Behind the Deal: An Interview with David Israelite, Intellectual Property Task Force Chairman

The U.S. Department of Justice in March 2004 launched the Intellectual Property Task Force to examine enforcement and explore ways to further protect copyrights, trademarks, patents and trade secrets.

The U.S. Department of Justice in March 2004 launched the Intellectual Property Task Force to examine enforcement and explore ways to further protect copyrights, trademarks, patents and trade secrets.

Chaired by David Israelite, DOJ deputy chief of staff and counselor to the attorney general, the Task Force released its report on Oct. 12.

In an exclusive sit-down interview Nov. 8 in Washington, D.C., Israelite shared with ELW his thoughts on the state of the music industry.

What is the first thing that comes to mind when you hear the words "music industry"?

Today the first thing that comes to mind is that the industry has been ravaged by theft, since I've been working so closely with the industry on these problems. A year ago I would have thought about nothing but music.

I think it's sad, but it's also a good thing that the government is beginning to recognize the scope of this problem and is taking this more seriously, because this is a very important part of our economy, a very important part of our culture and who we are. If we don't do more to protect it, there will be a real loss in human terms and in economic terms.

What did you speak about when meeting with people in the music industry?

The theft problem is over 90% of the interaction I've had with the industry. I think part of that is because we see a common ground of responsibility -- the government to enforce the law and an interest they have in helping us enforce the law.

Part of what we've been trying to focus on with this task force is how can we help each other, because I think the problem is so significant that there's no one easy solution. It's going to take a multifaceted approach to try to stem the tide of the theft. Figuring out ways we can help private property holders protect their own property, figuring out ways they can help the government be more aggressive in prosecuting issues with regard to technology and how technology can help protect intellectual property are all things where we've been working together.

Independent labels don't receive any part of the financial settlements reached between the RIAA and illegal file sharers. There are thousands of indie labels -- for them, even 5,000 units sold can be lucrative, so even small numbers of illegal downloads can hurt them. What can they do to help themselves when their music is pirated?

They have to look at the lawsuit strategy of the RIAA as something that benefits them more indirectly. They may not recoup civil penalties, but they will benefit from a culture that helps deter this type of theft in the first place. So if you're an independent label that's not collecting judgments from people, you still probably want to see an aggressive lawsuit strategy so that you can prevent people from stealing in the first place.

That's the ultimate goal. It's not to go catch the people and recover money. The ultimate goal is to stop them from stealing in the first place.

Obviously, like any type of property, if anyone's property is stolen, they have a civil remedy. But it's very difficult to identify it when you're a small-time artist or label because it's so anonymous -- the theft -- and you sometimes don't even know it's happening.

You may see declining sales from what you expected, but you can't exactly pinpoint where it happened. So it's an extremely difficult problem to deal with when you can't get your hands around the people who are stealing your property, which is why prevention is such an important aspect of this.

I do think the lawsuit strategy is beneficial for everyone involved because it helps create an environment where there will be less of it.

I once contacted the FBI in the Los Angeles area for a client whose CDs were being pirated. I was told they couldn't take on any investigation until it reached some dollar threshold -- I believe they said $50,000. Can the FBI help with theft that doesn't reach that threshold?

I was not able to locate any FBI office that has a dollar threshold on investigations. Now, it's true that like any other law enforcement agency, the FBI has to prioritize cases. We live in a world where terrorism is by far our No. 1 concern right now, and one of the problems with intellectual property theft is it's a federal crime -- copyright is exclusively federal, not state and local.

With a lot of this type of theft, it would normally be the type of theft that is dealt with by state and local -- petty theft -- but because it's copyright theft, you have the FBI, which is one of the real challenges in how to deal with copyright theft.

One of the things in our report is we've recommended significant new resources in terms of investigators and prosecutors to deal with just this type of problem, but you still are going to be dealing with a structure where a low-dollar theft is very difficult to get the attention of federal law enforcement agencies just because of the nature of resource management -- it would in any type of theft.

If someone walked into a shopping mall and shoplifted at the rate that people are stealing music, you would have 800,000 local police helping you catch those people; when it's copyright theft, you have hundreds of FBI agents, not 800,00 local police.

Particularly when you look at the international aspect, we're talking about a lot of the theft occurring in countries where law enforcement isn't interested at all in helping to catch the thieves.

In some countries like Taiwan, the identities of people arrested for CD or DVD piracy aren't released. When music companies do business with foreign individuals, it's important to them to learn who may be pirating product. How can American companies get those names?

It's a challenge when you're working with other countries because every country has its own set of rules. One of the things that we're doing now is going back and renegotiating a lot of our treaties with these other countries to specifically deal with intellectual property theft.

For example, extradition treaties allow you to get someone based in that country for prosecution in the U.S. Most of our extradition treaties are called list treaties, which means they list a set of crimes, and if the crime is not listed in the treaty, you can't get extradition.

We are going back and replacing those treaties with treaties that say if it is a crime in both countries, then extradition would be allowed. That's particularly important for intellectual property crimes because when these treaties were negotiated, largely intellectual property offenses were not included in the list. That's the type of thing we deal with in other countries.

[Regarding the release of] names, every country is different. What we're most concerned about now is getting better cooperation, better coordination with foreign countries and really getting them to recognize that intellectual property theft is the same thing as stealing real property. A lot of times, countries have biases against intellectual property, that sometimes it's a lesser category [than stealing other types of property].

Are you aware of individuals who conduct legitimate business with copyright industries and are also part of piracy rings?

We've seen this in other areas where you'll have legitimate manufacturers who, from 9 to 5, produce a product, which is then sold. Then they open up the shop at nighttime and produce the same product that just never gets accounted for.

We see this in other industries as well. It's part of the continuing effort -- you have to be vigilant.

I compare it with the drug problem. There are a lot of similarities.

You're never going to completely eliminate it. You've got to attack it on all different fronts -- the buyer, the seller, the large organized criminal element of it -- and the best that you hope to do is push it back.

That's what we're trying to do with intellectual property, and a large part of that is getting other countries aggressive in helping us investigate these types of crimes.

I'm aware of some indie label executives and artists who believe they might as well do business with foreign companies and individuals who may also be pirating some of the product -- they figure that the music will be pirated anyway in that country, so they should at least get some money, in the form of an advance and some royalties, and have some legitimate product available to support the artists when they tour in that country. What would you say to them?

Artists have some conflicts since some of their income comes from touring and merchandise. The recording company makes all of its money on the sale of that music, so for some artists it's a trade-off.

They may lose money on the sale if their product is stolen, but yet it might help their ability to tour and sell merchandise. And so I can understand how an artist can have some internal conflict about how to approach that.

[Pirating entertainment products is] a very attractive place for thieves right now, unfortunately. You can make a lot of money, and your risk of getting caught is very low. Even if you are caught, the penalties are so low. That's one of the reasons we've seen massive criminal involvement in theft of intellectual property.

I think people ought to realize that anything they do to encourage or assist people in stealing intellectual property ultimately can lead to the type of consequences we've seen in the past -- and might see in the future -- where an entire industry gets threatened with its existence. Unless we can protect that intellectual property, industries are going to fail.

Your report recommends educational projects. What are the plans at this point?

Our first proposal targets the fifth and sixth grades, teaching them why stealing over the computer is wrong. It's a public-private partnership.

The concept is to reach kids at that age, make a compelling case why stealing on the computer is wrong, get their agreement not to do it -- like the pledge [not to do drugs]. Then they get some type of reward for participating in the program, like a free download or DVD or videogame.

So far all of the content industries are very excited about this idea. We're developing a specific plan to try to get it into the school for next year's school year.

We don't want to give up on high school, teenagers. We hosted a conference with Court TV and had a couple of songwriters perform the hit songs they wrote. Kids recognized them, but didn't know songwriters.

The songwriters explained why artists might be rich, but these songwriters make their living off the sale of the compositions, and they aren't rich. After the performance and a talk, some of the high school kids actually stood up and said they used to download music but they're not going to do it anymore.

It was encouraging. That program will lead to educational materials that we hope to use around the country on a much wider basis.

Have you explored incorporating that information into testing material, such as SATs, to teach them individual and property rights?

No, but that's an interesting idea.

One of the challenges is that the educational industry is moving away from teaching values. You want to go in and use the school structure to teach right from wrong, but there's some resistance to that, in particular with this kind of activity.

How do you think the music industry is doing at this point?

I think that the music industry, which has had a devastating assault on it with theft, has really gotten back together. I look at what the industry and the individual companies now are focused on, what they're willing to do, and I'm encouraged.