Pirates of Digital Valley

Intellectual Property and Piracy in the Digital Age

by Heinz Bulos
August 200J

hen you think o modern pirates,
you think o shop owners in Virra
Mall selling imitation jeans and
street endors selling pirated VCDs. 1here's
another pirate we hardly gie notice to. Look
in the mirror.

\e're not just consumers o pirated goods,
we're pirates, period. \hen we download an
MP3 o a Metallica song, when we send that
ile to a riend, when we buy an Installer CD-
ROM o dozens o sotware titles, when we
install a single-license copy o MS Oice to
another PC, when we use a photo rom
another site on that o our own, when we
watch a moie in VCD obiously recorded
inside a cinema, the list goes on. \e don't
hae to produce and sell pirated goods to be
considered pirates. Digital media has only
made things easier or the producer,
distributor, and consumer o pirated items.

It's in this light that we inited more than a
dozen participants to 1he \eb magazine's
irst online roundtable discussion. 1hey come
rom dierse ields -- artists, businessmen,
consumers, lawyers, and producers rom the
music, moie, 1V, sotware, and Internet
industries.

1he discussion was held online ia our
mailing list in the course o seeral days. 1he
result is more than a hundred postings
equialent to twenty-our pages o unedited
text. \hile there was no way we can coer
eerything about the topic, the discussion was
neertheless educational and thought-
prooking. A ew key lessons and principles
were also brought to light. \e edited the
entire text to the essence o the discussion.
\e hope you will learn rom it as much as we
had.

SIDLBAR: Roundtable Participants

Jim Ayson - Philmusic.com ounder
Rico Blanco - Riermaya rontman
Roland Chan - Business Sotware Association
,BSA, regional marketing manager
Ronald Chua - Autodesk, BSA campaign
manager or the Philippines
Miguel de Leon - Cyberdyaryo.com Business
Manager
JJ Disini - Disini and Disini Law Oice, co-
drater o the L-Commerce Act
LXPOSL1lL1RU1l2000 - anonymous
consumer pirate
Jing Garcia - record producer, Manila
Standard writer
Martin Gonzales - entrepreneur
Butch Jimenez - GMA lilms President
Migs Paraz - Interdotnet, Linux and open-
source eangelist
Jim Paredes - Apo liking Society, member
Organisasyon ng Pilipinong Mang-aawit
,OPM,
Jose Jaier Reyes - ilm director
Dorothy 1adeo - head o the lilipino Society
o Composers, Authors and Publishers, Inc.
,lILSCAP,

COPYRIGH1 BASICS

1WP: What are the rights of a copyright
owner?

\
ClUA: 1he owner o a copyright has the
right to exclude any other person rom
reproducing, preparing deriatie works,
distributing, or using the work coered by
copyright or a speciic period o time.

1WP: When do you start owning the
copyright? Do you need to register your
work?

DISINI: Copyright protection exists rom the
moment o creation and persists usually or 50
years ater the death o the author.
Registration is not necessary. 1he ailure to
register does not make the author lose his
copyright.

1WP: How do you prove you own the
copyright? What if, before publishing or
releasing it, someone steals your work and
claims it as his/her own?

GARCIA: Locally, the National Library is the
place to submit copyrighted materials. lor
some o us musicians and record producers,
we send a demo copy o our own material ia
registered postal mail to ourseles and leae it
sealed until such time the materials become a
subject o dispute. 1his is what we called
"poor man's copyright"

DISINI: 1his inoles manuacturing
eidence that a piece o work was created at a
particular time. It's simple: the author mails
his work to himsel by registered mail. Ater
he receies it, he puts it away unopened. I his
copyright is questioned later, he can use the
post oice stamp markings to proe that as o
that date, he had already created the work.
1his is cheap and reliable.

1WP: Who owns the copyright -- the
creator or the producer/publisher?

RL\LS: 1his is also quite unclear. laing
spent years in the business, I still ask who is
the owner o the screenplay or the teleplay
considering that these are commissioned by
teleision networks or studios. 1hen there is
that ethereal "intellectual property" concept --
- that has neer been particularized as ar as
broadcasting and ilmmaking is concerned.
Besides, all contracts ,i there are any, rom
studios include the total surrender o rights to
the material to the studio or network upon
ull payment o serices. 1his does not protect
the writer rom sequels eentually being made
rom a successul original work, much less
commissions on ancillary products directly
deried rom the success o a material.

DISINI: Usually, the creator. Publishers
typically acquire the copyright rom creators
through publishing and other agreements. In
some cases ,as in the music industry,, the
publisher only acquires 50 o the copyright.
1he producer o an audio-isual work is only
one o the copyright owners ,director, author,
composer, but he controls the copyright. But
the important thing to remember when it
comes to the exploitation o copyright is that
the greatest economic beneit goes to the
party or entity who controls the distribution
o the work.

1he law on copyright or ilmmaking and
broadcasting is quite established in the
Intellectual Property Code. O course, IP
rights are inherently ethereal and in many
cases or authors in show business, leeting.

ClUA: In cases where the programmer or
author works or a company, his work
contract would usually stipulate that any work
produced during his employment at the
workplace will automatically become the
property and ownership o the employer.

1WP: Joey Reyes talked about derivatives
and changes to the original material. 1his
can also be applied to software code,
source code for Web sites, and song
compositions. Does this decompilation
constitute what the law calls fair use,
meaning it's okay as long as it's not
obviously copied substantially?

ClAN: lrom a packaged sotware industry
point o you, it is the prerogatie o the
copyright owner to set the terms and
conditions in the licensing agreement. Most
sotware copyright owners would hae clearly
stipulated that any orm o reerse
engineering or modiication to the original
code would be a clear iolation o that
agreement.

lor the majority o packaged sotware sold in
the market, I can't see how one can use a
"deriatie" portion without undertaking
substantial reerse engineering in the irst
place. lence, this argument cannot apply to
the packaged sotware industry.

DISINI: But these contracts can't preail oer
the air use proisions o the IP code, can
they In other words, decompilation or
purposes o interoperability would still be
permissible under the IP code.

1WP: What's the difference between
owning the work and owning its
copyright. 1he person who commissioned
the work owns it, but the creator owns the
copyright.

PARLDLS: I'e always maintained absolute
control o almost all my songs. By that, I
mean I hold the copyrights to them. \hich
means I can use them or cause to hae them
used as I please. \hen they are recoded, what
I am doing is I gie permission and allow the
talent,record company to record one
mechanical ersion o it, and they own the
rights to the ersion that they recorded. It's
the same when they are used or other
mecahnical deices like moies, ideograms,
etc.

But I still own the song, and or that I get
royalties or the sales their ersion generates.
In the case o lie perormance, I get a royalty
or the perormance o my songs although I'm
sure that not all royalties are properly
recorded and remittted. \hen my songs are
used or commercials, they pay me X amount
or one mechanical ersion ,sometimes with
lyric alterations, and with the lock-out
proision, meaning I can't allow the use o my
song by another product or an agreed time
rame. I also get royalties now or ringtones.

DLIINING PIRACY

1WP: What cases would be considered a
violation of copyright? In the case of
software, there's more to piracy than
outright purchase of pirated CD-ROMs.

ClAN: 1he biggest threat to the BSA today
is corporate end-user piracy. 1his is where a
typical organisation purchases one or a
handul o original sotware, and hae that
copied on to the rest o their computers at the
work place. Lssentially, the number o
sotware installations will outnumber the
number o licenses the company would hae
purchased.
1he common assumption is that when a piece
o sotware is purchased, the buyer has
bought ownership o the sotware. \hereas
the truth is that a purchase would amount to
haing bought the right to use a piece o
sotware, according to the terms and
conditions as speciied in the license
agreement.
1WP: In the case of Web sites, it's a bit
tricky. Source code can be easily copied.
What about layout and color scheme? Is
borrowing the look a violation of
copyright? What about downloading
photos for use on another site?
AYSON: Okay, I'm as eager for answers
as you are on this as I've seen our content
pop up on many Web sites without
authorization. Lspecially problematic is
the unauthorized use of our original
photographs, which extends beyond the
Web. I've seen them used in posters, in
print (the newspaper 1oday), on Web sites
of print publications (Philippine Star's),
slideshows, flyers, and quite a few fan
sites. In the cases involving fan sites run
by overenthusiastic teens, a stern warning
usually does the trick, but I'd like to know
what are the proper procedures involving
plagiarism of content in print and on large
corporate-run Web sites.
1WP: Do linking policies and terms of use
posted by a site owner enforceable by law?
DISINI: 1his is interesting. I understand that
or INQor example, you can't link to their
stories without paying them a ee. \ell,
linking is an inherent part o the \eb. \hen
you place your work on the \eb, you cannot
preent someone rom linking to it. I think
linking policies like these probably suer rom
some legal inirmity unless they can come up
with some law which supports the policy. I
am not aware o any law that does that.
1WP: In the case of music, when
someone makes an MP3 file of a
Rivermaya single and makes it available
in a file-sharing network, is that a
violation? And if someone downloads it on
her computer but doesn't make a CD out
of her collection nor distribute it, is she
violating copyrights?

1ADLO: In any recording o a song,
copyright must be cleared and royalties paid
regardless o medium o distribution, i.e., CD,
cassette, microchip, MP3, Internet, etc. and as
such, any unauthorized distribution o a
recorded song is a copyright iolation.

Regarding downloading o songs, the site
where the download is sourced should irst be
licensed in order or the downloading to be
authorized. Granting that the sites are licensed
or downloading ,like the sites o major
record companies,, the downloaded songs
rom these sites, just like songs contained in
CDs, cassettes, etc., are or personal use only
and may not be urther reproduced and
distributed to third parties.

1WP: In the case of 1V and film, there are
plenty of elements involved -- the script,
the soundtrack, the title, the film or
program itself. Howdoes the film and 1V
industries deal with piracy?

PARAZ: It is utile to regulate the copy o
digital media -- DVD, VCD and CD audio,
since copies o these can be readily made.
\hat cannot be duplicated are the
experiences o watching -- whether at a moie
theater, or better yet, a lie perormance. 1o
adapt, perormers should shit their reenue
model to things that exist in real lie -- rom
concert tours to merchandise -- that can't be
copied. Since people are willing to pay or
these or the entertainment alue, take
adantage o that. \ho loses out in this shit
1he middleman such as the record label or
moie producer.

DISINI: Sounds like John Perry Barlow's "An
Lconomy o Ideas", which came out in \ired
some years ago. I disagree that the middle
man like the record companies become
useless because o the Internet. 1hat's an
extreme iew. I think the more reasonable
iew would be to say that record companies
need to reiew their role in the digital age.
Certainly, they need to embrace it instead o
treating it like a threat. lor all you know, the
Internet might be the greatest thing that could
eer happen to them.

UNDLRS1ANDING PIRACY

1WP: Is price the most important reason
why piracy is so prevalent in our country?
If so, what steps are being taken to
address this?

GARCIA: I think price is a deinite actor.
Kids today would rather buy a P300 phone
card than a P450 CD. 1hen the P100 would
buy them a moie ticket plus the remaning
P50 would buy them a pirated CD. In 1hird
\orld countries like ours with a totally
dierent standard o liing, it is quite practical
to buy Adobe PhotoShop or P100 than
spend P45,000 on the same sotware. 1hen
buy ood, buy clothes, pay tuition, pay rent,
pay bills, upgrade computer, hae a good time
with the remaining P44,900.

A\SON: 1his is speaking solely o pirated
audio and ideo CDs which are a major threat
to the recording industry. Price and consumer
buying power hae oten been cited, but there
doesn't seem to hae been enough emphasis
on the stopping the pirates themseles at the
source -- the manuacture and,or importation
o this contraband. At the leels we are seeing
pirated CDs being sold openly in een
legitimate enues such as shopping malls, one
wonders how these hae been tolerated by the
authorities. Obiously there is organized
crime at work here and protection being gien
to the pirates. Much more important than ino
campaigns aimed at consumers is stopping the
low at the source. \here are the CDs coming
rom

BLANCO: Amen to this. Just my opinion: I
we want to crush piracy let's not waste our
mojo trying to educate the consumers. Lets
just crack the bloody pirates down! \e can
sermonize all we want about morality and
"what is air" to the consumers but sadly, the
temptation is too much or the ordinary
citizen -- een to the most nationalistic and
morally upright participants o LDSA Dos ,or
1res or that matter,. Paravg "jail the pusher,
sae the user" tavg, I think. .vg tavovg: what
would it take to nail these "pushers"

1WP: 1his reminds me of the movie
"1raffic", where the daughter of Michael
Douglas's character noted that it's easier
for teens to get dope than liquor, the
problem has to be stopped at the supply
side. If there's a crackdown on supply,
there will be much less demand?

DISINI: 1hat's a good analogy -- the drug
problem. I don't think the demand or cocaine
in the US will dip just because the supply isn't
there. It will just drie up the prices and orce
users to resort to cheaper, more accessible
drugs like marijuana or metamphetamines
,aka shabu,. 1he Americans like to complain
about the Colombians but the truth o the
matter is that without the huge demand or
cocaine in the US, there wouldn't be any
motiation or the Colombians to
manuacture and smuggle cocaine in the US.
So, the only way to do it is to curb the
demand. low do you do that I haen't the
slightest idea. I don't agree that people just
need education. People already know that
what they're buying is pirated and illegal. \et
they do it.

So long as people eel that there's nothing
morally wrong about making unauthorized
copies o IP products, piracy will continue to
be a problem. \e're seeing this now in
cyberspace with things like Napster and
Aimster.

1WP: Ior the consumers in this
discussion, is price the deciding factor
when choosing to purchase pirated goods
as opposed to original ones? Is it the only
factor?

DL LLON: I agree that price is deinitely a
actor. \ho wouldn't spring or a P100 CD
with 50 titles Imagine how much that would
cost at orginal sotware prices. Lower costs
also allow or easier market penetration.
Actually, I think Microsot's popularity owes
much to piracy. Access to these sotware
becomes easy.

ClAN: In BSA's 13 year experience since its
inception, we hae simply ound no
correlation between price and piracy. Some o
the most heaily copied products, games and
utilities, are the least expensie, and some o
the least-copied products such as mainrame
operating systems and applications are rarely
copied. Bearing in mind that end-user
corporate piracy is the biggest threat the
members o the BSA today, we are essentially
competing with pirated sotware which is ree
as a result o indiscriminate copying at the
work place.
It is my personal speculation that the most
important reason or the high leel o
sotware piracy is the ailure o the user to
equate price to the non-physical, intellectual
property alue and increased productiity that
the sotware brings to an organisation.
PARAZ: I think this is because o the
historical lack o support and consulting
serices that are oered to Philippine holders
o sotware licenses. 1his is not much o a
point when it comes to "commodity" sotware
like Microsot \indows or Oice, but it
comes into play with, say, AutoCAD or
Oracle. I beliee that sotware distributors
hae to show that they make it worth it to get
their legit ware -- carrots rather than sticks.
Some time ago "tech support" or a legit
license holder was some call handler leaing
through a manual's pages.

LXPOSL1lL1RU1l: 1he promise o
getting quality goods at a much cheaper than
retail price is certainly a top consideration.
loweer, another consideration is that
sometimes, een the "original" products are
not that good. lor example, a ew years ago I
started collecting some aorite moies on
locally-produced original VlS. loweer,
ater experiencing the sub-par ideo and
especially audio quality o local original VlS
moies, I stopped wasting money on locally
produced VlS tapes.

\hen pirated moie VCDs irst hit the scene,
many o these were dubbed rom Laser Disc,
and eatured CD-quality hi-i audio, ar
superior to that o the local original VlS, or
about the same price as the original VlS. So
in that instance, patronizing the pirated VCDs
was a no-brainer or me, considering the
alternatie. Questions o legality or morality
did not een enter my decision-making
process, it was simply a question o getting
better quality or the same price.

In my semi-regular trawling o the pirate VCD
stands in Virra Mall, Makati Cinema Square,
etc., I ind a preponderance o mass market
titles, true. But I'e also ound esoteric, out-
o-print, cult classic titles that are unaailable
locally in original ormat. 1hat's why I will still
occasionally pick up the odd pirate VCD,
despite the spotty quality and utter lack o
quality control. I pick up the moie on pirate
VCD just to satisy my curiosity. I I ancy it
enough to collect it, I certainly wouldn't settle
or a pirate VCD copy -- I would still get it on
original DVD.

1WP: Some people say software piracy
can be good for our country: that low
prices mean affordable access to software,
especially for students and the lower
classes. 1he high price of originals act as
a barrier for those who want to learn or be
exposed to the software, so they resort to
pirated copies. Reactions?

GARCIA: I hae always belieed that
sotware piracy narrowed the so called "digital
diide". At the BSA orum held at the
Miscrost oice last week, I een declared that
the prolieration o pirated Adobe and
Macromedia products locally helped the
deelopment o the multimedia cottage
industry sector o this country including a
number o small post-production recording
studios. But I also agree that big companies or
corporation should stay away rom pirated
products.

ClAN: Most o the members o the BSA
already hae in place a separate pricing policy
or the educational sector. \hat is important
to remember is that a successul moe
towards an inormation and knowledge-based
economy requires respect o intellectual
property rights. 1he leaders o tomorrow
need to be brought up today respecting the
alue o IPR. I would turn the statement
aboe to one that reads, piracy acts as a
barrier or countries who wish to progress
into a knowledge-based economy.

1WP: Let me point you to a report written
by the International Intellectual Property
Alliance (IIPA). If you look at the
numbers, piracy levels for business
software have dramatically decreased over
the years, while piracy for film and music
increased in 2000.

A\SON: Len without reading the report,
the conclusions make perect sense. Digital
technologies hae made piracy easier because
sonically there is no degradation unlike the
case o pirated inyl and audio cassettes which
sounded horrible. Similarly the adent o
recordable CD technology hae made small
scale piracy possible, as in the case o kid who
will burn you a mix or extra cash.
1he digital technology solution is o course
new ormats that will integrate copy
protection into the product. 1his was
attempted with consumer products such
digital audio cassette ,by Philips, not to be
conused with DA1, and the MiniDisc
ormat. Unortunately the market or pre-
recorded MDs neer took o as the market
preerred CDs. Another way is keeping the
CD ormat but moing rom CD audio to
some other data ormat that encrypts the
songs ,MS \indows media comes to mind,
but this will mean new types o players.
1he other spin eect is that since original
OPM CDs became cheaper than oreign
artists then in a way it is encouraging more
units o OPM to be sold. It is still no match
or the pirates because o the wide
distribution o their product. In an interiew
in Pulp, Riermaya manager Lizza Nakpil
quoted a igure like 50,000 bootleg Riermaya
albums sold a month -- what more masa
artists like Alpha's Aegis. 1he bootleg CD
plants need to be located, raided, and shut
down -- but unortunately seem to be
protected by some unseen hand. In the
meantime, the Philippines seems poised to be
the piracy capital o Asia as oerseas
organized crime seem to be moing their
piracy operations here. \hat's on the
horizon 1ourists who isit China now report
pirated DVDs on the streets o Beijing.
GONZALVLS: Just curious, I'e heard it said
that at least some legitimate CD reproduction
outits are also behind piracy o local albums.
As in they ulill the contracted run o an
album, then run o a ew thousand more to
sell themseles and hoard the proits. Any
truth to such rumors Are legit CD
reproduction outits shooting their own
industry in the oot
A\SON: \ell, a customer is a customer I
suppose. 1he irony here is that all those pirate
CD pressing plants can be put to good use or
legitimate purposes, such as opening low cost
serices to indie music acts who are bypassing
the traditional labels. loweer, a riend o
mine who runs the indie label N,A records
,which also runs its own music publishing,
aoided going through pirate CD pressing
plants and stuck to legit -- mainly because
once you hand oer your master to pirates,
you'll neer know i they're just going to run it
one day as a pirate pressing.
SOLVING 1HL PROBLLM
What do you think is the ideal scenario in
the digital distribution of music that will
lead to studios getting a good return on
their investment, artists getting a fairer
share of royalties, and consumers enjoying
a convenient way of listening to music?
GARCIA: 1he Internet is just another
medium or their business. I'm sure they can
ind a way, go around it and make money
again. I don't really how, right now, but the
marketing guys will think o something. I'm
sure.
BLANCO: Correct. I think the reason or all
the chaos now is the tremendous speed, or
maybe acceleration is more like it, in
technology deelopment. So ast that old
tycoon's business instincts hae not been able
to catch up and hae identiied technology as
oe. In time I think eerything will adjust so
that the situation isn't as chaotic. It's hard to
paint an ideal scenario in detail, again because
o the speed o change I mentioned. But my
ideal scenario which should hold true or any
period in human ciilization is one where the
artists are gien true artistic reedom, due
compensation, and due respect. I think these
things and businessmen earning proits are
not mutually exclusie.
1WP: 1he Internet has not been a threat
yet to the movie industry, compared to the
music industry. But the time will come
when broadband access becomes
widespread which will make it easier to
download entire films. How do local
movie studios and artists see the Internet?
RL\LS: 1he answer to this is...nothing. I do
not think the studio chies know about the
potentials o broadband access and Internet
downloading because they are more
preoccupied with their box oice receipt and
local sales as well as their ancillary rights. 1hey
are more concerned about VCD piracy,
ocusing on the problem with dismay because
the goernment, despite all its eorts, has
allen short o een proiding a meager
solution to the problem.
JIMLNLZ: 1he Internet becomes a major
threat to ilm makers. 1he 4 P's o marketing
that make or success in selling things are
Product, Promotion, Price and Place. 1he
pirates hae it all. 1hey will hae a great
product, a great price, promotion courtesy o
the ilm producer, and place -- accessibility ia
the Net, cable, street endors, etc. 1hat's near
impossible to beat.
What needs to be done to fight movie
piracy, considering that the industry is
fighting several fronts -- VCD, VHS,
DVD, cable, and soon the Internet?
RL\LS: A lot, yet no one is moing. A lot o
lip serice, a lot o rhetoric, but what is really
being done is nothing! 1ake the case o the
uproar o the moralists during the Lie Show
brouhaha. 1hey gathered together and burned
pirated VCDs o moies they deemed as
pollutants o the morals o the public. \et
pirated VCDs are blatantly sold in malls,
sidewalks and een outside churches. But do
they do anything about it except or token
raids with photo opportunities or possible
guesting in teleision talk shows where they
claim to hae heard the oice o God
DL LLON: I guess i the law is speciic
enough, law enorcement oicials will hae an
easier time. More oten than not, the the law
itsel is ague and ery much subject to
interpretation.
JIMLNLZ: Soling piracy needs a total
solution. It is a legal, moral, and economic
problem all rolled into one. Legal solutions
are strong laws, and proper implementation o
the laws. Moral solutions are trying to change
the mindset o eeryone that it doesn't pay to
buy pirated materials, or it is a orm o
stealing. Lconomic means that we need to
bring the price leel down to a point where it
isn't grossly dierent rom pirated items. A
VCD or 425 pesos s. a pirated VCD or 5
pesos is grossly dierent. It has been done.
BLANCO: I guess the economic solution
Butch is reerring to is in the hands o record
companies. Some hae already started
addressing this by lowering at least OPM CD
prices ,like Via at P250,. Moral solutions
should come easily aterwards. Its the legal
solutions that I am trying to ocus on. \e can
argue that there is poor implementation but I
just want to know i eerything is coered on
the law's side. I agree with Butch in saying
laws should be strong, and with Miguel's
statement that the laws should be speciic
enough and not ague. But here's my
question: does anyone know or a act what
kind o anti-piracy laws we hae in the
country at the moment
DISINI: Check out the Intellectual Property
Code and the Presidential Decree creating the
VRB. 1here isn't a shortage o laws on piracy.
In act, the legal protection to intellectual
property is quite extensie. It has always been
an enorcement issue. 1he problem is that the
IPO can't ,or won't, depending on your point
o iew, combat piracy without someone
iling a complaint. Plus, a copyright owner
needs to inance a raid or some other police
action. As you know, our law enorcement
agencies are not properly equipped and hae
meager resources. \ou need to support them.
Just ask BSA. Beore they came in, there were
no raids on business sotware pirates. Sadly,
the enorcement o the anti-piracy proisions
o the IP Code has been eectiely passed on
to the priate sector. I the priate sector does
nothing, piracy will run rampant.
SIDLBAR: Online Resources
1o ully appreciate the roundtable discussion,
we encourage you to check out the ull text
ersion at our \eb site. \ou'll ind expanded
explanations and more arguments rom the
participants as well as discussions on lreddie
Aguilar's "Anak", new local licensing policies
or streaming audio on the \eb, compulsory
licenses, Region 1 DVDs, ake Videogram
stickers, the digital diide, death o
middlemen, and more. Plus, links to releant
sites and documents. Go to
http:,,www.theweb.com.ph.