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Is copy protection bad for business?

The entertainment industry's pursuit of tough new laws to protect copyrighted content from online piracy is bad for business and for the economy, says a new report by the Committee for Economic Development (CED), a Washington policy group that has its roots in the business world.

The group urged policy makers to realize that hastily enacted laws and regulations could have unintended consequences and slow the pace of innovation and economic growth. It also recommends that the next two years be used to develop a consensus on the proper course of action to take. The group urged the government not to set mandatory digital rights technologies.

The report urges the entertainment industries to come up with new ways of doing business that can accommodate and even profit from digital distribution. It cited the success of Apple Computer's iTunes Music Store as one online business that offered consumers an easy-to-use alternative to free music services.

The report noted that this is not the first time that new technology has been perceived as a serious threat to entertainment interests. The industry adapted to, and in fact was strengthened by, development of the player piano, phonograph, radio, and VCR. In each of these cases, new business models were created in response to these new technologies, the report said.

Susan Crawford, a professor at the Cardozo Law School of Yeshiva University and an author of the report, told the New York Times that a growing number of business leaders are worried that the trend toward “equating intellectual property with physical property” might be hampering innovation.

“Bits are not the same as atoms,” she argued, contending that the distinction is being blurred by Hollywood. “We need to reframe the legal discussion to treat the differences of bits and atoms in a more thoughtful way.”

The chief author of the report, Elliot Maxwell, a former adviser to the secretary of commerce on the digital economy during the Clinton administration, said that middle ground was hard to find in the many conflicts over intellectual property. The report, he said, was an attempt “to find a way through this thicket.”

One of the most prominent critics of attempts to increase control over copyrighted material applauded the new report. “I think it’s exciting,” said the critic, Lawrence Lessig, a professor at Stanford Law School and founder of the school’s Center for Internet and Society. “The points they are making are obviously right,” he said, “but the only way people will get it is if more credible, mainstream organizations begin to utter it.”

Jack Valenti, the president of the Motion Picture Association of America, said that he had not yet seen the report but was strongly critical of the view that his industry was trying to place unfair burdens on consumers.

“They say it will stifle innovation—that’s malarkey,” he said. “If all of this digital property is free, who is going to invest 50 to 60 million dollars to make a movie?” he asked.

The full report, “Promoting Innovation and Economic Growth: The Special Problem of Digital Intellectual Property,” is available at:

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