If Washington is adept at anything, it's coming up with solutions that are worse than the problems. Two bills moving through Congress at the moment seek to protect copyright owners -- in particular, movie studios -- from the threat of digital piracy. To be clear, commercial piracy of movies is wrong and should be stopped. According to the Motion Picture Association of America, the principal supporter of this legislation, more than 90% of pirated movies can be traced to illegal recordings made in movie theaters with camcorders so you might think that this new legislation would target clearly illegal sources of piracy.
But rather than take on actual criminals, this proposed legislation greatly expands the power and reach of the federal government to target lawful consumers and entrepreneurs on the Internet at the expense of preserving the freedom and dynamism that has made the Internet a great source of wealth, jobs and innovation for the last two decades. The Senate version, the PROTECT IP Act (PIPA), was voted out of committee last May, while the House version, the Stop Online Piracy Act (SOPA), was just introduced in the Judiciary Committee yesterday.
The copyright owners are rightly concerned about their property. And to be fair, the balance among IP protection, freedom of speech and online innovation is a delicate one with no easy solutions. Yet the two bills swing the balance irresponsibly in the copyright owners' favor at the expense of all Americans who use the Internet every day.
Yesterday, the Consumer Electronics Association (CEA) hosted more than a dozen venture capitalists who are urging Congress to oppose passage of the two bills, because of the danger they present to Internet start-ups and U.S. competitiveness. In fact, many of the VCs who came to Washington with CEA were among the 130 entrepreneurs, founders, CEOs and executives, who collectively have been involved in 283 technology start-ups, who wrote a letter to Congress in opposition of PIPA.
"As investors in technology companies, we agree with the goal of fostering a thriving digital content market online," the letter states. "Unfortunately, the [PROTECT IP Act] will not only fail to achieve that goal, it will stifle investment in Internet services, throttle innovation, and hurt American competitiveness."
The VCs have a right to be concerned. The way the PROTECT IP Act, as well as its companion SOPA bill in the House, were written, copyright owners -- movie studios and other content providers -- would be able to effectively shut down a website simply by accusing it of copyright infringement. Equally disturbing, social networking sites like Twitter, Facebook and YouTube, and blogs would be subject to liability in the event that a user posts content that infringes a copyright.
Imagine this law on the books in the early days of Facebook or YouTube, when both sites relied heavily on VC funding to survive. Armed with the PROTECT IP Act, a competitor conceivably could have shut them down -- if not forever, then long enough to chill any future investment -- on the flimsy charge that users were "stealing" copyrighted content.
When a bill granting such power is as broadly written as the PROTECT IP Act or SOPA, the potential for abuse, particularly by the notoriously litigious content industry, is very real. Technologies that the movie studios have in the past identified as enabling infringement include the DVD player, the DVR and the MP3 player.
This is where the bills' overreaching power would begin to affect average consumers. Once a site is identified as infringing on copyright, the government would erase any and all links to the site, as well as instruct Internet providers like Comcast and Verizon to cease all access to the site.
But the true threat of the PROTECT IP Act and SOPA is to American innovation, jobs, and the overall health of the U.S. economy. As Brad Burnham, one of the VCs who visited Washington yesterday, noted recently on his blog, the global management consulting firm McKinsey & Company issued a report that looked at 13 mature national economies over the last five years. McKinsey found that 21 percent of GDP growth can be directly attributed to the Internet, while the efficiencies created by the Internet put $64 billion into U.S. consumers' pockets in 2009 alone.
As Burnham notes, "So when considering legislation or regulation that would impact the basic structure of the Internet, we believe that legislators and regulators should be guided by a key tenet of the Hippocratic Oath 'FIRST DO NO HARM.'"
Other venture capitalists who were in Washington with CEA emphasize the same. Independent angel investor and former Google employee Derek Parham added, "I'm really scared about this law. So many start-up ideas are going to be prevented. Instead of two guys in a garage you're going to have two guys in a garage with four lawyers."
The PROTECT IP Act and SOPA will do plenty of harm, without providing any real assurance that they will stem the flow of digital piracy. The most egregious offenders of copyright infringement are offshore, "rogue" sites that take camcorded content, slip in and out of operation, and easily avoid government regulations. As a country, we need to address this criminal behavior, but not at the expense of harming our own ability to grow and innovate.
Fortunately, opposition to the two bills crosses party lines, and politicians from both sides are stepping up to fight its gross government overreach. While Sen. Ron Wyden, a moderate Democrat, has put a hold on the bill in the Senate, Republican presidential candidate Michele Bachmann has rallied Tea Party supporters to oppose the measures. Rep. Zoe Lofgren of California perhaps said it best, "[T]his would mean the end of the Internet as we know it."
But the real source of anti-PROTECT IP Act/SOPA movement comes from the wealth- and job-creators themselves; the VCs who came to Washington yesterday. They know what it takes to grow a business and help rebuild a foundering economy. It's time Washington listens to them.
Gary Shapiro is president and CEO of the Consumer Electronics Association (CEA), the U.S. trade association representing more than 2,000 consumer electronics companies, and author of the New York Times bestselling book, "The Comeback: How Innovation Will Restore the American Dream."
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