I. Piracy Hurts?

Growing up in the 2000s and 2010s, occasionally you’d hear that piracy cost companies significant amounts of money. I’m sure we’ve all seen the infamous “you wouldn’t download a car” anti-piracy public service announcement. That message was meant to deter piracy by scaring audiences, reminding them of its illegality. 

Research has indicated that piracy has cost the US TV and film industry $11.6 billion. The video game industry has research pointing to a $74 billion loss to their industry in just 2014. However, that same CNBC report also has Marcin Iwinski, at the time CEO of the game studio behind Witcher 3 and Cyberpunk 2077, stating that he does not think pirated games represent lost revenue. He even argues that some pirates will enjoy a game and go out and buy it.

This “1 pirated software = 1 lost sale” logic has been met with heavy skepticism online. As seen through Iwinski’s comments, even some game developers are skeptical. The original developer of Minecraft also stated to developers and journalists in 2013 that “if a lost sale is so bad, should bad reviews be illegal? What about missed release dates?”. Sports Interactive, the developers of the Football Manager games, believes that 1.7% of illegal downloads would have actually resulted in a sale, which would have been about $3.7 million in revenue.  One study by the European Commission seems to have found that piracy increases consumption of video games specifically, though this study has a hilarious 45-percent margin of error. 

If you want to go deeper into the research, Corsearch has a solid look at the variety of piracy studies and concludes that it’s really hard to figure out conclusively how much piracy impacts sales. It seems that it does, but much more than that is tough to determine. 

There are some questions that you might have in response to the argument that piracy is lost revenue. If I pirate a $70 video game 10,000 times, have I just taken away $700,000 from the coffers of the developer? What if I would have never actually paid for the game? Perhaps because of J.K. Rowling, I might never want to buy the new Hogwarts Legacy game. Is my purchase of the game as used also lost revenue? If I were to go in front of a court seeking damages from digital pirates, what would the judge make of my argument? After all, to claim lost revenues, I have to prove it.

Let’s see what judges have had to say! 

II. The Cases

Truthfully, there hasn’t been a ton of caselaw on the question. The most on-point case I could find was U.S. v. Dove, 585 F. Supp. 2d 865 (W.D. Va. 2008). There, the government and victims argued for applying the 1996 MVRA, the Mandatory Victims Restitution Act. For the MVRA to apply, an offense against property needs to be found (criminal copyright infringement in this case) along with needing to prove “pecuniary loss,” with the victim being “a person directly and proximately harmed as a result . . . .” The issue came with proving actual losses to the victim. RIAA and Lionsgate argued their claim that each instance of pirated content was the same as a lost sale. The court viewed the government and victims as failing in their burden under 18 U.S.C. § 3664(e). 

Specifically, the court stated they were “skeptical that customers would pay $7.22 or $19 for something they got for free. Certainly, 100% of the illegal downloads through Elite Torrents did not result in the loss of a sale, but both Lionsgate and RIAA estimate their losses based on this faulty assumption.” U.S. v. Dove, 870. The judge likened the piracy to U.S. v. Chalupnik, 514 F.3d 748 (8th Cir 2008), where the defendant gathered discarded undeliverable CDs and DVDs at the post office where he worked and sold them to stores. There, the government similarly failed to prove the amount lost, as if the defendant had not sold those disks, they would have been thrown out either way. 

One should be careful to note the difference between piracy and the illegal sale of pirated goods. The government brought up a case where an eBay seller of pirated computer games was made to pay his gains back to the victim company. U.S. v. Chay, 281 F.3d 682 (7th Cir 2002). The Dove court distinguished between their result and Chay as the difference between the victim’s losses and the defendant’s gains. See also United States v. Anderson, 741 F.3d 938 (9th Cir. 2013) (“Speculation and rough justice are not permitted . . . ultimately, however, it is the government’s burden to establish that the victim suffered an actual loss in a quantifiable amount.”)

Millennium Films v. Robinson, No. 2:16-cv-04718-SVW-E, 2017 U.S. Dist. LEXIS 230149 (C.D. Cal. Feb. 15, 2017) is another interesting case to look at. The defendant never actually appeared or responded to the court and was connected due to his IP being tracked. Mr. Robinson seems to have downloaded at least three movies: London has Fallen, Criminal (2016), and Mechanic: Resurrection (2016). For a rotten tomato score average of 29/100 and the exact same movie taste as my dad, the judge used its discretion to give slightly more than plaintiffs were asking for and awarded $9,000 overall in statutory damages, or four times the statutory minimum. Plaintiffs also argued that Mr. Robinson distributed the movies more than 1,000 times over several months through BitTorrent. However, that argument didn’t go anywhere, likely due to proving that the guy was seeding willfully versus automatically being difficult to prove. 

Most significantly, despite awarding statutory damages, the court notes that “no evidence has been presented as to Plaintiffs’ actual damages or losses resulting from Defendant’s infringement, although the general detrimental impact of piracy on the motion picture industry’s revenues was put forth.” Millennium Films v. Robinson, 16. 

III. Piracy’s End

Something that occurs in many of these cases is how unique digital piracy is. Our desire to compare piracy to the physical theft of goods may be an unfair distraction. Downloading something illegally is not quite theft, as another individual does not have their property taken from their possession. It’s not the same as selling a used item, as both the pirate and the downloader both have their own copy. Assuming one is not selling the product, it’s not market competition. It’s simply copying. And while violating copyright is certainly illegal, it is purely statutory. This is why statutory damages seem to be the only way to find damages in court. And depending on how copyright law continues to develop in the upcoming decades, the challenges that appropriation artists bring regarding fair use in the modern art context may find their way to wiggle into the software distribution scene.

At the very least, this difficulty with linking piracy to actual harm may explain why companies have moved onto alternative revenue models, whether it’s streaming or “free-to-play.” If statutory damages are all you have, then you might be better off disincentivizing piracy by making it incredibly easy and affordable to access content.