TeChNoLoGy

When Congress updated copyright laws and passed the Digital Millennium Copyright Act (DMCA) in 1998, it ushered an era of investment, innovation and job creation.  In the decade since, companies like Google, YouTube and Twitter have emerged thanks to the Act, but in the process, they have disrupted the business models and revenue streams of traditional media companies (TMCs).  Today, the TMCs are trying to fast-track a couple of bills in the House and Congress to reverse all of that.

Through their lobbyists in Washington, D.C., media companies are trying to rewrite the DMCA through two new bills.  The content industry’s lobbyists have forged ahead without any input from the technology industry, the one in the Senate is called Protect IP and the one in the House is called E-Parasites.  The E-Parasite law would kill the safe harbors of the DMCA and allow traditional media companies to attack emerging technology companies by cutting off their ability to transact and collect revenue, sort of what happened to Wikileaks, if you will.  This would scare VCs from investing in such tech firms, which in turn would destroy job creation.

The technology industry is understandably alarmed by its implications, which include automatic blacklists for any site issued a takedown notice by copyright holders that would extend to payment providers and even search engines.   What is going on and how exactly did we get here?

The Digital Millennium Copyright Act (DMCA) updated copyright laws when Congress passed it in 1998 by providing four safe harbors including legal protection from copyright-infringing “information residing on systems or networks at the direction of users.” The DMCA set up an important balance that gave online service providers freedom from liability if they pulled down content upon notification.

The DMCA put the burden of identify infringing content on the TMCs, whereby for example NBC Universal had to notify YouTube that someone had uploaded a clip of Lazy Sunday and ask them to take it down.  So long as YouTube removed the video in question then no one got hurt, though some argue that this chain of events has in fact hurt TMCs.

A cynic would argue that TMCs are essentially applying the same strategy as tech firms just through different channels.  In other words, when venture capitalists fund entrepreneurs to write code which is intended to “disrupt stodgy old industries” (to quote from Sean Parker’s LinkedIn profile), no one objects when traditional content companies are not asked for their “input.”

Obviously it’s not quite the same: the bills would affect an entire industry (if not the entire economy) for the next generation of Internet startups whereas when a VC invests in a company it is a more limited act, even if that startup has the potential to “change the world” the way Napster or YouTube did.

Furthermore, the fact that emerging companies disrupt TMCs is evolution and a manifestation of the survival of the fittest.  While some will argue that TMCs are relying on lawyers, whereas tech firms compete in the marketplace, the truth is that many tech firms buy time by hiding behind the DMCA, further frustrating the TMCs.

The other reason why TMCs are being “proactive” is that it takes a lot of resources to chase down infringers, both through takedown notices and then through subsequent litigation.  In some cases, the most brass-knuckle approach is being replaced by carrots.  But when you consider that Viacom’s lawsuit against YouTube was “too little too late”, maybe the TMCs are pursuing this kind of pre-emptive, draconian first strike strategy to make the tech firms they are targeting more willing to play ball.

Indeed, now that the TMCs are showing their willingness to go nuclear, they hope that VCs and tech firms may become more inclined to engage TMCs on their terms.

Investor Fred Wilson is drawing attention to the two new bills, arguing that “these bills were written by the content industry without any input from the technology industry. And they are trying to fast track them through congress and into law without any negotiation with the technology industry.”  He adds, “the last negotiation produced an excellent compromise that has stood the test of time and allowed important new services like Google, Facebook, YouTube, and Twitter to be created and become large companies and massive job creators.”

He’s right.  No one doubts that these bills would spell the end of the Internet as we know it.  It’s also likely that the jobs created by tech firms over the past two decades far outweigh the jobs lost at TMCs.

But it’s fair to say that had the TMCs not gone ballistic, then perhaps the tech firms and the VCs who back them would not have cared so much about renewing the dialog and listening to the TMC’s wish list.  Case in point, Mr. Wilson extends the olive branch in his post: “If another negotiation is in order to amend the DMCA, then let’s have it.”

There’s a saying that it’s easier to ask for forgiveness than it is to ask for permission; that sums up some of the thinking of tech firms over the years.  It could now be argued that the TMCs are not asking for permission to try to rewrite the law and will hope that their pre-emptive strike will allow them to ask for forgiveness when the dust settles.

Both sides are driven by greed and fear, but if the TMCs get their wish and blow the DMCA away, then the uncertainty around the corner might come back and haunt them.  The technology industry will adapt if it needs to, and who knows what that will mean for the media industry.  After all, better the devil you know than the one you don’t.