IPcentral Weblog - Intellectual Property and Copyright Commentary

5.28.2004

Kill Jack (as in Valenti)

And while we are on the subject of corporate gamesmanship (see the last post), I just saw an email from a group called Protect Fair Use urging support for H.R.107, and pressing me to "Tell Congress You're No Pirate," and to fight against the "big movie studios" that are trying to "take away your fair use rights." The gist of the pitch is that I should be able to make back-up copies of DVDs, and that only a greedy poltroon could oppose this.

I was touched by this concern for the little man, this uprising of the digital masses. But years in Washington have made me cynical. So I noted that the site was sponsored by 321 Studios, which sells software that cracks the encryption protecting DVDs, and that stands to make much money if this product is legalized. And the site was designed by e-advocates, a group which describes itself as:

"[T]he nation's premier, full-service Internet and grassroots advocacy consulting firm backed by the commitment and expertise of Capitol Advantage, the nation's top provider of cyberlobbying technology. e-advocates helps organizations harness the power of the Internet to achieve legislative and political objectives, offering clients a full range of advocacy consulting services. Our campaigns generate online grassroots action and off-line legislative wins."

Is it possible, do you think, that e-advocates and Capitol Advantage charge money for their services? That they will share in the booty if they persuade Congress to redefine property rights so as take them away from the motion picture industry and give them to someone else, such as 321? And that this Internet demonstration has all the spontaneity of Red Square as of about 1950?

The scope of proper fair use rights is an interesting, difficult, and important question. But I have seen no evidence that large numbers of DVDs are defective or that there is any particular need to back them up. I do know that legalizing the de-encryption of DVDs would make it very difficult to control piracy, which is certainly not in the interests of consumers as a class. This interest is in having everyone pay for their DVDs so that they share the costs and everyone gets the products as cheaply as possible.

So once again, in my view, the moral balance is the reverse of where the opponents of property rights and markets would have you believe -- it lies with those of us who defend these institutions.

posted by James DeLong : 5/28/2004 09:25:20 AM

Kill Bill (as in Gates)

Forbes (June 7, 2004)(subscription required), has an article "Kill Bill: IBM Takes on Microsoft." The piece is about the billions of dollars that IBM is putting into open source software, particularly Linux.

At PFF, we are acolytes of Schumpeter's view that the gales of creative destruction unleashed by capitalism constitute its greatest virtue -- a colleague calls it Schumpeter's Trumpet. In consequence, we view contests between corporate giants as sporting events. If IBM wants to bet that the way to go is to commoditize the operating system and sell services and hardware, while Microsoft and Sun think it better to make the software so robust that services are unnecessary -- well, folks, we've got a ball game going tonight.

But there is a deeper import to this news of IBM support. The Free Culture Movement holds up open source software as a model of production that can be replicated in other areas, ranging from books to music to pharmaceuticals. Indeed, in his recent and highly-praised (though not by me) book Free Culture, Larry Lessig pays tribute to Richard Stallman, the most anti-market of the founders of the open source movement, a man who believes that using proprietary software is immoral: "[A]s I reread Stallman's own work . . . I realize that all of the theoretical insights I develop here are insights Stallman described decades ago."

In my view, the idea that we can dispense with the market system for the production of creative products and rely instead on cooperatives funded via some unspecified other mechanism, perhaps a tax on hardware, is dangerous and demented. Others disagree with me -- that, too, is what makes ball games. But, I submit, if in reality the open source software movement is increasingly dependent on IBM, then the moral pretensions of the Free Culture Movement to be achieving something beyond the morality of the marketplace stand discredited. And this is important, because it allows us to see the contest for what it is -- an economic and business debate over the best way to produce the proper mix of software, hardware, and services, not the dawning of Cyberman, a new species devoid of greed and selfishness.

posted by James DeLong : 5/28/2004 08:21:56 AM

5.27.2004

Cato Program on P2P

The Cato Institute will hold its 8th Annual Tech & Society conference on Thursday, June 17. The topic is: The Law and Economics of File Sharing & P2P Networks.

The program is not yet final, but it will feature Jack Valenti of MPAA, who has some strong views on the topic. As a counterweight, Congressman Rick Boucher, the sponsor of H.R. 107 (see here and here), has been invited. Confirmed panelists include Koleman Strumpf of the University of North Carolina, author of a recent study arguing that file sharing does no harm; Stan Liebowitz of the University of Texas, who is critical of the Strumpf study; and Michael Weiss, CEO of StreamCast Networks/Morpheus.

More detail in a day or two.

posted by James DeLong : 5/27/2004 11:21:31 AM

5.26.2004

Micropayments: A Trillion Ripples Could Make a Hell of a Tsunami

A serious barrier to the growth of online commerce are the transaction costs involved in making small payments. Credit card companies charge minimums of 25 cents on up to process a deal, so the overhead of selling anything for a buck or two is prohibitive. And selling for 10 or 25 cents is impossible.

Monday's Wall Street Journal (payment required) had an article on micropayments, the concept that people could buy material over the Internet for a few pennies per whack. This is not a new quest; techies have been searching for a good system with an avidity unrivaled since the Spanish explorers sought El Dorado, and the Internet, like the desert of the Southwest, is filled with bleached bones.

Nonetheless, the quest continues, and for good reasons: success is indispensable to the long-term health of the cyberworld, and whoever achieves it will be rolling in gold.

I share the view of Internet guru Jakob Nielson, quoted by the WSJ as saying: "We have been through 10 years of Dark Ages on the web, where useful services have stagnated because they couldn't charge their users."

There is simply no substitute for the market model whereby a producer offers something directly valued by the person paying the bill. In other models, the real product is the consumer. In advertising, for example, the content provider is selling eyeballs to a sponsor, not content to a viewer. How much are my eyeballs worth to a detergent maker? Not much, and this leads to lowest-common denominator programming that aggregates large numbers of viewers each of whom places low value on the content itself, which in turn leads to low-grade content. In contrast, every Sunday night I bless HBO for giving me the opportunity to buy the great shows Sopranos and Deadwood.

Consumers should want to be purchasers rather than products. Nor is a system that makes consumers into products in the real interests of the purveyors of goods and services. Google would be better off, IMHO, and so would its users, if it sold searches directly to consumers instead of developing crafty algorithms to sell eyeballs to advertisers. Search capability is valuable to me, and it is not to my benefit to have the capability limited by the amount that someone is willing to pay to get me to look at an ad.

Google is solving one problem because it is figuring out how to charge advertisers only for those eyeballs that are actually interested in specific ads, which will improve the fit between consumers' interests and the content available. But this advance still does not allow the consumer to adjust his payment to match the intensity of his interest in the actual search, as opposed to his value to someone who wants to sell him something connected to his search.

Micropayments are vital to the future of the content industries. Internet downloading is the wave of the future for movies and music, books and games and software. These industries are seriously threatened by piracy, and they cannot get straightened out until legitimate content is available on the Net at prices that seem fair to consumers, which is a level substantially less than the price of physical distribution. The transaction cost problem stands in the way of this. (For some thoughts on how Apple and other music services sell for 99 cents, see rentzsch.com.)

There are many explorers out seeking this El Dorado. WSJ mentions BitPass and Peppercoin, and other sources add eTelCharge, iPin, and microCreditCard. Other companies that now deal in larger amounts might enter. And of course it is unlikely that the credit card companies will sit idle while their business erodes..

So go to it, entrepreneurs. The fate of cybercommerce and the Internet rests squarely on you. (But, hey, no pressure!)

posted by James DeLong : 5/26/2004 11:22:07 AM

5.25.2004

More on Do-It-Yourself Socialized Entertainment

From BBC World News:

"Albums and films account for 70-80% of all internet traffic in Europe, traffic filtering firm Sandvine has reported.

"In the US, there has been a small decline of about 5%. But in Europe, file-sharing levels remain as robust as ever," said Sandvine's Chris Colman."

posted by James DeLong : 5/25/2004 09:35:49 AM

5.24.2004

The Cisco Kid

The tech press today is full of stories about Cisco's new product, code-named HFR for "Huge Fast Router." It is not just a hardware upgrade. Also involved is new software to replace the Internet Operating System that has powered the company for its 20-year existence, but which has grown to include an unwieldy 15 million lines of add-ons and patches.

The announcement prompts several thoughts.

One concerns the malleability of industrial categories. Cisco is regarded as a hardware company, but today's stories seem to invert that, saying its real role in adding value to the world is as a software provider, sort of the Microsoft or the IBM of the Internet. The lines between hardware, software, and services are getting blurrier all the time.

A second thought is something frequently voiced by Ray Gifford, head of PFF: You can talk all you want about how information "wants to be free," and the Internet wants to be open, but the underlying network layer is darned expensive. High-end routers cost up to $500K, and Cisco's 65% market share produces revenue of about $19B per year, which is a lot of routers. The whole enterprise rides on the willingness of telecom investors to keep committing major resources. So Congress and the FCC really need to stop play Lucy-and-the-football to the telecom companies' Charlie Brown, and get the system deregulated, or we may see just how free information is without the equipment needed to send it to its proper destination.

CORRECTION: Only about 40% of Cisco's revenue comes from routers - but that is still a lot of investment.
posted by James DeLong : 5/24/2004 02:35:13 PM

5.21.2004

Databases and Monopolies (Government Monopolies, That Is)

Stephen Moore, President of the Club for Growth (a political organization dedicated to government fiscal responsibility and deregulation) has a column in today's Washington Times on "Who Needs the NYSE?" His basic point, echoing Richard Baker, the Chair of the Subcommittee on Capital Markets of the House Financial Services Committee, is that the New York Stock Exchange "derives its power not from the marketplace, but from government charter."

A focus of Moore's critique is the information problem: "Perhaps the most harmful monopoly power bestowed on the NYSE is its status as an information cartel for the stock market. Brokerage firms are forced by regulation to send information . . . of great value . . . to the exchange . . . . Those same firms are then forced to buy the aggregated data stream back whem providing a stock quote . . . . This grants the NYSE an information cartel and impairs the liquidity of the stock market."

Protection of property rights and investment in databases is important to the long-term health of the economy and to simple Lockean justice. But the NYSE situation illustrates the problems when the government creates and continues ossified monopolies unrelated to real value added, monopolies that will be defended to the max with political contributions and other forms of influence.

The correct approach is to define the property rights correctly and assign them to the people doing the work -- and this in itself presents exquisitely difficult issues -- and then let the parties deal by private contract. The firms that produce the data, and their customers, should be able to bargain with the aggregators to share the value created.

This "less government action is more" approach is particularly important in a time of great uncertainty over the role of information in the economy and the society and over how information will produce value in the future. Part of the genius of F. A. Hayek was his emphasis on Competition as a Discovery Procedure, a process of learning and feedback rather than the static equilibrium of the academic blackboard.
posted by James DeLong : 5/21/2004 10:02:26 AM

5.20.2004

The Latest Linux Controversy

A report coming out today from the Alexis de Tocqueville Institution apparently questions the originality of Linux, and has already started a rancorous dispute in the tech press.

I have not yet laid eyes on the study, but I confess to some bafflement over the brouhaha. I did not know that anyone doubted that Linux must be classified as part of the Unix family, a point made by such gurus as Andrew Tannenbaum, Modern Operating Systems (2d ed. 2001) and Abraham Silberschatz, et. al., Operating System Concepts with Java (6th ed. 2004).

Tannenbaum: "Given this history [which the author has just recounted], strict POSIX conformance, and overlap between the user communities, it should not come as a surprise that many of Linux' features, system calls, programs, libraries, algorithms, and internal data structures are very similar to those of UNIX. For example, over 80% of the ca. 150 Linux system calls are exact copies of of the corresponding system calls in POSIX, BSD, or System V." (p. 680)

Silberschatz, et. al.: "In its overall design, Linux resembles any other traditional, non-microkernel UNIX implementation. It is a multiuser, multitasking system with a full set of UNIX-compatible tools. Linux's file system adheres to traditional UNIX semantics, and the standard UNIX networking model is implemented fully. The internal details of Linux's design have been influence heavily by the history this operating system's development." (p. 750)

More Silberschatz, et. al.: "Whereas the Linux kernel is composed entirely of code written from scratch specifically for the Linux project, much of the supporting software that makes up the Linux system is not exclusive to Linux but is common to a number of UNIX-like operating systems. In particular, Linux uses many tools developed as part of Berkeley's BSD operating system, MIT's X Window System, and the Free Software Foundation's GNU project." (p. 748)

This does not detract from the formidable intellectual achievement of Linus Torvalds and his fellows. Writing a great UNIX-family operating system is not easy, and full honor is due.

The sensitivity to the study, I think, comes from its effect in undermining the myth and the politics of open source. If Linux is derivative from UNIX, then the idea that spontaneous swarms of programmers, working without serious economic support, can perform the function of creating and maintaining an important industrial product, is a pipe dream.

Well guys, it is a pipe dream, as I recount here. Sorry.
posted by James DeLong : 5/20/2004 09:34:46 AM

Promethean Fire

The Competitive Enterprise Institute, a free-market-oriented analytic and activist organization here in D.C., held its 20th anniversary dinner last night. It awarded its PROMETHEUS award to Norman Borlaug, agronomist, creator of the Green Revolution, winner of the Nobel Peace Prize, and holder of over 30 honorary doctorates.

Borlaug is one of the towering figures of the 20th Century (throw in the 21st as well). As writer Gregg Easterbrook said in The Atlantic: "Perhaps more than anyone else, Borlaug is responsible for the fact that throughout the postwar era, except in sub-Saharan Africa, global food production has expanded faster than the human population, averting the mass starvations that were widely predicted . . . . The form of agriculture that Borlaug preaches may have prevented a billion deaths."

Borlaug is also exemplar par excellence of the great truth propounded by the late Julian Simon: The Ultimate Resource(2) in the world is the human mind, the ability of intelligence and creativity to wrest incalculable value from inert soil and water, silicon and copper, coal and oil, iron ore and bauxite.

He is a great choice for an award named for the god who gave humankind the gift of fire.
posted by James DeLong : 5/20/2004 08:05:34 AM

5.19.2004

FCC Commissioner Abernathy on Property Rights

A post on the general PFF blog describes a recent speech made by FCC Commissioner Katherine Abernathy entitled The Role of Property Rights in Understanding Telecommunications Regulation.

She noted that wireless has been organized into two distinct categories: a property rights model with little regulation for licensed spectrum and a commons model for unlicensed spectrum, and that both are a success. Wireline, on the other hand, has been characterized by a regulatory regime that treats property rights as malleable at the regulatory whim, and the industry and the public have suffered accordingly.
posted by James DeLong : 5/19/2004 01:03:01 PM

Yet More Pop Ups

In a riff on the pop-up controversy noted yesterday, GEICO has just filed a trademark infringement suit against Google, says c|net. In selling ads, Google uses "GEICO" as a keyword. Enter it as a Google search, and there at the top of the list in the left column of the results is www.geico.com. On the right, though, under "Sponsored Links," are other insurance offerings.

GEICO's claim is a bit thin because the possibility of consumer confusion seems small. But there is a real issue here. GEICO is saying that it has invested heavily to create in consumers' minds a synonymity between "GEICO" and "car insurance" so that a customer who wants the latter will routinely type in the former. Google is selling to other insurers the capacity to free ride on GEICO's investment, and is thus appropriating to itself some of the value.

The consumer harm would be that Google's siphoning off of value might in the long run force GEICO to underinvest in its brand name, perhaps by decreasing the quality of its product. On the other hand, of course, Google can argue that if GEICO's brand is superior then the comparison shopping will actually help it, so all Google is doing is discouraging investment in brand awareness that is based on hype rather than reality, and that this is actually a public service.

If it ever goes to trial, it will be an entertaining case. Economists will get rich.
posted by James DeLong : 5/19/2004 12:21:13 PM

Telling It Like It Is

T. J. Rodgers, CEO of Cypress Semiconductor and Silicon Valley truth-teller, was interviewed by Declan McCullagh in c|net yesterday. He commented on outsourcing, the business climate of California, the stock options controversy, and other matters currently bedeviling the tech world.
posted by James DeLong : 5/19/2004 11:09:14 AM

5.18.2004

Pop-Ups Pop Up Again

A couple of weeks ago, this journal commented on the Gator case in California, pointing out that the leisurely pace of litigation was denying companies an answer to an important question -- the legality of pop-up ads for rivals that appear when a potential customer logs on to a firm's website.

Now, L. L. Bean, which has been fighting to have the California suit dismissed for lack of jurisdiction, is pushing the issue in the more convenient forum of Maine. Yesterday, it filed suit there, but not against the provider of the software that produces the pop-ups. It directly sued the companies that commission the ads -- Nordstrom, Penny, Atkins, and Gevalia. Note that these are not all rivals of Bean. Atkins is diet, and Gevalia is coffee. So the case must be based on some trespass theories as well as trademark.
posted by James DeLong : 5/18/2004 10:00:39 AM

The Creative Enterprise

Prof. Tyler Cowen at Marginal Revolution discusses his latest book acquisition: Patently Absurd: The Most Ridiculous Devices Ever Invented. Tyler is not so sure about the absurd part though. Why not a combined fork/chopsticks utensil? Or a nightlight on a toilet seat?
posted by James DeLong : 5/18/2004 09:09:29 AM

Open Source & Drug Development

TechCentralStation today publishes my article "Peddling Dope: Open Source Drug Development." Written in my usual restrained and judicious style, it takes issue with the proposition that the development of open source software is a model that can or should be applied to the pharmaceutical industry (or to music or movies, for that matter).

One quote: "Socializing an important area of invention and commerce -- for that is what this recommendation entails -- is a dangerous prescription. One would have thought the world would have learned from the utter economic failure and vast human tragedy of the nations that embraced socialism as a basic organizing principle, and would be wary when the same mechanism is advocated for any single sector. A character in George Bernard Shaw's Saint Joan asks: "Must then a Christ perish in torment in every age in order to redeem those who have no imagination?" The answer, apparently, is, "yes"; there is no end of need to relearn.

The open source software movement and community are interesting and important. They have made and are making important contributions to software, and are pioneering some methods of organization that can usefully be applied by market-based companies. But open source is not a new mode of production that can replace the market system; there must be an economic support system operating in the background, and at the end of the day market systems have substantial practical AND MORAL advantages over non-market systems.

For an extended discussion of the open source movement, see The Enigma of Open Source Software (PFF Progress on Point No. 11.8)(March 2004). For anyone feeling especially masochistic, the paper even has a 10-page appendix discussing some of the uncertainties created by the viral nature of the General Public License that is used by the Free Software Foundation.
posted by James DeLong : 5/18/2004 07:51:35 AM

5.17.2004

Lessig in Wired

Lawrence Lessig has a good column up in Wired, entitled "Protectionism Will Kill Recovery." Cast in the form of a speech by a major-party candidate to an audience of tech innovators, it concludes: "Those hurt by transition can be helped by the government. But cries for protection must not be answered by economic folly. Your silence in the face of that folly is understandable. But your silence will only guarantee that folly prevails. And the consequence of that folly - continued protectionism - will benefit no one. Not the rich, not the poor. Not America, not the world."

Along the way he discusses intellectual property, including: "Intellectual property is vital to growth. But the law must be fit to technologies, rather than 21st-century technologies being forced to fit 19th-century laws. Copyright and patent laws could be simplified; the rightful and efficient protections they promise could be made much easier to navigate. Their aim should be to encourage competition and innovation. It should never be to protect the old against the new."

Lessig and I disagree on many specific issues, but I certainly have no quarrel with the sentiments expressed in that paragraph.
posted by James DeLong : 5/17/2004 11:19:16 AM

5.14.2004

Database Nation

The latest issue of Reason magazine arrived in the mail, and the cover causes a jolt. It is an aerial photo of my neighborhood, with my house circled and the legend underneath: "James DeLong: They Know Where You Are!"

The accompanying story has a rather different spin, though. Written by Declan McCullagh, chief political correspondent for News.com and keeper of the well-known politech email list, it is entitled "Database Nation: The upside of 'zero privacy.'" The theme is that the increasing availability of data is excellent news for all of us in many ways, primarily because of the increases in efficiency and choice in the provision of goods and services that are enabled by information.

As for the jolt of surprise -- my address has been in the telephone book forever, so anyone with a map and a crayon could always do what Reason did. My feeling of a loss of privacy is actually rather illusory.
posted by James DeLong : 5/14/2004 04:26:07 PM

5.12.2004

Digital Rights & Wrongs (cont.)

Yesterday's post discussed H.R. 107, named the Digital Media Consumers' Rights Act of 2003. The witness statements from today's hearing before the House Committee on Energy and Commerce are now available online.

Witnesses were:

Pro-H.R. 107:
Lawrence Lessig, Stanford Law School
Gary Shapiro, Consumer Electronics Association
Miriam Nisbet, American Libarary Association
Allan Swift, Colling Murphy
Peter Jaszi, American University Law School
Chris Murray, Consumers Union
Gigi Sohn, Public Knowledge
Robert Moore, 321 Studios

Anti-H.R. 107:
Jack Valenti, Motion Picture Association of America
Cary Sherman, Recording Industry Association of America
Robert Holleyman II, Business Software Alliance
Debra Rose, Entertainment Software Association

posted by James DeLong : 5/12/2004 04:17:36 PM

Economics for Regulators

From May 16 to May 20, PFF will inaugurate the activities of its Institute for Regulatory Law & Economics by holding a conference (in Aspen, Colorado, naturally, home of PFF's annual Aspen Summit). Over 20 state regulators will attend to focus on the economics of regulation in network industries, primarily telecom and electricity.

Partners in the enterprise are the University of Colorado Silicon Flatirons Telecommunications Program and the George Mason University Interdisciplinary Center for Economic Science. Faculty will include Vernon Smith of GMU, who won the Nobel Prize in 2002 for his work on experimental economics, Howard Shelanski of the University of California at Berkeley, Lynn Kiesling of Northwestern, and PFF's own Ray Gifford, Randy May and Tom Lenard, plus other luminaries of the academic world.

For anyone who wants to try this at home, the agenda, reading list, and complete faculty roster are here. But one cannot duplicate the faculty presentations or interactions among attendees at home -- one must sign up for 2005 (and be a regulator).

This is the first of what will be an annual affair. Possible directions of expansion include extending the invitations to federal as well as state regulators, and adding a module on the role of intellectual property in the world of regulation.
posted by James DeLong : 5/12/2004 02:48:47 PM

Frontier House

On April 30, the American Enterprise Institute sponsored a program on Intellectual Property Rights in Frontier Industries, looking at biotech and software. A summary is available now, and the papers will ultimately be published in book form.
posted by James DeLong : 5/12/2004 02:14:03 PM

5.11.2004

H. R. 107: Digital Rights and Wrongs

The Copyright Assembly protects the interests of "the copyright industries," a category of stunning diversity. Its members range from the predictable, such as the American Association of Publishers and the Motion Picture Association of America, to the surprising, such as the Ladies Professional Golf Association and the Student Photographic Society. The Directors Guild; ASCAP; the American Federation of Musicians; all belong, so it is a place where suits and artists stand shoulder to shoulder.

Diverse it may be, but the Assembly's membership is united in rage at Representatives Rick Boucher (D-VA) and other Congressmen of both parties who are pushing H.R. 107, innocuously titled the Digital Media Consumers' Rights Act of 2003. The bill hides within its bland language a few lines that would, in the view of the copyright forces, destroy their property by making impossible any effective system of digital rights management.

Hearings are scheduled for May 12, and the fight will be intense, with Jack Valenti of the MPAA leading the charge against Larry Lessig of the Free Culture Movement.

The Digital Millennium Copyright Act (DMCA) makes it illegal to crack an encryption system protecting IP. (A common example is the Content Scrambling System (CSS) used for DVDs.) This outrages the cyberleft, which argues that one should be able to crack systems for the sake of "fair use." If, for example, I have a DVD that plays only on a Windows machine, shouldn't I be allowed to crack the code so that I can play in on a machine using a different operating system? Shouldn't I have a "fair use" right to shift my use of the product in space and time, as per the Supreme Court decision in Sony that time shifting is fair use?

H.R. 107 would codify this and other cracking rights by saying:

"(b) FAIR USE RESTORATION- Section 1201(c) of title 17, United States Code, is amended--
"(1) in paragraph (1), by inserting before the period at the end the following: `and it is not a violation of this section to circumvent a technological measure in connection with access to, or the use of, a work if such circumvention does not result in an infringement of the copyright in the work'; and
"(2) by adding at the end the following new paragraph:
`(5) It shall not be a violation of this title to manufacture, distribute, or make noninfringing use of a hardware or software product capable of enabling significant noninfringing use of a copyrighted work.'."

The objection to this proposal is that passing it would have the practical effect of destroying all property rights in anything that can be digitized. Once the code protecting a creative product is cracked, then it can be disseminated world-wide over the Internet in milliseconds. So even if the cracker is pure of heart, once he sends it to a friend ("but surely it is fair use to share it with my buddy!") the genie is out of the bottle, and there would be no way of putting it back in. Thus the only way to protect creative product is to have a bright line standard of "no cracking," to deter the initial step.

The argument that equipment-shifting requires that cracking be allowed is dubious. If there is a demand, the cheerful greed of the content providers ensures that it will be met. This will not happen for any market that is preempted by hackers, so hacking will become its own self-fulfilling prophecy -- "I must hack because the market will not provide the product because it knows there will be no market because hacking will destroy it."

The assumption that current definitions of fair use should remain constant despite the technological revolution is equally dubious. Consumers would be better off if prices could be differentiated, and calibrated to the intensity of their use of a product. It is the cyberleft that is standing solidly athwart the development of new business models. When it comes down to it, would you as a consumer rather have "fair use rights" as defined by sclerotic government, or a variety of market-available rights that are defined by private companies that are desperate to figure out what you want and need so that they can create it and sell it to you?

Furthermore, the cyberleft knows all this. Its real goal, a skeptic might say, is to destroy the copyright system, not to protect fair use rights. As one such skeptic (me) wrote recently: "The ultimate goal of the [Free Culture] Movement seems to be cut the links between creative work and the market system."

Issues of technological change, fair use, encryption and decoding, and other aspects of the copyright problem present profound challenges to the legal system, challenges that are much too important to be resolved by a few lines of off-hand legislation based in the abstract imaginings of the cyberleft.

The proposal needs a thorough vetting -- and it certainly will get one if the Copyright Assembly has its way. One wonders if Boucher & friends are fully aware of the number and variety of hornets they have stirred up.

posted by James DeLong : 5/11/2004 04:20:21 PM

5.10.2004

Isn't It Romantic?

Last Saturday, Edward Rothstein, Critic-at-Large for the NY Times, wrote a piece on "Liberty, Technology, Duty: Where Peace Overlaps War." (Link good for 7 days only.)

He discusses Lawrence Lessig's Free Culture: How Bad Media Uses Technology and the Law to Lock Down Culture and Control Creativity (reviewed here, by me) and another recent book by Siva Vaidhyanathan, The Anarchist in the Library: How the Clash Between Freedom and Control Is Hacking the Real World and Crashing the System.

It is an interesting discussion. Best point: "For all their complicated arguments, these writers are partly engaged in a countercultural romance. It is not just antimodernist but also antimodern. It yearns for a preindustrial world in which an unbounded terrain of entertainment and folk art is somehow made freely available. In more extreme form, translated into the political realm, it is also a romance in which power is intrinsically disruptive and the marketplace intrinsically divisive. It is the romance of radical antiglobalization in which the very existence of a military or commercial power is evil."

But read it all.

However, Rothstein errs in one respect. He cites the open source software movement as evidence that: "That same romance . . . can lead to real accomplishments if properly harnessed."

In fact, as argued in The Enigma of Open Source Software (March 2004), the legend of open source has a core of truth, but glosses over the reality that the movement from its inception derived from work financed by many millions of dollars of funding from Bell labs, IT companies, universities, and -- far from least -- DARPA. Recently, it has become a major factor in the software world because of the investment of billions by IBM, Hewlett-Packard, Red Hat, and other major players, with the backing of major venture money. The current ratio of romance to the hard-nosed, sharp-elbowed tech marketplace is about one to five.

For more on the open source software movement, John Carroll, the entertaining columnist for ZDNet, started a five-part series on it today with a piece on "Proprietary drives the software economy."

posted by James DeLong : 5/10/2004 02:19:12 PM

5.6.2004

Alternatives to Copyright

The newest edition of IPCENTRAL REVIEW is now posted.

Featured is an article by Professor Stanley Liebowitz of the University of Texas on Alternative Copy Systems: The Problems with a Compulsory License. Riffs on the topic are provided by Professor Michael Abramowicz of the George Mason University Law School (Copyrighted Goods as Public Goods) and Katherine Lawrence of the University of Michigan (Why Be Creative? Motivation and Copyright Law in a Digital Era).

The idea that copyright needs to junked in favor of some scheme whereby taxes would be levied on hardware and possibly on connectivity and the proceeds divvied up among artists according to some formula is gaining currency in academia these days, and Professor Liebowitz brings his skeptical eye to bear on the issue.

posted by James DeLong : 5/6/2004 03:15:29 PM

Software Patents

Prof. Ronald Mann of the Univ. of Texas Law School has posted a working paper on The Myth of the Software Patent Thicket: An Empirical Investigation of the Relationship Between Intellectual Property and Innovation in Software Firms (Feb. 2004) on the Social Sciences Research Network.

He says: "The paper presents evidence about existing practices in the industry [that] suggests that technology in fact is readily available, rebutting the prominent claims of a patent 'thicket' that is supposedly stifling innovation in the industry. On the contrary, I argue, to the extent patents have an important effect in the industry, it is an effect that inures primarily to the benefit of the smaller firms trying to find a foothold from which they can compete."

This is a crucial general point -- protection of IP is vital to innovators and entrepreneurs. If IP cannot be propertized, then the competitive advantages conferred on large organizations with established marketing organizations, financing, brand recognition, and government contacts become insurmountable. I have always found it ironic that the academic copy leftists are in fact arguing for a world dominated by elephantine institutions -- but then many of them are part of this world, of which large universities are a powerful segment.
posted by James DeLong : 5/6/2004 09:40:02 AM

5.5.2004