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October 13, 2017

Copyright Provisions in a Renegotiated NAFTA: Setting the Record Straight

 
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I’ve done a lot of work on the role of intellectual property in trade agreements, so when nuttiness makes its way into the mainstream, I tend to notice.

If you’re interested in some of the work I’ve done on IP and trade, here’s a little:

Anyway, recently, the anti-copyright coalition Re:Create’s Executive Director Josh Lamel wrote an op-ed in “The Hill” claiming creative industry calls for modern, strong copyright provisions in NAFTA that reflect lessons learned about internet ills since the DMCA was enacted in 1998 “would cripple the creative economy and the internet economies.”

To support his bizarre and counterintuitive assertions, Lamel relies on dubious claims and ends-driven research. To help everyone see through Re:Create’s artifice, I set the record straight below.

Bottom Line: Copyright is critical not only for promoting American creativity and powering the diverse array of U.S. sectors that rely on it, but is also vital for driving U.S. economic growth, growing good American jobs and fueling a healthy balance of trade.

MYTH #1: Hollywood wants U.S. trade negotiators to believe that they alone represent “creators.” Yet they continue to neglect the interests of millions of creators who create using online platforms.

REALITY: Digital platforms do not speak for creators. More than 20 music industry groups and CreativeFuture—a coalition of more than 500 companies and organizations from across the creative industries, and more than 120,000 individuals—were among those who called out these absurd claims in various letters to the U.S. Trade Representative. 

Further, creators of all types, regardless of the medium they choose for distribution, rely on copyright and other IP protections to be compensated for their work. That’s why online platforms Lamel lists like Etsy, SoundCloud, Shapeways, Instagram and ebay all have IP policies, Terms of Use and Community Guidelines in place to entice creators to use their services.

But pointing to those services is intentionally misleading. All creators, whether users of those platforms or other distribution channels, are hampered in stopping websites dedicated to IP theft from distributing their creations because of abuse of safe harbors. Indeed, In March 2016 Google Search received 75,000,000 takedown notices, or over 100,000 every hour. And in 2014 Grammy Award Winning Composer Maria Schneider testified before Congress that she now spends more time trying to protect her work than creating music because of the toothless nature of the DMCA’s notice and takedown process. 

MYTH #2: The old economic model — where creators had to enter complex deals with big studios and record labels to distribute their content — has been supplemented by a new world of tools for creativity and distribution.

The notion that new online platforms free creators from the drudgery of “complex deals” is silly. While it’s true that online platforms like YouTube allow creators to monetize their content, they require creators to sign one-size-fits-all contracts to use their platforms. And the alternative to those terms is, essentially, “take this, or have it stolen online and get nothing.”

Or perhaps the “complex deals” Lamel is referring to are the hard-won collective bargaining agreements achieved by creative industry workers with mainstream producers and distributors? Those agreements allow for creative workers to make a living, support their families and educate their children—something “new world tools” offer only to a precious few.

The paternalistic assertion that limiting the contractual freedom of creators is something they should be grateful for should be dismissed out of hand.

MYTH #3: Fair use industries equate to 16 percent of the U.S. annual economy … Meanwhile, a recent study found that weakened safe harbors would result in the loss of 425,000 American jobs and $44 billion in U.S. GDP each year.

REALITY: This is the one that most drives me up the wall, because those studies, produced by anti-copyright trade groups CCIA and the Internet Association, are misleading. The CCIA report counts the recording, film, TV, book publishing, video game and other copyright dependent industries in their calculation of the “fair use” economy. Just as they call for the exception to swallow the rule in practice and law, their economic calculations are based on the exception and ignore the rule. Those calculations also fail to substantiate a tangible economic problem, ignoring the fact that the companies represented by such anti-copyright trade groups have greater market share outside the United States than they do here.

Pointedly, the most common basis of a fair use defense is that the use is non-commercial. How can there be billions of dollars of economic production based on fair use, if fair use is by definition non-commercial?

Moreover, credible, independent research by the Phoenix Center for Advanced Legal & Economic Policy Studies Chief Economist Dr. George Ford has made plain the costs to content owners of ineffective notice and takedown procedures. And further research by Ford demonstrates that abuse of safe harbors is costing the recording industry up to $1 billion in lost licensing revenue on YouTube is the U.S. alone.

MYTH #4: U.S. wholesale revenues from music increased 9.3 percent in 2016 … Online streaming and other online platforms like Netflix, YouTube and Hulu actually help drive down infringement and theft — despite Hollywood claims.

REALITY: The music industry is finally seeing growth after watching their revenue plummet for years. From 2001-2015, U.S. recorded music industry revenues went from almost $14 billion to $7 billion. During that same time period, Google went from receiving thousands of takedown notices annually to more than 1 billion in 2016 alone.

Furthermore, legal online options for content are ubiquitous. There are over 400 legal online video services and more than 400 authorized sites worldwide for music. Lamel’s assertion that piracy can be solved merely by more legal availability is a red herring. For instance, it was recently reported that the season seven premiere of “Game of Thrones”— which was available online globally at the same time it premiered on television—was viewed illegally a staggering 187.4 million times. It was viewed legally 16.1 million times.

MYTH #5:  81 percent of venture capitalists indicate that stronger safe harbor provisions are more important than strong economic conditions in deciding whether or not to invest.

REALITY: This Google-commissioned survey asked 189 angel investors and 24 venture capitalists if increased legal liability for online platforms might make them less likely to invest. No shock here: they answered yes.  

But as I previously noted in a blog about a similar survey:

“The notion that investors account for legal liability as they choose their investments isn’t insightful or new. And the idea that a VC might choose not to invest in a new business built on facilitating access to unlicensed copyrighted content shouldn’t be either …

Copyright laws aren’t written to reduce risk for billionaire VCs – they’re written to incentivize the creation of new cultural works, which benefit us all. In fact, when VC’s want to invest, they are reassured by strong patents. So it’s not at all surprising that VCs would want strong intellectual property protections for their investments but weak rights for those they intend to consume. But don’t those on the other side of the transaction naturally want and deserve similar intellectual property protection? …

In other words, if you’re a VC investor in content rather than in digital intermediaries, you have a whole different attitude toward copyright.”




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