France Fights to Protect IP

The great early 19th century, French economist Jean-Baptiste Say noted the importance of property rights: "Political economy recognises the right of property solely as the most powerful of all encouragements to the multiplication of wealth."

On protecting private property as a necessary role of government, Say wrote: "Without this protection of each individual by the united force of the whole community, it is impossible to conceive any considerable development of the productive powers of man, of land and of capital; or even to conceive the existence of capital at all; for it is nothing more than accumulated value, operating under the safeguard of authority."

While the technological state of our economy is light years ahead of where it stood two hundred years ago, the protection of private property - including intellectual property - remains a critical duty of government, and central to economic development and growth.

On February 20, The New York Times ran an interesting article titled "A Piracy Law in France Appears to Curb File-Sharing and Lift Digital Music." The main point of the story was that two years afo France approved a measure to fight digital piracy, and the result has been a sharp decline in file-sharing piracy, growth in digital sales, and a stabilization of music industry revenues.

The article described the process under the French law: "The agency that administers the three-strikes system, known by the French abbreviation Hadopi, had sent 822,000 warnings by e-mail to suspected offenders as of the end of December. Those were followed up by 68,000 second warnings, issued through registered mail. Of those, 165 cases have gone on to the third stage, under which the courts are authorized to impose fines of €1,500, or nearly $2,000, and to suspend Internet connections for a month."

The piece also quoted √Čric Walter, the secretary general of Hadopi, explaining: "Our work is to explain to people why piracy is a bad thing and why they should stop... When the people understand that, they stop. Of course, some people don't want to understand. Then we have to transfer their dossiers to the justice system."

A study on the impact of Hadopi by researchers from Carnegie Mellon University and Wellesley College was referenced in the article. That study, conducted by Brett Danaher, Michael D. Smith, Rahul Telang and Siwen Chen, summed up its key findings this way: "Our results suggest that increased consumer awareness of HADOPI caused iTunes song and album sales to increase by 22.5% and 25% respectively relative to changes in the control group. In terms of robustness, we find that these sales changes are similar for each of the four major music labels, suggesting that our results are not driven by one particular label. We also find that the observed sales increase is much larger in genres that, prior to HADOPI, experienced high piracy levels (e.g., Rap and Hip Hop) than for less pirated genres (e.g., Christian music, classical, and jazz). This tends to strengthen the causal interpretation of our results given that if HADOPI is causing pirates to become legitimate purchases, its effects should be stronger for heavily pirated music."

So, credit France for taking a significant and apparently powerful step to protect intellectual property. Jean-Baptiste Say would be pleased, and U.S. policymakers should take note.

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Raymond J. Keating is chief economist for the Small Business & Entrepreneurship Council. His new book is "Chuck" vs. the Business World: Business Tips on TV.