• Since the dot-com bust reached bottom in early 2004, employment growth in the high-tech sector has outpaced growth in the private sector as a whole by a ratio of three-to-one. High-tech sector employment has also been more resilient in the recent recession-and-recovery period and in the last year. The unemployment rate for the high-tech sector workforce has consistently been far below the rate for the nation as a whole, and recent wage growth has been stronger.
• Employment growth in STEM occupations has consistently been robust throughout the last decade, outpacing job gains across all occupations by a ratio of 27 to 1 between 2002 and 2011. When combined with very low unemployment and strong wage growth, this reflects the high demand for workers in these fields.
• Employment projections indicate that demand for high-tech workers will be stronger than for workers outside of high-tech at least through 2020. Employment in high-tech industries is projected to grow 16.2 percent between 2011 and 2020 and employment in STEM occupations is expected to increase by 13.9 percent. Employment growth for the nation as a whole is expected to be 13.3 percent during the same period.
• Workers in high-tech industries and STEM occupations earn a substantial wage premium of between 17 and 27 percent relative to workers in other fields, even after adjusting for factors outside of industry or occupation that affect wages (such as educational attainment, citizenship status, age, ethnicity and geography, among others).
• The growing income generated by the high-tech sector and the strong employment growth that supports it are important contributors to regional economic development. This is illustrated by the local multiplier, which estimates that the creation of one job in the high-tech sector of a region is associated with the creation of 4.3 additional jobs in the local goods and services economy of the same region in the long run. That is more than three times the local multiplier for manufacturing, which at 1.4, is still quite high.

The counterfactual impact analysis of fair use amendments in Singapore undertaken here demonstrates that flexible fair use policy positively influences growth rates in private copying technology industries. In 2010, five years after the policy intervention, Singapore's fair use amendments are correlated with a 3.33% increase in value-added (as % of GDP) for private copying technology industries. Prior to the amendment of fair use policies, private copying technology industries experienced - 1.97% average annual growth. After the changes were introduced, the same industries enjoyed a 10.18% average annual growth rate. This resulted in a total increase of € 2.27 billion in value-added for private copying technology industries in that period. The results show that, prior to fair use amendments, the private copying industries in Singapore were in recession. After fair use amendments, this group experienced a rapid increase in growth rates and continued to exhibit strong growth over the five year period.

There was no significant change in growth rates for the copyright group before and after fair use amendments when measured in terms of real economic growth (value added as % of GDP).

We suggest fair use amendments in Singapore did not negatively affect the copyright industries significantly because private copying technologies, which experienced high growth as an industry group after the fair use amendments, increase the value of copyrighted works to consumers. While one might expect a rise in private copying technology industries to result in a significant recession for the copyright industries, this has not been the case in Singapore since the introduction of more flexible fair use policy in 2005.

The counterfactual impact analysis results for the Singapore case study show that fair use policy is correlated with higher growth rates in private copying technology industries, while having a very limited impact on copyright industries.

Copyright protection is essential to the health of the motion picture and music industries and the U.S. economy as a whole. Like the sale of “pirated” copies, unauthorized importation of copies of protected works made overseas and intended only for sale in a foreign market can undercut or eliminate the economic benefit that Congress intended to provide under the Copyright Act.

Extending the first sale doctrine to copies made abroad for distribution in a foreign market could impede authors’ ability to control entry into distinct markets, limit their flexibility to adapt to market conditions, or undermine territorial licensing agreements. If accepted, Kirtsaeng’s view of the first sale doctrine could thus prevent U.S. copyright holders from obtaining the economic reward Congress intended to provide under U.S. law to motivate investment in creative activity.

When copyright owners distribute tangible copies of creative works in a foreign market, they recoup the economic benefit made possible by the copyright law of that country, which may be substantially less generous or well enforced than U.S. copyright law. They do not realize the separate benefit Congress intended them to derive from their U.S. copyright. If those copies are imported into the United States without permission, the copyright owner might never obtain that full benefit.

Those harms, in turn, could have deleterious consequences for the U.S. economy as a whole. As of 2010, the motion picture and television industry supported 2.1 million jobs and nearly $143 billion in total wages in the United States.... In addition to the major motion picture studios, the industry supports a nationwide network of nearly 95,000 businesses throughout the 50 States. Id. The music industry employed over 25,000 paid employees as of 2004.... The industry supports many smaller businesses such as retail stores, distribution companies, recording studios, and music professionals. The retail trade alone generates over $7 billion from the sale of sound recordings... Maintaining robust copyright protection is thus crucial to preserving not only the health of these creative fields themselves, but also their substantial contributions to the national economy.

Part of the difficulty in contesting this view is that there is also very little research showing that exceptions are important, especially for driving economic growth. That makes a new report called "Excepting the Future" (pdf), commissioned by the Australian Digital Alliance, and pointed out to us by @MsLods, a particularly important contribution to the debate.

It starts by explaining why traditional copyright, devised in an analogue world, is no longer working:

digital content cannot be handled without copying it. Thus in the digital world, the distinction between handling and copying a work has completely broken down. All handling of digital content, however helpful to society or rights holders, may prima facie be a breach of copyright, attracting liability to rights holders if they have not permitted it.

Australia's current copyright system is ill-equipped to cope with key Internet activities like search and indexing, caching and hosting, since they all involve incidental copying. Theoretically, companies providing those services ought to seek licensing agreements with copyright holders to avoid infringement. The report calculates how much time and money would be required to do that in the case of search engines:

If the 170 search engines listed at www.philb.com/webse.htm transacted with all 3.8 million Australian domain name registrants [to obtain permission to allow their sites to be indexed], it would involve 645 million transactions. If each transaction took 9.5 hours [to allow for multiple communications and checks by the site regarding rights], then, at average weekly wages, the transaction costs would exceed $150 billion a year. And that is just for the Australian domain names.

Of course, these figures can, and probably will, be contested by those ideologically against copyright exceptions. But it's a start, and a welcome one in the context of the prevalent assumption that more copyright equates to more economic benefit.

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• The broad definitions in the bill create tremendous uncertainty for nearly every site online. This sounds like hyperbole, but it is not. Defenders of the bill like to claim that it is "narrowly focused" on foreign rogue infringing sites. Nothing could be further from the truth. While PIPA targets only foreign sites, the mechanism by which it does so is to put tremendous compliance and liability on third party service providers in the US. SOPA goes even further in expanding the private right of action to domestic sites as well. We've already seen how such laws can be abused by looking at how frequently false takedown claims are made under the existing DMCA. Of course, under the DMCA, just the content is blocked. Under SOPA all money to a site can be cut off. Under PIPA sites will just end up in court. Or, with both laws, an Attorney General can take action leading US companies to have to effectively act as network nannies trying to keep infringement from being accessible. None of this is good for anyone building a startup company these days. The massive uncertainty around this, combined with the need for a huge legal department sitting in "the garage" as a startup begins, will certainly slow down the pace of innovation in the US, while likely driving it elsewhere.
  
  And the definitions are ridiculously broad. Under SOPA, you can be found "dedicated to the theft of US property" if the core functionality of your site "enables or facilitates" infringement. The core functionality of nearly every internet website that involves user generated content enables and facilitates infringement. The entire internet itself enables or facilitates infringement. Email enables or facilitates infringement. They have significant non-infringing uses as well, but the definition leaves that out entirely. Under SOPA, there's also a risk if you take "deliberate actions to avoid confirming a high probability" of infringement on a site. Of course, it's not at all clear how one takes deliberate actions to avoid taking action. The only way to read this clause from a tech company perspective is that it requires proactive monitoring, which is effectively impossible for a user generated content site. PROTECT IP's definitions are equally broad, again using the "enabling" or "facilitating" language.



• The risk of these broad definitions on perfectly legitimate companies is not theoretical: Defenders of both bills continue to insist that they're only meant to deal with the worst of the worst. If that were really true, the definitions would be a lot tighter and a lot more specific. Even if this is the intention of the authors of both bills, the simple fact is that the very broad definitions in the bill, mean that any entrepreneur today will need to take significant compliance costs just to avoid the possible appearance of fitting the criteria.
  
  Defenders also like to brush off the idea that a bill like this would target something like YouTube. But we know that's not accurate since Viacom is still engaged in a huge lawsuit against YouTube, in which Viacom's claims certainly appear to cover the definitions found in these bills. While it seems unlikely that anyone would try to shut down YouTube completely, given the public outcry it would create, the real fear is what happens to the next YouTube, or just the fear that a rights holder could strike into any company by threatening them under the private rights of action in each bill. It becomes a form of legalized extortion. Threaten to bring action under these bills, and watch tech companies crumble.
  
  And, already there are indications that companies are interested in bringing broad actions for infringement against organizations that most people would consider perfectly legal. Advertising giant GroupM recently asked its entertainment industry customers to compile a list of "sites dedicated to infringement," not unlike what's found under PROTECT IP. Universal Music, Warner Bros. and Paramount were three key providers to that list, which ended up covering a large number of perfectly legitimate sites including the famed Internet Archive (widely recognized as the library for the internet). It also included numerous innovative startups that are frequently used by content creators to get their works out, such as SoundCloud and Vimeo. Even more worrisome, it included a variety of publications and blogs, including Vibe Magazine, the quintessential hip hop and R&B magazine founded by Quincy Jones, as well as Complex, a popular lifestyle magazine recently recognized as one of the most valuable startups in New York.
  
  Even worse, it appears that Universal Music also included the personal website of one of its own top artists, 50Cent. The hiphop star has a personal website as well as a website owned by Universal Music. The personal website is much more popular... and it appeared on the infringement list. Suddenly, you can see how letting companies declare what sites are dedicated to infringement can lead to them looking to stifle speech and competition.
  
  Similarly, Monster Cable, who has stated its support for PROTECT IP, has put together its own list of "rogue sites" and it, rather stunningly, includes sites like eBay, Craigslist, Costco and Sears. It even includes consumer rights groups like Which? in the UK, and various popular shopping search engines like PriceGrabber.
  
  These companies clearly take an expansive view of what constitutes "dedicated to infringement," and have no problem suggesting they would like to stop these sites. Internet companies and site owners have every right to be extremely afraid of what laws like PIPA and SOPA would do when they give much more power to these private companies to take actions that could shut down these sites, tie them up in court or merely cut off their funding and advertising.
  
  
• That uncertainty has very real and quantifiable effects on jobs in this country. President Obama has noted that the internet adds approximately $2 trillion to the annual GDP (pdf). The amount of jobs created by the tech industry are massive, and represent a large percentage of all new job creation today. IDC has predicted 7.1 million new jobs and 100,000 new businesses created in the next four years from the tech sector. An astounding 3.1 million people are employed thanks to internet advertising -- jobs that simply did not exist a decade ago.
  
  And these jobs go way beyond just the jobs at tech companies themselves. The important thing in tech platforms is not in how many jobs are at those companies, but how many jobs they enable elsewhere. eBay has been said to have empowered 750,000 people to build their own small businesses. Facebook's app platform has, by itself, created somewhere around 200,000 new jobs (pdf). It's likely that Apple's iOS app platform has created significantly more than that, given how popular it is. Google's tools have been shown to create $64 billion (with a b) in additional economic activity.
  
  Do we really want to stifle all of that growth and activity with regulations that will stifle innovation and jobs, even (as noted above) as the evidence shows that merely adapting and providing a better service makes everyone better off?



• That uncertainty has extreme and quantifiable effects on investment in new startups. A very detailed look at the uncertainty in the cloud computing space, prior to and after the decision in the Comedy Central v. Cablevision case, which effectively set the framework for the legality of cloud computing, showed much greater investment when the law was clarified to be in favor of letting these new services thrive. Take that away, and investment in this engine of growth likely would be much lower. Considering that politicians claim to be so concerned about the economy and jobs these days, the idea that they would push forth a bill that quantifiably would reduce investment in one of the only sectors creating new jobs is really stunning.



• Broadly expanding secondary liability is a dream for trial lawyers, but will be a disaster for business. There's been a move, associated with these bills to somehow demonize important concepts of safe harbors from secondary liability. The suggestion is that secondary liability somehow "allows" bad activity. Nothing is further from the truth. Illegal activity is still illegal. The point of safe harbors from secondary liability is blaming the party actually doing the action that breaks the law. We don't allow people to sue AT&T because the telephone was used in commission of a crime and we don't sue Ford because someone crashed their pickup truck into another car. Liability should be properly applied to the parties doing the action that breaks the law. The safe harbors have just made that clear -- and allowed innovation to flourish. Empirical studies have pointed out that "the rich informational ecosystem we know today... is a function of the 'breathing space' Internet intermediaries currently have under the law."
  
  Other studies have shown that pulling back on such secondary liability safe harbors would mean that investors would need an astounding 13x to 20x return on investment to make the risk worthwhile. That triples or quadruples the standard risk level that most angel investors deal with.
  
  The key way that both PIPA and SOPA function are to drastically scale back that breathing space, by attaching secondary liability and compliance costs to US companies, in an attempt to keep users from infringing via other sites. That would represent a massive shift in the legal framework that has allowed the internet to flourish, and yet no research or studies have been done to look at the possible impact of all of this.



• The technical measures described in both bills is tremendously problematic. Looking to use DNS blocking is just a bad move. It's why a group of core internet infrastructure experts spoke out very early on (about COICA, in the pre-PIPA days) to explain how DNS blocking would set back a decade or more's worth of work on online security standards, would make people less safe online, and has the risk of fragmenting the internet. It's why the founder of the world's largest independent DNS provider, OpenDNS, in charge of protecting one-third of all schools in the US, has noted that under these laws, he likely wouldn't have started the company, or might have started it in another country.


• Having a judge determine the best network architecture is a bad idea. SOPA's attempt to address the "DNS blocking doesn't work" argument by adding a vague standard in which courts can order sites to take "reasonable measures" to block even more is also not encouraging. Does anyone really think that we want some judges determining what are "reasonable measures" for managing how the internet works? Wouldn't it be better to trust the long line of experts, drop any thought of DNS blocking, and move on?



• Going down the slippery slope of censorship is fraught with peril, both domestically and abroad. Supporters of the law get angry any time people bring up censorship, but as law professor Derek Bambauer has made clear, any effort to block content is a form of censorship. What we can argue is whether or not this form of censorship makes sense or is a policy that people think makes sense. But no one should deny that bills that lead to blocking access to websites is a form of censorship.
  
  There is reasonable debate as to whether or not this level of censorship goes violates the First Amendment. Constitutional scholar Laurence Tribe has argued that it does violate the First Amendment. Well over 100 of the country's top legal scholars have made the same argument. Arguing on the other side is well respected First Amendment lawyer Floyd Abrams... but even he admits that under SOPA and PIPA protected speech would get censored. He just deems that as acceptable collateral damage, as being merely "incidental." We can argue over whether or not it really is incidental, as we've already seen actions against sites under current law that seek to stifle large amounts of protected speech outside of any infringement.



• The functional setup of such site blocking -- via DNS blocking -- is effectively identical to how the Great Firewall of China works. While the intended purpose is obviously different, the actual mechanism for blocking is nearly identical. This creates significant cover for repressive regimes to resist any diplomatic efforts by the US to push back against attempts by the US to promote internet freedom. Furthermore, we have seen how countries, such as Russia, have used copyright law to censor political opposition, using the law to go against activists challenging the government. Even if the intended purpose of SOPA and PIPA are to protect against infringement, opening up the door to censorship for one purpose makes it nearly impossible to avoid it being used for other purposes. It also basically gives the perfect blueprint for repressive regimes. They merely need to claim that their Great Firewalls are designed to stomp out infringement, and then can use it to intimidate and block political opponents. Adding to that is the massive expansion of the diplomatic corp. pushing for greater enforcement, and it's almost as if we're begging countries to set up their own Great Firewalls that will certainly be abused.
  
  
• Countries abroad are watching us, and already noting the seeming hypocrisy concerning our statements. Media in other countries, who already are known for suppressing speech and censoring the internet, are already mocking the US for even considering such legislation at the same time as the US State Department claims to be promoting internet freedom. Talking about the importance of internet freedom on the one hand, while pushing countries to put in place the very tools that will be used to undermine internet freedom is not a particularly consistent message. This can be seen in VP Joe Biden's recent speech on internet freedom that presents all the arguments for why SOPA and PIPA should not be supported (in an unintended manner).
  
  
• Changing what counts as a felony for copyright, without understanding the implications or common usage of technology puts many at risk. This does not apply directly to PIPA, but its companion legislation in the Senate, S.978. Similar provisions are found in SOPA as well, making certain forms of "streaming" a felony. Supporters of these actions insist that they're merely harmonizing criminal and civil copyright laws, since the felony parts of the criminal copyright statute cover reproduction and distribution, but not performance. What they fail to recognize (or admit) is that there's a reason why performance rights were left out, and it's because it's pretty ridiculous to think of a felony performance in normal contexts. But it becomes even more troublesome in the online context, because "performance" is so vaguely defined in an era when streaming works via a simple one-line embed. To embed a video is no different -- from a technical standpoint -- from linking to a video. And most people would have significant problems with the idea that you could face five years in jail for merely linking to content you have no control over. Yet, the streaming portions of SOPA and of S.978 make that entirely possible. Merely putting a single line of code on a site, pointing to content on another server that you have no control over, potentially makes you a felon. This will have massive unintended consequences and puts at risk millions of Americans who embed videos all the time.

The Player Piano

“I foresee a marked deterioration in American Music…and a host of other injuries to music in its artistic manifestations by virtue – or rather by vice – of the multiplication of the various music reproducing machines” -- John Philips Sousa, 1906

The Video Cassette Recorder

"But now we are faced with a new and troubling assault on our fiscal security, on our very economic life, and we are facing it from a thing called the Video Cassette Recorder" -- MPAA President Jack Valenti in 1982

Cassette Tapes

"When the manufacturers hand the public a license to record at home...not only will the songwriter tie a noose around his neck, not only will there be no more records to tape, but the innocent public will be made accessory to the destruction of four industries" -- ASCAP, 1982

Digital Audio Tape


The Mp3 Player

“Diamond's product Rio was destined to undermine the creation of a legitimate digital distribution marketplace..." -- RIAA President Hillary Rosen in 1998

The Digital Video Recorder

"It's theft...Any time you skip a commercial or watch the button you're actually stealing the programming." Turner Broadcasting CEO Jaime Kellner in 2002

• Harmonise exceptions to copyright to create legal certainty across the EU about the permitted uses of works covered by IP
• Establish pan-European licensing arrangements as a matter of priority, and tie future enforcement policy to the successful development of such proposals
• Abandon repressive enforcement measures that would materially damage people's fundamental rights
• Establishes a moratorium on the exporting of repressive IP enforcement to third countries
• Makes a firm commitment to robust, objective evidence and re-evaluation of policy on the basis of it.

Proposition 1: The ascendant economic sector is the Creative Economy

Proposition 2: The primary commodity in this economy is intellectual property.

Proposition 3: The Creative Economy thrives online, in what is a unique, prosperous, and until recently free marketplace.

It results in a view of tech policy that is all about increasing the protection for intellectual property with little concern for the important connectivity, civic participation, and access to knowledge the Internet also provides--think e-mail, the robust political debate at online blogs, and Wikipedia, none of which need "stronger" IP protections.

Comcast lost 275,000 cable subscribers last quarter, and has lost 622,000 in the first 9 months of 2010. More evidence of "cord cutting"? Nope, says the cable giant. It's evidence that the economy sucks. That's the short version of the company's explanation for the drop during its earnings call this morning: It had a variety of reasons to explain the exodus of subscribers, but all of them revolved around money that their previous customers don't have or don't want to part with.

Businesses dependent upon exceptions to copyright contribute $2.2 trillion to the U.S. economy. They are responsible for one in eight jobs, for a total payroll of $1.2 trillion in 2006. Fair use is serious business; it is the glue that holds the Internet and new technology together. It is worth protecting.

"We are working harder. The financial crisis is not making it easy for them over there," said Banjo, 24, speaking about Americans, whose trust he has won and whose money he has fleeced, via his Dell laptop. "They don't have money. And the money they don't have, we want."

U.S. authorities say Americans -- the easiest prey, according to Nigerian scammers -- lose hundreds of millions of dollars a year to cybercrimes, including a scheme known as the Nigerian 419 fraud, named for a section of the Nigerian criminal code. Now financially squeezed, Americans succumb even more easily to offers of riches, experts say.

Banjo said, he has traveled six hours to the forest, where a magician sells scam-boosters. A $300 powder supposedly helps scammers "speak with authority" when demanding payment. A powder, rubbed on the face, reportedly makes victims viewing the scammer through webcams powerless to say no.

"No matter what, they will pay," said Olumide, a college student, adding that he is boosting his romance scams by wearing a magical, live tortoise hanging from a cord around his neck.

Overall production figures for the creative industries appear to be consistent with this view that file sharing has not discouraged artists and publishers. While album sales have generally fallen since 2000, the number of albums being created has exploded. In 2000, 35,516 albums were released. Seven years later, 79,695 albums (including 25,159 digital albums) were published (Nielsen SoundScan, 2008). Even if file sharing were the reason that sales have fallen, the new technology does not appear to have exacted a toll on the quantity of music produced....

Similar trends can be seen in other creative industries. For example, the worldwide number of feature films produced each year has increased from 3,807 in 2003 to 4,989 in 2007 (Screen Digest, 2004 and 2008). Countries where film piracy is rampant have typically increased production. This is true in South Korea (80 to 124), India (877 to 1164), and China (140 to 402). During this period, U.S. feature film production has increased from 459 feature films in 2003 to 590 in 2007 (MPAA, 2007).

As these results show, income from the sale of complements can more than compensate artists for any harm that file sharing might do to their primary activity. We are not aware of empirical work that has looked at these effects in industries other than music. But the potential of complements to provide ancillary income is certainly not unique to the music industry. In film, for instance, the International Licensing Industry Merchandisers' Association (LIMA) estimates that Hollywood derives $16 billion annually from sales of entertainment merchandise, a figure that exceeds the value of ticket sales (Film Encyclopedia, 2008).

The role of complements makes it necessary to adopt a broad view of markets when considering the impact of file sharing on the creative industries. Unfortunately, the popular press -- and a good number of policy experts -- often evaluate file sharing looking at a single product market. Analyzing trends in CD sales, for example, they conclude that piracy has wrecked havoc on the music business. This view confuses value creation and value capture. Record companies may find it more difficult to profitably sell CDs, but the broader industry is in a far better position. In fact, it is easy to make an argument that the business has grown considerably. Figure 7 shows spending on CDs, concerts and iPods. The decline in music sales -- they fell by 15% from 1997 to 2007 -- is the focus of much discussion. However, adding in concerts alone shows the industry has grown by 5% over this period. If we also consider the sale of iPods as a revenue stream, the industry is now 66% larger than in 1997.... Technological change will often lead to changes in relative prices and shifts in business opportunities. Focusing exclusively on traditional streams of revenue to arrive at a sense of how new technology changes welfare will typically be misleading.

While some folks I spoke to before the auction said they expected sales this year to be down by as much as 50 percent from last year, the final results were much worse. Friday's auction took in just under $2.9 million--more than 80 percent less than the roughly $17 million in patent sales generated by the company's San Francisco auction last year.

Out of more than 80 lots of patents on the block, only six sold. (An Ocean Tomo auction "lot" can include a single patent, several patents, or a portfolio of patents in related technology.) Ocean Tomo tacks on a 10 percent fee paid by buyers, and also charges fees to sellers, meaning the company probably took in less than $1 million for itself....

Ocean Tomo CEO James Malackowski looked a bit shaken by the end of the day.

"Obviously the market has become more selective," he said in brief concluding remarks.

Successful countries give rise to interest groups that accumulate more and more influence over time. Eventually, the groups become powerful enough to win government favors, in the form of new laws or friendly regulators. These favors allow the groups to benefit at the expense of everyone else; not only do they end up with a larger piece of the economy's pie, but they do so in a way that keeps the pie from growing as much as it otherwise would. Trade barriers and tariffs are the classic example. They help the domestic manufacturer of a product at the expense of millions of consumers, who must pay high prices and choose from a limited selection of goods.