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Heritage Foundation Misses the Market on Rogue Sites

January 6, 2012

The Heritage Foundation has a surprising analysis of the rogue sites problem and particularly SOPA—and frankly, a disappointing view as much for what it omits as for what it includes.

It is now becoming cant in these discussions for opponents of the rogue sites legislation—largely a market based approach to rampant online theft that is about 10 years overdue—to start by saying “we agree that online theft is a problem, but….” The opponents never return to their predicate.  I would suggest that the only reason that predicate is there is that the judiciary committees of each body of the Congress have taken an innovative and principled stand that is disruptive to the status quo and the incumbents are really, really threatened.

So let’s be clear—opposition to rogue sites legislation is about three things—money, money and money.

No one in the creative community expects a market with zero piracy.  We have always had piracy and we always will have piracy.  What is new about piracy on the Internet is the scale and the participation of publicly held companies that use their vast resources raised in the public financial markets to fight compliance with the law in order to free ride on the work of others that they seek to commoditize.

What is also new about piracy on the Internet is the lack of a doctrinal response from law enforcement.  This is not because law enforcement does not understand that evil is being done online.  They all know that evil in all its forms is alive and well.  Law enforcement lacks the tools and doctrine to deal with it in order to tell the desk sergeant or the beat cop what to do.

If you call 911 and tell the operator your car is being stolen off the street, the operator and the officers she summons will know what to do.  They have a doctrinal response to automobile theft.

But if you call 911 and tell the operator your life’s work is being stolen online, the operator and the officers she summons usually will not know what they are expected to do.  They have no doctrinal response to the theft of your life’s work, a greater crime than stealing a car.

Neither would you expect that you ran the risk of being sued by the car thief over whether you had the right to call 911, or that you were misusing your right to own a car by calling 911.

For the Heritage Foundation of all people to give short shrift to the magnitude of this problem and to ignore the power of the free market to correct many of these imbalances is rather startling.

This Cafe is Closed”:  A Form of Theft

The Heritage Foundation refers to online theft as a “form of theft”.  What is that supposed to mean?  Theft in all its forms is still theft and is a negative externality that is being forced upon legitimate actors in the struggling market.  While Heritage acknowledges the “problem”, it must be asked, where were you for the last decade that we have been living with “the problem”?  We didn’t get here overnight.  The Foundation rather sounds like Captain Renault, “shocked, shocked that there is a form of theft going on”.  (Whether they picked up their winnings will remain to be seen when they disclose their 2011 Form 990, in particular Schedule B.)

“Internet Security”

The Heritage Foundation devotes considerable attention to the notion that utilizing the effective tool of seizing and blocking Internet addresses justifies a cry for “internet security.”

I commend the Heritage Foundation for getting this out with a straight face.  It must be said that “Internet security” is about as much an oxymoron as “military intelligence.”  It’s striking to see the group of–largely men–of science revered as those who brought us the worldwide network that is capable of being used by anyone—literally anyone—to do a hugely damaging variety of bad acts, unpredictably, for any or no reason, and with little likelihood of being caught.

These Very Serious Men of Science have failed miserably to protect users from experiences like the Conficker worm or even find out who is responsible for the infection of millions of computers.  Yet these Very Serious Men of Science are lionized as “Heros of the Internet”—whatever that means.  (I must confess when I hear that moniker I get this image of old Soviet guys with bad teeth wearing bad suits with more medals than anyone should reasonably have, all competing for lapel space.)

I look at this differently.  It is this initial failure of “Internet security” that got the ball rolling for the worldwide network of online thieves, but it is the continued failure of these Very Serious Men of Science to fix the problem that got us where we are today.  So when speaking of “Internet security” it is well to keep firmly fixed in your mind that alongside all of the good that the Internet has brought, there has been vast harm that probably runs a close second to the financial benefit of the good.

Bad Guys Move Elsewhere

Heritage repeats the canard that domain name blocking will be ineffective because the bad guys will simply go to non-US domain name registrars, and so why bother?  Said another way, the criminals will try to outsmart us, so we should let them.  Why bother having laws if criminals will just find a way to continue to break them with impunity?

This position is, of course, unfortunately absurd.  As anyone in law enforcement could tell you at any point in history, criminals will always find a way to try to beat the odds.  The point is to make it harder and harder for them to do so–not to give up.

Disruptions to DNS

Another criticism of the legislation that Heritage uncritically repeats is that blocking the DNS address for rogue sites will negatively affect access to legitimate sites.  That may be if no one does anything to prevent it.  I’m sure this is something that the Heroes of the Internet can handle just fine in their quest for Internet security.

Security for Me But Not For Thee

This brings us to the black magic portion of the program, which Heritage states this way: “There are also concerns that SOPA could interfere with deployment of a newly developed Internet security system known as “DNSSEC” (which is intended to ensure the successful “resolution” of IP addresses), further weakening security.”

These “concerns” are addressed in part by network engineer Richard Bennett:

“SOPA simply requires ISPs to delist the Internet addresses of foreign sites found by a US court to be dedicated to criminal activities. DNS has had the ability to delist sites since it was designed in 1987, and all widely used DNS services have this capability.

SOPA critics charge that such filtering “breaks the Internet” [whatever that means–let’s ask a 5 year old], but it does no such thing as long as it’s done sensibly. (Security experts criticized an early version of SOPA, but the amended bill addresses their concerns.) It’s a practical means of protecting consumers from rogue sites that traffic in illegal goods.

The opposition to SOPA preys on ignorance and fear. Most Internet users don’t understand the details of DNS or the methods used by Internet search engines. It’s easy for the apologists for the Internet status quo to convince the less well informed that the Internet is too big and complicated to improve. But they’re wrong.”

What motivates the claim that implementing DNS blocking would “break the Internet”?  Paul Vixie (a well respected computer scientist who probably would be included in the list of “Heroes of the Internet”) explains:

“I’ve been asked by several people whether [technology developed by Vixie’s company]…can be used to implement government mandated DNS blocking, for example to protect Hollywood [sic] against intellectual property theft or to protect children against abuse by the distribution and viewing of Child Abuse Materials or to protect a society against content deemed dangerous by its government. Sadly my answer to this is a qualified “yes.” I say “qualified” because while I can agree that it’s worth perturbing the whole Internet ecosystem to wipe out a domain that’s being used for the distribution of Child Abuse Materials I simply cannot agree that this level of perturbation is warranted for the protection of intellectual property.”

Like so many things in the bizarre world of Internet devotees, the Heroes of the Internet would rather stand by and watch thousands of jobs be destroyed and private property rights be eroded or effectively be made voluntary because they don’t like the people whose rights are to be protected.

So at the end of the day, what constitutes “Internet security”?  Left to their own devices, it would be what the Heroes of the Internet say it does.

Even so, Chairman Smith has amended the SOPA bill to include the following language:

(5) NO IMPACT ON SECURITY OR INTEGRITY.— Nothing in title I shall be construed to authorize a court to require compliance with an obligation under section 102(c) in a manner that would impair the security or integrity of the domain name system or of the system or network operated by or on behalf of the party subject to the obligation.

This should make it clear that the legislation is not designed to nor will undermine DNSSEC, DNS Backup or the DNS system in general.  (For a more detailed analysis, see George Ou’s paper on the subject, DNS Filtering is Essential to the Internet.)

Heritage needs to ask the question whether the reason that there is a criticism of the “Internet security” aspects of the legislation is because of what Vixie said—we are not worth the trouble.  Or as Lawrence Lessig said, why break the Internet to protect this “tiny industry”.  I don’t know, maybe he should ask the AFL-CIO.

The “Free Speech” Mantra

Heritage shows another example of the equivocation of rogue sites opponents when they drag up the free speech canard:

“SOPA would undercut other policy goals as well. The requirement that search engines omit links to rogue sites undercuts the role of search firms as trusted intermediaries in conveying information to users. There are, of course, other circumstances where search engines already omit information and links—for instance, Google routinely screens out child pornography from its search results. But there has never been a government mandate that information be withheld from search results. Imposing such a mandate would represent the first step down a classic slippery slope of government interference that has no clear stopping point.”

Ah yes, the sky is falling.  How could this statement possibly be true: “The requirement that search engines omit links to rogue sites undercuts the role of search firms as trusted intermediaries in conveying information to users.”  If the link is to a rogue site—a site dedicated to theft—how is it that omitting the link undercuts the public trust in search engines?  Wouldn’t eliminating links to sites peddling illegal drugs and counterfeit goods strengthen the public trust in search engines?

There is no “government mandate” to “withhold information” from search results—the mandate is to stop crime.  That’s the stopping point and it is crystal clear.

But like Paul Vixie’s example which curiously also uses the child pornography example, Heritage doesn’t want to protect the rights of people they apparently don’t feel are worthy to protect from this “form of theft”.

Now we get to the real “free speech” canard that Heritage accepts uncritically:

“Arguably, the limits placed on search engines as well as other third parties under SOPA would also violate constitutional protections of freedom of speech.  But even if not barred legally, any such restrictions should be imposed only after the most careful consideration, only when absolutely necessary, and even then, to the smallest degree possible.”

Floyd Abrams—the leading First Amendment lawyer of our time–wrote an extensive letter regarding rogue sites legislation to the Senate Judiciary Committee expressing views he recently affirmed at a House IP subcommittee:

“I am aware that [such legislation] has been criticized on First Amendment-related grounds by organizations such as the American Civil Liberties Union and certain human rights groups, organizations for which I have the highest regard….[But such] legislation does not impair or overcome the constitutional right to engage in speech; it protects creators of speech, as Congress has since this Nation was founded, by combating its theft.”  (That would be the ACLU that just got $7 million from Google.)

Simply put—there is no first amendment right to steal.  The rogue sites legislation is narrowly drafted and clearly does not undermine legitimate speech rights.

Call for Mr. Kafka:  The OPEN Act Misdirection

Finally, Heritage demonstrates a curious disconnection from reality in supporting bringing rogue sites cases in the International Trade Commission, a body ill suited to such proceedings.  It must be said at the outset that the only thing slower than federal copyright litigation is federal copyright litigation preceded by a hearing at the International Trade Commission.

I realize that the Heritage critique is on all fours with Google’s positions, but this one is such a clear departure with reality that it makes one think they could have saved everyone some time if they had just signed their name to the Google talking points.

The OPEN Act is a clear act of desperation by companies like Google who have been caught with their hand in the billion dollar cookie jar.  In case they cannot actually stop the rogue sites legislation, they want to have the enforcement of the law be slowed down to a stop in a forum that advantages them—an administrative law proceeding in Washington, DC that your average artist will never be able to take advantage of.  The distance, cost, limited docket and limited number of lawyers who can take the case—not to mention the fact that Rep. Goodlatte made in the last SOPA markup that the an ITC hearing is a 180 out from the relatively informal DMCA notice process was designed to allow independent artists to protect their rights—would almost guarantee that only the 1% of the 1% would be able to enjoy the protection of the private right of action.

Support the Free Market

If you are a true believer in free markets, then you by definition must also be a true believer in property rights.  What defines a property right is its enforceability.   Enforceability comes in two flavors: public rights of action which allow the government to do what governments are supposed to do at the most fundamental level—protect the people from a life that is nasty, cold, brutish and short when harm is so widespread that it is unreasonable for the government to stand by and allow its citizens to sustain injury leading to the wide disorder in the markets.  In America, we say that our government is to protect us from all enemies, foreign and domestic.

The other flavor is the private right of action which allow the more well-heeled to stand in the shoes of the government to pursue damages claims or injunctive relief where government fails to act or the harm is not egregious enough to warrant a criminal prosecution.

Such disorder should be seen for what it is—a breakdown in the integrity of the free market, not a failure of the market.  Because there can be no market failure without a market, and there can be no market without property rights that are enforceable at a market-clearing price.

Even though the creative community has made significant strides in establishing retail outlets for a variety of goods online, and even though commerce online has become a mainstay of almost every human endeavor, the status quo that has become incumbent over the last decade is that respect for private property rights online is largely voluntary.  Where those rights have been voluntarily respected, companies have a chance prosper with repeatable business.  Where rights are not respected, companies extract free rider rents for a period of time on a “catch me if you can” business model.

When free riders are finally caught by private actors, they often shut down and perhaps pay a judgment.  Mostly they slither off into the night.  When they are caught by the government,  recent history suggests that they either slither off into the night by staying outside the reach of U.S. courts after having reaped the benefits from the U.S. market, or they will pay a large fine to avoid being indicted.

Consider one example of those who voluntarily respected rights: Apple, Inc.’s iTunes Music Store.  Apple has the best anti-piracy filter available—they get licenses.

By licensing each recording they make available for sale, paying royalties and cooperating with the creative community, Apple has become the largest online retailer of recorded music.  Apple has not spent time arguing about whether or not enforceable property rights exist in the music they want to sell—clearly the rights exists and Apple has always taken the view the it is “bad karma” to steal music.

Consider one example of those who voluntarily refuse to respect rights:  Google, Inc.  and its many business lines.  Instead of voluntarily respecting the rights of others, Google has chosen to use the money it raises from the public financial markets to engage in epic legal and lobbying struggles to try to undermine, ignore, and bully rights holders, especially independent artists.

Google only volunteers to respect rights when the rights holder has significant leverage over them or gets a final nonappealable judgment track by track and pill by pill.  This is why Google is viewed as an untrustworthy company by the music and movie businesses—it is not that the members of the creative community are such dim wits that they can’t understand Serious Men of Science.  It is because they do understand, and because they see them for what they really are.

An important point is that the comparison of Apple to Google reflects a comparison of choices.  Google chose to profit from piracy because it is able to do so.  And one of the reasons it is able to do so is because Google engages in yet another manipulation of the market by free riding that can only be remedied by the government.

Why Heritage Foundation can’t see this is beyond me.

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