On Theft and File Sharing

Dennis Jernberg has an interesting article at The Space Helmet Show on file sharing.  While it is overall an excellent article, it is here that he slips up:

“If it sounds like theft, it is.”

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Legally, file sharing is not and has never been theft. The harm associated with theft is always a real loss and includes the inability of others to use the original item. The harm of file sharing, on the other hand, is all conjectural, based on our understanding of economics: we expect that a certain amount of money would have been made by the owners of the property had the file sharers not gotten it for free.  From a common-sense standpoint, we imagine that if they had not gotten it for free, they would have had to buy it.  This is a logical and perfectly reasonable expectation, so we do not question it.  However, this common-sense approach is false.

Economic theory tells us that many people who would download something for free would not in fact pay full retail price, preferring to go without.  In short, some of those who benefit from file sharing would never have been paying customers in the first place.  They only took the shared item because it was free. Accordingly, punishments for theft and violation of intellectual property rights by copying are not the same.

Statistically, it is impossible to avoid the conclusion that economic harm is caused to owners of intellectual property by file sharing. There is a counter-argument that harm is mitigated by the increased exposure caused by file sharing, but it is difficult to prove that the value of the publicity generated exceeds the losses involved – while it sometimes may, very often it will not, making the argument a dubious proposition.

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However, the path from population-wide statistical certainty to punishment is murky at best: applying such statistics at an individual level results in unwarranted inferences.  On the whole, file sharing will cause some harm [not much, according to this study], but it’s impossible to say that a given instance has actually caused damage – if a product is no longer free, some will buy it anyway, and some won’t.  How can we determine which part of the population someone falls into?  We can’t, until they make that choice.  The indeterminate nature of of the matter belies glib simplifications such as, “sharing is theft, and theft is wrong.”

The law, of course, does not concern itself with such uncertain, philosophical matters.  However, given that the same economic theory that justifies punishment raises the specter of uncertainty, legal professionals cannot afford to ignore this issue entirely.  The very first cases against IP violators in the US all involved a spectacular number of violations – even if any one violation might or might not have caused harm, the sheer number of infractions made it statistically “certain” that overall, harm was caused.

I would revise Mr. Jernberg’s statement to read, “If it sounds like theft, it may not be – but it is still probably illegal.”

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Published in: on October 10, 2009 at 2:17 PM  Comments (7)  
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  1. “it is impossible to avoid the conclusion that economic harm is caused to owners of intellectual property by file sharing. ”

    On the other hand, it is impossible to avoid the conclusion that intellectual property owners are simply lazy bums expecting to be paid for doing nothing. You spend a crapload of work and resourses to make a car – you sell it but once, you spend work and resources on IP – you sell it as many times as you can sell it. How is that fair trade ?

    • Well, just as I urge people to not bring morality into the argument with assertions like “file sharing is theft,” I similarly urge that we not bring morality into the argument on the other side either, with arguments like “hard work and capital are the only things that justify pay.”

      In economic terms, your argument works out to alleging that the marginal cost of a good or service is the only thing that should matter. Unfortunately the system doesn’t presently work that way, and it’s hard to say if it will ever work that way. About $5 billion per year is currently spent on cancer research. If after 10 years of research, a cure is found that can be manufactured for 25 cents a pill, how much should patients be charged? Should only one pill be sold, at a cost of over $50 billion? Should subsequent pills be sold at around 25 cents each? Should the cost be averaged out over the pills, and if so, what is the best way of averaging it out?

      Of course, the modern pharmaceutical industry is interested in more than just recouping their losses, but as the example demonstrates, even if profits are not being made, it’s still a very thorny issue.

  2. Read that Jernberg post.

    Want my 5 minutes back.

    The only interesting thing, maybe, I dunno, is the distinction between free (beer) distribution as opposed to distribution that has a monetary cost. The way I see it quantified is that one economically displaces it in a tangible way where as the other isn’t. It’s a clever but ultimately false distinction, sadly, since it’s easy to argue that for far most people who are immersed with pop/mass media day in and out, the bottleneck is attention and time and not so much money. Mass media as a rule is dirt cheap, and quite affordable even after paying bills and whatever. Indie bands that distribute music via free sharing are vying for ultimately attention and not so much our wallets.

    The rest of it is pretty much the same dead-horse beating nonsense. I don’t understand what’s interesting about that article. It doesn’t matter if you feel it’s stealing or not, because the law doesn’t work on people’s own interpretation of vague social mores and they’re proposing laws in the end.

    • I found Jernberg’s examples pretty good, as well as his reminder that the debate is fundamentally different in different countries.

      You’re absolutely right – in the end it comes down to law, and the law does not care about personal morality.

  3. I remember reading about a study that was done somewhere in Europe, I can’t remember where, that showed that illegal downloads actually increased sales. Also I remember reading how an author, I think it was Neil Gaiman, convinced his publisher to post one of his slightly older novel online for free for a month and as a result saw a 40% jump in sales of that book for that month and a smaller but still significant jump in sales of all his other books.

  4. When I said “If it sounds like theft, it is,” I meant actual piracy: copying records or tapes in order to sell illegally, with profit going to the pirates instead of the artists and distributors. I’ve never believed that file sharing is theft; however, the record companies insist it is, and they’re suing as though it were. I remember that tried to wipe out home taping too. They failed then, and they’re failing now. I think the record companies, and those artists like Metallica and Lily Allen who support their position that file sharing is theft, are clueless. They don’t see the difference between file sharing and actual piracy, and want to erase that important distinction in law (and largely have).

    In my entry I posted a link to the Cato Institute study (in PDF) that showed that illegal downloads increase sales. The author is conservative, but so is file-sharing foe Garth Brooks. And there’s also the example of Cory Doctorow, who has posted free downloadable ebook copies of all his books and stories under a Creative Commons license.

    Speaking of home taping: Bow Wow Wow’s first single took a decidedly liberal position on the issue. It’s called “C30, C60, C90, Go!”

    • I agree that the distinction in law is important. However, if we accept your assertion that they largely have erased it, that suggests that they are very clever indeed: rather than pay respect to the laws as intended, they will simply rewrite the laws to suit them. I would not call that “clueless” if it meets with success.


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