Homeland Security Mission Creep: “Intellectual Property Crime”

In recent columns I’ve examined how the extraordinary powers granted to the national security state post-9/11 for “fighting terrorism” have been used for much broader purposes: namely, increasing the state’s control over its own citizenry, and suppressing economic threats to the corporate interests that control the state. As we’ve already seen, this mission creep includes the use of police state powers to suppress anti-globalization activism, and the use of the “Drug War” to control the domestic population while protecting the black market drug profits of the terror state and its allies.

Yet another example is enforcement of so-called “intellectual property” law (which is not a legitimate form of property at all and is in fact utterly repugnant to the principles of a genuinely freed market).

As before, we take the scholarship of USAF Col. Jennifer Hesterman as a paradigmatic case. Col. Hesterman treats “intellectual property crime” as an important component of the phenomenon she studies: the intersection of transnational crime with the funding of terror networks. In her monograph “Transnational Crime and the Criminal-Terrorist Network,” she defines “intellectual property crime” as “the counterfeiting and pirating of goods that are then manufactured and sold for profit without the consent of the patent or trademark holder.” IPC, she says, “is more lucrative than drug trafficking, is less pursued by law-enforcement agencies, and the penalties if caught and prosecuted are far less severe than those for other criminal activities.”

On her personal blog, Counter Terror Forum, she celebrates the increased dedication of federal law enforcement resources to combating IPC.

“IPC,” she writes, “is a lucrative criminal activity with low initial investment and high financial returns, possibly even higher than drug trafficking. For example, a Nintendo game costs $0.20 to duplicate and is resold for $20 at flea markets on online, thus recognizing enormous profit for the criminals.” Hence “IPC… generates unbelievable amount of profit.” She quotes figures estimating counterfeit goods trade at $450 billion annually, resulting in US business losses of $200 to $250 billion.

I believe she’s getting it backwards. As with the drug trade, the main reason “IPC” is so lucrative is IP law itself. The real “intellectual property crime” is that Nintendo, with the help of coercive enforcement of monopoly privileges by the state, is able to charge an enormous sum of money for a game whose marginal cost of reproduction is twenty cents. The seller of “pirated” goods or knockoffs makes money by arbitrage: they compete by eliminating a major portion of Nintendo’s markup, but can still (thanks to competing with Nintendo’s price) charge a significant — if lesser — markup. As with the drug laws, if copyright law were eliminated, both Nintendo’s markup and the markup on the knockoff goods would evaporate, and the game would sell for marginal production cost.

So if the U.S. national security state really wants to eliminate black market funding of terrorism, all it has to do is repeal the drug laws and “intellectual property” law. But when it comes to this, the U.S. government, Disney and Al Qaeda are all on the same side.

In any case, the primary focus of U.S. copyright enforcement — and particularly recent increases in enforcement efforts — is against digital “piracy,” on behalf of such parties as the RIAA and MPAA. Such “piracy” is not lucrative at all — in fact the copyrighted work is downloaded free of charge. So the claim that crackdowns on file-sharing will result in less money for terror networks just doesn’t meet the smell test.

However transparently self-serving the “counter-terror” rationale, though, the national security state is indeed ramping up its enforcement efforts against (primarily digital) “intellectual property crime.” Following a “piracy” summit in December at which Joe Biden (formerly Senator from MBNA and now Vice President from Disney) compared digital file-sharing to a “smash-and-grab” at Tiffany’s, in February Attorney General Holder announced a new “IP task force” at the Justice Department. And last month Biden announced the dedication of fifty FBI agents to anti-piracy enforcement, while Homeland Security boasted (from Disney’s offices!) of raids on nine movie-sharing sites.

Al Qaeda must be shaking in their boots.