The intangible investor Written by Bruce Berman He’s no Robin Hood File sharing promotes a culture of piracy infringe inventions unwittingly, but others government for having, through its that makes it more acceptable to steal do so systematically because, like file sharers, shutdown of the site, deprived innocent third branded goods and inventions, as well they know that the chances of getting caught parties of access to their files. It as content. Big daddy Kim Dotcom is are slim, the punishment is relatively light also suggests that the seizure violated the sticking it to all IP holders and, perhaps most importantly of late, the First Amendment.” public frequently does not care. In the 1970s and 1980s many people who The piracy economy exists in no small went into the field of copyright saw In the court of public opinion, copyrights part because a wide range of people believe it themselves as fighting to help authors, and brands have fared poorly. Thefts of is acceptable - even fashionable - to use musicians and artists - and therefore as digital content and counterfeits are easily other people’s creative output. Many being on the side of the angels. By the 1990s, achieved and difficult to stop. Patents have otherwise honest violators believe they are however, many who entered the field came not done much better. A cultural disdain for not stealing, but are merely doing what most from tech backgrounds and saw copyright as IP rights has emerged, facilitated in part by PC or smartphone users are meant to do – a constraint to progress. a range of businesses that stand to profit download, copy and share. Most companies The Sony Betamax decision of 1992 may from free content, lookalike goods and the that violate patents are not as naïve as they allow Dotcom Schmitz to escape inventions of others, and end users who make themselves out to be. A significant punishment. This is more than just an don’t give a damn. number have concluded that many outdated law that exempts recording Exhibit A for the legitimisation of IP inventions are merely incremental device manufacturers from prosecution. It is theft is Kim Dotcom Schmitz. Dotcom improvements on prior ones, and are part of a larger change in attitude that Schmitz has slyly built himself into a questionable to begin with. has allowed an emerging class of businesses modern folk hero, complete with mellow “Megaupload and the twilight of and end users to rationalise profiting gangsta style and outsider reputation (he is copyright” is an extraordinary article which from IP theft. a champion gamer and car racer). This appeared recently in Fortune magazine. It is Most do not realise that the piracy larger-than-life, medallion-wearing bad boy written by respected legal journalist Roger culture is hardest on little-known artists, looks like he deserves a modest scolding Parloff, and is essential reading for anyone authors and innovators. Popular musicians and a heath club membership, not 20 years affected by IP rights. In it, Parloff details how who thrive on live performances can afford behind bars. That is what he and his Dotcom Schmitz created a piracy empire that to provide free or reduced-cost access to supporters would like you to believe. In fact, generated hundreds of millions of dollars, their recorded work. It’s an alternative form his illegal businesses have generated more and how he may yet escape prosecution. He of advertising and they will recoup recording than 66 million illegal subscribers and have also puts into context the complex evolution royalties on concert sales and brand equity. helped to make file sharing acceptable and of file sharing and its potential impact. Left out in the cold are the artists who need cripple the recording industry. “At one time,” writes Parloff, every dime from every book, song or Dotcom Schmitz’s image is no accident. “Megaupload (Dotcom Schmitz’s photograph sale they can generate. Similarly While it may appear that he is merely international file sharing operation) alone ignored are inventors without sufficient taking on the Man on behalf of the public accounted for 4% of the globe’s entire capital to commercialise their work, license good, he is really part of a larger IP crime Internet traffic and was the 13th-most- the rights or sell them competitively. mechanism that ignores ownership when visited site on the web, according to the IP theft feeds on new ideas, thrives on convenient and belittles enforcement. government, with more daily visitors than distribution and prospers on cooperation. Dotcom Schmitz, who has previously been Netflix, AOL, or the New York Times.” The effort to legitimise stealing of convicted of embezzlement and insider Dotcom Schmitz founded Megaupload in creative expression - from songs to handbags trading and whose net worth is estimated at 2005 and set it up in Hong Kong, although to smartphone improvements - is working US$200 million, is no Robin Hood. he himself is a dual citizen of Germany and because a culture of complicity supports it. Respect for IP rights has reached new Finland, and a permanent resident of I am afraid that it will take more than lows. While the public may not yet be New Zealand. When arrested on 19th January putting Dotcom Schmitz behind bars to set interested in using patents illegally, many 2012, he was living in a leased US$24 million things right. manufacturers of the products that they buy estate. The vanity plates on three of his fleet are. Some try to paint patent enforcers in a of more than 25 luxury cars read GUILTY, negative light, calling them names such as EVIL and GOD. Bruce Berman is principal in Brody Berman troll or predator; others rely on flawed To date, says Parloff, the only sense of Associates, a strategic communications firm academic research to demean them. Their public outrage has been against the that supports IP assets, holders and arguments are no less specious than prosecutors: “The Electronic Frontier investors. A link to the Fortune article above Dotcom Schmitz’s. Some companies Foundation has filed papers criticizing the can found at IP CloseUp. www.iam-magazine.com Intellectual Asset Management November/December 2012 53.