Theft of intellectual property


            The global problem of downloading music off the Internet illegally threatens to put many recording labels out of business, and continues to damage the worldwide economy.  In the United States, music piracy has cost the nation $12.5 billion. (“Techweb”).

            Since the advent of Internet piracy it is difficult for young artists to make a living in the business.  The music industry lost $186 million in store sales in 2005, with 20 percent of its employees laid off. (Henderson 25).

The music business has worked to find new stars and assist them in getting their music played on the radio.  But the climate today is different with recording labels unwilling to invest in an artist when customers will download the music for free. Artists have supported the passage of worldwide legislation to protect intellectual property in the age of Internet access (Henderson 25).

The Prioritizing Resources and Organization for Intellectual Property Act was signed by President George W. Bush in 2008.  It increased penalties for the infringement of copyrights and allowed for greater enforcement ability.  Patrick Ross, of the Copyright Alliance applauded Bush for signing the bill and said intellectual property theft robbed billions from the economy of the United States and costs the nation thousands of jobs (“Techweb”)

The downloading of music, videos and other software infringes on the rights of media producers, and record companies causing them tremendous economic hardship and challenges.  Although new laws have evolved to try to halt such piracy and intellectual property theft, it still continues in the global marketplace.

Theft of Intellectual Property

            The global problem of illegally downloading music off the Internet not only threatens to put many recording labels out of business, but it also dampens the growth of the worldwide economy. For instance, in the United States alone, music piracy, or the theft of intellectual property, has cost the nation $12.5 billion. Additionally, piracy costs the country 71,000 each year in jobs (“Techweb”).

            According to a report by NBC Universal, half of the nation’s economic growth is propelled by industries that are dependent on intellectual property. The wages in these industries pay 40 percent above the median average and give hope to increase exports abroad in an effort to decrease the U.S. trade deficit (Wright 22).

            Internet pirates in Hong Kong dared the music industry to stop them in their illegal efforts. TNS, a market research firm, stated that 130 million in software programs and music has been illegally downloaded in the last 2 ½ years since the advent of broadband (Lee and Lord). Illegally downloading such music is a violation of copyright law and could result in substantial fine. Hong Kong was a participant in the Berne Convention that dealt with the theft of intellectual property. However, the theft of music by illegal downloads in Hong Kong is on par with the theft of intellectual property within the United States (Lee and Lord).

            Five hundred Hong Kong residents ages 15 and above were surveyed and nearly half had illegally downloaded music off of the Internet. These youths join millions globally who cost the music business billions of dollars each year. Two students were arrested in Australia for running an illegal MP3 Internet site that had 1,800 songs available for download. This act alone cost the industry approximately $60 billion. The culprits received a suspended sentence of 18-months for their illegal act. (Lee and Lord).

            Worldwide there are Internet piracy teams working to uncover the illegal businesses. In Hong Kong, officials in a three-year period closed 39 cases. Since the unit was formed 123 cases have been handled with 17 cases of theft over the Internet, seven cases of the use of software without permission, along with one case of money-laundering. There were 85 cases which dealt with the pirating of compact discs (Lee and Lord).

            Canadian Music Creator Coalition spokesperson, Steven Page, of the Barenaked Ladies music group, said that outdated copyright laws in his nation are causing many young singers to give up because they cannot make any money. Similarly, Kelly Lee Evans, an Ottawa singer, said she needed people to buy her CD. She is a mother of two and wants a career in the music business (Henderson 25).

            Since Internet piracy it has become more difficult for the young artist to make a living. The music business lost $186 million in store sales in 2005, and 20 percent of employees had to be laid off. Canadians blamed outdated copyright laws (Henderson 25).

            Gwen Stefani sold a record 3.6 million copies of her “Love, Angel, Music, Baby” album in 2005 with Canadian sales topping 443,000. Stefani became the first artist to sell a million downloads in the United States alone. Based on her sales, Canadians estimate that she should have sold 120, 00 downloads. However, due to piracy, the singer only sold 25,000 CD’s by download. Unfortunately, for Stefani, Canadians preferred to illegally download her music rather than purchase the goods (Henderson 25).

            The music business has for years worked to find new stars and help them get their music played on the radio. Today, the climate is quite different with recording labels not wanting to invest in a new artist when the customer is merely going to download the music free of charge. Artists supported the passage of the worldwide legislation to protect intellectual property in an age when so many people have Internet access. (Henderson 25).

            In 2005, a total of 1.2 billion counterfeit CDs were sold. These statistics indicate that one out of three CDs is a pirated copy. Worldwide, 20 billion songs were downloaded illegally. In 2005 there were record numbers of seizures of CD copy equipment as well as pirated discs. There was strong enforcement levels in the countries of Mexico, Brazil and Spain but seizures doubled from one year to the next (Pain 22).

            In 2004 there was a 40 percent piracy rate in Brazil with a billion songs downloaded in an illegal manner. China also has a tremendous problem in the pirating of illegal discs with a rate of 85 percent in 2005. Piracy has increased rapidly since the unsought of broadband technology in China. In Greece there is a piracy rate of 50 percent with the legal sale of music dropping considerably in the last five years (Pain, 22).

            Organized crime is becoming more and more involved in the piracy of music and black-market activities. Italy has taken steps to increase police action but it is difficult in a nation with an estimated 2.7 million people involved in file sharing (Pain 22).

            Things are not any better in Mexico. In 2005 there were 110 million pirated products sold. Digital piracy is becoming a larger problem in Mexico with the downloading of $70 million worth of illegal music downloaded. In Guadalajara, Mexico, Operation Mexico Plus investigators worked to close illegal markets, and install legitimate music trading. Experts reveal the effort yielded moderate success.  Theft of intellectual property is also a problem in Russian where the nation has a poor record in prosecution of intellectual theft. One in four websites that are involved in copyright infringement are located in Russia. One such site, sells music globally without payment to rights holders or permission from record labels (Pain 22).

            In the nation of South Korea recent innovation in technology has resulted in broadband service that sends music to cell phones without any permission. In 2004, similarly issues occurred in Spain with illegal downloads at 500 million. Recent actions by law enforcement, however, has improved the problem even through 22 percent of downloaded material is done illegally (Pain 22).

            Of the software running in China, 90 percent is being used illegally. Although the Chinese government tells the west it will fight the illegal activity, there appears to be no real will to do so. In fact, many government offices in China are using unauthorized computer programs and software. Much of the problem in China has to do with the culture of its people. The Chinese have no real concept of intellectual property protection in the way that the west does. Prior to the 20th century, the emperors of the Chinese people had an interest in anything published without authorization. However, it was because they were concerned with what was being disseminated to the people. Over the years, the Chinese have come to view intellectual property as a burden placed upon them by foreigners. In was only in the 1980s that the Chinese came to realize that the theft of intellectual property was losing someone money (Alford)

            Anti-piracy investigators traced the music group, Placebo’s album, Meds across illegal distribution services. Law enforcement preceded in extending notice and take-down letters to sites that hosting illegal music. The effort was aimed at the first week Meds was released. However, within two weeks, investigators estimated it prevented the illegal download of 450,000 materials (Pain, 22)

            The Prioritizing Resources and Organization for Intellectual Property Act was signed by President George W. Bush in 2008. It allowed for the increase of penalties for the infringement of copyright and allowed for greater enforcement ability. Patrick Ross, of the Copyright Alliance applauded Bush for signing the bill and reiterated the fact that intellectual property theft robbed billions from the economy of the United States and costs the nation thousands of jobs (“Techweb”)

            The Institute for Policy Innovation in 2008 stated that more than 11 million United States citizens have jobs in the copyright field. The group estimated that the nation lost 400,000 jobs each year to counterfeiting and illegal downloading of property. With passage of the Bush law, the National Music Publisher’s Association indicated that creativity and innovation will be better protected. CEO David Israelite said, “Music publishers and songwriters are profoundly grateful.” (“Techweb”).

            Gigi Sohn of the group Public Knowledge opposed the bill and said it was unnecessary. She claimed there already was an imbalance between citizens and the copyright holders. (“Techweb”).

            The act made the infringement of copyright, piracy and counterfeiting offenses under the RICO statute. RICO stands for the Racketeering Influence and Corrupt Organization. The legislation blended seizure and forfeiture proceedings in Intellectual Property cases, including unauthorized motion picture and songs and trademark counterfeiting, and restitution for losses due to theft. It also banned exportation and importation of counterfeit materials and imposed more severe penalties for repeat offenders. In addition, title one of the law increased both civil and criminal penalties for intellectual property theft. Also, a new advisory committee was formed to develop a strategic plan to halt piracy and counterfeiting of products. Title five of the bill mandated that the government’s office for accountability, or GAO, audit the above stated committee to insure that there was no duplication of Intellectual Property related laws (Pyun 355).

            Throughout history few penalties have been given by court systems for the theft of intellectual property. As early as the 1970s, industry officials began to see the explosion in technology and the ramifications that could result in sales of pirated materials. When suspects for the crimes were brought to trial, however, only civil penalties were attached. Industry lobbying groups were organized to pressure Congress to strengthen copyright laws with the last 20 years bringing about tougher standards (Pyun 355)

            With the 2008 legislation, criminal penalties in the areas of trademark law and copyright regulations, along with a new impoundment and forfeiture provisions now act as criminal and civil sanctions for piracy and counterfeit violations. Opponents of the bill believe that it blurs the reasons behind the trademark and copyright laws (Pyun 355).

            For the purpose of trademarks, counterfeiting is classified as a “spurious mark which is identical to or substantially indistinguishable from a registered trademark affixed to goods” (Pyun 355). Using any form of counterfeit label in copyright law is a violation of criminal law. Scholars have asked if it is possible to violate trademark and copyright laws. Both can be violated if one sells illegal copies of music that features a counterfeit label (Pyun 355).

            Common law in the United States has long protected copyrights and the rights of the individual. In the 17th century England, piracy was a word used to describe any book printed that was unauthorized. After the invention of the printing press, the piracy of books became a flourishing offense. The attempt of government entities to try to halt the piracy was an important part in the decisions made in today’s laws (Pyun 355).

            In 1710 the British Parliament drafted the Statute of Anne for the purpose to alleviating the piracy of books. It gave book authors exclusive permission to have their work printed and then distributed. By the late 19th century, however, the problem Britain had with piracy expanded becoming a global problem. The United States was responsible for pirating British sheet music and books. Ninety percent of all sheet music that came from the United States to Britain were reprints of books that had been copyrighted in Britain. To solve the problem, England’s Music Publishers’ Association was organized to keep an eye on English copyrights. Additionally, the organization hired its own group of investigators, as well as volunteers, to try to halt the process. Chapel and Company v. James Fisher and Company, 1905), featured the prosecution of the defendant for the sale of 300,000 copies of sheet music by illegal means. The defendant, James Frederick Willets, went by the name “Pirate King.” (Pyun 355). He led the People’s Music Publishing Company that attempted to provide music on a cheap basis with the use of pirating. He received nine months in jail without benefit of hard labor. This case provided a strong foundation for copyright law in the United States (Pyun 355).

            The United States Constitution gives the Congress the right to protect artistic and scientific endeavors by giving artists rights to their products for a time that is limited. Criminal penalties have been given to lawbreakers of copyright law since 1897. In 1907 copyright laws were extended to cover all work if done for profit or “willfully.”  It created what was called the “state of mind” statute that distinguished a civil cause from a criminal act. This act had the first felonies for offenders with prior offenses in the area of copyright infringement. The Piracy and Counterfeiting American Act was adopted in 1982 and adopted felony charges for first time offenders of copyright violations. As a response to the increase in computer software, Congress amended the law ten years later to include felony penalties that embraced all copyrighted work. (Pyun 355).

            The idea of trademark protections goes back 4,000 years in the ancient societies of China Greece, Egypt, and Rome. Goods were marked in that day to identify their source. In colonial America copyrights were maintained through the different guilds. In 1791, Thomas Jefferson suggested the establishment of a Federal Trademark law to give exclusive rights to establish a system of trademarks. However, Congress rejected his proposal and merchants developed their own method of registration. In 1996 the first criminal laws in copyright and trademark arenas was developed into the Anti-Counterfeiting Consumer Protection Act (Pyun 355).

            The legislation mentioned above has resulted in criminal statutes today dealing with intellectual property. According to the legislation all copyright infringement must be done for commercial reasons with the item reproduced within 180 days. The value of theft must be over $1,000. It is also illegal to make any item on computer and distribute it for commercial gain (Pyun, 355).

            With the advent of the Internet problems associated with counterfeiting and piracy increased. United States industry less an annual loss in the area of $250 billion. Investigators now link such criminality to organized crime and terrorism. The first global effort to fight online piracy was called Operation Fastlink in 2004. The Federal Bureau of Investigation took on 120 searches that covered 27 states. In addition, 11 foreign countries were involved in the endeavor that targeted pirating sites called warez. These sites produced and released illegal copies of computer games, software and music by downloading and removing copyright protections embedded within the material. Illegal merchandise had an estimated value of $50 million. The results of the intervention were 175 arrests. Of those, 56 people were prosecuted with 12 as felonies. The last defendant found guilty was sentenced to 18 months in prison (Pyun 355).

            One year later as second sting operation called Operation Sitedown seized 118 computers, 13 laptops and a total of 4,567 CDs and DVDs that were counterfeit. The Prioritizing Resources and Organization for Intellectual Property Act was the final piece of legislation that resulted from all previous endeavors. The law takes the important step of moving copyright infringement from just an economic offense for the individual to a criminal offense (Pyun 355).

            Music industry executives were pleased with the passage of the PROIP Act but did not realize that critics would use the law to attack movie studios and record labels. The bill asked that the GAO study piracy and be able to quantify its damage. The Institute for Policy Innovation indicated that the entertainment industry suffered $12.5 billion in losses each year. They added that workers lost $2.7 million, with $422 million lost in tax revenue. The GAO told industry members that the figures they were citing could not be verified. In fact, the GAO recognized that piracy was a substantial issue but that there was no way to verify pirate activity as no records are kept (Sheffner)

            In 2007, Internet pirate Hew Raymond Griffiths was found guilty and sentence to four years in a jail in the United States. Griffiths, of Australia, served as reminder to other privacy violators that they will be prosecuted. Griffith was the leader of an Internet privacy group called DrinkorDie. Chuck Rosenberg, U.S. attorney stated that “whether committed with a gun or a keyboard-theft is theft” (Mitchell 37). Griffith was responsible for the theft of more than $60 million in software, games, movies and music (Mitchell 37).

            Although the piracy of music eats into the profits of big business, there was growth in the industry within 13 markets globally. Sales of music fell, however, in 2009 due to a decrease in the two largest markets of Japan and the United States (“Reuters”). Rapper 50 Cent said that the industry is not being killed by piracy but is providing new challenges that have to be overcome. “I don’t think the music business is dying. I just think we’re just experiencing technology and we just have to pass new laws, eventually, to change how music is being distributed.” (“New Musical Express”).

            The crisis in the music industry is best explained with the information that record label, EMI, may go out of business if substantial income does not come their way in the next few months. EMI was a major record label that made the Beatles and Pink Floyd household names. With the rampant amount of piracy in Britain alone, an estimated 7 million file sharers, the company is on its last legs. The album has always been the largest money maker for industries, but digital websites, even legal ones such as Apple’s iTunes, has taken money out of the label’s hands. Paul McGuinness, the manager of the band U2 said the industry as a whole is coming back from a near collapse. He said that change in the industry, including record label funding, can be substituted by corporate sponsorship. He added that the drop in the sales of CDs could be replaced by the sale of subscriptions to different music sites (Mostrous 12-13). The chief of UK Music, Feargal Sharkey said that the research indicated that 14-24 year olds would pay for a service that was legal. He said that the industry as a whole should move in that direction (Mostrous, 12-13).

            EMI executives encourage members of the industry to fight piracy. They encourage artists to let their fans know that the illegal downloading of music deprives them of income. EMI states that without income, the artists will not be able to continue to maintain their livelihood (Lee and Lord).

            Warner Brother’s executive, Darcy Antonellis explained that the development of legitimate options to the online piracy is important. She said that leaders in technology need to consider new business models that feature a method to protect the content from theft. She said that the “video-on-demand” idea what good if there was a method of securing the content. Unfortunately, according to Antonellis, many people see the theft of intellectual property as a victimless crime. She added that there is a generation of young people worldwide that believe piracy is an effective means of gaining access to entertainment. Antonellis expressed the notion that the gap between pirated material and the legitimate release of materials is declining, but encouraged industry executive to remain vigilant in the struggle against the theft of intellectual property (Gubbins).

            Members of the music community have asked those that download music illegally to consider the ethical viewpoint of their actions. In fact, surveys indicate most people do consider the ethical point of view, but that financial considerations take higher priority. Those that consider piracy think about the risk of getting caught, as well as the effects on the musicians themselves. (Coyle, Gould, P. Gupta, R.Gupta 1031). Nevertheless, with the recording industry losing as much as $5.33 billion in 2007, the reasons for piracy are of little comfort (“Techweb”).

            The industry was further ruffled with the Google vs. Performing Rights Society regarding UTUBE downloads. UTUBE, which is owned by Google, got into trouble for the exploitation of intellectual property. The company, however, was able to reach a settlement in the case, although it was controversial. According to the court, copyrighted texts that have been digitized by Google from libraries will not be available to readers. In addition, revenue is to be sent through a book registry. The only voice a writer will have is to be able to not participate in the program (McCrum 24).

            In conclusion, the downloading of music, videos and other software does infringe on the rights of media producers, and record companies causing them tremendous economic hardship and challenges. Although new laws have evolved to try to halt such piracy and intellectual property theft, it still continues in the global marketplace.

            The best method to stop the big business of media piracy is through the criminal prosecution of those involved. However, penalties remain insignificant when compared to the amount of money in the illegal businesses. Nevertheless, criminal prosecution does help in the countries of the west, but has not been successful in countries such as China. The Chinese have a different mindset when it comes to intellectual property theft and will continue to pose challenges to those who advocate against piracy.

            Other remedies to the problem of the theft of intellectual property include the development of new software that contains built in protections against such theft. Until such innovation, piracy will continue to threaten the livelihood of those in the entertainment business, while taking millions away from the global economy.

Works Cited

Alford, William. “Whose Property? Whose Rights.” CIO Magazine, 15, Sept. 2006: Feature Section, 1C.

“Artist 50 Cent Speaks out Against Piracy.” New Musical Express, 28, April 2010.

Coyle, James, Gould, Stephen, Gupta, Pola, Gupta, Peetika. “To Buy or Piracy: The Matrix of Music Consumers’ Acquisition-made Decision-making.” Journal of Business Research, 62, 10. (Oct. 2009): 1031.

“Groups Weigh in on Intellectual Property Act.” Techweb, (2008).

Gubbins, Michael. “Anti-Piracy Expert Calls for New Business Models.” Screen International, 11, Jan. 2005: Corporate Section.

Henderson, Graham. “Protect Artists: Reform Canada’s Copyright Laws.” National Post, 11, May 2006: Issues and Ideas, 25.

Lee, Matthew, Lord, Paris. “Illegal Downloads on Rise.” The Standard.  24, Jan.2004.

McCrum, Robert. “Google vs. Performing Rights Society,” The Observer, 22, Dec. 2009: Review Book Pages, 24

Mitchell, Peter. “Australian Internet Pirate Arrested.” Sunday Mail, 24, June 2007: Foreign Section, 37.

Mostrous, Alexi. “Label Threatens to go Under,” The London Times, 1, March 2010: National, 12-13

“Music Piracy Costs U.S. Economy $12.56 Billion Report Reveals.” Techweb. (2007).

Pain, Steve. “Music Industry Tightens Internet Policy.” Birmingham Post. 8, Jan. 2006: Technology Education, 22.

Pyun, Grace. “Pro-ipact: The Inadequacy of the Property Paradigm in Criminal Intellectual Property Law,” DePaul Journal of Art, Technology and Intellectual Property Law, (2009): 355

Reuters. “Worldwide Music Sales Drop in 2009.” National Post, 29, April 2010, Arts and Life, AL3

Sheffner, B. “Prioritizing Resource and Organization for Intellectual Property Act of 2008.” Billboard, 1, May 2010, Headlines.

Wright, Bob. “Intellectual Property.” New York Times, 3, February 2006, Section A, 22