms, since it carries with it duties and responsibilities, may be subject to such formalities, conditions, restrictions or penalties as are prescribed by law and are necessary in a democratic society, in the interests of national security, territorial integrity or public safety, for the prevention of disorder or crime, for the protection of health or morals, for the protection of the reputation or rights of others, for preventing the disclosure of information received in confidence, or for maintaining the authority and impartiality of the judiciary.

At the outset, the Court did conclude that the Pirate Bay founders’ actions taken to run the site were an exercise of their right to free expression, and the subsequent conviction did interfere with that right. But that is only the beginning of the Court’s inquiry. It next turned to a three-pronged question: (1) was the interference prescribed by law, (2) was there a legitimate aim to the interference, and (3) was the interference a “necessity in a democratic society.” The first two parts of this question were easy to answer. The convictions were based on Sweden’s Copyright Act and Penal Code, and were in pursuit of the legitimate aim of protecting plaintiff’s copyright — i.e., protecting the rights of others and preventing crime.

The final prong, perhaps unsurprisingly, generated the most discussion. As the Court said, “The test of whether an interference was necessary in a democratic society cannot be applied in absolute terms. On the contrary, the Court must take into account various factors, such as the nature of the competing interests involved and the degree to which those interests require protection in the circumstances of the case. In the present case, the Court is called upon to weigh, on the one hand, the interest of the applicants to facilitate the sharing of the information in question and, on the other, the interest in protecting the rights of the copyright-holders.”

How the Court characterized the interests of copyright-holders is, in my opinion, the most striking part of the decision. The Court stressed “that intellectual property benefits from the protection afforded by Article 1 of Protocol No. 1″ to the European Convention on Human Rights. This article states:

Every natural or legal person is entitled to the peaceful enjoyment of his possessions. No one shall be deprived of his possessions except in the public interest and subject to the conditions provided for by law and by the general principles of international law.

That is, under the European Court on Human Rights, intellectual property rights are treated as property rights. This wasn’t a new holding; the Court cited to a 2007 case that agreed that intellectual property “incontestably” enjoys the same protections as personal and real property under the Convention.1

The Court’s case law is consistent with the conception of copyright and free speech in the U.S. that I have previously suggested accounts for their unquestioned co-existence from the founding of the country and nearly two centuries afterward. Copyright was considered property. Remedies to protect property were generally not seen as infringing freedom of speech. Just as the First Amendment does not typically trump trespass law, it does not typically trump copyright law.2 This conception has, of course, been assailed in recent decades by the academy3 and certain civil society groups (and, lately, from a subset of libertarians) — all of which likely helped convinced the Pirate Bay founders that they had a case here.

Not only are intellectual property rights treated as property rights, but, as the Court reiterates, States have an affirmative duty to protect them. That means in certain cases, it is sometimes appropriate to have criminal enforcement in addition to civil enforcement. The Court concluded that this was one such case. It said the Swedish government had “weighty reasons for the restriction of the applicants’ freedom of expression [Emphasis added].”

This, along with the Court’s holding that “the prison sentence and award of damages cannot be regarded as disproportionate”, led to its ultimate conclusion that the interference the Pirate Bay founders’ conviction caused with their free expression rights was ”necessary in a democratic society.”

Footnotes

  1. Anheuser-Busch v. Portugal [GC], no. 73049/01, § 47, ECHR 2007‑I. [↩]
  2. For a modern take on this comparison between copyright, the First Amendment, and trespass, see Lillian BeVier, Copyright, Trespass and the First Amendment: An Institutional Perspective, 21 Soc. Phil. & Pol’y 104 (2004). [↩]
  3. For a lengthy yet nonexhaustive list, see this footnote from Copyright and Censorship. [↩]
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Shutting Down Megaupload Did Impact Digital Movie Sales

March 07, 2013 · · 4 comments

The majority of academic literature has found that piracy has a negative impact on movie and music revenues.1 This is accepted by all but a few filesharing denialists. The big question is, what does this mean for copyright policy? Because it’s one thing to establish that online piracy reduces sales, it’s another to figure out what to do about it.

And there has been no shortage of those whose answer to what to do about piracy is: nothing. Or, rather, authors and creative industries need to learn how to “compete with free”, piracy enforcement doesn’t work.2 A litany of justifications for this have arisen over the past decade and a half, but generally, the idea seems to be that most unauthorized downloading or streaming of media comes from individuals who would not have paid in the first place. Thus, while anti-piracy efforts might reduce piracy, they won’t increase sales. Right?

Wrong, according to a growing body of empirical research. Last year, a group of researchers found that HADOPI, France’s recent graduated response program, led to a 20-25% increase in music sales in that country.3 And in 2011, researchers concluded that physical music sales increased 27% and digital music sales increased 48% in Sweden following copyright protection reform that increased the risks of unauthorized downloading.4

This week, Brett Danaher and Michael Smith, working at the Initiative for Digital Entertainment Analytics (IDEA) at Carnegie-Mellon University, have released another study looking at this question. The study, Gone in 60 Seconds: The Impact of the Megaupload Shutdown on Movie Sales, found that digital movie revenues from online sales and rentals increased by 6-10% following the January 2012 shutdown of the popular cyberlocker site (Megaupload execs, including Kim Dotcom, are of course currently facing criminal charges in the U.S. for copyright infringement).

The abstract says:

The growth of Internet-based piracy has led to a wide-ranging debate over how copyright policy should be enforced in the digital era. While some enforcement approaches involve policies designed to deter consumers from filesharing though incentives or penalties, other approaches target the supply of piracy by shutting down Internet sites that serve as major conduits for pirated content. In this paper we analyze how one such anti-piracy intervention, the shutdown of the popular Megaupload site, affected the digital sales of movies for two major studios.

Simply examining changes in sales after the shutdown would produce an inaccurate measure of its actual effect as sales are changing over time for a variety of reasons. Instead we exploit cross-country variation in pre-shutdown usage of Megaupload as a measure of treatment intensity. Controlling for country-specific trends and the Christmas holiday, we find no statistical relationship between Megaupload penetration and changes in digital sales prior to the shutdown. However, we find a statistically significant positive relationship between a country’s Megaupload penetration and its sales change after the shutdown, such that for each additional 1% pre-shutdown Megaupload penetration, the post-shutdown sales unit change was 2.5% to 3.8% higher, suggesting that these increases are a causal effect of the shutdown.

Aggregating these increases, our analysis across 12 countries suggests that, in the 18 weeks following the shutdown, digital revenues for these two studio’s movies were 6-10% higher than they would have been if not for the shutdown. Thus our findings show that the closing of a major online piracy site can increase digital media sales, and by extension we provide evidence that Internet movie piracy displaces digital film sales.

As the paper notes, not only does this research add to the empirical studies on this subject mentioned above, but it makes a couple new contributions. For one, Danaher and Smith note that this is the first paper to look at “supply-side” enforcement. The previous studies focused on “demand-side” enforcement — both the French and Swedish laws studied policed individual downloaders. Each has its pros and cons, its costs and benefits, but it seems to me that the trend in the U.S. and many other countries is to move away from demand-side enforcement and toward supply-side enforcement. For another, this is the first paper to measure digital movie sales. Both physical and digital sales of music have been measured numerous times since the late 90s, as well as DVD sales and box office receipts, but until now there has been no data on digital movie sales and rentals.

Perhaps most interestingly, Danaher and Smith were able to show that the shutdown of Megaupload did not just correlate with the subsequent increase in digital film revenues but actually caused it. Filesharing denialists are quick to discredit the numerous studies showing negative effects of piracy on sales by spouting that “correlation does not imply causation”, but by looking at the data country-by-country and comparing sales with Megaupload’s penetration rate in each country, the researchers were able to conclude that the shutdown “caused some customers to shift from cyberlocker-based piracy to purchasing or renting through legal digital channels.”

Also interesting is the discussion from Danaher and Smith at the end of the blog post announcing the study. The authors say, “While some have argued that you can’t compete with free, we think a more productive view is that competing with free (pirated) content is just a special case of price competition.” They note that convenience is sometimes more important that prices to consumers and explain that “we would expect that some consumers would be willing to buy through legitimate channels if content in those channels is more valuable than the ‘free’ pirated alternative.” But then they apply the results of their study to this line of thinking:

[W]e believe that another key part of competing with free piracy can be making content on illegal channels less valuable to consumers. In this regard, our finding of a 6-10% increase in digital movie revenue suggests that even though shutting down Megaupload didn’t stop all piracy, it was successful in making piracy sufficiently less reliable, less easy-to-use, and less convenient than it was before, and some consumers were willing to switch from piracy to legal channels as a result.

Taken this way, one might say that enforcing against piracy is necessary to ensure a vibrant, functional marketplace for expressive works online (though this alone is not sufficient). That’s not to say that the goal must be the complete elimination of piracy (that has never been the reality), nor is it to say that there is not a point where the costs of enforcement (monetary or otherwise) overtake the benefits. Efforts to mitigate piracy also do not need to be limited to law enforcement efforts or new legislation. They can include voluntary, market-based solutions aimed at education, like the Copyright Alert System that began operations on Monday, or reducing financial support of infringing sites, like the Statement of Best Practices to Address Online Piracy and Counterfeiting adopted last year by the Association of National Advertisers and American Association of Advertising Agencies.

But simply ignoring online infringement, and the harm it causes creators of all levels, forestalls the development of that vibrant marketplace and impedes the progress of the arts and sciences.

Footnotes

  1. See Smith & Telang, Assessing the Academic Literature Regarding the Impact of Media Piracy on Sales (Aug. 19, 2012), “Based on our review of the empirical literature we conclude that, while some papers in the literature find no evidence of harm, the vast majority of the literature (particularly the literature published in top peer reviewed journals) finds evidence that piracy harms media sales.” [↩]
  2. See, for example, Joe Karaganis, Media Piracy in Emerging Economies (SSRC 2011). Note that this report’s conclusion, that “After a decade of ramped up enforcement, the authors can find no impact on the overall supply of pirated goods,” does not contradict the findings of the study discussed here. Even if true, it would seem that supply of pirated goods is a meaningless metric, especially where, as here, the goods are capable of infinite reproduction. [↩]
  3. Danaher, Smith, Telang, and Chen, The Effect of Graduated Response Anti-Piracy Laws on Music Sales: Evidence from an Event Study in France, Journal of Industrial Economics (forthcoming). [↩]
  4. Liang & Adermon, Piracy, Music, and Movies: A Natural Experiment, Working Paper, Uppsala University, Uppsala, Sweden (2011). [↩]
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Friday’s Endnotes – 06/08/12

June 08, 2012 · · 1 comment

‘South Park’ Wins ‘What What (in the Butt)’ Legal Fight — The Seventh Circuit affirmed a lower court’s ruling that a South Park parody of the viral video “What What (in the Butt)” was fair use. What’s notable here is that the ruling was made on a motion to dismiss, before any discovery had commenced. The court’s ruling could lower the risk of litigation for legitimate fair users.

Getting Paid is a Moral Right, too! Why Creative Commons Gets it Wrong — The 1709 Blog presents this compelling look at Creative Commons licensing from legal scholar Dr. Mira T. Sundara Rajan. “In the United States, artists who want moral rights can opt for licensing their work through Creative Commons, but (unless they choose to license only a few select works to benefit from ‘free advertising’), they cannot expect to enjoy moral rights protection and earn money from their work at the same time. Welcome to the future?”

Scenes From The Pounding Heart Of A Tech Bubble — Buzzfeed’s Jack Stuef paints a picture of TechCrunch Disrupt NYC, New York City’s largest startup conference, that is bustling with absurdity. “‘We’re the original tech vertical,’ he said, then paused. ‘It’s an ironic thing because it is disruptive,’ he continued, staring unblinkingly into my eyes. I still don’t know what that meant.”

Artists, Know Thy Enemy – Who’s Ripping You Off and How… — Another great post from The Trichordist: “Let’s be clear about this, our battle is with businesses ripping us off by illegally exploiting our work for profit. This is not about our fans. It is about commercial companies in the businesses of profiting from our work, paying us nothing and then telling us to blame our fans.”

B&N: DOJ e-book suit endangers consumers, bookstores and copyrighted expression — Barnes and Noble weighs in on the Fed’s anti-trust suit involving e-books. According to PaidContent, “B&N argues that the proposed settlement is a government action ‘analogous to a cartel imposing a detailed business model on publishers.’ It would transform the DOJ ‘into a regulator’ and would ‘injure innocent third parties, including Barnes & Noble, independent bookstores, authors, and non-defendant publishers; hurt competition in an emerging industry; and ultimately harm consumers.’”

BitTorrent Admin Jailed For Tax Evasion On Site Donations — “The former administrator of the PowerBits private tracker was found guilty of copyright infringement and tax and accounting fraud after he failed to register donations provided by the site’s users as income with the tax authorities. He will serve one year in prison.” Perhaps Sweden needs to innovate instead of relying on its outdated business model of “collecting taxes.”

Guest Post: Is Copyright a threat to Free Speech? by David Newhoff — Filmmaker Newhoff provides this provocative article arguing that, rather than clashing, copyright and free speech complement each other. “If the U.S. is founded on one idea above all others, it’s that there is a link between free enterprise and freedom itself. Yes, this ideology has its flaws, and we’re still living through the economic woes of certain kinds of enterprise run amok; but let’s not throw out the baby with the bankers just yet.”

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