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PROTECT IP's Groundhog Day

July 21, 2011

There’s often a curious Groundhog Day-like quality to the debate over the PROTECT IP legislation.  Many of the arguments rolled out in opposition to the bill –- narrow and targeted legislation exclusively focused on overseas rogue websites trafficking in copyrighted works and products and impervious to U.S. law -- seem quite, well, familiar.  

Several leading venture capitalists recently wrote a letter criticizing the bill, outlining a concern that the legislation would “stifle investment in Internet services, throttle innovation, and hurt American competitiveness.”  Other venture capitalists have similarly predicted that the bill will “substantially increase the risk of investing in an already risky sector.”   

Fair enough.  As an industry that is both dependent upon investment in digital innovation and who now earns roughly half of its revenues from various digital business models, we too would be worried about any policy proposal that threatens to undermine our digital music partners and the progress we’ve achieved so far.  Just think:  in the last two months, we’ve seen the U.S. launch of Spotify and Apple’s iCloud music service and the historic IPO of Pandora.  We have a deep respect and admiration for America’s leading technology entrepreneurs.   

The problem is that these arguments are frequently recycled, and, in the most high-profile recent example, proved to be wrong.  Back in 2005, as we debated the upcoming momentous MGM vs. Grokster Supreme Court case, groups including the National Venture Capital Association warned that an adverse decision:


“…would have a devastating impact on the development of legitimate and valuable new products and services for consumers.”


“…would compound the technical, financial, and legal risks that emerging technology companies already face, thus stifling innovation, causing disastrous consequences for those companies, and ultimately damaging the public interest.”


“…will reduce innovation and investment in the Internet and, perversely, hamper the most robust forum for the dissemination of copyrighted works.”

What actually happened?  The Supreme Court ruled 9-0 in the favor of the creative industries and that bad actors like Grokster who facilitate and encourage illegal downloading can be held accountable.  And since that unanimous decision:   

•    Venture capital investment grew for Media and Entertainment to 7.1% of total VC dollars (from just 4.6% in the four years prior to Grokster).  According to one report, nearly $400 million has been invested in music startups in 2011 so far!
•    Licensed music services grew to more than 400 in 2009, from less than 50 in 2003
•    Legal digital music market grew from less than $200 million in 2004 to over $3 billion in 2010

What’s the moral of this story?  Strong, measured intellectual property laws and enforcement can help spur -- not stifle -- innovation.  And while Chicken Little arguments might raise eyebrows, we have yet to see the sky fall.

It’s not a story lost on Senators.  Last week, Ben Cardin (D-Md.) was the latest Senator to throw his weight behind the PROTECT IP Act.  With Senator Cardin’s support, the number of co-sponsors of this highly bipartisan legislation has now reached 25 and counting.

It’s hard to see why a quarter of the U.S. Senate wouldn’t support a bill that protects consumers by shutting down access to illicit sites that profit from the unauthorized sale of American products.  Rogue sites who primarily traffic in counterfeit pharmaceuticals, airplane parts, sportswear, music and many other U.S. goods will be the losers if this legislation comes to pass.  Which we can all agree would hardly be a bad thing.

Is PROTECT IP perfect?  No, and we’ve added our voice to the ongoing dialogue over a few of its provisions. But a lot of the criticism is smoke and mirrors, and one thing is certain – with its clearly designed goal of protecting American consumers and businesses, we cannot lose sight of the forest for the trees. Because ultimately what this is about is strengthening the legitimate marketplace by providing incentives for users to get their content legally and for American creators to continue creating the best content in the world.  Which we can all agree would be a great thing.

Jonathan Lamy, Senior Vice President, Communications, RIAA