It’s weird. I’ve listened to particular songs on internet music stations many times over and over again, without paying for them, while I have paid for songs on iTunes and Amazon that I have listened to only once and may never hear again. I pay for expensive software that I use infrequently (like the Adobe Creative Suite apps), but I don’t pay for the programs that I use the most, like Eudora, iTunes, and Google apps. In short I will pay for digital products that I use when they demand payment, and not pay when they don’t. I certainly don’t have any problem with creators asking to be paid.
But while I will pay for “paid” digital stuff, I realize not everyone does. Because the logic of what is charged is so odd (see above), and because the consequences of not paying for paid products are unexpected and weird (see my essay Technology Wants to be Free), and because demands to be paid cannot be enforced with any effectiveness, I do have a problem with certain ways of trying to punish those caught using “paid” digital products for free.
Specifically, I find the snitching program of Business Software Alliance (BSA) to be a racket. The BSA will pay you to snitch on someone who is using commercial software without payment. But BSA will only pay you if they succeed is forcing a payment from the infringing institution. If they don’t get anything, you don’t get anything. In fact even if they get something you still might not get anything. As BSA says in its terms of agreement:
The decision to pay a reward based on your report and the amount of that award shall be within BSA’s sole discretion. A reward may be payable only if BSA pursues an investigation and, as a direct result of the information provided by you, receives a monetary settlement from the reported entity.
BSA reserves the absolute right, in its sole judgment, to determine whether it believes your report is reliable and accurate and whether and how to pursue your or any related piracy reports. You agree that you have no right to contest BSA’s determination.
If either BSA, a BSA member company or the reported organization initiates a lawsuit relating to the facts reported by the source in this case, a reward may not be payable to you. In such case and to the extent allowable by federal, state or local law or regulations, and by applicable canons of professional responsibility or similar guidelines, BSA may in its discretion reimburse you for your time and reasonable expenses for submitting the report, responding to BSA’s follow-up questions and attending or testifying. Any reimbursement paid will not be dependent upon nor any way connected to the outcome of the case or the content of your testimony, if any.
But here these are terms of employment because snitching for pay is a job (although you can work from home!) As the BSA terms say:
You must be eligible to work and receive wages in the United States or Canada. Prior to making any reward payment, we will require a Social Security Number for tax purposes.
According to a press release issued by BSA, it has paid out $327,000 in rewards since 2008, based on an average of 2,419 reports per year. In two years that’s 5,000 whistles blown. But very few informants are paid out because very few cases are substaintally lucrative. BSA gleefully reports those few that are. They recently reported:
Gibson Overseas paid $65,000 to BSA to settle claims that it had unlicensed copies of Adobe and Microsoft software installed on its computers. BSA was alerted to the unlicensed software use by a confidential report made on its web site www.nopiracy.com.
In business since 1979, Gibson is a leading manufacturer of tableware, cutlery, cookware, and more to every class of trade in the retail industry. “Gibson Overseas has cooperated fully with BSA throughout its investigation. While Gibson Overseas has made no admission of any liability regarding the allegations made by BSA, the audit performed by Gibson Overseas has permitted our organization to implement processes that will assure that software licensing issues do not resurface,” said a representative of the company.
There is probably a story there. Gibson does not admit to deliberate piracy, but made a payment. BSA does not crow about how much they paid the informant from their profit of $65,000.
And where does BSA get the valuations that they demand? Basically they make the numbers up. Damages are based on imaginary things. For instance they assume that each copy of pirated software is a copy that would have been bought, when it is obvious to everyone that a lot of software is pirated because someone would not, or could not, pay for it. For many products the culprits would have found an alternative program, either one free or less expensive, or even skipped the whole task. Then there is the retail cost of the product’s loss, which is a virtual loss, since by definition the property was duplicated for free. And finally the “damage” amount takes no account of the advertising value of these illicit copies which is unknown but greater than zero, since many casual pirates upgrade to paid copies of a favorite program over time.
Recently the US Government (not EFF or other copyright activists) compiled a report on the state of counterfeiting and its economic consequences. This report determined that:
Three commonly cited estimates of U.S. industry losses due to counterfeiting have been sourced to U.S. agencies, but cannot be substantiated or traced back to an underlying data source or methodology.
First, a number of industry, media, and government publications have cited an FBI estimate that U.S. businesses lose $200-$250 billion to counterfeiting on an annual basis. This estimate was contained in a 2002 FBI press release, but FBI officials told us that it has no record of source data or methodology for generating the estimate and that it cannot be corroborated.
Second, a 2002 CBP press release contained an estimate that U.S. businesses and industries lose $200 billion a year in revenue and 750,000 jobs due to counterfeits of merchandise. However, a CBP official stated that these figures are of uncertain origin, have been discredited, and are no longer used by CBP. A March 2009 CBP internal memo was circulated to inform staff not to use the figures. However, another entity within DHS continues to use them.
Third, the Motor and Equipment Manufacturers Association reported an estimate that the U.S. automotive parts industry has lost $3 billion in sales due to counterfeit goods and attributed the figure to the Federal Trade Commission (FTC). The OECD has also referenced this estimate in its report on counterfeiting and piracy, citing the association report that is sourced to the FTC. However, when we contacted FTC officials to substantiate the estimate, they were unable to locate any record or source of this estimate within its reports or archives, and officials could not recall the agency ever developing or using this estimate. These estimates attributed to FBI, CBP, and FTC continue to be referenced by various industry and government sources as evidence of the significance of the counterfeiting and piracy problem to the U.S. economy.
Creators of digital (and hard) products have a right to be paid if they demand it. Yet piracy is real, and that piracy can diminish the creator’s legitimate income. Those who use digital products unfairly should be stopped from doing so, particularly if the pirates are profit-making entities themselves.
Unfortunately enforcing intellectual property (which at the moment has very blurry lines) has become a business. And because the lines about property in this new realm are gray and ill-defined, this enforcement business, like all gray markets, has slid into a racket.
The BSA, RIAA, and MPAA are businesses. They make money by finding faults in others and extracting payments from them by exaggerating the economic consequences of the guilty’s wrongs. They get the pirates to pay them instead of the government, and then use some of that profit to lobby the government to uphold their exaggerated import. I call that a racket.
What’s not to like about this system? Why not run the whole country this way? Since private fault-finding companies have an economic incentive to find fault, they will not only find it, but will also do all they can to 1) increase the occurrences of faults they find, and 2) increase the valuation of each fault, and finally 3) decrease their cost of finding fault by crowdsourcing it. And of course this is exactly what we see BSA, RIAA, and MPAA doing.
We might start running the country this way except for one fact: it doesn’t work. The racket set up by BSA, RIAA, and MPAA does not significantly reduce piracy to any measurable degree. But it does work in making them richer.
I love free markets, even a free market for faults. Putting a private bounty on crime is clever. But the system set up by BSA in software, RIAA in music and MPAA in movies is not a free market. It is a racket because they have their thumb on the scales. They have had an outsized weight in crafting recent laws they hope to enforce, in exaggerating the costs of piracy, in hiring the fault finders, and in directly benefiting from the pirates they are policing. In any other arena we would call this closed circuit of self interest what it is: a clever scam.
You can join them and get a job as a piracy snitch. They may or may not pay you. If they do, watch their thumbs.
What to do? Break the racket 1) by letting someone other than the beneficiaries determine their awards; 2) base injury on scientific evidence; 3) don’t fund informants, and 4) make this policing financially transparent, as real police do (or should).