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Stop the Stop Online Piracy Act Now

By Evan Niu, CFA - Updated Apr 6, 2017 at 5:33PM

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This legislation might just ruin the Internet.

Over the past month, a battle has been brewing in Congress, and the fate of the Internet is on the line. The stakes are huge, and so are the companies lining up and picking sides. Which side are you on?

The proposed bipartisan bill in question is called the Stop Online Piracy Act, or SOPA, which builds off the Protect IP Act proposed earlier this year. Its title is self-explanatory in that it aims to stop online-content piracy, which in itself is a noble cause. I think we can all agree that piracy is a bad thing. It's bad for businesses, it's bad for content creators and artists, and it's ultimately bad for consumers because it inevitably destroys the incentive to create.

Why stop SOPA?
Instead, what's so unsettling about SOPA is its proposed implementation and its implications in regard to net neutrality and censorship. The bill targets "rogue" websites that are primarily dedicated to piracy, copyright infringement, counterfeiting, and generally anything your mother wouldn't approve of. Many are based outside the United States, putting them out of our government's jurisdiction to shut them down altogether.

Websites in violation would be added to a DNS blacklist, which would effectively block access to those sites for average users. This is notably the same method that countries like Iran, China, and Syria use to censor the Internet from their citizens, which is something our own government has publicly decried on multiple occasions. It would be terribly hypocritical if we enacted a similar system of censorship.

"I own that!"
SOPA differs from the Digital Millennium Copyright Act, or DMCA, that was inked in 1998. The DMCA included "takedown notices," through which an owner of intellectual property could demand the content's removal. Included in the DMCA was a crucial Safe Harbor Provision that made sure not to penalize sites that host user-submitted content, transferring any potential liability from the site to the infringing user, so long as the site made good-faith efforts to remove infringing content.

Under the new bill, an entire site could be crippled, as a copyright holder could force Internet service providers, ad networks, search engines, and even payment processors to cut off access and payments to any "infringing" site. SOPA would undermine DMCA safe-harbor provisions, transfer much of the onus of compliance from users and content owners to sites, and open the door to lawsuits targeting sites based on user-posted content.

Those in favor?
Some of the main proponents of the bill are those in the media business who are seeing the fruits of their labor being illegally shared. That list includes the Recording Industry Association of America (RIAA), which has tried numerous angles to battle rampant piracy in the music biz. You also have the Motion Picture Association of America (MPAA) backing the bill on behalf of Hollywood movie studios. The RIAA and MPAA have both been waging war on pirates for years to little avail.

The Business Software Alliance (BSA), which is an industry group that represents the interests of software and hardware players alike and includes some powerful members, was also onboard the SOPA train. Thanks to the BSA's initial support, an army of massive tech powerhouses are implicitly in favor of the bill, including Adobe, Apple (Nasdaq: AAPL), Autodesk, Microsoft (Nasdaq: MSFT), Intel (Nasdaq: INTC), Dell (Nasdaq: DELL), Symantec, and more.

But in a recent turn of events, the BSA has now issued a statement saying that SOPA "needs work to address innovation considerations" and now wants to work with lawmakers to resolve the bill's weaknesses while pursuing its goals.

Those against?
While acknowledging that SOPA addresses a valid concern, another group of bigwigs is congregating in opposition to the bill in its current iteration. Many of the companies that are stacking up against SOPA rely heavily on the DMCA's Safe Harbor Provisions, since they feature large quantities of user-submitted content.

Together, AOL (NYSE: AOL), eBay (Nasdaq: EBAY), Facebook, Google (Nasdaq: GOOG), LinkedIn, Mozilla, Twitter, Yahoo! (Nasdaq: YHOO), and Zynga all took out a full-page ad in The New York Times recently to publish an open letter opposing the measures. The companies argue that the Internet's inherent openness has contributed to economic growth, job creation, and innovation, and that the proposed censorship would "jeopardize the foundational structure" that has benefitted content owners and Internet companies alike.

What's it mean for investors?
Google Chairman Eric Schmidt has called SOPA "draconian," and Google warned that investment in Internet startups would dry up from a dramatically riskier legal environment. The open Internet is a breeding ground for innovation, with startups popping up daily, and many of them heavily incorporating social aspects and user-generated content.

If you think today's patent and intellectual-property environment is overzealous, just think how much worse it would be if SOPA passes, opening a floodgate of lawsuits and blocked websites.

Think of all the dot-com darlings we've come to love as investors. More importantly, think of the ones that are still in utero that we may love tomorrow (think of the children!). Think of Facebook's inevitable IPO, Yelp's upcoming debut, or Zynga's public future. SOPA would negatively transform the risk profiles of these Netizens and countless others in a negative way.

Collateral damage
SOPA has a good heart and pure intentions, but in reality, law-abiding sites and well-intended companies would end up taking the brunt of the downside and tech-savvy pirates would still find ways to circumvent the blockade.

If passed, SOPA would probably have negligible success in achieving its stated goal while threatening to take away the two things that we love most about the Internet: freedom and openness.

If you agree, add your name to this petition asking Congress to stop SOPA now.

Which side are you on? Would SOPA do more harm than good? Or would it be effective in battling piracy? Weigh in using the comments box below.

Fool contributor Evan Niu owns shares of Apple, but he holds no other position in any company mentioned. Check out his holdings and a short bio. The Motley Fool owns shares of Microsoft, Yahoo!, Google, Intel, and Apple and has bought calls on Intel. Motley Fool newsletter services have recommended buying shares of Apple, Microsoft, Google, Yahoo, Intel, Dell, and eBay and creating bull call spread positions in Microsoft, Apple, and Intel. Try any of our Foolish newsletter services free for 30 days. We Fools don't all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.

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