Re: Comments on the Joint Strategic Plan

Victoria Espinel

Intellectual Property Enforcement Coordinator

Office of Management and Budget

Executive Office of the President

Dear Ms. Espinel:

We write to you today in response to your request for comments on your upcoming Joint Strategic Plan on Intellectual Property Enforcement.  We are a group of entrepreneurs and venture capitalists who have worked hard to build successful companies that have helped to create jobs, expand creativity and enable cutting edge services around the globe.  Collectively, we represent a part of the core engine of economic growth in the US.

We are eager to help as you go about developing the latest version of the Joint Strategic Plan on Intellectual Property Enforcement, as such plans have a strong impact on our ability to grow new companies, hire new employees and provide services to billions of people around the globe.  That said, we are concerned that over-enforcement and the nature of existing enforcement efforts have created real and significant chilling effects for us and others hoping to create new businesses.  Indeed, we believe that such efforts are actually counterproductive in that they interfere with the very innovations that could help respond to the challenges of widespread infringement.

Our key thoughts are as follows:

1. The federal government should focus on supporting innovation over enforcement, as history has shown that innovation is the best solution to new technological challenges, rather than IP enforcement.
2. The government must be careful to avoid the chilling effects of greater enforcement’s collateral damage, which can create massive uncertainty and lead to the stifling of important innovation
3. Attempts to increase enforcement through legal changes like SOPA & PIPA or via international trade agreements like ACTA and the TPP have significant consequences for the innovative companies that we have built and which we expect to build going forward.  Disrupting existing technological and legal frameworks may have significant ripple effects throughout the economy.

Strategy Recommendation:

Support Innovation: Historically speaking the only long-term success stories in decreasing infringement have come from innovation and new services -- not from enforcement.  Research from Adrian Johns^[1] and Matt Mason^[2] has highlighted the historical truth: infringement is not the result of general “lawlessness” among the population because of a lack of rules or enforcement, but the near inevitable result of changing technology enabling new forms of creativity and cultural sharing and distribution, which come into conflict with existing commercial infrastructure.

A perfect example of this can be found in Sweden, where both The Pirate Bay and Spotify were started.  While infringement rates in Sweden were quite high, the introduction of Spotify has resulted directly in a significant and ongoing decline in infringement for music.^[3]  Not only that, but it has resulted in demonstrable increases in revenue, such that Spotify is now the leading source of revenue for the record industry in Sweden, with sales increasing by an astounding 30% in the first half of 2012 alone.^[4]

The track record of increased legal enforcement in Sweden shows the opposite result.  When Sweden passed a strict new anti-piracy law, IPRED, there was a short-term dip in public file sharing, but a quick bounce-back as users found other ways to get the material they wanted.^[5]

The best strategy to reduce infringement is to enable new innovations, and help to break down the barriers (such as excessive licensing demands) to building these kinds of new services that help update these industries and provide new revenue streams.

Beware the chilling effects of greater enforcement:  Over the last few years, we have seen increasing enforcement activities by the federal government, including the seizing of websites without due process, the shutting down of websites and businesses both in the US and abroad (sometimes without charges being filed) and even the incorrect closure of 84,000 websites due to excessive and poorly thought-out enforcement activities.^[6] In some cases, these businesses have been shut down for more than a year with no legal recourse, only to later have the government admit it had made a mistake (in part by relying on promises of evidence from the entertainment industry that never arrived).^[7]

Innovative startups often push the envelope when building disruptive new services that create massive new opportunities.  Unfortunately, to existing players in the market, these innovations are often so disruptive that they react instinctively by insisting that they must be illegal, and framing them as such.  Yet every single time this happens, the resulting disruptive innovation has created more opportunities and more businesses down the road.

The MPAA’s Jack Valenti famously said that “the VCR is to the American film producer... as the Boston strangler is to the woman home alone.”^[8]  Yet just nine years after the Supreme Court declared the VCR legal, the home movie business surpassed the box office business in total revenue, and was largely credited with saving, not killing, the movie business.

If the federal government had jumped in and automatically declared the VCR illegal, and accused manufacturers of criminal activities, such a market would likely never have developed, and the movie industry would likely have never reached the heights that it did.

Excessive enforcement of innovative technologies can stifle new businesses and services, creating chilling effects.  Already, popular legitimate cloud services have been shutting off tools and features to avoid facing similar surprise takedowns by the US government.  It is difficult to innovate when the government is building up a reputation for completely shutting down businesses.

Don’t disrupt the legal and technological frameworks that we know work today.  While various parts of the DMCA have significant problems that could be fixed, the clear delineation of safe harbors means that innovators and entrepreneurs can develop services knowing that they are mostly safe from sudden legal attacks for how their users use the services.  Those safe harbors, along with similar safe harbors in section 230 of the CDA, have been credited with fostering a significant amount of the innovation we see online today^[9] including useful new services that have helped content creators create, distribute, promote and monetize their works.

Unfortunately, some are calling for the removal or weakening of such safe harbors, believing that the service providers should bear the brunt of policing every action of their users.  The inevitable result of such a change would mean many new and innovative services would never get off the ground, held back by significant potential liability (driven, in part, by disproportionate statutory damages rates for copyright infringement, in which a single act of infringement can lead to damages awards up to $150,000).

Weakening these safe harbors would inevitably hinder the new innovations and services which the economy needs today, and which can help the entertainment industry continue to create and thrive.

Similarly, we worry about attacks on the fundamental technical infrastructure of the internet, which we saw recently with the proposals in the US Congress for SOPA and PIPA which, among many other problematic sections, completely gutted key technological security measures (such as DNSSEC) which are important components in keeping the internet safe.

While those issues were averted when a huge contingent of the public spoke out, we are equally worried about many of these policies coming back to cause problems through future legislation or via secretive international trade agreements, like ACTA and TPP, that are negotiated without input from the entrepreneurial community, and without any transparency.  If any such efforts are to have legitimacy among innovators, they must be done in an open and transparent fashion, rather than negotiated in secret.

Stopping these constant attempts to use trade agreements and regulatory pressure to change the technological and legal framework under which we operate would help the entrepreneurial community focus on what we do best: innovating and creating the useful new services to help the economy grow, to improve the lives of the public and to offer new and more innovative ways to create, to consume, to distribute, to promote and to monetize content.

We look forward to working with you as you put forth this plan and are happy to be of assistance wherever and whenever possible.

Sincerely,

Will Aldrich

SurveyMonkey

Jean Aw

Founder, NOTCOT Inc.

David Barrett

Founder & CEO, Expensify

Nicholas Bergson-Shilcock

Founder, Hacker School

Jeff Clavier

Managing Partner, SoftTech VC

Michael Clouser

University of Edinburgh

Zach Coelius

CEO, Triggit

David Cohen

Founder & CEO, TechStars

Dennis Crowley

Founder, Foursquare

Drew Curtis

Founder & CEO, Fark

Chas Edwards

CRO, Luminate

Dale Emmons

Founder & CEO, Vidmaker

Brad Feld

Foundry Group

Rand Fishkin

Founder & CEO, SEOmoz

Mark Fletcher

Founder, Bloglines & Onelist

Jude Gomila

Founder, HeyZap

Ben Huh

CEO, Cheezburger

Ben Ifeld

Founder, Sacramento Press

Daniel James

CEO, Three Rings

David Jilk

Co-Founder & CEO, Standing Cloud, eCortex

Seth Levine

Foundry Group

Erik Martin

General Manager, Reddit

Michael Masnick

Founder & CEO, Floor64

Ryan McIntyre

Foundry Group

Jason Mendelson

Foundry Group

Alexis Ohanian

Founder, Reddit, Breadpig

Scott Rafer

CEO, Lumatic & Founder, Mashery

Ian Rogers

CEO, TopSpin

Geoff Schmidt

Founder, Meteor, MixApp & Tuneprint

Cliff Shaw

Founder & CEO, Mocavo

Pete Sheinbaum

Founder & CEO, LinkSmart

Rich Skrenta

Founder & CEO, Blekko

Josh Stansfield

Incident Technologies

Elizabeth Stark

Stanford and EIR, StartX

David Ulevitch

Founder & CEO, OpenDNS

Joseph Walla

Cofounder, HelloFax

David Weekly

Founder, Hacker Dojo

Evan Williams

Founder, Twitter & Blogger

Dennis Yang,

Bureau of Trade