Wednesday, October 05, 2005

Story of a U.S. IP Pirate Busted in China

This month Wired has a story of an American citizen who worked as an intellectual property pirate out of China and how he got busted. It's the story of Randy Guthrie, heir to the Guthrie-Phipps fortune and a grad degreed ivy leaguer who came up with a great scam -- he moved to China and set up a site called "3 dollar DVDs" and made loads of cash sending to US customers. Wired has a 6 page story on how the discovery of a few fake DVDs at a flea market by a low level agent led all the way to Guthrie's ultimate take-down through Chinese-US cooperation. The bust is analyzed as a red herring though -- allowing the US to say they're getting Chinese cooperation in the fight against piracy and allowing the Chinese to take credit for enforcing IP rights, when in fact Guthrie was more or less a small-time player who did absolutely nothing to cover his tracks (he put his return address on the envelopes of DVD for crissakes!). He was just an easy target who provided some political points for all involved in his arrest while Chinese authorities basically either ignore, or even profit from, IP theft. Randy Guthrie ended up with a 2.5 year sentence in China, but when he gets deported to the US it will probably get eveb worse for him. Here's an interesting snippet from the article:

In fact, piracy is the unofficial official policy [in China]. The state licenses many retailers of pirated DVDs and collects taxes on their sales. And, in a country where the economy is still tightly monitored and regulated, there's every reason to believe that the government has some control over the illicit DVD market.

Certainly the Chinese government has shown little interest in widening the net to prosecute anyone beyond Randy's immediate circle. In April, he was convicted of violating China's intellectual property laws, was fined $60,500, and began serving a two-and-a-half-year sentence in Chinese custody. (Randy's Chinese lawyer was able to convince the court to drop the charge of operating an unlicensed business, which carries a prison term of 15 years.) After that, he'll be deported. Two of Randy's employees were arrested and jailed. The shopkeepers who sold him the discs were also arrested.

But the authorities didn't follow the trail any further. They didn't arrest the middlemen. They didn't trace the discs back to the factories that produced them. They didn't investigate the sources of the original digital files. The extensive network that supplied Randy's business is healthy and intact.

Meanwhile, the US government continues to pursue Randy's prosecution. On July 13, the office of Jay Golden, the assistant US attorney in Mississippi, indicted Randy on 17 counts of smuggling, copyright violations, and interstate trafficking of counterfeit goods. The government is also seeking approximately $1.1 million in cash. "A lot of the time, people can't pay the penalties," Golden says. "This case might be different."
Wired: The Decline & Fall of Randolph Hobson Guthrie III


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