VCs to Congress: Antipiracy bill will 'chill' tech investment

Some well-known venture capitalists ask lawmakers to reconsider support for Pro IP Act, a bill that would hand government sweeping powers to combat copyright theft.

Greg Sandoval Former Staff writer
Greg Sandoval covers media and digital entertainment for CNET News. Based in New York, Sandoval is a former reporter for The Washington Post and the Los Angeles Times. E-mail Greg, or follow him on Twitter at @sandoCNET.
Greg Sandoval
4 min read

The people who are instrumental in getting technology start-ups off the ground are imploring Congress not to support a bill designed to give the government more freedom in combating Internet piracy and counterfeiting.

Sen. Patrick Leahy has thrown his support behind the Protect IP Act, a bill that venture capitalists say is harmful to innovation. Greg Sandoval/CNET

About 50 of some of tech's best-known venture capitalists, including Marc Andreessen, Fred Wilson, and Vinod Khosla, wrote an open letter to members of the U.S. Congress yesterday and outlined how the Protect IP Act would not only fail to achieve its goal of protecting intellectual property but would also "stifle investment in Internet services, throttle innovation, and hurt American competitiveness."

The Protect IP Act would hand the U.S. Department of Justice the power to seek a court order against an allegedly infringing Web site. The order could be served on search engines, certain Domain Name System providers, and Internet advertising firms--which would in turn be required to "expeditiously" make the target Web site vanish.

The legislation, the offspring of a bill introduced last year called the Combating Online Infringement and Counterfeits Act (COICA), is supported by a wide range of copyright owners, such as the Motion Picture Association of America (MPAA), the Recording Industry Association of America (RIAA), clothing manufacturers, the Alliance of Safe Online Pharmacy, and others. Supporters say the bill is necessary to stop the mass pirating of intellectual property occurring online, which costs U.S. businesses billions in lost revenue.

Protect IP is unnecessary, said the VCs in their letter. The Digital Millennium Copyright Act already serves to protect the rights of content creators as well creates safe harbors that allows innovators to come up with new technologies that benefit consumers and the economy.

"The DMCA creates legal certainty and predictability for online services," the VCs wrote in their letter, "so long as they meet the conditions of the safe harbors."

Many content creators don't agree that the DMCA has come anywhere near to protecting copyright owners. They point to the near decade-long swoon in music sales as well as the growing number of people around the world downloading unauthorized movie files. Copyright owners argue that many pirate sites are located overseas and don't care about adhering to the DMCA. For that reason, they say a solution that goes beyond the DMCA is necessary.

"We can't keep being asked to choose between technology and creativity, and we can't stand by as criminals profit from the hard work of the millions of American men and women of the creative and entertainment industry," said Michael O'Leary, the MPAA's executive vice president of government affairs. "This is a smart, narrowly crafted bill whose purpose is stopping theft, not slowing innovation. All we're asking is that the innovators play by the rules."

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Some from the music and film industry say they've heard for a decade how protecting intellectual property harms the tech sector and innovation. They heard it when file-sharing service Napster was shut down and when the U.S. Supreme Court ruled that P2P network Grokster could be held liable for copyright infringement. They note that there's no evidence that any of these events has slowed investment even a little.

They note that since 2005, the same year the Grokster decision came down, venture capital in the media and entertainment sectors grew faster than the rest of the VC market in four out of the six years. By comparison, in the five years before the Grokster decision, growth was lower in four of them. From 2000 to 2004, media and entertainment venture capital accounted for about 4.6 percent of total VC dollars invested. From 2006 through 2010, media and entertainment VC dollars grew to 7.1 percent of total VC dollars.

The tech sector is going to have to do more than write letters if it wants to get in the way of the Protect IP Act. The bill was unanimously approved last month by the Senate Judiciary Committee. Sen. Ron Wyden (D-Ore.) is holding up a vote before the full Senate but lawmakers who support the bill will try negotiating with Wyden first. Individual senators are allowed to put a hold on a bill. Wyden has said Protect IP endangers the integrity of the Internet and that the Web "is too important to our economy and to advancing American values to be inappropriately regulated and censored."

Supporters of the legislation that if they can't reach a deal with Wyden, they will take steps to get the bill voted on in the Senate without his support. Meanwhile, similar legislation is expected to be introduced in the House of Representatives next month.