Coyote Blog

Modern pirates do not need a ship or swords or cannon, they only need lobbyists.  Ever wonder how Captain Morgan rum pays for all that expensive TV advertising?  They don't -- you do!   At President Obama's insistence, their subsidies (along with many others) were extended in the recent "fairness" tax bill.

While nominally about the Gibson Guitar raid, this article is actually a great primer on abusive prosecutorial tactics businesses are increasingly facing

Prosecutors who are looking for an easy “win” know that businesses roll over. A public raid on its offices, or an indictment of its officers, can destroy a business’s reputation and viability. That makes the owners easy to intimidate into a plea bargain.

If they choose to fight, they face the full wrath and fury of the feds. In the Gibson raids, the SWAT teams were deployed even though Gibson had offered its full cooperation to investigators. Such raids are increasingly used to intimidate citizens under suspicion. The orchid importer, a 65-year-old with Parkinson’s, was shoved against a wall by armed officers in flak jackets, frisked, and forced into a chair without explanation while his home was searched

The government also attempts to get low-level employees to “finger” their bosses. For example, the feds threatened Gibson employees with long prison sentences. This is not a search for truth, but an immoral attempt at extortion to win convictions. Investigators examine the lives of “little fish” and use minor, unrelated violations (smoking a joint, or exaggerating income on a loan application) to pressure them to back the government’s case against their employers. Mobsters have experience with threats like this, but a secretary or an accountant is scared to death by the threat of prosecution.

A favorite ploy of prosecutors in these cases is to charge defendants with false statements based on their answers to the investigators. The sentence for this can be five years in prison. No recording is made of the interviews — in fact, the feds prohibit taping the interviews — and the agents are not stenographers. They cannot possibly recall the exact wording of the questions and the answers. Yet after the interview, they will produce a “transcript” replete with quotes throughout. And if a witness says he did not actually say what the agent put in quotes, it is the witness’s word against a fine, upstanding federal agent’s. Staring at a five-year sentence will get most people to say whatever the government wants them to.

The feds also pile up charges. According to Juszkiewicz, the Justice Department warned Gibson that each instance of shipping a guitar from its facility would bring an added charge of obstruction of justice. Prosecutors routinely add extra counts to stack potential prison sentences higher. For instance, faxing invoices for the wood would be charged as wire fraud. Depositing the check for the sale of the guitars would be money laundering. The CEO’s telling the press he is innocent would bring charges of fraud or stock manipulation. The intent is to threaten such long sentences that the targets plead guilty rather than risk decades in prison.

Prosecutors further tighten the screws by seizing the assets of the company, a tactic once used against pirates and drug lords but now routinely used to prosecute white-collar crimes. The federal agents seized six guitars and several pallets of ebony during their initial 2009 raid against Gibson. Federal law allows assets to be seized not just from convicted criminals, but also from those never charged. Owners must prove that the forfeited property was obtained legally; otherwise, the government can keep it. That gives the government incredible leverage, because without the seized inventory and bank accounts, the business will most likely go under. How can Gibson make guitars if the wood is being held by the government? How can it service customers when the government took its computers as evidence? How can it pay lawyers when its bank accounts were seized? Asset forfeitures bring to mind a similar twist on the law uttered by the Queen of Hearts in Alice in Wonderland: “Sentence first, verdict afterwards.”

On the cover of the WSJ today, "US Cargo Ship Repels Pirates."   So there weren't any Spanish treasure gallions to attack instead?

Movie producers sell DVDs cheaper in, say, Taiwan than they do in the US.  This is not an unheard of economic phenomenon -- it happens in every commodity and product.  The reason we don't notice these price differences too much is that traders and arbitragers and shipping companies will target the largest price differentials and take advantage of them by buying and shifting products around until the price differential is less than the transportation and transaction costs.  Basic economics.

However, despite a number of structural advantages that already serve to reduce this cross-flow (e.g. different languages), the media companies are trying to stretch copyright law far beyond what CopyOwner says is legally defensible:

Copyright owners (including the owners of the "works" embodied in
the copyrighted labels on common non-copyrighted goods) like to
discriminate in pricing by creating artificial markets so that
discounts in one market won't be resold at a lower price in over-priced
markets. The thinking goes, "Why let U.S. consumers get the benefit of
prices that are affordable to people in developing countries when we
know we can get more out of the U.S. consumer's pocket?"

The
"first sale doctrine," now codified as Section 109 of the Copyright
Act, makes clear that the copyright owner's right of distribution is
subject to the copy owner's right to sell it to anyone, anywhere, at
any price. And that's great policy. Entrepreneurs who see too big a gap
between the prices charged U.S. consumers and the prices charged
consumers elsewhere for identical copies can buy the cheaper product
and sell it at a profit, while still giving the U.S. consumer a better
bargain.

But that's not why I nearly fell out of my chair. I
was used to these anti-competitive price discriminators ranting about
perfectly lawful gray market goods. What this story does is label these
perfectly legal importers as pirates. That's right. Despite quoting the
Supreme Court in Quality King Distributors v. L'anza Research International,
that "once the copyright owner places a copyrighted item in the stream
of commerce by selling it, he has exhausted his exclusive statutory
right to control its distribution," a ruling that suggests that the
evildoers are those who try to circumvent the law by preventing gray
market imports, they go on to call the importers "pirates"

With Google headed off in nearly every direction at once in their product development, I wonder why they don't offer a service to corporations (and even individuals, like politicians) that seems much closer to their core business.  The service I have in mind is the Internet version of the old clipping service (where some PR folks would watch the papers and keep a file of articles about you or your company, bitterly clipped out of the papers).

Let's say I am Dell, and I would like to see what people are saying about be.  Well, if I search for "Dell,"  the first 30 or 40 hits are probably the same -- retailers and such.  What I really want is anything new that popped up in the search today vs. the search yesterday, and which might be buried hundreds of items down in the list.  This is something that a third party could certainly do, caching the search each day, but it would be a layup for Google.  I'd think this service would be pretty valuable, certainly saving money over having employees manually troll blogs and comment boards.  I can think of 10 ways right now this base service could be improved over time with more value-added services hung on the basic structure.  I could sell it to retailers as a way to uncover pirates or illegal channel activity.  You could even charge premium pricing for fast spidering, where the Google spiders go looking in certain places the client cares about more often.

If I have reinvented the wheel here, and someone is already doing this, let me know in the comments.

Okay, how could you resist that title for a post.  My thoughts on this subject were spurred by an article by Fox News about pirates that won election to the NC State student government:

By an overwhelming majority, the Raleigh school last week elected a candidate
called "The Pirate Captain" student body president, giving the old sea dog 58
percent of the vote.

"We're quickly goin' to bae getting our plank started, get the simple things
out of the way," The Pirate Captain (), real name Whil
(or maybe "Will") Piavis, a junior, told supporters after election results were
unveiled Wednesday night.

Many outlets have reported this story with incredulity that such an unserious person could be elected to so lofty an office.  Several student government weenies at NC State agreed:

More sober student-government types seemed appalled that a character straight
from "SpongeBob SquarePants" had crashed their party.

I was not surprised in the least, for two reasons.  First, I think many Americans in general are fed up with the self-importance of most legislators.  This goes double for students and the student government.  In fact, I think it is nearly a law of nature that the more trivial the government post, the more self-important the occupants of that post are.

The second reason I was not surprised was that we had a similar event twenty years ago at Princeton where the student government was taken over by the Antarctic Liberation Front:

Back when I was an undergrad
at Princeton, one of my fondest memories was of a bizarre Student Body
Governing Council (USG) election.  The previous USG administration,
headed by none other than fellow Princetonian Eliot Spitzer, had so
irritated the student body that, for the first time in memory, the
usually apathetic voting population who generally couldn't care less
who their class president was actually produced an energetic opposition
party.  Even in his formative years, Spitzer was expert in using his
office to generate publicity, in this case frequent mentions in the
student newspaper that finally drove several students over the edge.

The result was the incredibly funny and entertaining Antarctic
Liberation Front.  I wish I had saved their brochures, but their
proposals included things like imposing a dawn to dusk curfew on the
school and funding school parties by annexing the mineral rights
between the double yellow lines of the US highways.  All of this was
under the banner of starting jihad to free Antarctica.  The ALF swept
the USG election.  This immensely annoyed Spitzer and other USG
stalwarts, who decried the trivialization of such an august body.  The
pained and pompous wailing from the traditional student council weenies
(sounding actually a lot like liberals after the last presidential
election) only amused the general student population even further.
After a few student-council-meetings-as-performance-art, the ALF
resigned en mass and life went back to being just a little bit more
boring.

Yes, that Eliot Spitzer, the overreaching Aspiring Governor of New York.  He is STILL mad about getting dissed in this student election, and whined about it twenty years later in print.  And don't miss fellow Princetonian Virginia Postrel's reflections on the ALF and Eliot Spitzer.