September 28, 2004 | By Fred von Lohmann

A Tax on Innovators

Yesterday, the Senate Judiciary Committee released yet another version (PDF) of S. 2560, otherwise known as the Induce Act. Today, after facing a withering hail of opposition (PDF) from everyone other than the RIAA, the committee staffers are apparently working on yet another draft, making it the fifth by my count.

Every draft released so far has suffered from the same fatal flaw: each would haunt legitimate American innovators while doing nothing to solve the peer-to-peer file sharing dilemma. P2P vendors will simply move offshore (many already have) and filesharers will turn to open source applications (like Bit Torrent) that already circulate freely in cyberspace.

It will be legitimate American innovators who are left under the gun. Vague new laws targeting "inducement" or "dissemination" technologies will give entertainment industry lawyers leverage over big technology companies (like Apple, TiVo, and Intel) and a crushing hammer to wield against small ones (check out Sling Media for one compelling example of a great technology that Hollywood certainly doesn't want you to have).

So let's call this what it is: a tax on innovation. Technology companies would find themselves under constant pressure from entertainment industry lawyers waving their newly-minted "inducement" law. This means many great products would be hobbled, and many others would never be built. Less flexible, less useful products means fewer sales, lower revenues. That's a tax on our nation's technology companies, a damper on earnings, a drag on competitiveness.

And all for nothing - this tax won't magically solve the file-sharing dilemma, nor will it put a nickel into the pockets of artists.

That's why the Amercian Conservative Union and National Taxpayer's Union have both joined the long list of public interest and technology industry groups opposing the Induce Act.

I'm a copyright lawyer. I believe in copyright. But copyright has never given an oligopoly of media companies a veto over new technologies. Call and write your members of Congress. Tell them that the Induce Act, in any of its many guises, is a tax our high technology economy doesn't need.


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