California Continues Protecting Hollywood: Imposes Greater Fines On Infringement Based On Faulty Reasoning

Copyright

from the protectionism-at-work dept

Paul Keating sent this one over a few weeks back, but just got around to going through the details. It appears that, as of January 1st, California (rather quietly) greatly increased (mostly doubled) the fines for “piracy” and “counterfeiting,” while expanding the definitions of what qualifies for these new fines, by passing two laws (pdf) late last year, based on questionable reasoning:

According to its provisions, AB 819 was intended to increase the state’s tax base and stimulate the economy by safeguarding the legitimate sale of intellectual property, and to send a strong signal that California is committed to protecting the intellectual property created by innovation and entertainment industries in the state.

In other words, here’s a gift to Hollywood so that it will pay more taxes. As for the specific reasoning behind these bills, it gets more laughable the deeper you dig into the specific text of the bill which is summarized in the document above. However, let’s go through the full findings:

(a) According to a 2007 study by the Institute for Policy Innovation, intellectual property piracy, meaning the theft of movies, music, software, and video games, costs the United States economy $58,000,000,000 each year.

This one is just sad. The IPI’s “methodology” for calculating such numbers has been debunked over and over and over again — most thoroughly by Tim Lee years ago, in which he highlighted how their methodology involved double, triple, quadruple counting of the same exact dollars to come up with their ridiculous sums. Of course, rather than improve their methodology, IPI’s response was to try to get Tim fired from his job. That the State of California would base significant legal changes on such a methodology is downright scary.

(b) The problem of intellectual property piracy continues to grow worse. A 2005 Gallup study found that 5 percent of Americans had purchased, copied, or downloaded counterfeit music in the preceding year. By 2007, this number had jumped to 9 percent. The percentage of respondents that admitted buying a pirated movie rose from 3 percent in 2005, to 6 percent in 2007. At the same time, once robust DVD sales have flattened over the past few years, while CD shipments to retailers have plummeted.

Correlation is not causastion. Doesn’t anyone in politics know this?

(c) The effect of intellectual property piracy on California and its citizens is particularly dire. Intellectual property piracy adversely affects the California economy, eliminates jobs, and damages industry. According to the Business Software Alliance, in 2003, software piracy alone cost the California economy more than 13,000 jobs, over $802,000,000 in wages and salaries, over $1,000,000,000 in retail sales of business software applications, and roughly $239,000,000 in total tax losses.

The BSA’s numbers are even more ridiculous than the IPI’s and have been debunked over and over again. Even the company that put together the numbers for the BSA had admitted that the BSA clearly exaggerates what they mean. For example, the BSA still insists on using a 1:1 unauthorized copy = lost sale argument, which anyone with an ounce of common sense knows is laughable.

These are the kinds of stats that the GAO had specifically warned governments not to believe. So why are California politicians believing them?

(d) Intellectual property piracy poses a significant threat to consumers, who, through no fault of their own, are often deceived or deliberately misled, or both deceived and deliberately misled, as to the nature of purchased products, whereby pirated goods are palmed off, including in electronic form, as legitimate authorized goods.

Citation needed. Seriously. A major citation is needed here, because the studies we’ve seen suggest something quite different. They suggest that, quite rarely are consumers confused. In fact, multiple studies have shown that counterfeiting usually isn’t a problem, because people know what they’re buying, know they’re fake, and often use them as incentive to save up for the real version later. Furthermore, many other studies have shown that the actual impact of counterfeiting is a tiny fraction of what the industry claims.

(e) A growing number of criminal organizations worldwide are involved in intellectual property piracy.

This is both questionable and misleading. This claim has been tossed around for years with little in the way of actual evidence to back it up. Yes, there are some organized crime groups involved in counterfeiting operations, but most of this bill is about infringement of digital goods. This is an attempt to conflate the two issues since the actual reasons for such a legal change is so incredibly weak.

(f) This act will send a strong signal that California is committed to protecting the intellectual property created by California’s innovation and entertainment industries.

(g) Finally, by safeguarding the legitimate sale of intellectual property, California will increase its tax base, and stimulate the economy.

That one sort of speaks for itself. Basically, here’s a bill designed as a favor to our friends in Hollywood. As for the claims that it protects the tax base, that’s also been debunked, as it’s been shown that such infringement almost certainly helps other industries at a much greater rate — and those industries pay more in taxes. Plus, all the money not spent on these things doesn’t just disappear, but still is spent in the economy (and taxes are paid on it).

It’s pretty sad to see California passing laws like this based on such ridiculously bad and debunked evidence.

Filed Under: california, copyright, fines, statistics