"Film Pirates: Should Hollywood Beat 'Em or Join 'Em?"

Carl Horowitz

11/11/2006 12:01:00 AM - Carl Horowitz

Few things grate against one's sensibilities than the image of someone getting something for nothing. Unless it's a gift, "theft" is a word that often comes to mind.

The subterranean world of film piracy is about getting something for nothing. These pirates, mainly operating in cyberspace, not the Caribbean, impose a major cost on the film industry and the U.S. economy as a whole. The true long-term cost, however, is far harder to discern, in light of a 30-year-old statute known as "fair use," and the near-impossibility of fully enforcing it.

The film industry trade group, the Motion Picture Association of America (MPAA), for at least five years has been urging Congress to pass anti-piracy legislation. It's now got ammunition in the form of two recent reports.

The first, done by L.E.K. Consulting for the MPAA, concludes that major U.S. movie studios lost $6.1 billion in 2005 to piracy. About 80 percent of that figure resulted from piracy outside the U.S., with Far East Asian countries leading the way. Some $3.8 billion was lost through hard copy, and another $2.3 billion through the Internet.

Another report, released by the Lewisville, Tex.-based Institute for Policy Innovation (IPI), concludes this estimate is actually on the low side, taking economic ripple effects into account. The author, Washington, D.C. consultant Stephen Siwek, puts the annual cost of movie piracy to the U.S. economy at $5.5 billion in earnings, $837 million in tax revenues, $20.5 billion in industrial output, and 141,030 lost jobs. Of the $5.5 billion in lost earnings, Siwek estimates, $1.9 billion would have been earned by workers in the motion picture industry.

Organizations favoring unlimited downloading, such as the Electronic Frontier Foundation (EFF) and Public Knowledge, by contrast, see film pirates as guerrilla-capitalist innovators, latter-day Davids with personal computers and camcorders doing battle with the Hollywood Goliath. The EFF website doesn't mince words: "You should be able to make personal use of your media...whenever, and wherever you want. Great gizmos make that possible..."

Kaiser Kuo, writing for the Chinese media blog site www.danwei.org, opines, "All those Hollywood movies and all those CDs flooding the streets of Chinese cities have provided unprecedented exposure for young Chinese to the cultural output of the West."

In a way, the rationale is flattering. Piracy, like it or not, does provide exposure. Two of the most successful Hollywood filmmakers of the last 20 years, Ang Lee (Taiwan) and John Woo (Hong Kong), come from that part of the world.

But such words also are disturbing. They suggest, as an analogy, that so long as there are empty seats at a major league baseball game, there's nothing wrong with crashing the gates. After all, my freebie neither affects the game's outcome nor diminishes anyone's revenues or salaries. Plus, by telling my friends about the game, I am widening the audience for baseball.

The point is that there is an inevitable gray area between creative borrowing and outright stealing. At some point, holders of intellectual property must have recourse if copyright law is to mean anything.

Defenders of film piracy have their trump card: the fair use exception. Federal law, they argue, protects free access to media, including a right to make reproductions without anyone's permission. It does, actually, up to a point.

The basis for defining fair use is Section 107 of the Copyright Act of 1976. In clarifying common law, as well as Article I, section 8, clause 8 of the U.S. Constitution, Congress set forth four factors in determining the legality of using copyrighted work without obtaining permission: 1) the purpose of the use; 2) the content of the work; 3) the amount and proportion of the complete work copied; and 4) the effect of the use upon the work's potential audience or market value.

Under a reasonable interpretation of the law, a high school history teacher covering the Civil War shouldn't have to get studio permission to show students Gettysburg, Gods and Generals and Cold Mountain. But that right doesn't extend to renegade entrepreneurs who make and sell unauthorized copies through street vendors or file-sharing software.

Back in 1984, well before the Internet age, the U.S. Supreme Court issued its landmark decision, Sony Corp. of America v. Universal City Studios, Inc. The court defended the sale of video cassette recorders for private home taping. Writing for the 5-4 majority, Justice John Paul Stevens sensibly observed that prohibiting noncommercial uses that had "no demonstrable effect upon the potential market for, or the value of, the copyrighted work...would merely inhibit access to ideas without any countervailing benefit."

Film industry leaders, while not necessarily discounting the importance of the ruling as a catalyst for such innovations as CD burners and iPods, argue that the decision, intentionally or not, has given a green light to activity not meeting any fair use criteria.

As a matter of practical necessity, it is often necessary to bite the bullet and allow unauthorized use. If copyright exclusivity were enforced with fetishistic zeal, tens of millions of Americans by now would have been fined and/or jailed for "crimes" committed at Kinko's. Bar bands across our land would have to secure copyright permission every time they cover another artist's song.

Yet when exceptions become commonplace, at some point they're not exceptions anymore; they're the rule. Even lawmakers and jurists sympathetic to the need for safe harbors from copyright infringement suits understand that free use of another person's work has its limits.

Certain members of Congress want a narrower interpretation of fair use. Nearly a year ago Rep. James Sensenbrenner, R-Wisc., backed by Rep. John Conyers, D-Mich., introduced legislation, the Digital Transition Content Security Act (H.R. 4569). The measure would outlaw the manufacture or sale of electronic devices that convert analog video signals into digital ones, unless the makers of encoding devices adhere to an industry-approved plan to curb redistribution. Even assuming compliance, the maximum allowable pixel resolution would be 720 x 480.

Such restriction, say backers, is necessary because anyone with a PC-based digital video recorder can convert copyright-protected digital material to an analog format, strip away the protection, and shift the material back to a digital format, and with only a negligible loss in visual and sound quality. MPAA Chairman Dan Glickman believes the bill "will promote more consumer choice as it protects copyright owners in the digital age."

Opponents think otherwise, and are ready to do battle, as they did, successfully, in the last Congress against the Senate's "Induce Act." Public Knowledge President Gigi Sohn, in recent House testimony, stated the Sensenbrenner bill would mandate a "one-size-fits-all technology that has not been the subject of public or even inter-industry scrutiny." She added that last year's unanimous Supreme Court ruling in MGM v. Grokster gives ample copyright protection against abusive peer-to-peer file-sharing anyway (the defendant, Grokster, had to pay $50 million in damages to movie studios and record companies).

The best way out of this impasse may be for Hollywood to join the bastards rather than sue them. Film studios have taken legal action against any number of ISPs and individuals, but over the long run, they may find the approach of iTunes Music Store (available from Apple Computer, allowing Mac and PC users to legally discover, purchase and download music) more profitable and less time-consuming. The phenomenon of YouTube, just sold to Google, Inc. for a cool $1.65 billion, gives testimony to that.

Writing in the Richmond Journal of Law & Technology, Anna Engelman and Dale Scott observe that while "e-piracy is clearly theft," filing lawsuits is not realistic at a time when 400,000 to 600,000 movies are illegally downloaded each day. Hollywood, argue the authors, "should not waste valuable resources and damage public goodwill by pursuing e-pirates in court," especially since many of the violators are minors.

Searching for compromises with unauthorized users may well lessen the need for lawsuits over the long run. Still, piracy too often harms our economy; rips off studios and filmmakers; and breeds contempt for the law. Those are sound reasons for discouraging it.