Blog on the Run: Reloaded

Thursday, December 13, 2012 7:11 pm

Ahh. Order is restored in the intellectual-property court. Plus, we got to fire a bright 24-year-old and keep your drugs expensive. Cool!

Back around Thanksgiving, I wrote about Derek Khanna, a 24-year-old staffer for the House Republican Study Committee who had the unmitigated gall to point that American intellectual property law is not the cognitive nirvana that a lot of Republicans like to think it is. (I, myself, have long referred to American IP law as “where creativity goes to die™.”)

Before the weekend was out, the report had been retracted, ostensibly because it had not been subjected to “adequate review.” (Insert your own euphemism here.) And not long afterward, Khanna was fired.

The Washington Examiner elaborates:

The reason [for the retraction], according to two Republicans within the RSC: angry objections from Rep. Marsha Blackburn, whose district abuts Nashville, Tenn. [Nashville is home to the country-music industry, for those of y'all not from around here -- Lex.] In winning a fifth term earlier in the month, Blackburn received more money from the music industry than any other Republican congressional candidate, according to the Center for Responsive Politics.

The American Conservative helpfully notes:

Needless to say, members weighing in on staffing decisions is very unusual. Also, Blackburn isn’t just on the industry’s take. Her chief of staff is a former RIAA [Recording Industry Association of America] lobbyist.

The Examiner’s Timothy P. Carney summarizes the sad hypocrisy of the GOP in all matters IP:

Republicans are surprisingly close to the entertainment industry. For instance, Mitch Glazier, as a Republican House Judiciary Committee staffer in the late 1990s, played a key role in drafting GOP bills expanding copyright before cashing out to the industry. He now runs the [RIAA], a $4 million-a-year lobby operation that fights for more government protection of record labels.

So Republican politicians, with their sensitivities to K Street and their general pro-big-business tendencies, are not eager to roll back the extraordinary government protection for Hollywood and Nashville. But free-market think tanks and writers are banging the drum.

Jerry Brito, a scholar at the Mercatus Center, has just published “Copyright Unbalanced: From Incentive to Excess,” an entire book of essays critiquing current copyright law from a free-market perspective, and the Cato Institute is hosting a panel on the book Thursday.

Brito’s incisive book tells tale after tale of government kowtowing to copyright holders. An egregious example is Mickey Mouse. “Each time the copyright … was about to expire, and the happy rodent was about to become a shared cultural icon like Santa Claus, Hamlet, and Uncle Sam, Congress has extended the copyright term,” Brito explains.

This is not at all what the founders had in mind when they authorized Congress “To promote the Progress of Science and useful Arts, by securing for limited Times to Authors and Inventors the exclusive Right to their respective Writings and Discoveries. … “

Retroactively extending the copyright on a work produced long ago cannot promote useful arts and sciences. It just enriches the copyright holder and denies access to everyone else — which is exactly the point, if you’re an industry lobbyist.

Once again, big business is aligned with big government and against open competition. So far, the party of free markets is on the wrong side.

But let’s say you’ve never written a book or composed a country song or created a bankable cartoon character like Mickey Mouse. Why should you care?

Simple. Do you use any kind of non-generic prescription drug or medication? If so, the odds are good that because of this same legal structure, you’re paying more for it than you need to be and than a free market would require. That fact, in turn, contributes enormously to the fact that the U.S. pays far more per capita for health care than do other advanced countries. And that fact — not Social Security, not Medicare, not Medicaid, not welfare — is one of the biggest reasons why we have the deficits that we have.

(h/t: Fred)

Wednesday, November 21, 2012 6:42 pm

American IP law: Where ingenuity goes to die, RSC edition

A sensible solution to a vexing and expensive intellectual-property problem? By God, we can’t have that!

For a brief moment last week, a House Republican group that serves as an idea shop for the party was on record proposing a remarkably far-reaching reform of American copyright law. The memo (PDF), written by a young staffer named Derek Khanna, was released Friday afternoon by the Republican Study Committee and noticed by The American Conservative’s Jordan Bloom.

Khanna’s memo begins by laying out the original constitutional purpose of copyright protection and how the current legal landscape has strayed from it. It then proceeds to challenge several widely-held beliefs about copyright law, including the claims that it promotes the greatest possible levels of productivity and innovation and that it represents free market ideals at work:

[A]ccording to the Constitution, the overriding purpose of the copyright system is to “promote the progress of science and useful arts.” In today’s terminology we may say that the purpose is to lead to maximum productivity and innovation.

This is a major distinction, because most legislative discussions on this topic, particularly during the extension of the copyright term, are not premised upon what is in the public good or what will promote the most productivity and innovation, but rather what the content creators “deserve” or are “entitled to” by virtue of their creation. This lexicon is appropriate in the realm of taxation and sometimes in the realm of trade protection, but it is inappropriate in the realm of patents and copyrights. […]

Today’s legal regime of copyright law is seen by many as a form of corporate welfare that hurts innovation and hurts the consumer. It is a system that picks winners and losers, and the losers are new industries that could generate new wealth and added value. We frankly may have no idea how it actually hurts innovation, because we don’t know what isn’t able to be produced as a result of our current system.

But by Saturday afternoon the RSC had pulled the memo, citing an inadequate review process and apologizing for the “oversight.” …

The memo lists several specific examples of the damage done by copyright law: Stifling the DJ and remix markets in the United States, making the creation of public libraries — and in particular Project Gutenberg — more difficult, and penalizing legitimate investigative journalism. It concludes with suggestions for reform such as significantly shortening the length of copyright claims, expanding “fair use” doctrine, and reforming statutory damages. (Those damages can currently rise as high $150,000 per infringement.)

The email announcing the removal came from RSC executive director Paul Teller, who said the memo “was published without adequate review within the RSC.” …

However, a source “with knowledge of the RSC’s operations” told Tim Lee at Ars Technia that content industry lobbyists had brought pressure to bear on the RSC’s leadership to disavow the memo.

Among the many manifestations of genius in the United States Constitution is its provision for ““promot[ing] the progress of science and useful arts” by giving an innovator a fair early share of the benefits of his creation, but then later allowing others to build on that innovation without prohibitive legal or financial obstacles. It’s that second part that has come under attack, primarily via industry lobbying (so much so that not that long ago Greensboro’s Rep. Howard Coble’s political affiliation was being mocked in some quarters as “R-Disney,” after one of the primary offenders).

This is both bad public policy and, if you’re a Republican, bad politics. Coble sits on the Judiciary subcommittee that oversees intellectual-property law and chairs the subcommittee that oversees commercial and administrative law (as well as the courts).  Peeps in the 6th District might want to drop him a line on this subject.

Wednesday, August 10, 2011 8:29 pm

The trolls under the intellectual-property bridge

I have said many times in private communications during the past 15 years or so — since the Telecommunications Act, basically, although that’s not the only thing I’m talking about — that intellectual-property law is where American ingenuity goes to die.

Now I’m saying it publicly because the wonderful people at NPR’s “Planet Money”  have found an example so clear that even I can understand it.

You can either read the text or listen to the audio; it’s good either way. And what it says, in short, is what I’ve been saying for years: A lot of stuff is patented that shouldn’t be, including many kinds of software, and some of the most vociferous critics of those patents are the people who own them.

… we talked to a half dozen different software engineers. All of them hated the patent system, and half of them had patents in their names that they felt shouldn’t have been granted. In polls, as many as 80 percent of software engineers say the patent system actually hinders innovation. It doesn’t encourage them to come up with new ideas and create new products. It actually gets in their way.

Many patents are so broad, engineers say, that everyone’s guilty of infringement. This causes huge problems for almost anyone trying to start or grow a business on the Internet.

“We’re at a point in the state of intellectual property where existing patents probably cover every behavior that’s happening on the Internet or our mobile phones today,” says Chris Sacca, the venture capitalist. “[T]he average Silicon Valley start-up or even medium sized company, no matter how truly innovative they are, I have no doubt that aspects of what they’re doing violate patents right now. And that’s what’s fundamentally broken about this system right now.”

This brings us back to Chris Crawford’s patent, the patent Intellectual Ventures cited as an example of how they encourage innovation by ensuring that inventors get paid. As we’ve said, this patent also seems to cover a big chunk of what happens on the Internet: upgrading software, buying stuff online, and what’s called cloud storage. If you have a patent on all that, you could sue a lot of people.

And, in fact, that’s what’s happening with Chris Crawford’s patent. Intellectual Venures sold it to a company called Oasis research in June of 2010. Less than a month later, Oasis Research used the patent to sue over a dozen different tech companies, including Rackspace, GoDaddy, and AT&T.

We called Oasis several times, but no one ever answered the phone. For a while, the company’s voice mail message directed all questions to John Desmarais , a lawyer in New York.

He didn’t return our phone calls, but we did track him down at an intellectual property conference in San Francisco.

He cited attorney-client privilege, and wouldn’t tell us anything — not even who owns Oasis Research. (He did say he’s a big fan of NPR.) …

All the big tech companies have started amassing troves of software patents — not to build anything, but to defend themselves. If a company’s patent horde is big enough, it can essentially say to the world, “If you try to sue me with your patents, I’ll sue you with mine.”

It’s mutually assured destruction. But instead of arsenals of nuclear weapons, it’s arsenals of patents. And this was a problem Intellectual Ventures founder Nathan Myhrvold said he was trying to solve when he first started the company. A problem that he and others from his company talked about at investor meetings around Silicon Valley. Chris Sacca attended one of those meetings a few years back.

The pitch he heard was, basically, Intellectual Ventures helps defend against lawsuits. Intellectual Ventures has this horde of 35,000 patents — patents that, for a price, companies can use to defend themselves.

Technology companies pay Intellectual Ventures fees ranging “from tens of thousands to the millions and millions of dollars … to buy themselves insurance that protects them from being sued by any harmful, malevolent outsiders,” Sacca says.

There’s an implication in IV’s pitch, Sacca says: If you don’t join us, who knows what’ll happen?

He says it reminds him of “a mafia-style shakedown, where someone comes in the front door of your building and says, ‘It would be a shame if this place burnt down. I know the neighborhood really well and I can make sure that doesn’t happen.’ ” …

And companies like Intellectual Ventures and their shadowy partners that do nothing but control and litigate over patents are growing more numerous every day, with untold costs for American industry. Here’s a particularly good example, which caught my eye because my friend Tony used to work for Nortel:

In early July, the bankrupt tech company Nortel put its 6,000 patents up for auction as part of a liquidation. A bidding war broke out among Silicon Valley powerhouses. Google said it wanted the patents purely to defend against lawsuits and it was willing to spend over $3 billion to get them. That wasn’t enough, though.

The portfolio eventually sold to Apple and a consortium of other tech companies including Microsoft and Ericsson. The price tag: $4.5 billion dollars. Five times the opening bid. More than double what most people involved were expecting. The largest patent auction in history.

That’s $4.5 billion on patents that these companies almost certainly don’t want for their technical secrets. That $4.5 billion won’t build anything new, won’t bring new products to the shelves, won’t open up new factories that can hire people who need jobs. That’s $4.5 billion dollars that adds to the price of every product these companies sell you. That’s $4.5 billion dollars buying arms for an ongoing patent war.

The big companies — Google, Apple, Microsoft — will probably survive. The likely casualties are the companies out there now that no one’s ever heard of that could one day take their place.

The current system stifles innovation, and when you stifle innovation, history shows, you stifle long-term prosperity.

Fun fact: My current rep, Howard Coble, is one of the most senior members of the House subcommittee with jurisdiction over IP law, although not having researched the question I have no idea to what extent, if any, he’s responsible for any of this mess.

UPDATE: In catching up on my RSS feed, I see that Kevin Drum at MoJo also has linked to the “Planet Money” piece and come up with another example, this one involving Spotify, a streaming music service that arrived in the U.S. market this summer. I got a membership so recently I haven’t even tried it out yet. And even before I did, Spotify got sued over the (pun intended) patently ridiculous notion that the plaintiff, a company called PacketVideo, could actually own a patent on the simple idea of streaming audio over the Internet.

Kevin checks out the patent that PacketVideo holds and then comments:

There are no specific algorithms involved and no specific implementations proposed. Basically, it appears to be a claim that covers any system in which music is compressed and encrypted by a server, shipped out over a network, and then decrypted and decompressed at a client. The patent claims seem to include pretty much any kind of server, any kind of storage device, any kind of compression, an extremely broad set of communications protocols, and pretty much any kind of remote device. If you’re streaming music this way — and honestly, there’s really no other way to do it — then PacketVideo says you’re infringing their patent.

At least, that’s how it reads to me. Neither the news stories nor the legal filing go into much detail about the precise nature of the infringement PacketVideo is claiming, and they don’t appear to have sued all the other streaming music vendors in the world, so it’s possible their claim is more specific. But my amateur reading suggests they really are claiming patent rights to the whole idea of streaming music from a server. And the fact that they waited to file suit until Spotify had entered the U.S. market suggests that their claim isn’t valid anywhere else. Only in the U.S. do we allow a patent claim this broad.

Commenter Jon F. asks, “How do we fix it?” I haven’t had a lot of time to think about it, but I honestly don’t know, and here’s why: A big chunk of the source of this problem isn’t statutes (although they certainly contribute), but Supreme Court decisions. Given the makeup of the Supreme Court and the difficulty that even Democratic presidents can have in getting appointees confirmed who aren’t more or less allied with big business interests, this pooch might not be unscrewable for at least a generation. Meanwhile, other countries are going to be eating our lunch.

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