DirecTV/Dish get $180M in anticipated damages

In what may be a first, the Orlando Sentinel reports that a Sacramento, CA man has been found guilty of attempting to defraud DirecTV and Dish through scheming to sell satellite decoding equipment.

The amazing thing is that he will be paying back a $180M settlement at $500/month for the rest of his life all based on what damage he could have caused the two companies had the technology gotten out.

However, it didn't. He apparently never sold it to a customer (although he had orders from 2000 people).

This brings up two important issues: can you hold somebody responsible for restitution for something they did not succeed in doing? and should theft-of- service "damages" be considered the same as actual incurred damages.

The former issue is one of constitutional appropriateness of depriving an individual of property (restitution) to compensate someone for an injury not sustained. That doesn't make a whole lot of sense to me. Although, I think I'd like to get thousands of dollars from every hacker who probes my firewall because he intends to take over my computers, thus causing me to spend many hours reconstituting and cleaning my systems. That sounds like a nice revenue stream considering the number of attacks per day going on.

The second bit is also important given all of the discussion about theft of "intellectual property." I'm growing less and less fond of the term as time goes on. As somebody in the software industry, I believe I have good standing to discuss the merits of intellectual property rights, piracy and damages. The difficult truth is that (with the exception of monopoly products) people will seldom pay for the products they "steal" if they are given the choice of going without and paying the price. Whereas that may also be true for conventional businesses (like a clothing store), the theft that occurs in a clothing store actually deprives the store of the ability to sell the good to somebody else and adds the cost to the store's bottom line. In the case of "intellectual property" (and theft of service, as is occurring in the DirecTV case), the theft is the loss of the opportunity to sell to somebody who would not buy otherwise.

In the case of the satellite broadcasters, the "theft of service" argument is weak. If you were to have a plumber come to your house and fix the toilet and you did not pay them, then you would be committing "theft of service." The plumber performed a service for you and you didn't pay them. You have taken their time and their work product, which they made for you, and not compensated them.

In the broadcast environment, theft of service does not deprive the company of money they would have otherwise made. It does not require them to do something specific for you, and it does not incur additional costs.

Now, don't get me wrong, I'm not in any way, shape, or form promoting the idea that using software or broadcast services without permission is a good idea. Nor am I saying that the people who use those services shouldn't be punished when it is found out. However, I think that there are some significant inconsistencies in how these "theft losses" are indicated and what they companies that report them do to the markets by talking about them.

Let's take for example the claim from satellite TV industry that they lose $4B in revenue due to the piracy problem. That's a fine assertion and they are using it to yell and scream at the government to do something special for them to help combat the problem. However, I think it's also important to note that if they succeed in increasing the government's play in this area, it is unlikely to actually increase the number of customers using their service. The reason for this is that most of the folks who aren't paying now, won't pay then. They will drop their service back to cable or off-air broadcast TV.

In the end of the day, two classes of people suffer from the inflation of these estimates: investors and the public. The investors are hood-winked by the software and broadcast service industry into believing that if they can get just one more law passed, that they will see skyrocketing revenues and profits. The general public suffers because of onerous new legislation which constrains the public's right to make legal use of property which the purchaser has rightfully bought or licensed.

Ironically, these software companies and broadcasters complain about a practice that may actually help them in the marketplace. Think about this scenario. You have a friend who is a known pirate. He has every piece of software ever made for word processing. You go to him and ask "Friend, what word processor should I use?" He says, "Use Microsoft Word, it's great. Here, you can have a copy of mine." You take a copy and use it for a week. Deciding that you do, indeed, like it, you go to the local store and plunk down $229 (or $239 for Office) because you don't want to be a software pirate.

The point is, though, you may not have bought the pricey package had not your pirate friend suggested it to you. If, instead, he had said "Use OpenOffice, it's free and open source," you might have followed his lead, downloaded the (pretty good) software from and had a product that does easily 70% of the things that Word does without costing you a red cent.

Note: if you really think you get support from Microsoft, try giving them a call some time. Most people give up and go talk to their computer friends to get the answers to Office questions. If your friends are using OpenOffice, you can do the same.