The Pirate Bay - Not the King Kong Defense

2009-04-25T16:41:00.000-07:00

The Pirate Bay's defence lawyer, Per Samuelson's famous King Kong Defense along the lines that The Pirate Bay had no influence over its users and that they were ignorant to their identity is fair enough in front of a judge but to make this argument outside a courtroom is to fall into the trap of a baseless assumption that copyright laws have merit. Copyright lobbyists continue to pejoratively accuse the copyright content file sharing community of theft or accessories to theft. This is a primitive understanding of ownership based on the premise that creator = owner where it does not and where excludability can be assumed where in fact it can’t. Furthermore, simply stating you have exclusive rights to a commodity is inadequate to qualify as an owner – you need to demonstrate that the exclusivity is both economically meaningful and sustainable.

The Pirate Bay chose to brazenly goad its opposition with a proverbial and even literal f**k you. That is their prerogative but it's a shame that, in doing so, they have somewhat undermined their cause with a robin-hood style image that plays right into the hands of Copyright Plaintiffs. All the while the core argument has been successfully obfuscated or evaded from discussion - Copyright laws and Intellectual Property laws in general are an eminently predictable market failure that deserve no place in business because data is a Public Good thus firms that depend on copyright to engineer artificial excludability are not Allocatively Efficient that is Price (P) is not equal to Marginal Cost (MC) and the disparity is sizeable. The model is therefore not sustainable and the proportion of failure i.e. the ratio of unpaid downloads to licensed downloads will rise as the delta between P and MC widens and it becomes more exploitable.

File sharers are Homo Economicus – purely rational and purely selfish. They are thus merely market participants in a model that is presented to them. If I download a copyrighted file without paying for it I'm not making a grand statement there is no subtext about media corporations overcharging or anything akin to waving a skull and crossbone flag. I'm simply using an available system without intrusion or deprivation upon anyone else that best suits my interests and if that system provides a more efficient allocation of resources then that is the one that interests me. I don't care for an alternative unless it does a better job and I resent the persistent assumptions about what file-sharers think and their opinions on the entitlements of creative entrepreneurs. As for being a criminal, since data does not tick the necessary boxes of intrinsic exchange value, excludability and rivalry, I cannot recognise that it has a proprietor irrespective of a claim to that effect and if it has no proprietor then there is no theft. Indeed rivalry is the basis of the classic definition of theft: "The actus reus of theft is usually defined as an unauthorised taking, keeping or using of another's property which must be accompanied by a mens rea of dishonesty and/or the intent to permanently deprive the owner or the person with rightful possession of that property or its use."

Some more moderate than I on the subject of freedom and free market principles, believe copyright laws can actually be accommodated and that the market needs to "adapt" better and that we need to “move on”. The market has responded and the outcome is ugly. There is no happy co-existence of copyright law and a dynamic, free and open internet for the two concepts are diametrically opposed. As Roderick T. Long of the Molinari institute remarks, you cannot own information without owning people for information exists in people’s minds and to restrict use and reproduction of copyrighted material is itself an infringement on free speech and freedom of the press.

Even if we indulge the fantasy that there is a business model waiting for us nearby that supposedly would maintain the idea of copyright and placate its rights holders, let's be clear, it has been achieved under duress and constant legal threats and litigation. This is not a compromise or natural equilibrium as they might have you believe - it's just a resignation. Following The Pirate Bay verdict of Friday 17th April, Mark Mulligan of Forrester Research commenting on said "There is already a massive program of modernisation in place by the music industry." I'm astonished by such an audacious lie from a supposed research expert. The RIAA and MPAA are waging war on the internet fighting tooth and nail through threats, intimidation and litigation and he interprets this as "modernisation"? Defenders of copyright will play a violin about rewarding creative work but they remain ignorant or choose to ignore the fact that the entire business model is a fragile system built on legislation and terms that violate and infringe upon what I consider non-negotiable principles of free markets and freedom of information. It is their survival lifeline and they are clinging to it for dear life.

Core economic theory demonstrates that exchange-value or price is simply a function supply and demand which themselves are sub-functions of marginal utility, marginal cost of supply and scarcity inter-alia. Data and Information, as a commodity whether this be a formula to make a drug, a song, a movie, a computer application exhibits less usual properties. First of all, it is non-rivalrous that is to say my consumption of it does not impinge on anyone else’s nor does it diminish the overall supply since it has no Scarcity. Secondly, it can be identically and instantly reproduced ad infinitum at virtually zero cost – it has a Marginal Cost of supply of zero that is to say after its initial creation each subsequent instance of that same data file can be generated at virtually zero cost. The data vendor’s LRAC is thus not the classic U-shape but merely tends geometrically to zero as output tends to infinity. Whilst data has great Utility (use value) it has zero scarcity, it is non-rivalrous and in the absence of copyright is also non-excludable meaning not only does one man’s usage not compromise another man’s usage he further cannot exclude or restrict the enjoyment of that data from another man and it therefore qualifies as a Public Good a famous market failure subject to the Free Rider problem which is not solved by engineering an artificial monopoly. As Austrian economist Joseph Schumpeter rightly pointed out excess profits enjoyed in a monopoly by virtue of copyright restriction merely encourages technological advancement and competition to defeat the monopoly known as the “Schumpeterian Creative Destruction”.

Some will find this a hard concept to swallow but whether 1000s of man-hours of creative work and testing were involved in producing a data object, a movie a, a song or an application, it does not change the fact that a piece of public data has a replication cost of zero and thus an acquisition value of the same. I might invent the most popular and delicious cooking recipe in the world but the moment I publish it, it is worthless to acquire no matter how much enjoyment or "utility" is derived is from it. Charging for the information is theoretically incongruous and practically destined for failure in a world where data multiplies exponentially. File Sharers are accused of "wanting everything for free". False - data IS free by virtue of its inherent characteristics and thus it is and will continue to be consumed at a price of zero notwithstanding prohibitive terms or laws that say it can't be done.

Copyright is thus nothing more than an intervention and intrusion which aims to circumvent the scarcity principle, Free Rider problem and wider free market principles in general by creating Artificial Monopoly through the use of an ownership stamp roughly stating "you cannot copy this data object, you must pay me for each instance that it exists and you may only enjoy it's use with certain conditions". They are fundamentally flawed laws begging to be exposed, ignored and abused in an efficient market and none more adept to do this job than a sharing protocol like BitTorrent. I submit that a Privileged Group essentially the open source communal model is the only solution to the Free Rider problem that does not interfere with market forces, that preserves freedom and simultaneously encourages innovation.

Since data vendors create an artificial monopoly resulting in a perfectly elastic (horizontal) supply curve at price x i.e. an infinite supply of the virtual product at price x they create a false price because it bears no relationship with the Marginal Cost of Supply as it would do if subject to unprotected and unregulated market forces. The genuine supply curve is horizontal at near enough price zero that is the data is in infinite supply at a tiny price. The intersection of a diagonal demand curve across these two curves forms a triangular area of "black market" demand. whose demand function is highly elastic - i.e. their demand is highly price sensitive and the wider the absolute gap between the black market price of zero and the artificial market price of x, the less likely the download would have been paid for legitimately and thus the less reasonable the claim of a lost sale. It is no secret that most downloaders would actually happily pay "some price" to download in a "legitimate" or "approved" environment if the price were closer to it's true supply curve price. I do not imply that copyright content vendors are obliged to reduce their price or are guilty overcharging. A free market means they reserve the right to charge whatever price they see fit but it comes with a caveat - they WILL be subject to a black market if resources aren't allocated efficiently. Of course, the reality is that without copyright they can't charge an artificial price and without charging an artificial price, they can't remain a viable entity. Where does this leave them? IT, the music industry and Hollywood are full of great creative talents. Are we saying this pool of resources should all go down the tube? Of course not, all that creative enterprise will be channelled differently and flourish by different media. Creative desire is innate and is independent of financial reward. The connection with big profits and incentives is driven by big business and studios. Inventors, Artists and Creators of all varieties do it for the love of it, it's corny but true.

The argument that without copyrights creativity would be stifled is a tiresome falsehood upon which the arguments of copyright lobbyists are premised. There is no evidence of this claim whatsoever in fact quite the opposite. Linux, Apache Web Server and Mozilla Firefox are just a few examples of high quality products born in a copyright dominant environment, sometimes suppressed and marginalised by big IT businesses and denied a real chance to flourish to their full capabilities. Web 2.0 projects like Wikipedia, YouTube and elements of Google make a mockery of copyright and epitomise the thoughtlessness behind such laws.

As for reward, obviously a Privileged Group makes the idea of property redundant so reward takes the form of mutually beneficial use and through the enhanced business and the sale of compliment goods. This will almost certainly be the case on a large open source projects like IT applications. Smaller data downloads, music artists and movie companies can run on ad funded download and streaming platforms. Quoting from Wiki "In the absence of artificial scarcity, businesses and individuals would create software based on their own need (demand). For example, if a business had a strong need for a voice recognition program, they would pay to have the program developed to suit their needs. The business would profit not on the program, but the on the resulting boost in efficiency caused by the program. The subsequent abundance of the program would lower operating costs for the developer as well as other businesses using the new program. Lower costs for businesses result in lower prices in the competitive free market. Lower prices from suppliers would also raise profits for the original developer. In abundance, businesses would continue to pay to improve the program to best suit their own needs, and increase profits. Over time, the original business makes a return on investment, and the final consumer has access to a program that suits their needs better than any one program developer can predict."

This presents just one scenario of course. There are many others except this isn't good enough for copyright defenders. They demand to know how business can work without copyright. They want a design and schematic except they won't get one - not one they want to hear in any event. It is not the responsibility of file sharers to propose an alternative. The onus is not them or anyone else to do that. Spontaneous Order, as always takes charge and is already doing so and thus you have a paradigm shift. To file sharers and would be file sharers I think my message is clear, refuse to be labelled a thief, reject false assumptions about starving creativity and continue to share by the best means available for you are doing a service to the underpinning of the internet and the future of the data business.

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The Pirate Bay - Not The King Kong Defence

The Pirate Bay - Not the King Kong Defense