International Piracy, Technology and Intellectual Property
There is no clear beginning for a story about international piracy ofintellectual property. As long as there has been a concept of intellectualproperty there has been piracy. It could be argued that attention to conceptssuch as the proprietary author became important because of an activity calledpiracy. Laws were established in order to change piracy into a crime.
Even though there is no clear beginning to this story, there are historicalpoints in time which can serve to structure the argument. There are alsoactors who can add substance to the story. The primary actors in this dramaare the United States, ASEAN countries generally and China specifically.
In May of 1989, the occupation of Tiananmen Square brought the eyes of theworld to China. Even as the Bush Administration expressed concern aboutinterfering with China's internal affairs in regards to Tiananmen Square, theywere threatening the PRC with "massive and unprecedented trade sanctions ifChina did not promise to devise legal protection for computer software toAmerica's liking."[1] As William Alfordputs it,
The decisions that led the U.S. government to pay insufficient heed to theepochal events culminating on June 4, 1989, and instead to devote a goodlyportion of its available leverage to securing promises about software, wereneither inadvertent nor passing tactical errors. On the contrary, theyexemplify the high priority that intellectual property protection has assumedin American foreign policy with respect to the Chinese world and beyond sincethe mid 1980's, and the concomitant conviction that the key to securing suchprotection is the passage of new legislation, through pressure if need be. While 1989 was not the first time pressure had been put on China to make andimprove its intellectual property laws,[3]this new pressure, which has carried into the Clinton Administration,illustrates the importance of intellectual property in international policymaking. Additionally, it shows how important software as an exchangeablecommodity has become to the United States. The 1989 negotiations were not thelast. On April 26, 1991 the United States government used Section 301 of the 1988Trade Act to place China on the priority list of countries with problematicintellectual property laws.[4] The U.S.gave China a November 26, 1991 deadline to comply with U.S. demands or facetrade sanctions. Secretary of State James Baker visited China in November of1991 and "Baker informed the Chinese that the misuse of American intellectualproperty stood with the sales of weapons of mass destruction to internationaloutlaws such as Iran and abuses of fundamental human rights as one of threeissues impeding better bilateral relations."[5] One month later, the United States Trade Representative(USTR) gave China its ultimatum -- either "rewrite its Intellectual Propertylaws to the satisfaction of Washington or face the imposition of hundreds ofmillions of dollars of punitive tariffs."[6] China, for its part, was already improving its intellectual property laws. In1991 they implemented their own copyright code, in part because of Section 301threats in 1990.[7] The 1991 threatended when China agreed to outlaw theft of computer software and protectpatents of agricultural chemicals and pharmaceuticals if the U.S. agreed totake China from the "priority list."[8]Chinese officials were less than happy, however, at what they saw as aviolation of their sovereignty. It was predicted that China's new stance against piracy would create a climatemore amenable to U.S. investment. China even executed a man caught sellingfake Maotai, a brand name liquor, in 1992 during an antipiracy campaign.This strong stance against piracy made companies like Walt Disney feel safeenough to reinvest in China. In 1993 Walt Disney granted 20 licenses tomanufacturers in China to produce Walt Disney products.[9] However, the issue of intellectual property piracyreared its ugly head again in 1995. In 1995, China and the U.S. were on the brink of another trade war because ofintellectual property piracy. The U.S. accused China of failing to protectproducts as far ranging as Disney's The Lion King to Microsoft'scomputer programs. At issue was enforcement of the intellectual property lawsChina has already put on the books. The U.S. felt China had not tried hardenough to eliminate piracy. Again, the US used its Section 301 club to"investigate" China's intellectual property record and possibly imposesanctions if China did not comply. China listed its retaliatory measures ifthe U.S. imposed sanctions and in January of 1995 a trade war lookedimmanent.[10] Faced with $1.1 billion of sanctions if it did not agree to U.S. demands,China capitulated to the U.S., making "the China market safer for Americancomputer programmers and pop stars."[11]America emerged victorious again. However, the price was high. China may havegiven in to US pressure on intellectual property, but it retained itsdiplomatic dignity by rejecting an attempt to ban nuclear weapons tests and bypublishing a report, "timed to coincide with the copyright accord, that Chinahas no political or religious prisoners."[12] The possible $1 billion returned to US companies due todecreased piracy will make an "enormous impact" on the $30 billion tradedeficit we have with China.[13] However,as one diplomat stated: "When you add up the costs and benefits of theintellectual property accord, I wonder if it's really worth it." Regardless of its reasons, the U.S. has been threatening trade war with Chinaover intellectual property for many years. There is evidence to suggest thatthis hardline attitude towards China is really about trade, barriers, anduntapped markets, as pointed out by Awanohara and Kaye: Outclassed by Japan in consumer products and unable to vie with the easy-creditterms of European capital-manufacturers, the US' only hope of narrowing itsgrowing trade deficit with China -- US $10 billion last year and projected atnearly US $15 billion this year -- must lie in technology exports. Because technology is often protected by intellectual property, the U.S. usesintellectual property as a club to open China's markets. The much publicizedfact that China and Taiwan are the most blatant pirates, especially of computerprograms and books, justifies the U.S. pressure. However, our rockyintellectual property relationship with China can in part be attributed to thevery notion of intellectual property itself. The United States has a well defined intellectual property system with a longEuropean history. The U.S., now that it is a leading exporter of intellectualproperty, is concerned that other nations of the world understand intellectualproperty as Americans understand it. Thus, along with intellectual propertyexports, the U.S. is trying to export its intellectual property story. It isthe U.S. insistence that the rest of the world follow its intellectual propertystory which causes the problems. The U.S. intellectual property story isespecially important to American businesses who endlessly repeat itsassumptions as fact, however, it is not the only way to view intellectualproperty. China, with a strong history of government censorship and controlover ideas, and its distinct lack of private property rights, looked uponintellectual property as a collective good owned by the state, if it thoughtabout intellectual property at all. China wrote their first intellectualproperty laws in the beginning of the 20th century under pressure by foreigngovernments. They have added and "improved" these laws only at the pressure offoreign governments. Thus, it can be surmised that significant problems willerupt when two such opposing viewpoints clash. Technology has made more sophisticated piracy possible. Not only are computerprograms, movies, CD's, and videos easily pirated and sold, but technologymakes it possible to rapidly reproduce books as well. It is the possibilitiesopened by technology that makes intellectual property piracy such a greatthreat. The computer industry is among the most threatened since its' productis so easily replicated and sold. Software companies have highlighted theirplight in China and Taiwan, estimating that 90% of software in these countriesis pirated.[16] The traditional American intellectual property story, as outlined in ChapterTwo, is no longer simply an American tale. The Chinese drama illustrates howcopyright has become a set of beliefs which the U.S. feels the entire worldshould embrace. Through its link with international trade and piracy, the U.S.version of the intellectual property story is moving beyond U.S. borders andbeing forced upon the developing (and some developed) nations of the world.This chapter is about the extension of the U.S. intellectual property storyabroad using the guise of fighting international piracy, how this story istold, who is telling it, and what it means in terms of international trade. First, I will trace the emergence of a crisis in the United States overinternational protection of intellectual property which culminated in the TradeRelated Intellectual Property (TRIPs) negotiations attached to the UruguayRound of GATT. Second, I want to look specifically at the story ofinternational piracy, how it is crafted, and the implications. This story isintimately related to US concerns for intellectual property law. The piratestory helps justify US trade actions both bilaterally and multilaterally.Finally, I want retell this story -- illustrate the assumptions upon which itis based and the purpose it is designed to serve. SOME GENERAL BACKGROUND For hundreds of years, a theory of intellectual property has existed basedupon the assumption that creation is facilitated by the provision of atemporary monopoly which ensures the author of a work will be the solebeneficiary of any profits.[17] Asdiscussed in Chapter Two, the Lockean concept of landed property was used tojustify the extension of proprietary rights in intellectual property. Themetaphor of a landed estate has helped individuals for centuries becomeaccustomed to the ownership of ideas. Intellectual property has been the subject of international conventions,agreements, and divisions for over 100 years and piracy has been problematicthe entire time.[18] Piracy andintellectual property have been linked from the beginning. If one is to definea new set of property boundaries, then one defines a type of criminal actionwhich transgresses those boundaries. The pirate is one of the intellectualproperty criminals. Within circles that rely upon intellectual property (suchas publishers and scientists), these legal regimes have been a common aspect ofthe everyday work experience for years. However, the international importanceof intellectual property has not been considered a crucial aspect of Americanforeign policy until quite recently. The emergence of intellectual property as a critical international issueoccurred in the mid-1980's, when intellectual property leapt from obscurity toa central place on the national agenda. Today, intellectual property hasbecome a primary motivating factor behind the United States position oninternational trade, and it informs treaties at both a bilateral andmultilateral level.[19] Implicit in thischange of heart has been an increased concern over enforcement of intellectualproperty rights and a focus upon piracy which, until this point, was moreirritating than threatening. However, the pirate emerges as a threat as anindustry or country finds itself competing in a new environment where legal andillegal competition are infringing upon its ability to maintain its marketshare. The pirate is especially threatening in countries lacking the legalframework which provides incentives for creating intellectual property andpunishments for violating these "rights." The threat posed by pirates led tothe passage of the first U.S. Copyright Act in 1709 and is in part responsiblefor the United States' interest in strong intellectual property protection. THE EMERGENCE OF A THREAT -- PIRACY IN THE 1980s Until 1891 the United States would not recognize foreign copyrights, In 1891 the U.S. passed the Chace Act which provided protection for foreignauthors. Even then, however, American copyrights were not consideredprofitable. As one publisher of the time noted, Americans were used to bookssold at significantly reduced prices. In order for British publishers to printcopyrighted works in America they would have to raise prices or forego profits.Raising prices would probably choke off potential buyers. Thus, even withcopyright available in America it was not in the publisher's best interest toprocure an American copyright when the volume could be sold in Britain at aprofit.[25] This scenario is analogous tothe way many countries view American books, movies, and computer softwaretoday. Because pirated copies are significantly cheaper than original, thereis little incentive to buy the legitimate products. It wasn't until 1988 that the United States finally joined the BerneConvention on the protection of copyright (written over 100 years earlier andsigned by most major participants in or around 1887). Even after signing theBerne Convention, the US rejected one of its major components -- moralrights.[26] Sometime between 1891 and 1988 the United States underwent a significantchange in the way it viewed intellectual property. The U.S. made thetransition from pirate to police over the past 100 years. So much has changed,in fact, that the United States has become the international advocate of strongintellectual property protection. This advocacy has been the motivating forcebehind the inclusion of intellectual property rights in the GATT, the UnitedStates-Canada Free Trade Agreement, NAFTA, and numerous other treaties. Congress made the protection of intellectual property a principle negotiatingobjective of the Trade and Tariff Act of 1984. In the 1984 Act, "Congress madeexplicit that intellectual property inadequacies are an unfair trade practiceand constitute a basis for Section 301 proceedings."[28] These goals were reaffirmed in the 1988 Act. Following Congressional action, intellectual property rights were made apriority by Ronald Reagan in a trade statement on September 23, 1985. In the mid-80's the United States was undergoing a transformation. Thecountry was transforming from an industrial economy to an information one.This transformation meant two things. First, waning industrial competitivenesshurt U.S. companies and U.S. trade internationally. Second, the U.S. begansearching for new areas of commerce which would maintain U.S. competitivenessin the world market. As Arvind Subramanian puts it, Faced with the gradual erosion in competitiveness in some of the traditionalareas of production, some of the leading trading nations, notably the UnitedStates, now view intellectual property (IP) as a new basis of comparativeadvantage.[32] This search for a new basis of comparative advantage brought the U.S. to thedoorstep of the developing technological industry. Computer technology during the mid-80s was a huge growth industry as personalcomputers hit the market, computer games became hot items, and computersoftware emerged as a commercial product with a high level of economicreturn.[33] The computer had alreadybegun to assert its muscles nationally as issues such as copyright of computercode hit the courts.[34] Additionally,as traditional industries were having trouble, there were several intellectualproperty dependent industries, namely the entertainment industry (records,movies, and books) and pharmaceutical companies who were becoming extremelyimportant contributors to the U.S. economy. These groups were finding that dueto progress in technology, they dealt in products easily copied or replicated.Since a significant portion of foreign trade was in countries with little or nointellectual property laws, U.S. companies became frustrated with internationalpiracy. Thus, the problem was more widespread than simply pirated software.New technologies help subvert traditional methods of proprietary control andare cause for great concern among intellectual property industries such asmovies, music, software, and pharmaceuticals. These industries are alsothreatened by the internet in the U.S. where they lose control over theirproducts to a form of domestic piracy. The trade problems of the United States (which included trade deficits withmany countries accused of piracy) created the perfect justification for puttingintellectual property rights at the top of the national trade agenda.Professor William P. Alford notes, The realization that trade and intellectual property concerns were linked didnot spring full blown from the head of Ronald Reagan in the 1980s (as if muchof anything did)... But what did occur in the 1980s that brought these issuestogether in a politically powerful fashion was a conjunction of interestbetween industry and government. American exporters heavily reliant uponintellectual property -- such as the computer, entertainment and pharmaceuticalindustries -- were growing ever more frustrated with both legitimatecompetition and proliferating piracy, while the White House found itselfcasting about for a politically painless way to address the growing tradedeficit.[35] The emergence of intellectual property as a trade issue during the mid-80s isrelated to our growing trade deficit, the transformation of our economy from anindustrial to a service one, the sudden importance of technology as anindustry, and the increasing ability to pirate intellectual works made possibleby new technologies. With all these insurmountable problems knocking on theU.S foreign policy door, international piracy provided a clean answer to whyAmerica was having difficulties in the world market. Piracy also providedAmericans with a villain which could be fought, unlike the murky domestic andeconomic problems at the root of the problem. In an effort to solve the problems of the United States economy (at leastsuperficially), the Reagan and Bush administrations gradually replacedantitrust laws with high praise of intellectual property rights and theirexploitation.[36] These new attitudeswere brought to policy maker's attention through a variety of avenues. AsWaller and Byrne point out: These new attitudes were expressed in articles and speeches, new internationalguidelines, new research and development joint venture guidelines, the filingof amicus briefs in private antitrust litigation, the issuance of businessreview letters...[37] These activities helped not only to legitimize intellectual property as animportant issue, but provided the framework for the intellectual property storythe United States government began to produce in order to justify itsinternational actions. I wish to describe the story as it is told throughgovernment documents and then provide some analysis of what this story means. THE INTELLECTUAL PROPERTY STORY Critical to this story is a survey done to discover the extent of piracy. TheU.S International Trade Commission (ITC) did a study for the USTR which askedAmerican businesses to estimate the amounts they lost per year to piracy. TheITC reported that 431 companies responding to a questionnaire suffered lossesof more than $23.8 billion in 1986 due to piracy.[38] From these numbers, the ITC estimated that overall, theUnited States lost between $43 billion and $61 billion from piracy each year. The ITC survey proved that international piracy was costing Americanindustries millions, if not billions, per year. An evil had been identifiedand that evil could be attributed to lax intellectual property laws foundaround the world, but found especially in Asian countries. As a study by theAnnenberg school puts it: "Though piracy occurs in every country, it is mostconcentrated in nations like Taiwan -- developing countries with activecommercial sectors."[42] Using Taiwan asexemplary of piracy is not an accident. It centers piracy in a very specificgeographical spot -- Asia. The Intellectual Property Alliance has helped theUSTR identify other "problem" countries. While these countries vary from yearto year, the following have all been considered "priority watch" countries:Korea, Taiwan, Thailand, Saudi Arabia, Philippines, India, People's Republic ofChina, Malaysia, Indonesia, Egypt, Brazil, and Nigeria.[43] While piracy occurs everywhere, a disproportionatenumber of countries singled out for action are developing countries or, as thislist makes clear, Asian countries. It is upon these numbers and places thatthe story of piracy begins to be built. It is mainly a story based upon clearNorth/South lines. There are three government documents I will use to focus this analysis. Thesedocuments span a timeline from 1986 to 1994 and all focus on internationalprotection of intellectual property and the threat of piracy. As with allgovernment documents, testimony is solicited to provide politicians with"expert" opinions on which they can base their decisions. The story whichemerges from these documents is at first filled with villains, heroes, andblistering rhetoric, which is gradually replaced with assertive and aggressivestatements about how the U.S. should protect intellectual property world-wide.The change in tone occurs as the issue develops from one where the problem isdefined and victims identified to developing and using policy to deal with theproblem. As government support is rallied behind the cause of increasedintellectual property protection there is less need to play the victim and moreneed to play the defender and talk about access to markets and unfair trade.Additionally, in these eight years, the world economy has developed enormouslyand the change in rhetoric reflects the change in the economy. The intellectual property story also reflects general assumptions andunderstandings of intellectual property in government circles. While there arenumerous critics of intellectual property, the intellectual property storyremains remarkably unchanged over the course of decades, if not hundreds ofyears. This comprehensive narrative on the meaning of piracy and intellectualproperty emerged before the 1980's. While this specific version of theintellectual property story links it to trade issues, at its heart are thebasic assumptions found in the traditional copyright story. This versionillustrates how the narrative of intellectual property works to provide acoherent method of action. CORPORATIONS AS VICTIMS -- PIRACY IN 1986 Senator Pete Wilson opened the 1986 hearing on International PiracyInvolving Intellectual Property before the Subcommittee on Trade,Productivity, and Economic Growth of the Joint Economic Committee by outliningthe actors in the drama. He states, The focus of our hearing this morning is piracy. We are going to stop piracyof intellectual property rights. The copyright industries in this Nationprovide jobs, they provide entertainment, they contribute significantly to whatwould be a favorable balance of trade, or at least a far more favorable onewere it not for the fact that this piracy goes on.[44] The general problem is understood immediately: pirates are responsible for aloss of jobs and are partially responsible for our trade deficit. It isinteresting that Senator Wilson begins to state that we would have a favorablebalance of trade without piracy, but then corrects himself. This moveindicates that the rhetoric of this situation is enhanced to show theseriousness of the problem and while the claims not be exactly true, it doesnot hurt to create a situation rhetorically in the strongest manner possible.Pirates, afterall, are stealing from hard working Americans. The average motion picture production involves millions of dollars ininvestment, enormous costs, which of course are in no way recompensed by thosewho simply pirate these motion pictures and who sell them for great profits,obviously at a far lesser cost because the pirate is in no way required toabsorb the same cost, he can make the same profit with no investment. This statement, which sounds remarkably like those of British publishers acentury earlier, provides us with the beginning of a moral framework. Honestpeople work hard. Pirates steal this hard work and profit because they don'thave to invest anything in the project. Making piracy a moral issue instead ofa legal one is an important step in distinguishing the good from the bad. Ifthis story were to focus on law alone there would be no case. Afterall,respect for national sovereignty dictates one country should not interfere withthe laws of another country. Piracy as a moral issue, however, gives the U.S.a justification for interference. "Problem countries" are quickly identified. They are: Philippines,Indonesia, Malaysia, Singapore, Thailand, Korea, Taiwan, India, Brazil andMexico. The generalization from pirates to entire states occurs with theidentification of problem countries. The assumption made is that countrieswith poor intellectual property laws are in league with pirates and endorsetheir behavior. The result is a targetable agent for retaliation -- thegovernment of each "problem state." The converse is also true -- a relativelysmall group of intellectual property industries are generalized into the "U.S." In order to clearly justify intervention, the story needs to tell whystrategic economic retaliation is the best solution. Senator Pete Wilsonprovides this rationale in his numerous statements and conclusions throughoutthe hearing. He conceptualizes the problem as one which cannot be solvedthrough diplomatic channels. He is especially clear about his belief thatAsian governments are incapable of responding to any form of negotiation andonly respond to force. While he is the most outspoken, his sentiments arealluded to by all individuals testifying this day. He states: I think the only way we're going to convince them that it is in their interest-- and in the short rather than in the long term, because we can't afford toallow the problem to continue -- is by taking very severe retaliatory measuresagainst them, of the kind that you have outlined here with respect to thepossible denial of continued preferences, to Korea. (Sen. Pete Wilson, p.21). Having traveled to Korea, to Taiwan, to Japan, in every instance we found thatthey were not self-starters in terms of this reform, but that they were awareof the problem, as they could hardly fail to be aware of it, but that theyneeded to severest kind of show in order to actually make progress. (Sen. PeteWilson, p. 22). Mr. Good, I think as we have all learned the hard way, they regard rhetoric ascheap and, frankly, not at all persuasive. I think they will be persuaded onlyby a clear determination to see reform or else to bring about retaliation inorder to compel it. That's not the way we like to do business. It'sunfortunately apparently the only way that we're going to secure theirattention and cooperation. (Sen. Pete Wilson, p. 23). Senator Wilson provides insight into how the problem of piracy is constructed.First, the U.S. identifies piracy as a problem which it can understand in termsof U.S. interests. Second, a villain is identified without asking what maymotivate the "villain's" actions.[46]Attempting to understand the problem from the perspective of the "enemy" is notpart of the U.S. narrative. Finally, in a feat which defies most politicaleconomy, multi-million dollar industries become the victims. After the initial testimony, the subcommittee becomes the stage upon whichthese victims tell their stories. These private sector victims include: theMotion Picture Association of America, Walt Disney, and the Recording Industry.Each victim has a sad tale to tell Congress about its problems withinternational pirates. As Jack Valenti, President of the Motion Picture Association of America putsit, I believe that unless the Congress designs a comprehensive, firm and stringenttrade policy that's going to soothe out a tormented unfair trade environment,we're going to find one day we will be sitting upon the ground imitatingRichard II, composing our own epitaph for exporting goods generally, andspecifically that which is copyrighted, and more specifically of films andtelevision.[47] The result of such piracy is, in Valenti's words, "heartbreaking." Hestates, Pirates are skimming the cream off of the American hit pictures and some who"almost" hit. They are devastating the theatrical release of these films,abusing the flow of revenues that would come in the posttheatricalmarketplaces.[48] The lack of an intellectual property "shield" makes the movie industry "easyprey for pirates, for unscrupulous businessmen, and moreover, Senator, we areprey for legitimate businessmen who, if they break no law in their country bytaking that which belongs to us, using it without our authorization, andwithout giving us any compensation for what they use, they do it." Senior Vice President of Universal City Studios Mr. Charles Morgan also bearswitness to American victimization. His story is one of cable piracy by aPanamanian company called Rexsa. Rexsa sells television programming it piratesfrom U.S. broadcasts. Universal City Studios tried to get the Panamaniangovernment to help them stop the illegal piracy, but 10% of Rexsa was owned bytwo former Panamanian Presidents and a former Foreign Minister. In addition toits political connections, Rexsa makes up to $400,000 per month from piratedproducts while Universal City Studies must rely upon external sources forlitigation funding. This means Rexsa is in a better position to protectitself. As Morgan states, "Our opponent is rich, influential, and adept inusing that system to his advantage. We have seen Rexsa transform its lossesinto delays, and those delays into victories, for each month of transmission isanother $400,000."[50] Again, the U.S.motion picture industry is placed in this narrative as a victim and adeveloping nation becomes the victimizer. The testimony of Jack Valenti andCharles Morgan led Senator Wilson to conclude that we: [C]annot rely upon the moral probity of the people that we're dealing with tosuddenly persuade them to do the right thing. I think it is in the nature ofthings that they are going to have to see that it is in their economic interestonly by being persuaded that there is going to be a tremendous cost to them forfailing to operate as they should.[51] The problem is conceptualized as a moral one where innocent American victimsare deprived of their rightful property by pirates who not only have no senseof morality, but have government support for their actions. Of course, the waythese countries "should" act is in a manner dictated by the United States. The morality play is further substantiated by the fact that the originalcreators who are both innovative and creative are deprived of royalties frompiracy. One cannot have a story about intellectual property without theoriginal author making an appearance. Intellectual property rests upon theassumption that monopoly protection provides the incentive to create. Thecreator is the person most hurt by piracy, at least that is part of the story.As Jack Valenti puts it, "Producers, distributors and most importantly creativeartists are cheated of their rightful royalties in the process and so isAmerican trade."[52] The President of therecording industry Association of America, Mr. Stanley M. Gortikov agrees. Hestates, But despite that universal popularity, the American creators and copyrightowners and performers realize virtually no revenue from the sales of theirproperty and their creativity. They are literally robbed every day almosteverywhere and seemingly most of the governments in their foreign territoriescondone the thefts and really just don't give a damn.[53] In such a situation, the pirates benefit and the creators of such uniquenessand innovation end up as "total losers."[54] Finally, Frank G. Wells, President of Walt Disney Co., widely known for itsaggressive stance on intellectual property states, At Disney, story people and artists spend hour upon hour of work in developinga number of character concepts, most of which are discarded for a variety ofreasons. Once a concept is preliminarily accepted by our people, stories arecreated to provide personality and a setting in which the characters can beperceived... As you can see, all of this activity takes enormous dedication andinspiration, as well as large investments of risk capital and the hard work ofmany Disney employees.[55] Mr. Wells wishes us to empathize with those hard working Disney employees byasking us to "imagine, then, how our Consumer Products division feels when,after having spent all that time, effort, and money, they see "Chinese" orcounterfeit copies of their characters on the marketplace."[56] Of course, the President of Walt Disney does not wantCongress to hear that the very artists and story designers he refers to workfor hire. This means they receive an hourly wage for their creative laborwhile Disney reaps the millions of dollars in profits from their creativity.Such a division of labor is obscured in the testimony which places the WaltDisney company in the place of the victim. The reference to "Chinese" assynonymous with pirated goods indicates who Disney blames for piracy andsupports in a subtle manner the more overtly racist statements of SenatorWilson. The Chinese slur helps switch the emphasis away from the millions inprofits Disney makes each year to the victimization of Disney by immoralforeigners. While there is mention of the original creator in the testimony provided toCongress, the larger picture is hidden. Each storyteller is careful to include"copyright owner" as well as producers and other workers in their victimizationscheme. While the moral ground lies with the protection of creative andinnovative work, the reality is that the creators are not the primarybenefactors of the intellectual property system. Creation as discussed bythese businessmen occurs within a fully developed industry where those who makethe money are rarely those who create. The division of original author fromcopyright is rarely addressed, yet the author is pulled out of the bag when adefense of intellectual property rights and the incentive they provide forcreation is needed.[57] While this committee was not charged with coming up with a policy orintroducing legislation, the language and tone of the meeting reflects theprevailing attitudes about intellectual property in public policy makingcircles. This type of narration occurs frequently in the U.S. and thoroughlyentrenches the traditional intellectual property story. Through testimonywhich provided stories from major U.S. industries, and through the discussionabout the issue, the Subcommittee justifies a tough trade stance onintellectual property in order to curb international piracy. The testimonycontains tragic stories where hard working Americans are deprived of theirproperty by immoral foreigners. Indeed, not only is it problematic thatforeigners are illegally migrating to the U.S. each day, but unauthorizedreproductions of American intellectual property is brought into the U.S. eachday as well.[58] While the numbers may beinaccurate, a good story will stick with the committee members in detail andcan be recalled at a later date to provide evidence of international piracy.This is the power of a political narrative. Through a combination of bilateral and multilateral negotiations, the UnitedStates has been forcing countries to change their intellectual property laws toreflect United States law. This force is applied through threats of economicsanctions for non-compliance, placing countries on a "priority watch list,"giving them a deadline for compliance with U.S. laws, and by makingintellectual property part of the GATT, ensuring that it is linked with fairand unfair trade practices. A significant part of the story told in the 1986 Congressional hearing is thatthe United States is morally superior because it values intellectual propertyrights and the international action it has decided to take is appropriate.These other countries have no moral fabric and the U.S. must rely upon force(which is the only thing these countries understand) to convince them to complywith U.S. wishes. This force is euphemistically concealed in at least onestory as "suggestions" for improvements.[59] The fact that Asian and other developing countries areheeding American "suggestions" about how to improve their intellectual propertylaws only fulfills the narrative which makes U.S. industries victims, immoralforeigners villains, and the U.S. government the hero. This story is importantfor how the United States pursues its intellectual property interests abroad.It is a story that has changed little in the past decade as a reading of thenext two documents will show. PIRACY IN THE 1990s The 1991 government hearing on Intellectual Property and International Issuesbefore the Subcommittee on Intellectual Property and Judicial Administration ofthe Committee on the Judiciary tells a remarkably similar story to the 1986hearing. Probably because the 1991 hearings were not primarily concerned withpiracy, but with intellectual property as an international issue, there was aslightly different focus. Whereas the 1986 hearing reflected a concern withinternational piracy, by 1991 intellectual property had emerged as a traderelated issue and the U.S. switched its concern to getting the Trade RelatedIntellectual Property agreement (TRIPs) attached to the Uruguay round of GATT.However, piracy was still addressed in this hearing. This threat has beendeveloped as one to our status as a creative leader, introducing the rhetoricof America as "Number One" into the story. This hearing, unlike the 1986hearing, has evidence that the intellectual property story constructed by theUnited States might have a few flaws, however the "Number One" rhetoriccontinues to justify our actions as correct and rational. Representative William J. Hughes notes in his introductory statement: "TheUnited States is the world's leader in creativity, both artistic andindustrial."[60] In 1986 the computerindustry was still emerging as an economic powerhouse. By 1991 this emergencewas complete. Additionally, the pharmaceutical, movie and recording industrieshad continued to thrive despite dire warnings of their eminent demise fouryears earlier.[61] Countries continued to pirate U.S. intellectual goods. In April of 1991 theUSTR used Section 301 of the 1988 Trade Act to identify China, India, andThailand as priority foreign countries.[62] Two things are interesting about this designation.First, even though Western countries such as Canada, and the European Communitywere causing quite a lot of trouble on intellectual property matters, theirnames do not appear on the U.S. watch list. Second, of the names listed byCarla Hills (China, India, and Thailand), we had trade deficits with allthree.[63] Hills' testimony, along withnumerous other "experts," continues to perpetuate the story that Asia and otherdeveloping countries are the bad guys who must be punished. Jack Valenti putsa masculine tone on the story when he claims that pirates deliberately intendto "impede us, to shrink us, to exile us."[64] Those testifying before Congress are Presidents and CEOs of importantintellectual property related companies. Since 1986, however, they have more"accurate" numbers to provide. These numbers are those published by the USTRassessing international piracy at somewhere between $43 and $61 billion. Eachtestimony also provides evidence of large trade surpluses. The language ofvictim has been replaced with the language of fair trade. In this story,intellectual property rights must be protected because America is the mostcreative place on the planet and all other countries benefit from ourcreativity either legally or illegally. Unlike 1986, there are several people who voice minor opposition to the claimsmade in the U.S. intellectual property story. First, while Ralph Oman, theRegistrar of Copyrights, is certainly in favor of strong protection, he alsosuggests that the United States needs to open its markets to foreignintellectual property in order to show that protection is not a one-waystreet.[65] A more assertive voice ofdisagreement comes from Stanley M. Besen, a Senior Economist at the RandCorporation. He points out that the U.S. position on intellectual property isshort sighted. It assumes the U.S. will be a technological creditorindefinitely. If we lose the upper hand, we will be disadvantaged by the veryintellectual property laws we designed.[66] There is no room in the story of America as "Number One" for Dr. Besen'sperspective. A strong intellectual property story cannot be written in whichthe U.S. leaves room for the possibility of falling from the Number Oneposition. As Representative Hughes said, we are a world leader in this area.It is upon this claim that our actions are based, regardless of the rationaloption of following a middle path. Mr. Besen also offers that the exchange of new knowledge is more important, orshould be more important, than immediate royalties. Of course, as evidenced bythe outcome of GATT (all countries agreeing to "harmonize" their laws with theU.S.), Dr. Besen's voice was not successful. Dr. Besen's 'conservative'approach, while certainly compelling, does not comply with the intellectualproperty story United States policy makers as a whole want to tell. In thatstory, the U.S. is the world's best competitor in creative goods, othercountries benefit by pirating our products and this activity must be stopped.The only possible method by which another country could become a world leaderin technology is if they illegally stole our creative work. By protectingintellectual property, according to the U.S. story, we insure our continuedhegemony because we stop the only possible avenue through which our dominantposition could be challenged. Of course, our continued technologicalsuperiority remains to be seen. In 1994 another hearing was held on piracy matters. As in the 1991 hearing,the emphasis was on the theft of American creativity instead of Americanvictimization. The story of victimization served its purpose, it provided asympathetic atmosphere in which to pursue the agenda of opening foreign marketsto U.S. trade. Indeed, the language of trade is pervasive throughout the 1994document. While the amounts lost to piracy are still given as the fallaciousUSTR figures, what has increased in importance is the maximization of foreignmarkets. It is this rational that makes intellectual property so crucial to aGeneral Agreement on Tariffs and Trade. The new international situation is explained by Ira Shapiro, General Counselto the Office of the USTR as follows: Advancing the interests of U.S. industries that rely on copyright and patentand trademark protection and other intellectual property is one of our highesttrade priorities. It is fundamental to the success of our trade policy, but,more important, it is fundamental to our Nation's economic strength. As amature economy, realistically there are limits on the amount of growth that wecan generate here at home domestically. Moreover, we confront, as othernations do, a world that is transformed by technology so that more and more canbe produced by fewer workers. These realities that we deal with point us inone direction and in the same direction. First, we need to seek growth aroundthe world competing for even markets and expanding our exports.[67] Bruce Lehman brings the market analysis home with his pharmaceutical example.He states that the market for pharmaceuticals in Egypt, Turkey, Argentina,Thailand, and Brazil is $10 billion. Because of differences in intellectualproperty laws, the U.S. receives no money from these markets. Under therecommended TRIPs agreement, these countries would be required to 'harmonize'their laws with the U.S. The result would be the opening of new markets toU.S. pharmaceutical companies.[68] This market narrative holds throughout the 1994 hearing. It is noted byHoward L. Saiers that developing countries constitute 40% of our exports andthese are our fastest growing markets.[69]In his strong testimony in favor of a tough stance on intellectual propertyissues, Lawrence E. Levinson makes clear where intellectual property andmarkets stand on the agenda. He states, "Denial of market access isintolerable, and it is not right."[70]Intellectual property trade is a moral issue, where U.S. behavior is defined asmoral and countries with different laws and customs are "immoral." Mr. Levinson, in a strangely contradictory yet compatible claim states laterthat, "quotas, especially in the world of high technology and delivery ofsatellite signals, really have no place in a global market where informationand ideas ought to travel freely across borders."[71] He obviously does not see the incompatibility of thesetwo statements. Mr. Levinson has come before Congress to complain about theinability of his proprietary ideas to travel to Europe and be heard and so hestates that ideas should be allowed to move freely across boundaries. Yet, heis also complaining about piracy, which is the exchange of ideas acrossboundaries. The tension between proprietary ideas and free exchange is largerthan Mr. Levinson's world view. It reflects a larger contradiction ofintellectual property in an information age dominated by computer technology. Technology makes it possible to develop new products which have a market valueworldwide. At the same time, technology allows for the exchange of newproducts outside the control of those who call themselves the "owners." Theresult is the uncontrolled flow of "proprietary" products. If it were enoughfor the European Union to be open to the free flow of ideas then we would nothave this debate about piracy. However, proprietary ideas are meant to becontrolled, not freely exchanged. Problems arise when ideas are commodified atthe same time as technology makes it possible to exchange ideas in a radicallyfree environment -- exchange and control cannot coexist. The more tightly weprotect one, the less there will be of the other. The balance is fragile, yetimportant. However, as U.S. government hearings illustrate, that balance is indanger of tipping irreversibly towards control. THE COMPUTER INDUSTRY Lacking from testimony before Congress has been representatives from thecomputer industry. While the 1986 hearing was still relatively early in thecomputer industry's commercial history, it would seem logical that a strongcomputer industry presence would be found in later hearings. There are noclues to why testimony from the computer industry was not included. Computersoftware was uniformly included in all discussions of piracy and in all thestatistics about piracy. The industry was far from forgotten and certainly wasnot idle during the past nine years. Bill Gates claims that software is the country's sixth largest manufacturingbusiness having grown nine times faster than the rest of the U.S. economybetween 1982 and 1993.[72] The SoftwarePublishers Association (SPA) estimates that the software industry lost nearlyhalf its potential sales in 1993 coming to a total of $8 billion world-wide. THE FINAL STORY Because the amount of money, real or imagined, is so large, the issue ofpiracy and the issue of trade related intellectual property has become apolitically important one. It is a story which can be told persuasively, wherea threat to U.S. interest is directly evident, and where the U.S. canillustrate its prowess at making the world safe for intellectual property. By the end of the 1980s, through a series of speeches, congressional hearings,lobbying efforts, and surveys, piracy and intellectual property were firmlyestablished as important trade issues. The story which emerged was completewith plot, villains, innocent victims, and a hero. In this case, an organizedeffort by foreign countries, especially those located in Asia, tosystematically usurp American creativity and technological knowledge emerged asa threat. The innocent victims in this case were American companies, such asMicrosoft, or Walt Disney, whose products were stolen without any recourse inthese foreign lands. Something had to be done to stop such aggressive andirresponsible behavior and so the United States government stepped in to savethe day. Armed with Section 301 of the 1988 Trade Act and an insistence thatintellectual property be protected via the GATT, the United States coercedvirtually all Asian countries (and developing countries) to comply withAmerican standards for intellectual property protection.[75] With some grumblings because protection and enforcementwill not meet U.S. business standards immediately, the U.S. claimed a tradenegotiating victory due to U.S. efforts both bilaterally and multilaterally.Little or no attention has been paid to the impact these laws will have on thedeveloping world. As the debate became more sophisticated, so did the story. The result was thereplacement of innocent victims (they still made appearances, but their veryprofitability made their claims to economic hardship less viable) with unfairtrade practices. Again, with the exception of some European countries, thefocus was on Asia. Piracy in these countries threatened the U.S. by stealingthe best creative products and using them without paying. This was unfair.Since intellectual property had already become a trade related issue, theintellectual property story merely had to repeat itself over and over. It wasrepeatedly said that U.S. companies cannot do business without strongintellectual property protection. It was repeatedly said that intellectualproperty provided the incentive to create and do research. It was repeatedlysaid that foreign piracy was in part responsible for the U.S. trade deficit,for the high prices of intellectual property related products, and for unsafeproducts entering the market. It was also repeatedly said that the lack ofstrong international intellectual property laws hindered international trade(even though most IP related fields were certainly already active in all themarkets they complained about). UNDERLYING CURRENTS OF THE INTELLECTUAL PROPERTY STORY By the mid-80s the United States was suffering from trade deficits due to itsdeclining competitiveness as an industrial superpower. During this period,Japan proved itself a formidable trade opponent. As Ira Shapiro mentioned,domestic markets will not last forever, and the increased number of productsmade by fewer people means the U.S. needs to turn to foreign markets tocontinue its economic growth. American companies began to turn their sights totwo markets which were opening and represented enormous profit potential --China and India, but also the Newly Industrialized Countries in South and EastAsia. These markets remained relatively untapped by American products, butrepresented our fastest growing markets for exports.[76] In addition to vast untapped and growing markets, the developing countriesselected as "priority" countries by the USTR, had few, if any, intellectualproperty laws. While these elements are mentioned in the American story, theyare not central to the reason for action. In order to obscure that the U.S. iseconomically deteriorating and in transition, the attention is drawn to thesource of our troubles -- those Asians are stealing the very soul of America --our ideas. This form of piracy cannot be tolerated and must be stopped. The U.S. story obscures the political economy of developed and developingnations in which typically the developing nations are considered victims andspecial considerations are taken to remedy their problems. In the U.S.version, the roles are reversed. The U.S. is a victim and the developingcountries are the hostile aggressors which threaten the very foundation ofAmerica -- our creativity and ideas. This switch represents a significantdeparture from what traditionally goes as international trade negotiationswhere a concept called Most Favored Nation status provides protection fordeveloping countries in order to facilitate development. However, it fits inwell with conventional U.S. development policy towards developing countries.William Preston Jr. outlines our perspective on the position of the third worldin international development. He states, [the United States] offered [the Third World] orderly economic growth,stability, technical assistance, and political reform; [the Third World] inturn had to fit into the world economy on [United States] terms, follow the[United States] model of development regardless of their indigenous culture,and stop short of choosing radical political alternatives. Order took theprecedence over democracy, and containment against fundamental change in theworld system remained a dominant priority. Dollar diplomacy, loan embargoes,and financial sanctions against international agencies offending United Statesinterests served to enhance the latter's pervasive influence.[77] His more general claims apply quite well to the U.S. position on intellectualproperty. The developing countries, especially Asia, are allowed toparticipate in world trade only if they follow the rules established by theUnited States. These rules include the U.S. version of intellectual propertyto which the developing world must "harmonize." The extension of the U.S.intellectual property story to developing countries around the world, shows howthe dependency of developing countries is perpetuated through presumably"neutral" trade laws. The intellectual property story developed in the UnitedStates is literally forced upon other countries, regardless of the interestsand philosophies of said countries. THE ROLE OF THE PIRATE Pirates enter the story as significant problems for U.S. companies attemptingto do business internationally, especially in Asia and the developing world.The International Intellectual Property Alliance noted that in 1993 the U.S.lost $110 million in computer program revenue to China alone, and the figuresare similar for other Asian countries including Japan, Taiwan, Indonesia,Philippines, and Thailand.[78] Again, theidentity of the state is collapsed into its profit making sectors for thepurposes of defending the "national interest."[79] These criminals serve a function in the narrative theUnited States is writing about intellectual property and the way it ought to beprotected internationally. Conceptual fences are being built around intangibleproperty and pirates serve as justification for tough laws and harsh penalties. Norms and practices for dealing with intellectual property in an informationage are still in flux. Additionally, the nature of technology makes copyingand exchanging information more easy than controlling it. The division ofintellectual rights from tangible property are not fully appreciated by theaverage citizen who feels they own something if they buy it. In the world ofintellectual property, ownership is not straightforward. Ownership of thetangible item does not confer ownership of the intellectual property rights.Pirates are used to articulate the boundary between ownership and exchangeinternationally, much like hackers are defining this boundary as a nationalsecurity issue within the United States (the subject of Chapter Six).Identifying pirates for punishment helps average citizens understand thedifference between legitimate and illegitimate uses of new technology. In theprocess, the pirate become a scapegoat for economic insecurity and is elevatedto the level of a national "threat." In the 90's pirates are threateningcriminals. I am not applauding the actions of pirates. Rather, I wish to point out thatthey serve a function in the American intellectual property story. They arethe villains, the aggressors, and the evil ones which must be fought in orderfor upstanding and innocent Americans to practice business. This story haswinners and losers and if it is accepted uncritically the power relationshipsit inscribes upon us all will pass unchallenged. Such a conversation leaves noroom to critically assess the world's political economy, the role ofmultinationals in that economy, the way in which the push for strongerintellectual property laws has specific benefits for a few Americancorporations at the expense of the developing world, and the long-terminterests of the United States. The construction of pirates as criminals does not occur in a vacuum. Thereare very specific beneficiaries of such a story. The beneficiaries are thosecompanies engaged in new forms of business reliant upon technology which iseasily copied, reproduced and "pirated." It is in their best interest tomaximize profits and the fact their products are easily reproduced by piratescuts deeply. My focus on international piracy should not be taken to mean the U.S. is doingnothing about domestic piracy. The actions of U.S. pirates, often associatedwith hackers (the subject of the next chapter), have also come under scrutiny.Because the internet is so easily used to trade copyrighted material, it hasalso come under legal scrutiny in which crackdowns on bulletin boards are usedto curb the exchange of proprietary information. Bulletin board services areoften considered havens for hackers to exchange pirated work. Copyrightedmaterial is exchanged via the internet constantly and the courts are nowworking to create a liable party. One example of domestic piracy is the indictment of Richard D. Kenadek inAugust of 1994 for running a bulletin board where pirated software could betraded.[80] The hacker/pirate villains inpiracy tales don't get away as easily as their counterparts. Another exampleis the George Frena case. Playboy sued George Frena for copyright violationwhen it came to light that Frena's bulletin board uploaded and exchangedPlayboy pictures without crediting Playboy. The court case, PlayboyEnterprises, Inc. v. Frena illustrates how little exchange of copyrightedmaterials will be tolerated via the internet. This case decided in favor ofPlayboy on the grounds that their copyright in these pictures was violated andthat Frena's service constituted unfair competition.[81] Piracy is nothing new; it is a common aspect of themarket system. The ease with which electronic products are pirated, however,make it far more of a concern than in the past. CONCLUSION The U.S. position within GATT is simple: if all countries will harmonizetheir intellectual property laws with the U.S., then the U.S. will not imposetrade sanctions on those countries. Our recent bout with China proves theUnited States is willing to enter a trade war over intellectual property.However, as technology continues to develop, both within the United States andwithout, it will become increasingly difficult to control the exchange ofintellectual property. At the heart of the U.S. government interest inintellectual property as a trade issue lies the fact that despite its effortsto control the exchange of intellectual goods, this control will only come atthe expense of extremely aggressive laws. We have entered a stage when thevery definition of "author" is under question. As computer technology beginsto influence the way we create, communicate, and exchange information, new waysof thinking about intellectual property must be created. The U.S. response todate merely reflects a desire to control for the short term benefit of a fewindustries. It also reflects outdated assumptions about ownership of knowledgeand authorship. While the stories written by the U.S. government are politically persuasive,they will not last in the face of the larger transformation of how knowledge isproduced and owned without increasing amounts of pressure, legal action, and"education." It is time for the U.S. to critically reflect upon the futureinstead of playing the international bully and creating rules which ultimatelymay be detrimental, even to itself. The pirate does not stand alone in the actof rearticulating property boundaries in an information age. The pirate isjoined by the hacker in helping define the acceptable boundaries for action ina technological era. The hacker is the subject of the next chapter.