Suppose I make a chair and then sell it too you. If we treated that chair just like we treat intellectual property law I'd have a great deal of control over what you do with that chair. You cannot duplicate any part for your own personal gain without my express permission, and gaining my permission might require a monetary transfer from you to me.
Doc Searls passes along a question from Phil Windley.
Suppose you'd been asked to address the CTO organization of a major (over 125,000 employees) company on digital rights management. What would you tell them?
In my book for entrepreneurs, I talk about the importance of the 30 mile-an-hour wind. In baseball, if the wind were that strong toward right field, you are much better off trying to hit with the wind than going to left. Trying to use DRM to control content is like trying to hit against a 30 mile-an-hour wind. It's not impossible, but it's very unpromising.
Earlier, I mentioned Alex Tabarrok's idea of rewarding intellectual discovery in proportion to effor. Now, Brother Lowe has picked up on the idea, and pointed out some flaws.
I think that passage of such a law would turn out to be the Cost Accountant and Patent Lawyer Full Employment Act of 200x. As I said, I can see the theoretical appeal. But in practice, I think that this attempt to reward the costs of innovation would only create more expensive makework, none of which would have anything to do with research itself.
Having said that, I think we should encourage Tabarrok and others continue to think "outside the box." One thought I have is to use prizes rather than patents as rewards for research. Some prizes could be offered ex ante. For instance, the government might offer a prize for developing an AIDS vaccine.
Other prizes could be offered ex post. Suppose somebody develops what they believe is unique and valuable distance learning software. They could apply to the "prize office" (replaces the patent office) with a description of what their software achieves and ask the prize office to determine a fair prize for such an achievement.
I know, I know, there are all sorts of issues. But conceivably, after enough prizes have been given out and enough precedents have been set, the system could be workable.
Maybe we should offer a prize for the best alternative to the patent system.
Politicians know that most voters understand squat about how monopolies work best. They also know that there won't be a rally on Capitol Hill in favor of price discrimination. It is therefore cheap to scold big pharma for the "windfall profits" made by charging so much more for drugs in the US than in other countries. Cheap, and criminal. This behavior by politicians simply denies medicine to those who need it most.If politicians don't like the logic of price discrimination, then let them fund pharmaceutical research in a different way. Abolish drug patents, and grant rewards for great inventions, or give huge subsidies to universities and companies to develop new medicines.
Alex Tabarrok points out that patents work differently in theory and practice.
The key element in the economic theory is that pioneer firms have large, hard to recoup, sunk costs. Yet patents are not awarded on the basis of a firm's sunk costs. Patent law says the subject of a patent should be novel, useful and non-obvious but nowhere does it say the original idea should have required extensive costs of research and development as the economic theory would predict.
Iconoclasts Stan Liebowitz and Stephen Margolis revisit the economists' brief against the Sonny Bono copyright extension. They argue that the economists may be wrong, based on hypotheticals.
First, copyright extension for already-created works, although it does not affect the incentive to create those works, might improve the "management" of such works. For example, a copyright owner will keep people from debasing the work. However, that argument could be used to justify almost anything, including giving Bill Gates a copyright on the alphabet. After all, we might debase the alphabet, so why not give somebody copyright control over it?
Second, the fact that copyright extension can confer only minimal present value to creators might be offset by a high "elasticity of creation," meaning that a small increase in returns might stimulate more creative works. Yeah, it might. But in practice the elasticity of creation is probably pretty low--it does not take much incentive to get people to create, particularly if they already capture many years' copyright value.
I'm not persuaded by this article.
If there is anyone who is more curmudgeonly about Open Source than I am, it is James V. DeLong.
The open source theorists know perfectly well that the model might translate to academia, but not beyond that. In fact, they have another model in mind, which is to make content free, tax the hardware industry, and then distribute the revenues to the creative community according to some complicated government-run formula.
I could see, say, Apple, obtaining licenses to bundle thousands of songs with some future iPod. Apple would collect the "tax" and distribute the revenues. For past creations, the revenues would go to RIAA publishers (boo, hiss), but going forward they would go more directly to people who create, produce, and filter music.
Economist Robert Shiller is for them.
In 1993, the American Stock Exchange (AMEX) expended considerable resources to develop and promote its new concept of an exchange-traded fund (ETF), with its first embodiment as Standard & Poor's Depository Receipts (SPDR's). The ETF was a key innovation that made it possible for investors to hold an instrument that effectively tracked the value of a specified portfolio, such as the S&P index, with low trading costs.But once the idea was proven successful, it was widely imitated by other organizations, depriving the AMEX of a big share of the returns on its innovation.
In one of his first (only?) attempts to market one of his innovations, Shiller co-founded a company that used a statistical model to replace human appraisers. In my opinion, that company illustrates why business process patents are a bad idea. I tried to deal with his company both while I was at Freddie Mac and when I was on my own with a web site. In both situations, they were impossible. Shiller's partner was arrogant and just plain ornery.
If Shiller's company had owned a business process patent, it would have made things even worse, because it would have kept competitors out of the business. Competitors eventually did a much better job of scrubbing the raw data needed for the models and of forming grown-up partnerships with other companies.
Left to their own devices, the markets will reward execution, implementation, and marketing, rather than pure creativity. I believe that is how it should be. The alternative--locking up creativity with business patents--only means that creative people who cannot execute effectively will be able to stifle innovation.
