ArtsWatch: Sizing Up The Creative Economy

Government study is the first to quantify intellectual property's economic importance
April 16, 2012 -- 7:19 am PDT
By Philip Merrill /

In recent news ...

On April 11 the Department of Commerce released "Intellectual Property And The U.S. Economy: Industries In Focus," a first-of-its-kind report prepared by the department's Economics and Statistics Administration and the U.S. Patent and Trademark Office. U.S. Intellectual Property Enforcement Coordinator Victoria Espinel said, "As the study shows, intellectual property is a key driver of our economy. The report found that IP-intensive industries create 27.1 million jobs and indirectly support another 12.9 million jobs. All told, nearly 30 percent of all U.S. jobs are directly or indirectly attributable to the IP-intensive industries." The study comprises patent, trademark and copyright IP and declares that it "is not intended to directly advance particular policy issues." In the copyright area, a shout-out was given to the industry-sponsored research conducted for several years by Stephen E. Siwek of consulting firm Economists Incorporated. Speaking at the report's announcement in Washington, D.C., AFL-CIO President Richard Trumka said, "Digital theft has cost the U.S. entertainment industry countless jobs. ... The need to address foreign rogue websites remains urgent as they continue to profit at the expense of U.S. jobs and income." While the Department of Commerce's study adds heft to this argument, it is more likely to help over the long run than the short run — tougher antipiracy legislation seems unlikely before November's elections. The report also recognizes "the public domain and limits such as fair use which balance the public's right to use content legally with IP owners' interests." Now that the subject of Siwek's research has been addressed by the government, it is worth noting that the Computer & Communications Industry Association has sponsored a competing quantitative framework to estimate the fair use economy. Better data often reveals a need for additional research, but this latest data clarifies what is at stake — better IP protection is key to improving a major segment of the U.S. economy.

The Digital Media Association, NMPA and RIAA announced an agreement for mechanical licensing rates for 2012–2017 on April 11, including five new digital license categories such as different types of music locker services and bundles combining downloads, Internet radio and on-demand streaming. Digital Media Association Executive Director Lee Knife said, "Today's agreement paves the way for our members to continue developing exciting new business models that satisfy consumers, create greater revenue opportunities for music creators and effectively fight piracy, the music industry's greatest threat." Steven M. Marks, RIAA executive vice president and general counsel, blogging about the history of this latest agreement and its 15 months of negotiations, wrote, "We are proud to have worked with our partners to reach this agreement, and hope that it paves the way forward for many great new and existing companies to offer music to consumers." The terms were submitted to the Copyright Royalty Board and are now pending formal approval. Digital Music News posted the proposal and took a more dour view, suggesting that smaller new music services will still find themselves in a struggle for survival.

On April 10 the Department of Justice and U.S. Immigration and Customs Enforcement announced that the tally of domain names seized under Operation In Our Sites enforcement actions has reached 758. The multi-agency effort seized $896,000 from previously targeted online counterfeiters and seized seven new domain names under which they had continued to sell merchandise bearing unlicensed brands from professional sports teams. ICE Director John Morton said, "As a country, we can ill afford the toll that intellectual property theft exacts on our economy and industries. Operation In Our Sites and the related efforts of the National Intellectual Property Rights Coordination Center are critical to combating intellectual property crime and consumer fraud over the Internet."

The Fourth Circuit Court of Appeals reversed a lower court's finding in favor of Google, reviving language-software company Rosetta Stone's trademark infringement and dilution claims against the search giant's sale of trademarks as advertising keywords. Tech-friendly consumer advocates Public Knowledge complained that the appellate court's ruling did nothing to clarify the complex issue of consumer confusion. Rosetta Stone President/CEO Stephen Swad said, "We believe that the unauthorized sale of our trademarks to third parties, including counterfeiters, is wrong as it harms and confuses American consumers and infringes upon and dilutes Rosetta Stone's trademarks." Trademark law is conventionally resolved based on consumer confusion. Google allows advertisers to buy links that are displayed when third parties' trademarks are used as keywords for search, it reviews uses of these trademarks within the body of the advertising copy as well as on the advertisers' landing pages, and Google refuses overtly deceptive ads. It is much harder to control what actually happens at times — as Rosetta Stone put into evidence — when customers go to the linked websites and are then ultimately sold counterfeit merchandise bearing the trademark in question. In other words, despite Google's well-intentioned policies and efforts, counterfeiters have an economic incentive to defeat the system and deceive customers.

April 9 coverage that Netflix had formed a political action committee called Flixpac caused the hacker collective Anonymous to tweet, "Dear freedom lovers, @netflix is forming a PAC to push for a new version of SOPA, cancel your sub and go back to pirating!" Anonymous also launched denial of service attacks against the tech and wireless associations TechAmerica and USTelecom, upset that the groups supported cybersecurity legislation. Netflix is just getting started with its PAC, has not and is not expected to support rogue website legislation, and is apparently much more interested in Net neutrality, which directly affects its business model. Many Netflix subscribers who canceled their accounts blamed the company's support for cybersecurity legislation. While some Internet freedom activists are likely becoming trigger-happy, confused, or both, this populist movement remains passionate.

The Recording Academy actively represents the music community on such issues as intellectual property rights, music piracy, archiving and preservation, and censorship concerns. In pursuing its commitment to addressing these and other issues, The Recording Academy undertakes a variety of national initiatives. ArtsWatch is a key part of an agenda aimed at raising public awareness of and support for the rights of artists. To become more involved, visit Advocacy Action @ and sign up for Advocacy Action E-lerts.

Click on the "ArtsWatch" tag for links to other GRAMMY News stories in this series.

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