Ridiculous: Lamar Smith Basing His Plan To Massively Regulate The Internet On False Or Misleading Research

from the that's-just-scary dept

It is estimated that intellectual property (IP) intensive industries provide jobs to more than 19-million Americans and account for more than 60 percent of US exports. Despite this enormous positive impact, these industries endure tremendous losses at the hands of increasingly organized and sophisticated foreign-based counterfeiters and pirates.

A February 2011 Frontier Economics report[1] estimates the total value of counterfeit and pirated goods in 2008 and projects the impact in 2015. In 2008, the report concludes the total global economic value of counterfeit and pirated products to the G20 economies alone ranged from $455 to $650 billion annually. The report notes this estimate was likely to be �conservative� for years beyond 2008 �given the rapid increase in counterfeiting and piracy observed between 2005 and 2008.� The report projects the impact could rise to $1,220 to $1,770 billion in 2015.

On the subject of digital piracy, Frontier found digitally pirated music, movies and software accounted for between $30 billion and $75 billion in value in 2008 and estimated an impact of between $80 billion and $240 billion in 2015.

An earlier Frontier study entitled �The Impact of Counterfeiting on Governments and Consumers� concludes that �approximately 2.5 million jobs have been destroyed by counterfeiting and piracy�[3] across the G20 economies. The report adds that no attempt was made to measure the secondary impacts of employment in G20 economies (i.e., suppliers, retailers and other sectors in the supply chain) or the impact on non-G20 economies.

Two other recent studies provide new insight into the scope of infringing traffic on the global Internet as well as the scale and complexity of the online counterfeiting and piracy problem. In the first, a report[4] finds that nearly one quarter (23.8%) of global Internet traffic infringes on the trademark or copyrights of intellectual property right holders. The report also estimates that approximately two-thirds of BitTorrent traffic was illegitimately shared content.

The second report[5] surveyed 22 legitimate trademarked brands revealing that sites offering pirated content and counterfeit goods generated 53-billion visits a year. In a release, the study‟s authors note that �[g]iven the large number of popular brands, it is reasonable to assume that hundreds of thousands of other rights-holders, brands and content creators are suffering the same damage.�

According to the report, �domains classified as �digital piracy‟ attracted the highest levels of traffic with a high in excess of 32-million daily visits on average for the most trafficked domain � rapidshare.com. On an annual basis, that traffic equates to more than 11.8 billion visits per year for that site.� The report further states that the �three [most-trafficked] digital piracy sites generate more than 21-billion visits per year.�

As damaging and extensive as digital piracy is to IP right holders, the harm is not confined to companies. The �2010 Digital Music and Movies Report: The True Cost of Free Entertainment�, which was conducted by security technology company, McAfee, reveals a growing number of cyber threats associated with �free� online music and videos. For instance, the researchers determined that searches for free music ringtones resulted in a 300-percent increase in the riskiness[6] of sites returned by major search engines. Searches for �MP3s� and �free MP3s� resulted in even greater risks.

The harms caused by digital piracy don't take into account the human suffering inflicted by dangerous counterfeit goods sold over the Internet. A March 2011 report by the US Government‟s Counterfeit Pharmaceutical Inter-Agency Working Group warned of the increasing challenges posed by thousands of websites that peddle harmful and/or counterfeit drugs or drug without a valid prescription in violation of federal law.

In addition to the obvious harms to consumers posed by criminals who traffic in counterfeit pharmaceuticals, health and safety concerns also negatively affect our men and women who serve in uniform as well. A 2010 GAO study revealed an alarming risk of counterfeit products entering the military supply chain and creating substantial danger to service-members

Director of US Immigration and Customs Enforcement (ICE) John Morton said �counterfeit and pirated goods present a triple threat to America. They rob Americans of jobs and their innovative ideas; fuel organized crime; and create a serious public safety risk. Counterfeiting has evolved to such a great extent that intellectual property thieves will sell just about anything that will make them a buck, with no regard for the integrity of the federal supply chain or the safety of our war fighters.�

A January 2010 study by the U.S. Department of Commerce estimated that counterfeit aircraft parts were �leading to a 5 to 15 percent annual decrease in weapons systems reliability.� The Commerce Department study, which surveyed military manufacturers, contractors, and distributors, reported approximately two and a half times as many incidents of counterfeit electronics in 2008 as in 2005. The Government Accountability Office (GAO) reported in March 2010 that a supplier who sold a package containing a personal computer circuit as a $7,000 counterfeit circuit for a missile guidance system had been paid $3 million as part of contracts worth a total of $8 million.

Based on existing civil and criminal authorities, ICE has seized 350 U.S.-based[10] domain names that were investigated by ICE and ordered by federal judges to be seized after a showing the site is operating[11] in violation of criminal copyright or trademark laws. At least 86 of the domain names seized by ICE have been forfeited to the U.S. government. One foreign-owned site, Rojadirecta.com, which streams unlicensed and unauthorized sports programming over the Internet, has challenged the seizure of its domain name in federal district court.

These operations are not without critics. Some maintain ICE has overreached in this and related enforcement actions that involve child pornography investigations.

In response to concerns that H.R. 3261 may violate the First Amendment, the first provision in the bill, Section 2(a)(1), guarantees that the Act shall be applied in a manner that does not impose a prior restraint on free speech or the press. Constitutional scholar Floyd Abrams has also provided a detailed analysis of the free speech and due process implications of the bill and found it to be in complete accord with the Constitution and the rules that govern all civil litigation in US federal district court. A copy of his November 7, 2011, letter is on file with the Committee

In response to arguments that protecting American consumers and the US market from counterfeit and pirated goods delivered via the Internet establishes a dangerous precedent for repressive foreign regimes, the sponsors note that there is no moral equivalence between a US court issuing an order to enjoin continuing criminal activity and protect private property rights in full accord with the rule of law and the U.S. Constitution and a foreign regime that denies fundamental human rights to its citizens.

Finally, in response to assertions that permitting a federal district judge to authorize a service provider to apply the DNS solution to not deliver users to criminally-infringing websites, the sponsors note that Internet Service Providers already use this technique to ensure that subscribers do not gain access to websites that are associated with malware, spyware, viruses, child pornography or other unsafe or undesirable material.

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Well, this is unfortunate. As the House Judiciary Committee's "markup" process is underway for SOPA, chair (and sponsor of the bill) Lamar Smith has sent around a memo concerning the markup and defending the bill against widespread criticism. The memo is embedded below. It gives you some of the reasons why he's supporting the bill... and it's absolutely ridiculous. Much of the "evidence" he uses to defend the bill is clearly false or misleading, some of which was debunked ages ago. This is not how legislation should be put in place. In fact, it's the exact opposite of how legislation should be put in place. I'm against faith-based legislating where people decide to create legislation based on a belief, but perhaps it's even worse when the legislation is given theof being supported by facts, but the reality is that those facts are either falsified or misleading.Oh goodness. Not the bogus "19-million" jobs in "IP-intensive industries" again. That data point is so misleading and so downright stupid that anyone quoting it shouldn't be allowed within 100 feet of the legislation making mechanism. The clearmade by those who used this stat is that all of those jobs (1) need intellectual property protection for those jobs to exist and (2) that those jobs would be better or there would be more of them if IP law was stricter. Unfortunately, neither of those key assumptions holds up to any scrutiny. First, the "job count" is based on very, very, very loose classifications, and assumes that anyone and everyone who has a job in any industry that IP covers has a job because of IP laws. That's ridiculous. Technically it would mean that me and my staff are all included in that 19-million, yet we reject copyright on our content. It would also mean the entire tech industry, almost all of whom are totallythis law, are included in those 19-million. When huge parts of the people you claim to be protecting are telling you you're not helping at all, perhaps it's time to dump this bogus statistic.More to the point, since that stat says absolutely nothing about the need for stricter IP laws, CCIA conducted a studyand found that exceptions to copyright law contributed significantly more to the economy than copyright law. So, as we've said before, if you're going to pull out this ridiculous number and insist it's accurate, in order to be intellectually honest and consistent, then youto also admit that those 19 million would be better off with less copyright law, not more. After all, this is using the same methodology.But, of course, that would require intellectual honesty.Damn. $1.2 trillion in possible losses by 2015? That sure sounds high. Too bad the actual evidence says this is all a ton of hooey. I mean, total and complete garbage.Let's dig in. First of all, I was a bit surprised to see a quote from "Frontier Economics," since there are tons of other, much more credible, research on issues of counterfeiting. I was unaware of this Frontier Economics report until I read about it here. The footnote, however, notes that this report was "Commissioned by the Business Action to Stop Counterfeiting and Piracy (BASCAP)." And who is BASCAP ? Why they're yet another front group set up by the US Chamber of Commerce, the world's largest business lobbying group, who has put tremendous resources into getting this bill passed. You would think (wouldn't you?) that an intellectuallypolitician wouldn't rely on stats written by the lobbyists trying to pass the bill. You would think. And while we're talking about intellectual honesty, why not just say upfront that the report was by the US Chamber of Commerce, rather than naming its front group, BASCAP?And, really, if you're going to look at claims regarding counterfeiting, why not use the government's own Government Accountability Office (GAO)? Wouldn't that be just slightly more credible than using the lobbyists who want the bill passed? Well, the GAO has noted that claims of how much counterfeiting is going on has been totally and completely overblown by trademark holders, and there's no evidence to support those numbers. The same GAO put out a report last year that debunked industry reports on "piracy" and noted that none of those studies stood up to any scrutiny at all.If the GAO isn't good enough, how about the OECD? The OECD studied international counterfeiting rates and simply could not match the industry's favorite number of $200 billion (note: significantly lower than the Frontier Economics report above). In order to appease the US Chamber of Commerce, which was flipping out about this, the OECD put out a report that included some random "multipliers" based on guesses to suggest that the problembe worth $200 billion, but noted that the actual evidence didn't support this at all. What did the actual evidence show? Well, an independent analysis of the OECD's own research suggested that it massively exaggerated what the numbers showed , and the real value of counterfeit products was more like $5 billion. Okay, so one pretty detailed analysis by independent parties shows $5 billion... and one report from a ridiculously biased party claims $455 to $650 billion and rising to $1.22 to $1.77Who in their right mind would cite the obviously bogus, ridiculously high numbers, other than someone who is not legislating based on reality?So how did Frontier come up with their crazy estimates? Astoundingly, they relied on the OECD report as well. But rather than question the assumptions, Frontier took OECD as fact, decided that it didn't actually count enough stuff... and added even more multipliers to generate even larger numbers. Tellingly, the Frontier report explicitly warns users of the report not to assume that these values are, since it does not explore the substitution effect. And yet, it's clear by the implication in Smith's memo that he's doing exactly that, and expecting others in Congress to do the same.We've already discussed the questionable ancestry of this report, so no need to point out that the credibility here is entirely missing. But, again, the stats here simply don't add up to anything approaching reality, at all. Again, we'll point to the (credible, respected) GAO, which suggested numbers like this simply didn't pass the laugh test . Also, it's worth noting the other bit of sleight of hand here: using "the value" of these works. That lets you imply that these numbers represent losses. But anyone who is intellectually honest (there it is again!) has to admit that most of the people getting these works for free wouldn't be buyers anyway. So that number is essentially meaningless in actually determining the size of the problem.I went through the "earlier study" (pdf) and how they calculate this 2.5 million number appears to be something of a joke. At best, it looks like they picked a few small industries, then "decided" how many jobs were lost due to counterfeiting, and then did massive extrapolation. I'm not joking. This is not credible research. At all. To rely on this to make massive regulatory changes to the internet is downright scary.This is the infamous Envision study -- commissioned by NBC Universal , whose claim to fame is that the company likes to completely hide its methodology , so people can't check to see if it's even remotely accurate. Of course, even if we assume that the Envision report is accurate, once again, that makes no statement on how much of that traffic is a substitution for people who will actually buy the products. At the same time, it's worth pointing out that another report has highlighted how Netflix takes up more traffic than BitTorrent (showing that the best way to "beat" piracy is to get more legitimate services going -- but that's made impossible by the ridiculous licensing demands of the folks lobbying for this bill. Furthermore, a separate report that compared Netflix traffic to Bittorrent traffic noted that if you converted everyone downloading BitTorrented films into Netflix customers... it would bring a grand total of $60 million more to the industry. In other words, while throwing out claims of large percentages of trafficimpressive, when you look at theon revenue, it's minimal, at best.That's the infamous MarkMonitor report. We debunked that one a few weeks ago, so I'll just do a little cut & paste of the next two paragraphs from the original Let's start with the 53 billion claim. Guess what? It's from a US Chamber of Commerce-funded study by an anti-piracy monitoring company called MarkMonitor. And the details suggest serious problems with the study . First, the study itself was based on Alexa, widely considered the least accurate web traffic measuring tool out there. Second, the number of "visits" to any site is an especially meaningless number -- especially when trying to discuss the actual economic impact of such visits. Who cares how many visits there are if we don't know anything about what people do on those sites?Third, a large percentage of those visits all come from three sites: RapidShare, Megavideo and Megaupload. These are three cyberlockers that the industry has declared as "rogue," but which have significant legitimate purposes. Rapidshare, in particular, has been repeatedly ruled to be perfectly legal, both in Europe and in the US . The company follows DMCA takedown rules and has plenty of legitimate uses. Including Rapidshare in these calculations makes the whole thing a joke. And none of those sites are involved in "selling" counterfeit goods that put US citizens in harm's way.Once again: Rapidshare has been ruled legal in the US (and elsewhere). Pretty freaking scary when US politicians are simplyof a company that has been judged legal.You know how you beat that? By getting companies to offer legit services. You know how you make it worse? By driving infringement further underground with poorly thought out laws, like SOPA. Congrats, Lamar Smith, you're making the problem worse.Um, the "harms" caused by digital infringement don't take into account the issue of counterfeit drugs, because they're. You know what else doesn't take into account the human suffering inflicted by dangerous counterfeit goods? Nearly everything. Weather reports don't. Traffic. The time of day. Perhaps we should regulate them all with this bill too. Sheesh.Smith ignores the fact that the bill does not distinguish between truly counterfeit products that are dangerous, and legitimate grey market imports that tons of people, including huge numbers of senior citizens, rely on so they can afford the drugs they need to stay alive. The "problem" of counterfeit drugs is blamed for a ton, and is used as the key driver by supporters of SOPA. If they wrote a bill that just focused on that narrow problem, we'd be all for it. But don't use fear-mongering of fake drugs to regulate the entire internet.Oh hey, Lamar Smithknow about the GAO when they release reports that are useful to him rushing through bad legislation. Perhaps someone can explain to me why the military is buying counterfeit military equipment from "rogue websites"? Answer is... they're not. The counterfeit military supplies stuff has nothing to do with rogue websites whatsoever. Again, I have no problem with going after counterfeit military equipment suppliers. Just don't use that narrow problem to regulate the entire internet... especially when this has absolutely nothing to do with the internet. At all.Ah, Smith would quote Morton, the man who proudly censors the internet already. Note the massive conflation of a variety of different issues. And, really, the whole "organized crime" thing has been debunked so many times already, it's just sad to bring it up. Remember, it's based on "decades-old" anecdotes, not credible research, and does not take into account the fact that the internet has basically made it so such businesses are not particularly lucrative. That is, internet infringement actually cut out the bottom of the organized crime infringement business years and years ago. Bringing it up as if it's still true is just ridiculous, and certainly no basis for regulating the internet.Again, what does that have to do with rogue websites? Seriously. Someone provide an answer.It seems worth noting that multiple other siteschallenged the seizures, but the US government has denied them their day in court by filing secret extensions that they won't let anyone see, including the domain owners. Furthermore, Rojadirectastream the content. They embed or link to the content. If Lamar Smith can't understand the difference between hosting and embedding, that should disqualify him from regulating the technology. I mean, come on, this is basic stuff.Yeah, those are the only two sentences devoted to the backlash. Um, it's not just that there are "critics" or that they "overreached." It's that they took down 84,000 websites "accidentally" and they've been totally censoring other websites for over a year with no due process. That's not "overreach," that's called being totally unconstitutional.From there, the memo goes on to defend SOPA and totally downplay criticism.Okay, but is the letter from equally well-respected Constitutional scholar Laurence Tribe, which goes into great detail why Floyd Abrams' (who wrote not on his own behalf, but for the movie studios who employed him) analysis is lacking, on file? Or how about the letter from over 100 legal scholars , all noting that SOPA appears to violate the First Amendment? Just putting one paid-for representative of the movie studios' letter on file is no "response" to the criticisms. It's ignoring them.That's just silly. There's plenty of moral equivalence, and just because Smith wants to put his head in the sand over this, it doesn't mean that foreign countries aren't already using this system to mock our attempts to tell them that they need to keep the internet free. Furthermore, we've already seen how Russia has used claims of "copyright infringement" to stifle political speech criticizing the government. Do we really want to suggest more countries do the same? Smith is basically telling China that all it needs to do to keep censoring the internet is to declare anything it doesn't like as "infringing." What a legacy.It's one thing for a service provider to make a voluntary decision on how it runs its network. It's an entirely different thing for the government to get into the network management business.It seems clear that Lamar Smith is not troubled by facts or intellectual honesty. He's going to push this bill through using whatever trick he can come up with. It's a really sad statement on the state of politics in the US today. Lamar Smith's name should forever be branded with the fact that he tried to mislead his way into setting up America's first internet blacklist.

Filed Under: copyright, facts, lamar smith, markup, regulations, sopa