Internet Piracy: The Virtual Marketplace for Counterfeit Goods
Business managers need to monitor several trends regarding the protection of a firm’s intellectual property on the Internet. In this chapter, we examine that pirates on the virtual sea can be very sophisticated opponents, such as the Warez group, and that
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Internet Piracy: The Virtual Marketplace for Counterfeit Goods
10.1
Introduction
Business managers need to monitor several trends regarding the protection of a firm’s intellectual property on the Internet. In this chapter, we examine that pirates on the virtual sea can be very sophisticated opponents, such as the Warez group, and that various stakeholders create the supply and demand for fake goods by way of a pyramid of Internet piracy. We provide a synopsis of recent US government sting operations with the assistance of other countries to target Internet piracy. Finally, we address the problem of educating the consumer that downloading music, software, movies and the like without compensation is unethical. This is a key issue in terms of decreasing the demand for counterfeit goods in the virtual marketplace where a consumer can exhibit a more rogue behavior with a limited fear of prosecution. As discussed in Chapter 6, social marketing tactics have been employed by both the Motion Picture Association (MPA) and the Recording Industry Association of America (RIAA) to educate the consumer about fake products.
10.2
The Growth of Counterfeits in the Virtual Marketplace
Passariello, in her article in the The Wall Street Journal reports the sale of counterfeits on the Internet is now the third largest market for the distribution of counterfeits, behind China and Italy, and companies such as Louis Vuitton (LVHM), Rolex, and Tiffany & Co. have sued eBay in order to provide more responsible selling at its Internet site (Passariello, 2004). On June 30, 2008, a French court ordered eBay to pay Louis Vuitton €40 million ($63 million) for failure to adequately protect counterfeit LMVH merchandise being sold at its Internet auction site (Waters, 2008b). However, an US court on July 14, 2008 did not uphold a similar decision for Tiffany against eBay. Judge Richard Sullivan did not believe that eBay should be held liable for contributory trademark infringement from fake goods being sold at its site (Waters, 2008a). Frederick Mostert recently commented on these two opposing court decisions and drew an interesting analogy to the railway vs. farmer court cases in a
P. Chaudhry and A. Zimmerman, The Economics of Counterfeit Trade, DOI-10.1007/978-3-540-77835-6_10, © Springer-Verlag Berlin Heidelberg 2009
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Internet Piracy: The Virtual Marketplace for Counterfeit Goods
previous time where the legal system was tested for who would pay for a spark generated from a steam locomotive that would inflame nearby crops - the railway or the farmer? Thus, Mostert reasons that the solution is for the trademark owners and the Internet auction site to work together to solve the problem instead of using the court system to reason their polar positions (Mostert, 2008). A personal communication with Siân Croxon, Partner, DLA Piper UK LLP presented one solution as the automated software that is available to search and send notice and takedown letters to Internet auction sites. This software also helps a firm distinguish between th
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