Economic Gridlock – the Invisible Cost of IP Law

smellsofbikes writes "This week's New Yorker magazine has a financial article, 'The Permission Problem,' discussing the hidden cost of patent, trademark and copyright laws. It's a subject anyone here already knows well, but he brings up two interesting points: 1) He uses the term 'tragedy of the anticommons.' Instead of depletion of a shared resource, this describes under-use of hoarded resources: areas that can't be explored because they're encumbered by patent/copyright issues. As he points out, the result of this is an invisible loss: drugs not made, software not written. The loss is impossible to quantify and difficult to see. I like the term 'tragedy of the anticommons' because it encapsulates a long-winded explanation into a pithy, memorable phrase that will stick with people unfamiliar with the topic. 2) He also cites a study by Ben Depoorter and Sven Vanneste that discusses why anticommons effects are seen, beyond mere competition. Individual right holders value their contribution to the overall project as a significant fraction of the project value, so if there are more than three or four right holders, their perceived value can far exceed the total value of the project, making it uneconomical."

Divesting yourself of intellectual property

I've been anti-copyright for years, testing the water in a large variety of industries to see how getting rid of copyright can actually aid artists. I've now discovered that in every market I've tested, holding on to copyright creates less profit for the artist.

In music, I helped 3 bands (one who is now on an international tour, has had MTV coverage, and sells out a lot of shows) move away from copyright. Tell your fans to bootleg your album, and amazing stuff materializes. It's free promotion, and the tour is where you make your money. Let the fans design their own shirts, and you're getting your own artists for nothing. The plumber makes his money doing repeat work, the musician does the same. The plumber goes to school, and learns new skills all the time; the musician does the same when they compose music.

I moved on to photography and discovered that giving away your photography (say, as free stock imagery) is the best form of marketing your ability as a photographer. I now know at least 3 photographers who openly give their images away online, and have seen their hired work double or even triple. Again, marketing is free if you give it away.

As a writer myself, I repudiate copyright on all I do. I openly ask others to reprint my writings, and even stick their own names on it if they want. Because I write about niche markets, the aid of distribution of my thoughts means more people are attracted to those ideas, which means they'll likely eventually find me. That's a huge benefit for me as I can then sell future newbies to the market on my newsletters, or even hire myself out as a ghost writer or personal writer. My income has surged because I don't copyright my writings, or even ask others to attribute me during the redistribution process.

Copyright doesn't inhibit a market in any way, it inhibits the artist who thinks they can retain creative control and distributive control of prior labor. That's over -- if you didn't charge for the labor, it's now a marketing tool. If you did charge for the labor, you've profited. If you market your abilities correctly, you'll get hired for the work in the future.

I do understand the "need" to patent medicines, but I truly believe even that is useless. Research and development for medicines does not need to be publicly funded or protected by patents. Instead, research can continue the way it always has: fund raisers, private charitable donations, and other ways to get the money needed to develop new medicines. What is the biggest reason medicine costs hundreds of millions to develop? The FDA and other organizations which restrict the market due to government intervention. No different from why copyright is a failure and harms the copyrighter more than it helps them.

YouTube cartoonists will trump Disney eventually. Online music distribution has already destroyed the record stores. Free PDF newsletters, blogs and other web products are killing the newspaper industry and periodical industry. Free product = marketing yourself for being hired to do new work. It's a good thing.

Re:Divesting yourself of intellectual property

You're basically advocating the service as opposed to selling position that a lot of people on slashdot have been advocating in the software sector for years. While it may work for you I don't think it can work on a universal level. Why would someone hire you to ghost write a book if they can't get any profit from the actual sale of that book? As for the medicine patent thing, you are completely and utterly wrong if you think that absent either patent protection or intense government funding will produce new medicines. They cost way too much to bring about, and that "government intervention" you complain about it basically "make sure the drug companies do their job testing the medicine before they release it."

Re:Divesting yourself of intellectual property

Actually, the person you are replying to is 100% correct.

The only time the service doesn't work is in an unestablished industry with 0 competitors. In every other industry if you look long term giving things out for free makes exponentially more.

You are absolutely incorrect about medical patents. If it weren't for medical patents, my cousin would have been able to release a cure for a form of HIV she discovered about 5 years back. 5 years! But what happened? A similar modification by a big company has been patented, and they did it merely by patenting every possible variant of the string she used.

Patents are allowing the medical R&D companies to over-recoup the costs of research by a factor of 50+, easily, considering government sponsored research as well.

Lets look at other industries. If cars were given away through promotions (which happens all the time), do you think it might draw up more buzz for the companies?

Lets look at other industries. Take any product, and the more you sell it for, the less people come back for more business. The less you sell it for, the more competitive and more people come back for more business. All products break, or wear down, or need some sort of service. Not all products are worth buying twice in anyone's eyes.

This is also why well trained and good customer service policies make or break a company. Think of Dell's customer service and how people hates them for that.

Re:Divesting yourself of intellectual property

Why would someone hire you to ghost write a book if they can't get any profit from the actual sale of that book?

Just because there's no copyright on a work doesn't mean that there can be no profit on selling copies of it. Every bookstore I've ever been in stocks copies of public domain works, e.g. Shakespeare plays, Sherlock Holmes stories, which suggests that they and the publishers of those works must make enough to justify doing it. Apparently some people are willing to pay for the tangible copy even if they could get the work fixed within for free elsewhere. Of course, competition between publishers will tend to drive the price down to just above marginal cost, but that's fine as far as the customers are concerned.

Additionally, there are some other advantages a publisher can get in the marketplace which are unrelated to copyright. For example, there is a first mover advantage, where the first publisher to market can capture more business than he otherwise would until his competitors catch up. Shakespeare more or less did this, as his company would perform his plays first, but couldn't really stop other people from copying them (sometimes by means of audience members committing the lines to memory and dictating them later). Authors can take commissions, as well. There tends to be an inverse relation between price and the size of the audience. E.g. a wedding photographer can charge a lot because really no one cares about the photos he takes other than the families involved. But if ten thousand fans of a particular author each pledge a few dollars to get that author to write a book (there are some escrow schemes to make sure of the deliverables on both sides, roughly mirroring the means that authors and publishers already use to avoid either side being cheated) then that may be enough to get him to do it. Some people might not care about the copyright status of their work, because that's not how they plan to make their money (e.g. the work is just a draw for some other thing), or they're not interested in making money at all (much of YouTube).

And of course, the entire system always runs on authors and investors who are unduly optimistic. Remember, most authors are not stars, or even successful, and most works are of no or very little economic value. Copyright can't make works valuable, it just lets the copyright holder monopolize whatever value there is to be had anyway. Thus, a copyright on Gigli or Ishtar, or Heaven's Gate just isn't worth much.

Without copyright, established and popular authors tend to be better off than unknowns, but that's really how it is with copyright as well. And copyright isn't a magic method of getting popular. No one's figured out a perfect method for always making hits that will draw in a huge audience over the short and long term.

There is a likelihood that without the artificial incentive of copyright (or with less of an artificial incentive from reduced copyright) that fewer works will be created and published. That is a loss to the public. But the public gains from being less restricted as to those works. The important thing is to maximize the net public benefit, whether that requires more copyright or less. The effect upon authors and publishers, save for how that interacts with the public benefit, is of no consequence.

Re:Divesting yourself of intellectual property

Most of the examples you gave seem more like "Less restrictive copyright helps" than no copyright. Give your songs for free! The money is on the tour... Of course, as long as another band doesn't do -exactly- the same songs with a bigger marketing budget (and if everyone does it, ONE of the bands who copy you will most likely be bteter). Also, thats as long as the video of your show isn't in hi definition 7.1 surround blu ray the day after it for free (or even worse, SOLD by someone else). With absolutely -zero- copyright, its a lot less powerful as a promotion tool. (Now it works because you're only letting indiviuals step in... once corporations can rape your copyright too, things get a little grim). Oh, and without IP laws, people can rip off your name, your logo, everything, and not only sell it as free promotion to you... but make it -theirs- and use it for -themselves-.

If you're really well known... no one will think the "fake" Metallica is the real thing. If you're just starting though? BANG! Gone.

For the photographer... yes, giving their pictures away is great if they get their money from hired work (all photographers I know do this). But lets remove all IP laws for a sec there... The photographer's customers aren't going to be too too happy once their FACE (your pictures that you, not only gave away, but couldn't restrict in any ways, shape and form) is on a box of cereals or used on TV to advertise condoms.

Overly strong IP laws and copyright hurts, yes. None at all though... That will leave only niche markets. Heck, look at the extremes like China... their "illegal" copying practices are only working at all because there are people across the ocean who invest millions and billions in their IP products, because they have market for them. The result's good enough that a ton of people are willing to pay for even copies... But if no one needed the original?

And you'd want to stop regulations on medecines? If you did that, medecines would be even LESS tested than they are now... The customers would be "beta testers" like they are in software... oh yeah, that would work. Sure, its far from perfect the way it is now... (a lot of info is "hidden" to push the medecine out even if its known not to work), but without any market restrictions, they could just lie in your face legally on medecines that were barely tested on mice, woohoo!

The only example you gave that would still work with zero copyright or IP laws is your own (the writer stuff). We agree I think that the current system is overboard and doing way way too much, and its hurting rather than helping... Its an extreme. I don't beleive the OTHER extreme is any better, however...

Re:Divesting yourself of intellectual property

In music, I helped 3 bands (one who is now on an international tour, has had MTV coverage, and sells out a lot of shows) move away from copyright.

That's great for you and the bands, but let's leave it up to the individuals and groups to decide if they want to take that path.

If someone busts his ass producing something, he has the right to determine what to do with it. If he wants to give it away, fine. If he wants to restrict it a million different ways, fine. It's his work, so it's his choice.

Our copyright system, while it does have flaws, enables people like you and the bands you've worked with to decide for yourselves what you want to do. Without a strong IP system, that choice will be taken away.

Re:Divesting yourself of intellectual property

If he wants to give it away, fine. If he wants to restrict it a million different ways, fine. It's his work, so it's his choice. [...] Without a strong IP system, that choice will be taken away.

My answer to this is quite simple: So? So what if the author doesn't have that choice?

The purpose of copyright law is to benefit the public, by increasing the level of quality in writing, music, software and other items covered by it. The mechanism used is letting the authors apply restrictions to their customers, which will (according to the implicit assumption) make more people pay the authors, which will make being an writer (musician, coder, etc.) be a good enough way of making a living that enough people will do so; spending eight hours per day on your craft will make you better than one who spends only their spare time (assuming there's less of that). That's how copyright is thought to fulfill its purpose.

If we let the authors grant fewer restriction, it might mean that some fraction of them will choose to enter a different business, and the public loses some of their products (they may still perform music or write code in their spare time). In return, since the public is less restricted, it will be able to use all authors' works to a larger extent.

Whether the trade-off is beneficial to the public depends on the specifics; but what is certain is that as long as copyright has its stated purpose, one should choose the option that benefits the public the most. Whether the authors lose options they have previously had should not, per se, influence the decision; it could, however, influence which option is best for the public, but you haven't argued that it does (or will).

The restrictions and the choice of whether and how to employ them are a means, not an end. You can't defend any means other than by showing how well they serve the end.

(sorry for the missing car analogy)

(insert a similarly styled rant on patents, and a similarly styled rant on trademarks, here)

Re:Divesting yourself of intellectual property

Let's say that there was no copyright... then the reality of things is that publishers would have not have any incentive to publish the works of an unknown without an up-front payment (which means that only rich people could get published by the big publishers), because they would know that some other publisher could easily come in after the fact and copy the work at lower cost (because they wouldn't have to deal with royalties). Sure, one might argue that there never used to be copyright until only a few hundred years ago, and one might observe that artists seemed to get by before then, but let's remember that back then, copying something was very hard work... it had to be done by hand and was error prone and tedious enough that it was sufficient deterrent for somebody to try to produce accurate unauthorized copies of published works. Not that this stopped some unscrupulous people from trying, but inevitably, such efforts would fail simply due to the unreliability of the process and the person trying to publish unauthorized copies just could not compete. Today, copying can be done by anybody with no more effort than pushing a button.

Okay... so if publishers aren't willing to take on people who may represent an unknown quantity, then the artist would just have to publish himself, right? In the day of the internet that might not seem be a problem, except again... with no copyright to protect the artist from somebody else copying the work without consent, somebody else with a larger distribution capability could easily take a copy of the work and start distributing it themselves, possibly charging for the work, perhaps not, but suddenly without copyright there's not a darn thing the original artist can do about it. One might argue that the original artist should be happy that his work is being received by a wider audience, but if the artist had originally intended to profit from his distribution of the work, that avenue would now be closed. This would seem to me to quite strongly conflict with your aforementioned notion that copyright results in less profit for the artists. And this hits even harder if the publisher who copied the work starts trying to take the credit for the work. You may be able to partially solve that issue by creating new laws that specifically prohibit plagiarism, but copyright already solved that notion.

If you can present workable solution to the above problems in the absence of copyright, I'd be eager to hear them.

Re:Divesting yourself of intellectual property

I have my own personal theories on this matter. As a writer myself, I repudiate copyright on all I do. I openly ask others to reprint my writings, and even stick their own names on it if they want. Because I write about niche markets, the aid of distribution of my thoughts means more people are attracted to those ideas, which means they'll likely eventually find me. That's a huge benefit for me as I can then sell future newbies to the market on my newsletters, or even hire myself out as a ghost writer or personal writer. My income has surged because I don't copyright my writings, or even ask others to attribute me during the redistribution process.

--xigxag.

Re:Divesting yourself of intellectual property

There is probably room for both.

At least 90% of the work done is bread and butter work, where the need and use of IP protection is outright counter-productive. The remaining 10% is where it may be worth to do some IP protection, but you shouldn't be too obnoxious about that either.

The only things worth to protect are the few items that can be classified as "Brilliant". And there are very few that actually has that class. And it's impossible to tell which picture or music tract that is going to be the next new hit. So your idea of spreading your work to give you more work has some merit.

The big disadvantage with IP protection schemes is that you as a producer will have to do the work of protecting your IP. (OK, you may hire a lawyer) but in effect it will result in that you have less and less time and resources over to produce something new.

In technology patents are also a way of protection against patent trolls. Which means that the patent offices and lawyers are the only ones really profiting from this scheme.

But there is also another way to cut it. You may spread your work widely but with an usage clause that states that as long as it's for non-commercial use it's free to use. I.e. nobody else shall be able to use your picture to do a profit unless you get a cut of the deal. And reasonable deals can always be worked out.

Re:And Games?

I make singleplayer PC games. Can you explain to me how abandoning copyright makes me better off?

Well, obviously they'll be great marketing tools for all those millionaires who want to commission more single-player games.

No, wait, that's wrong. You're in the wrong market! Yeah, that's it. You should be making multiplayer games. You could provide a subscription to a server that hosts the games, and hope that no-one else will reverse engineer your code in ten minutes and then provide a different server more cheaply.

Oh, wait, people already do that sort of thing. I guess you'll just have to ship every game you sell only with a contract that states that the person receiving it won't copy and distribute it further, so that you can afford to sell it at a price many individual customers would be willing to pay and the sum of all the small payments would provide you a worthwhile profit. Yeah, that might work. If only I could think of a name for reserving the right to copy something... Nope, I got nothing, sorry.

Translation:

Individual right holders value their contribution to the overall project as a significant fraction of the project value

Let me translate.

People are greedy.

Making a profit is good. Making a fair profit is better.

Of course, this article points out what the problem is without tendering a solution. No, I don't have a solution, either. Is this just human nature?

I recall reading in "A Brief History of Nearly Everything" how an anthropologist was paying a local tribe a bounty for every bone or fragment recovered from a fossil field. He soon discovered that the bounty hunters were smashing the large bones into tiny fragments in order to maximize their profit.

In this case, of course, it's an ill-thought-out bounty - whereas I don't know the answer for the IP question from the article. However, it points out the same conclusion: People will tend to maximize their profit whenever they see a way to do it that doesn't involve extra work on their part.

Move it back to 14 years.

Copyrights / patents ... if you cannot turn a profit in 14 years then it's your fault.

The system was not ORIGINALLY intended to provide someone with a lifetime's worth of income. It was to ENCOURAGE development.

Another form of gridlock

I've seen a situation where a few major manufacturers dominate a field (which i wont name) but all have cross-licensing agreements with each other.

It'd be like Ford holding patents on wheels, doors and windows but GM holding streering wheels and brakes. Then they agree to cross license all their patent portfolios.

This effectively makes it nearly impossible for a newcomer to break into the field. They don't have the resources to challenge fords "wheels" patent, and all the people who are resourced to have that thrown out - aren't motivated to because they have a licensing agreement.

Re:Another form of gridlock

What if the newcomer develops a new method of transportation? Hovercraft, jetpack, skycar, Segway?

Then he's sued out of business because chances are, his novel method of transportation infringes on at least one of the big boys' patents. Sure, his propulsion method is new... but what about that suspension? OK, he's got a new suspension... but the fuel delivery system is covered. Or the windscreen.

IP Rights can be a Religion

Discussing patents and copyrights can quickly become an exercise in futility when people have an almost religious fervor about their rights. While some would say that copying ideas is natural human behavior, which IP laws artificially restrict to a degree in the name of public good, others would argue that IP is an inherent human right which IP laws simply recognize. These two positions are fundamentally opposed.

But even IP fundamentalist can be convinced that fully exercising one's own rights is not always in one's own best interest. For example, suppose we believed that each of us had the innate right to rule the world and everything in it. That right would work fine if humans could live far enough apart so as never to have any contact with each other. We could live under the illusion of total dominion (at least until we wanted to reproduce). But stubbornly defending that right in practice would be a huge obstacle to forming any kind of functioning society.

Modern IP laws and their vocal proponents have gone a long way toward convincing the public that IP rights are indeed inherent and sacred, not merely privileges granted by lawmakers "for limited times," but a fundamental requirement of civilization. In discussions about limiting copyrights or patent rights, IP fundamentalists invoke images of a backward, anarchic world without modern conveniences, medicines, literature or basic services. It's a false dichotomy, but one that has been painted all too vividly on the public's mind.

I've always found that real-world examples are a good way to point out the flaws in absolutist arguments. The example of the aircraft patent pool illustrates how IP cooperation can be beneficial even when it has to be forced. But there are readers out there who will argue that even that specific example was a bad idea. Some people feel threatened by any notion that something they consider theirs might be taken away from them. They seem to feel that losing everything is at stake whenever they give up anything, and that totalitarianism is always just around the corner. I don't know how to communicate with those people.

Golden Rice

IP fragmentation is also a huge problem in biotechnology. Golden Rice [wikipedia.org] is a classic story of the anticommons.

Re:Golden Rice

The reason golden rice fails is simple - it does not deliver a high enough amount of vitamin A. It takes 300 gm of golden rice to deliver the dietary requirement of vitamin A to a child. Most target children eat less than one half that amount of rice. Then there is the question of bioavailability. For it to be useful their needs to be a certain level of body fat present, something that is often lacking in the target population.

Ultimately there are a lot of OTHER micronutrients missing too. Golden rice doesn't do anything for these. Poverty and overpopulation are the real issues. GE rice isn't going to fix these.

The obvious answer...

is to require that any patent or copyright holder be actively developing and/or selling related products. In other words, the economy must be able to obtain the "benefits" of the "innovation" in order to justify the government grant of monopoly. Remember that these "rights" are actually privileges granted by the government on behalf of the people for their greater benefit. Limitation or revocation of these privileges is not confiscation and should not be viewed in the same way as a taking of land or other tangible property; it is appropriate in cases in which the public interest is clearly not being served by their continuation.

For copyright, this approach is fairly easy because the work subject to protection already exists; if a work subject to copyright protection has not been newly licensed by or performed for an end user (i.e., not a reseller) in the past 3 years on terms generally available to other end users, that copyright expires. This definition prevents the holder from offering a work for sale at an absurd price, transferring it among subsidiaries, or giving away one copy a year to a "lucky winner" to avoid losing protection. Perpetually out-of-print books, obsolete software, and music owned by defunct record companies would all be freed from copyright protection.

Patents are harder because the patent may exist before commercially viable products do. One possible first-order approximation might be that patents may not be owned by holding companies; only individuals and operating companies may possess them. This requirement would make it difficult for patent trolls to execute their business model. Another strategy might be to require holders to notify the patent office when they first manufacture a product they believe is subject to protection under a specific patent; the patent office could then allow double-blind challenges (to protect trade secrets associated with ongoing R&D) to patents that are not apparently in use and are at least 3 years old. An inspector would then attempt to obtain evidence from the holder that product development is actively occurring; if it is not, the patent is invalidated. There are plenty of pitfalls here; I challenge everyone to try writing a definition that actually solves the problem. The principle is sound, but it's harder than it looks.

Re:The obvious answer...

There is a saying - for any problem there is a quick, easy and obvious answer that is wrong. You have clearly found that answer here.

There are MANY companies that conduct research only that have no interest whatsoever in being in the business of making any thing. Most of the research conducted in biotechnology is performed in such companies. And the individual inventor? You have just wiped him out completely. There is NOTHING wrong with a company or individual focusing on inventing things, and then using the licensing of those inventions to support itself.

And of course what of universities? Your idea makes it very difficult for any university to obtain a patent.

And copyrights? To begin with the TFA is making a serious error incorporating copyrights into this discussion. It shows a fundamental misunderstanding of what a copyright is, so much so as to completely discredit the author. With your application of copyright law you have wiped out freelance photographers, artists, individuals writing books with hopes of being discovered, and millions of other individual content creators.

Copyrights owned by defunct companies are something of an inconvenience, but it is not a really large one thanks to the existence of fair use, right of first sale, libraries, etc.

All I know is...

...I can't get seasons 1 and 2 of Reboot because the current copyright owners (Universal) are just sitting on it.

Linux clusters are a perfect example of this

If you look at the disruptive growth of Linux HPC clusters, you will find that there are no IP agreements. I actually wrote about this: Why Linux On Clusters? [clustermonkey.net]. The absence of IP agreements allowed the HPC community to work together and grow faster than anyone imagined. On the famed Beowulf mailing list (started by Don Becker BTW) their is a free exchange of ideas and no one claims ownership of any IP. I call it a "Lawyer Free Zone" similar to what was proposed in Scotland [eetimes.com] back in the late 90's.

Re:Calculating Loss

I'd prefer not to stoop to their level, but you don't win against a bully by fighting fair.

On the contrary, usually that is exactly how you beat a bully. Most bullies win precisely because the people they are bullying consider themselves constrained in ways the bullies do not. Release those constraints to put the participants on an equal footing, and most bullies lose very quickly.

This applies almost universally, whether you're talking about the kid who gets beaten up at school because the teachers always tell him not to fight back, or the RIAA cases against song swappers where one side has to pay silly legal fees just to get their day in court while the other side pays no legal fees if it gets settled out of court.

However, you're right that the results of the "loss calculations" for works never produced because of copyright would be just as valid as the RIAA's, which is to say not at all.

Re:Calculating Loss

Drugs are a special case; much of why the patent system is such a mess is that the same rules are applied to drugs and software, while the economics behind the two fields are so different.

Getting back to making an effort at explaining the parent's (grandparent's?) comments -- without indicating any agreement with the same:

Sure, the GPL depends on copyright... so what? Folks can't make derivative works combining GPLed works with proprietary software (or software under permissive but incompatible licenses, which there are a lot of) -- and such proposed derivative works really are "software not written". (What do I mean by "proprietary" in a proposed world without copyright? Source code is a trade secret, object code is obscured). There've been plenty of fan-based projects trying to resurrect classic games by writing modern engines for them shut down because the original copyright holder -- while not selling the original game -- refuses to allow creation of the involved derivative work... and there are plenty of cases where Free Software avoids implementing functionality which is known to be patented; look at how the development of Tux3 was held up.

The argument that there are works not created due to restrictions via intellectual property laws is quite sound. That said, I tend to give credence to the position that intellectual property protection is necessary for much (not all) commercial development to take place as well... but that level of protection doesn't need to be anything like what it is today. Personally, I'd like to see copyright durations rolled back to their original values, and patents only available in fields where they make sense (not business models, not software)... but the latter seems unlikely, and the former flat-out impossible.

Re:Invisible?

I think that happened around the time they started giving patents out for things that weren't actually significantly inventions at all, and allowing write-ups of the claims that were so hopelessly generic that they did not (as originally intended) provide a means for others to reproduce a significant invention when the durationg of protection expired. The duration of protection is itself arguably too long in some fields as well, but that's not the biggest problem IMHO. Patents as originally conceived are a reasonable proposal for incentivising the sharing of new inventions, but the practice is now so far from the principle that the whole system is beyond hope. Let's hope the recent sparks of common sense in the US and Europe result in doing something about this.