Buy a Fake Vuitton, Fund a Real Terrorist

Ensuring that innovators keep creating is key to economic growth and national security.

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Due to short supplies, Apple fans may have to wait up to 10 days before they can get their hands on the new iPhone 5s, which will  be released Friday.
Due to short supplies, Apple fans may have to wait up to 10 days before they can get their hands on the new iPhone 5s, which will be released Friday.

The responsibility for the protection of intellectual property was viewed as so important by the Founding Fathers that it was incorporated into the body of the U.S. Constitution, a point often made by Let Freedom Ring, where I am a senior fellow. The government’s role now may be less clear, as far as the details are concerned, than it was in 1789, so it must adapt for the age of the Internet.

The House Subcommittee on the Courts, Intellectual Property and the Internet took a look Tuesday at the rise of innovative business models and methods of content delivery in our brave, new, technologically-driven world. If the committee members are smart, they will do what they can to make sure the primary objective of the U.S. government remains the protection of copyright and intellectual property, and otherwise stay out of the way.

The growth of the Internet is an example of the kind of technology-driven breakout for which America is famous. To people who grew up thinking remote control televisions were a big deal, the ability to stream video to a telephone or hand-held tablet is nearly science fiction. In fact, it is reality, a new reality made possible by the combination of private capital and intellectual ambition married to a system where the rights of innovators are protected. The linkage between the two cannot be overlooked.

[See a collection of political cartoons on the economy.]

Much of the credit for the advances produced in the digital age goes those who have created new hardware, the Silicon Valley-type companies that are producing smaller, faster, more flexible devices that consumers are gobbling up. The old saying about what happens when someone builds a better mousetrap can be seen in practice every time Apple, Sony, Nintendo, Samsung or a similar company produces a new device. People wait on line overnight like they were getting ready to buy concert tickets.

The need to secure their rights to IP is obvious. It is wrong, however, to ignore or even discount the role that content providers are playing in all this, and it is important to understand that their IP must be protected as well.

The current push to create innovative ways to deliver video to online viewers using a plethora of devices and platforms is world-changing. There are more than 90 legitimate video streaming services currently offering programming to U.S. consumers. It is a growth industry because the economic reward it provides to those behind it is commensurate with the cost of the investments necessary to bring it about. The risks are appropriate to the potential rewards.

As retired United States Marine General James Jones said recently at the U.S. Chamber of Commerce's Intellectual Property Summit, "Innovation is the engine of American prosperity. Without the incentive provided by the recognition and protection of bona fide intellectual property, innovation will wither and with it will go America's economic vigor and all that entails."

"An IP fueled genius has kept the United States prosperous and growing through our history and indeed it has transformed the world as we know it today, just in a very, very short number of years, which has enabled us to improve lives through discoveries and innovation that mankind would barely dream possible not that long ago," Jones continued.

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This is where government does have an essential role to play in protecting copyrights and safeguarding intellectual property so that the innovators do not lose market share to those who are simply pirating the result of their creativity and selling it at a lower cost derived from the incorporation of the "five-finger discount" involved in obtaining the product.

"Every instance in which U.S. intellectual property is violated, when our patents are stolen, our goods counterfeited, our creations illegally copied, this erodes the health of the U.S. economy and our ability to compete and lead in a tightly contested trade based global economy," Jones, who served as President Barack Obama's national security adviser in his first term, said.

Copyright and other intellectual property protections are driving innovation. Without the former there would be little incentive for innovators large and small to pursue the latter. By recognizing and protecting those rights, the government is lawfully and appropriately promoting investment that generates new jobs at good wages and adds considerably to U.S. gross domestic product.

It's a broad issue, one that Congress needs to address. As Gen. Jones told the IP Summit, the theft of U.S. intellectual property is becoming ubiquitous in the developing world. "I just got back from Kurdistan in Northern Iraq and I couldn't help but notice a chain of fast foods that I hadn't seen before. One chain was called Burger Queen and the other one was called Dairy King," Jones said. "If the nation's economy is not strong, neither will remain the ability to defend ourselves, to advance our interests and to protect our values in a dangerous world that still needs us, and contrary to what you may read or think or hear, still very much wants the United States to play its proper role."

As Jones observed, the reasons enhanced protection of U.S. generated intellectual property are needed are not just economic; they affect U.S. national security.

[See a collection of political cartoons on defense spending.]

"Low quality counterfeit goods and phony parts leave us and our allies' critical infrastructure very vulnerable. IPR violations threaten our security in a more subtle, but no less noxious way," Jones said. "Counterfeit goods and phony parts can make their way into critical infrastructure and security systems creating significant vulnerabilities, not just for ourselves but also for our allies whose property and security in this globalized world is increasingly linked directly to our own." Moreover, he explained, there is a "connection between international criminal cartels and other organizations to include terrorism."

"One of the last conferences I attended as national security adviser was sponsored by Russia in Sochi. There was about 40 companies in attendance and the theme for the conference was the growing relationship between organized crime, drug trafficking, radical terrorism ... arms shipments, human trafficking and even the staggering arise of the counterfeit cigarettes that are now populating the world's markets because the penalties for being caught with illegal tobacco products is much less than the penalties associated with illegal drugs," he said. "But there is a growing nexus of that, those entire communities functioning as one. I first saw evidence of that in Afghanistan not too many years ago. And that trend is now a global trend."

For all these reasons, the U.S. government must be vigorous in its protection of U.S.-created intellectual property. There is too much at stake to turn a blind eye to the theft of movies, of pharmaceuticals, of television programing, of apparel and accessories and other items that are routinely sold over the Internet and on street corners in New York, Washington. D.C. and other cities. What may seem at first blush like a good deal for consumers is really a bad deal for America.

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