Copyright Tariffs Ineffective, Trade Group Says

Rather than collect money after the fact, governments should focus on strong anti-piracy laws to prevent the issue from happening at all, according to officials at the Semiconductor Industry Association.
SAN FRANCISCO — Copyright levies, duties imposed on goods capable of reproducing copyrighted materials, add substantial cost to electronic products and, in effect, offset the economic benefits of Moore's Law, according to leaders of the Semiconductor Industry Association (SIA), who called for governments to adopt alternative measures to protecting copyright holders.

In a press briefing here Wednesday (May 10), SIA Chairman Brian Halla, board member John Daane and President George Scalise said governments should focus on preventing piracy rather than levying the copyright tariffs, which they labeled as ineffective.

Copyright levies are mostly associated with European countries, though they are in force to a lesser degree in other parts of the world. They are designed to compensate copyright holders for the copyright infringement potential of blank media, such as a blank cassette tape. In recent years, most European Union members have extended copyright levies to many electronic devices in the wake of the emergence of digital music formats such as MP3 and other media.

The SIA points to a 2006 study by a European organization called the Copyright Levies Reform Alliance (CLRA), which found that nine of the largest EU countries collected a total of €534.4 million in 2001, a number that is expected to more than triple to €1.78 billion in 2007.

Both the SIA and the international organization it helped create a decade ago, the World Semiconductor Council (WSC), oppose copyright levies on electronic media, but say they strongly advocate intellectual property rights. On one hand, the organizations say copyright levies are not effective, but they sensitive to the issue of piracy, particularly since piracy of electronics and components is becoming a larger issue.

"We'd rather see barrier eliminated on a stronger and worldwide basis," Scalise said. "We've got to get people around the world to focus on piracy."

The men outlined some less formal measures, emphasizing industry self-policing and swift action over formal legal proceedings, to combat and reduce piracy.

In one example, Scalise suggested that governments request that silicon foundries make "best efforts" to determine if a chip design that has been brought to them for fabrication has been pirated. Scalise emphasized that such an arrangement should be informal, not placing legal requirements or responsibility on the foundries.

"You know who your customers are," said Daane, who is also president, chairman and CEO of programmable logic supplier Altera Corp. "When you look at a complex design, you'd have reason to believe whether they were capable of creating it or not."

If a foundry determines that a design may have been pirated, governments should immediately investigate it on a "fast track" basis rather than leave it for courts to sort out, Scalise said. The time it would take to conduct formal legal proceedings would be far too long to prevent damage from being done, he said.

"It may work in some cases, it may not work in other cases," Daane said.

Scalise acknowledged that piracy of semiconductor design is not very common.

"But when it happens, it hurts a lot," Scalise said. "It's not an issue that is out there every day."

EDA, because its product is typically contained on computer disks, has been hit particularly hard by piracy, Scalise said. He was unable to quantify the degree to which EDA has been impacted, but said the ease of copying software on computer disks has resulted in EDA being impacted almost to the degree of "the music industry, where you can see all of these knockoffs are out there on the street."

According to the SIA, copyright levies are generally collected by national collecting agencies authorized by the respective governments. There is a lack of transparency in the methodology for collecting the levies and distributing the proceeds, according to the SIA.

"Almost none of the money gets back to the artist [whose works are potentially copied]," Scalise said, adding that most of the proceeds go to the collection agencies.

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