Years ago, when I was a Research Fellow in MIT, the Recording Industry Association of America (RIAA) sued MIT asking to identify the student who used MIT’s network to upload copies of copyrighted music. Of course, while this was going on outside our freezing office – for some reason, MIT’s air-conditioning was regulated centrally from a building on the other side, the west campus – inside our freezing office, one of my fellow, er, Fellows was quite busy downloading episodes of Friends and Cold Feet. Obviously on the MIT network. He is a supersmart guy but the knowledge of the subpoena made no difference to him.

Now we have the PirateBay case where several content owners including Hollywood studios and record companies won the case against the Swedish file-sharing site, sending the young founders to jail and hopefully receiving $3.6 Million in fines.  What is PirateBay’s defence? That they are just a directory; they do not host content or otherwise enable swapping of files, like the original Napster did. They say they are “like Google” in that respect.

Businesses can learn from the PirateBay case and related emerging technology trends.

This is an interesting line of argument. Ever since YouTube was bought, it has been sued several times for copyright violations. The lawsuits began the minute YouTube had a wealthy parent i.e. Google. In contrast, it is highly unlikely that the young founders of PirateBay have the wherewithal to trump up $3.6 Million to the complainants. So, will Google be next in the firing line of the studios and record companies? After all, it enables people seeking illegal or free downloads. Can Google use the “I’m just a dumb pipe/ algorithm” excuse to defend itself?

The dumb pipe excuse is slowly losing ground. ISPs, the purveyors of dumb pipes to your and my offices and homes, are required by law to block certain categories of content. And it is not as if Google has not done some content filtering, whether it is for fear of offending some people or for fear of offending certain governments.

Businesses and content owners would do well to pay attention to the two emergent themes in this discussion.

What’s the strategic intent?

MIT’s network is used for several purposes including research, computing, email and web access. But it was not created with the intent of enabling students to do illegal things including upload content in violation of copyright and other applicable laws.

Google’s intent, in their own words with no added value judgements – is ‘to organise the world’s information and make it universally accessible and useful’. Its efforts at universal indexing however is famously stymied by the ‘walled garden’ nature of social networking sites such as Facebook. Randall Stross’s book Planet Google has an interesting chapter on the dilemma and you can read about some interesting new developments here.

Strategic intent is important for corporate mission statements as well as to ensure the business model is robust.

PirateBay differs from MIT’s Network and from Google in intent. PirateBay was created to track and index BitTorrent files around the world. I don’t know about you but I find it hard to believe that despite BitTorrent’s superior technology, highly valuable or confidential business documents are flying around on the web and are indexed on PirateBay. The PirateBay founders are smart and cannot have missed this point. Does that enable us to file PirateBay’s strategic intent under ‘reasonable doubt’? I think so.

It is worth reiterating that many lawsuits turn on ‘motive’, another word for ‘intent’. Those seeking to create legitimate businesses need to be clear – and not just in the corporate mission statements put out for public consumption – that the strategic intent is not to enable illegal activity. So thinking through business models is crucial including asking questions such as ‘if I were a swindler, how would I go about using the business model to my own ends?’.

Sounds obvious? Well, then we are good to go.

What’s the societal contract?

It is easy to see why child abuse and porn needs to be blocked. Our societal contract is to protect children who can’t always protect themselves. The logic is that if we can starve the supply and cull the demand simultaneously, as recent crackdowns around many countries show, we can deal with the scourge.

But what about films and music? Do copyright laws need overhaul? Or is it that the music/ film industry is out of sync and needs to reconsider their raison d’etre?

I have written about the issue before. My point was that: as consumers of music, our relationship is with the musician, his story, the mystery of his song-writing, his musical abilities, not with his record company. Record companies and musicians are not on the same side in this debate and recently a coalition of recording artists was formed to redress the balance.

So what is the societal contract here – for rewarding talent and for paying for what we consume, whether music or films? I think, at best, it is evolving. 

Businesses are not just dumb, legal entities. They function within a living, breathing society and must understand their societal contracts.

Musicians are trying to cultivate fans through album giveaways, pay-what-you-want downloads and ‘intimate gigs‘; some are even doing ‘fan-financing‘. But at the same time, musicians are trying to get copyright extended. Record companies are suing with enthusiasm. And consumers? As I mentioned early on, the subpoenas being served made no difference to my friend’s enthusiasm for downloading stuff from the web. Likewise with PirateBay’s user base.

But let’s apply the societal contract question to any other business. Your business. Does the business model serve the implicit societal contracts in its context? e.g. If you make a life-saving drug, will you only sell it in rich countries? Or will you at least try and negotiate with governments of poor nations to make the drug available? The questions you ask will be tough and specific to your context but they do need to be asked.

Alas, as growing evidence shows, the “I’m just a dumb pipe” excuse doesn’t fly anymore. Businesses operate within living, breathing, organic societies. Businesses aren’t just dumb, legal entities either. Understanding the societal contracts – and their evolution – is essential to creating business models that deliver the strategic goals as well as deliver on the societal contract.

This is an evolving discussion so do contribute your views.

Related reading:

JP Rangaswamy’s A Simple Desultory Philippic about Copyright is one of my favourite posts. I may not wholly agree with him. But he makes the point eloquently.