If there is one thing that multi-millionaire and convicted fraudster Kim Dotcom is very good at it is publicity. If he is to be believed he is a tireless fighter for internet freedom whose enemies are incapable of developing business models that are relevant to the 21st century. From a PR perspective he has played a virtually flawless game since Megaupload was closed down and he began fighting attempts by the US government to have him deported from New Zealand to fight charges of copyright piracy which could see him imprisoned for up to 20 years. Today, he was all over Twitter, various social networks and internet news sites as he launched Mega, the successor to Megaupload, which he claims is completely compliant with the law.

As an antidote to the various panegyrics Dotcom is currently receiving, below is a piece on his activities at Megaupload, and how these feed into the general anti-IP narrative, written by Bruce Berman and published in Issue 56 of IAM. Do I think that Dotcom should go to prison for 20 years? Absolutely not (I doubt Bruce does either). Do I think he is a remarkable self-publicist who is consistently given an easy time by too many credulous journalists even though he helped to ensure that legitimate copyright owners – the majority of whom are not rolling in cash - were denied the opportunity to exploit potential revenue streams to maximum effect? You betcha.

Anyway, this is what Bruce had to say:

He’s no Robin Hood

File sharing promotes a culture of piracy that makes it more acceptable to steal branded goods and inventions, as well as content. Big daddy Kim Dotcom is sticking it to all IP holders.   

In the court of public opinion copyrights and brands have fared poorly. Theft of digitally rendered content and counterfeits are easily achieved and difficult to stop. Patents have not done much better. A cultural disdain for IP rights has emerged, facilitated in part by technology businesses that stand to profit from free content, look-alike goods and others’ inventions, and end users who don’t give a damn.

Exhibit A for the legitimization of IP theft is Kim Dotcom Schmitz. Dotcom has slyly built himself into a modern folk hero, replete with a mellow “gangsta” style and outsider reputation. (He is a champion gamer and car racer.) This larger-than-life, medallion-wearing bad boy looks like he is deserving of a modest scolding and a heath club membership, not 20 years in jail. That’s what he and his supporters would like you to believe. In fact, his illegal business has generated more than 66 million illegal subscribers and has served to help to make file sharing acceptable and dismantle the recording industry. 

KD’s facade is no accident. While it may appear that he is merely opposing the Man on behalf of the public good, he is really part of a larger IP crime mechanism that ignores ownership when convenient and belittles enforcement. Schmitz, who has previously been convicted of embezzlement and insider trading and whose net worth is estimated at $200 million, is no Robin Hood. 

Respect for IP rights is reaching new lows. While the public may not yet be interested in using patents illegally, many manufacturers of the products they buy are. Some try to paint patent enforcers in a negative light calling them names like “troll” or “predator”; others rely on flawed academic research to demean them. Their arguments are no less specious than Schmitz’s. Some companies infringe inventions unwittingly, but others do so systematically because they know, like file sharers, the chances of getting caught are slim, the punishment is relatively light, and, perhaps most importantly of late, the public frequently supports them.

The piracy economy exists in no small part because a wide range of people believe it is acceptable, even fashionable, to use other peoples’ creative output. Many of the otherwise honest violators believe they are not stealing but merely are doing what most PC or smart phone users are meant to – download, copy and share. Most companies that violate patents are not as naïve as they make themselves out to be. A significant number have concluded that many inventions represent incremental improvements on earlier ones that are questionable discoveries in the first place.

“Megaupload and the twilight of copyright” is an extraordinary article which appeared recently in Fortune. It is written by one of the most respected legal journalists, Roger Parloff, and is essential reading for anyone affected by IP rights. In it Parloff details how Kim Dotcom Schmitz created a piracy empire that generated hundreds of millions of dollars, and how he may escape prosecution. He also puts into context the complex evolution of file sharing and its potential impact.   

“At one time,” writes Parloff. “Megaupload [Schmitz’s international file sharing operation] alone accounted for 4% of the globe's entire Internet traffic and was the 13th-most-visited site on the web, according to the government, with more daily visitors than Netflix, AOL, or the New York Times.” He founded Megaupload in 2005 and set it up in Hong Kong, though Dotcom is a dual citizen of Germany and Finland and a permanent resident of New Zealand. When arrested on Jan. 19, he was living in a leased $24 million estate (with a domestic staff of 50). The vanity plates on three of his more than 25 luxury cars read GUILTY, EVIL, and GOD.

To date, says Parloff, the only sense of public outrage has been against the prosecutors: “The Electronic Frontier Foundation has filed papers criticizing the government for having, through its shutdown of the site, deprived innocent third parties of access to their files. It also suggests that the seizure violated the First Amendment.”

In the 1970s and 1980s many people who went into the field of copyright thought of themselves as fighting to help authors, musicians, and artists -- and therefore as being on the side of the angels. By the 1990s, however, many who entered the field came from tech backgrounds and saw copyright as a constraint to progress.

The “Sony Betamax Decision” of 1992 may allow Kim Dot Com Schmitz to escape punishment. This is more than just an outdated law that exempts recording device manufacturers from prosecution. It is part of a larger change in attitude that has allowed an emerging class of businesses and end-users to rationalize profiting from IP theft. 

Most do not realize that the piracy culture is hardest on little-known artists, authors and innovators. Popular musicians who thrive on concerts can afford to provide free or reduced-cost access to their recorded work. It’s an alternative form of advertising and they will recoup recording royalties on concert sales and brand equity. Left out in the cold are the artists who need every dime from every book, song or photograph sale they can generate. Similarly ignored are inventors without leverage, i.e. sufficient capital to commercialize their work, license the rights or sell them competitively.   

IP theft feeds on new ideas, thrives on distribution and prospers on cooperation. The effort to legitimize stealing of creative expression from songs to hand-bags to smart phone improvements is working because a culture of complicity supports it. I’m afraid that it will take more than putting Kim Dotcom behind bars to set things right.

Sectors

IP politics, IP litigation, Copyright, IP business

Comments