It is bizarre that the US doesn't watch what other countries are doing to extend intellectual property rights even as it is pushing ACTA to impose our laws on other countries seeking trade deals with the US. One such story link here is this whining by a musician who advocates extending the EU copyright on music from 50 to 75 years, so performers like himself could receive more royalites. He reasons, "I feel it is unfair that it should be finished." The US constitutional standard remains that IP "should promote ... the Useful Arts". Does extending the term do that?

It is heartening to find more and more critics of our intellectual property regime, partly as a result of growing knowledge but more importantly, the growing critical reaction to the extreme excesses of the application of the law. A new voice for me is that of Dean Baker, co-director of the Center for Economic and Policy Research in Washington, DC. whose book, THE CONSERVATIVE NANNY STATE; How the Wealthy Use the Government to Stay Rich and Get Richer, is available for download on line link here under a Creative Commons license. The book is about much more than IP, as the subtitle indicates, but this review focuses on the IP issues Baker covers. He calls the chapter, "Bill Gates Welfare Mom: How Government Patent and Copyright Monopolies Enrich the Rich and Distort the Economy".

He begins by examining the richest man in the world, Bill Gates, and Microsoft, noting that it was not Gates hard work or brilliance, or the superiority of his software, but his government provided monopoly based on IP law that made him today's Croesus.

The heart of Baker's argument is that the same situation applies to patent protection in the pharmaceutical industry, and copyright protection in the entertainment industry. Vast segments of the economy are dependent on government-enforced monopolies for their profitability and survival. "In the case of prescription drugs, patent monopolies raise the average price of protected drugs by more than 200 percent, and in some cases by as much as 5,000 percent." "In the case of copyright protection, items like software and recorded music and movies that would otherwise be available at zero cost over the Internet, can instead be sold for hundreds of dollars. Clearly these forms of protection are substantial interventions in the economy."

He goes on, "The government is not obligated to award patent and copyright protection; it only makes sense if these are the best ways to promote innovation and creativity." "Copyright and patent protection support a $220 billion a year prescription drug industry, a $25 billion medical supply industry, a $12 billion recorded music industry, a $25 billion movie industry, and a $12 billion textbook industry. According to the International Intellectual Property Alliance, industries that rely heavily on copyright and patent protection accounted for $630 billion of value added in 2002, almost 6 percent of the size of the economy."

Baker's more original argument is that IP does provide an incentive for innovation as the constitution requires, but that there are less costly ways of doing so. He does so in a section titled "Efficient Mechanisms for Supporting Innovation and Creative Work".

He opens with an example, that "patent-protected brand drugs sell for more than three times the price of generic drugs that sell in a free market. This means that the country could save approximately $140 billion a year on its $220 billion annual bill for prescription drugs if the government did not provide patent protection and drugs were instead sold in a competitive market." The country could save much of that, if the research were carried on by the government, as in fact much of it already is (though to the gain of IP owner).

Baker next turns to copyright and singles out the textbook racket for close attention, arguing that revised texts are constantly being marketed with little real change in substance and at great cost. Again he would turn to the government to fund standard texts, but would allow copyrighted versions as well, which would have to find their place in a freely competitive market.

For the broader class of copyrighted material, Baker suggests a voucher system in which individuals would be given a set value of vouchers that he could credit to one or more artists. They in turn would put their creations on the internet, making them free to download. If the artist wants to copyright his work and sell it at whatever the market will bear, he could alternatively do that.

Baker ends by noting that these may not be the best alternatives to patents and copyrights, but that alternatives need to be explored.

The rest of Baker's book is ideological and will put off any who are not self identified progressives or liberals. But his basic argument is that conservatives have framed the issues in terms that they would keep the government out of much of the economy but that this is a lie. For Baker, the issue is that the government intervenes for the rich to the cost of for everyone else.

JANET RAE-DUPREE has a thought-provoking piece entitled "For Innovators, There Is Brainpower in Numbers" link here. She begins, "Despite the enduring myth of the lone genius, innovation does not take place in isolation. Truly productive invention requires the meeting of minds from myriad perspectives, even if the innovators themselves don't always realize it." She goes on to examine how individuals work together successfully in groups with some examples, but it led me to speculate on what this means for promoting innovation in another sense. Since what we want is innovation, policy on IP needs to accomodate to this perception. Much innovation seems to come from large companies with the resources to devote to it. They would, I expect, prefer less regulation, such as that coming from the copyright and patent laws which fence in what they can do.

That may be wrong, however. Instead, one might argue that the really large companies with lots of patents have accomodated to the IP regime. They can cross license and largely avoid any limits on their own activities. Large companies may even find a cross-licensing regime preferable, by limiting competition. IP-based oligopoly would then be preferred to open competition.

But that bars a large number of potential innovators, whether as individuals or small groups, from doing so. In the long run we see innovation reduced or slowed. The social cost of this regime is enormous, bad for consumers and more broadly, for humanity.

Financial Problems in Japan!

Following the problems in the financial sector in the US, uncertainty has now hit Japan. In the last 7 days Origami Bank has folded, Sumo Bank has gone belly up and Bonsai Bank announced plans to cut some of its branches. Yesterday, it was announced that Karaoke Bank is up for sale and will likely go for a song, while today shares in Kamikaze Bank were suspended after they nose-dived.

While Samurai Bank is soldiering on following sharp cutbacks, Ninja Bank is reported to have taken a hit, but they remain in the black. Furthermore, 500 staff at Karate Bank got the chop and analysts report that there is something fishy going on at Sushi Bank where it is feared that staff may get a raw deal.

Is the Digital Theft Deterrence Act constitutional? It is being challenged by the Boston University student Joel Tannenbaum and Harvard law Professor Charles Nesson link here. The case questions how the act allows a private group copyright holders to enforce a criminal statue by way of civil suits. Mr. Nesson's goal in making this argument is to ‘'turn the courts away from allowing themselves to be used like a low-grade collection agency."

This is an interesting strategic response to how the recording industry uses current law to end file sharing of copyrighted material. I wouldn't expect an early result, but anything that makes the industry's enforcement more difficult and expensive is good news for consumers.

This is only the opening gun but US producers, under pressure from imports, are suing the Korean firms for patent infringement in both the International Trade Commission and the courts link here. Silicon Valley flash memory maker Spansion is suing Samsung as well as a long list of companies like Apple using the chips. After announcing that it would be reducing its employees by half or 5000, a Spansion share rose 20 cents to $0.50.

In a similar case, Kodak is suing Korean companies Samsung and LG for violating its digital camera patents.

To read more about these cases, Google spansion+samsung.

I guess we can expect more such suits, given the recession and the drop in consumer demand. The great advantage of pursuing these cases before the ITC is that it usually acts much more rapidly than the courts.

In an op-ed, James Gibson castigates Google's deal with authors and publishers to pay for its right to scan their copyrighted books link here. Although Google had initially argued that scanning was fair use, it has now caved in to the copyright holders, apparently preferring to pay rather than litigate. Gibson argues that the deal gives Google a monopoly on scanning because no other companies will be in a position to scan library collections. He hopes the court will not agree to this anti-competitive deal.

Subsequently, Harvard's library which has a deal with Google to scan its books, is pulling out on books still under copyright, arguing that it went with Google initially because it expanded access to its collection link here.

It is depressing how copyright's power keeps getting extended and the monopoly, expanded.

And what has happened to "do no wrong"?

Saul Hansell, writing on the NYTimes Bits website and in today's paper, discusses the McCain campaign's "right to remix on YouTube" as fair use, observing that McCain introduced a new position on copyright law" link here. His commercial ads had used snippets of TV news broadcasts, the news organizations complained under the Digital Millennium Copyright Act, YouTube took the ads down, and the campaign complained, asserting that the mashups were fair use.

The incident has led the campaign to assert that the election is upon us and it can't wait for the issue to be adjudicated, so it should receive priority treatment. YouTube doesn't want to be forced to make the judgment on fair use. The Electronic Freedom Foundation opposes special treatment for political groups and wants uniform and extended fair use for all.

Hansell observes that given the unlikelihood of McCain's winning the election, he may never have the chance to lead the move to change the DMCA.

But this experience once again illustrates the fundamental absurdity of this law and more broadly, of copyright.

Slashdot reports that Microsoft has received a patent for the Automatic Censorship of Audio Data for Broadcast link here. It sends us to the patent itself which describes "methods for muting offensive words" or making them unintelligible or replacing them with "less offensive words." A word or syllable is rejected when there is a probability above a threshold that it meets of test of "offensiveness" link here.

I ask myself if MS is serious with this patent. The probability of false positives or altering meaning is high so that I can see damage suits arising. I also read the patent as being a hunting license rather than an existing device and ask myself why it was granted. The patent itself notes that a delay in transmission with humans reviewing the speech to determine offense has generally worked. Is this MS in its latest guise as patent troll?

The Patent Office seems to have lost all sense.

JOHN ELIGON describes the close of the Harry Potter case link here. Author Rowling won. Eligon quotes the judge's ruling, "Plaintiffs have shown that the lexicon copies a sufficient quantity of the Harry Potter series to support a finding of substantial similarity between the Lexicon and Rowling's novels." The ruling blocks publication of a Harry Potter Lexicon written by Steven Jan Vander Ark. For details, see Ligons piece.

The judge apparently admits to being an ardent Potter fan. One would have to see the Lexicon text to judge whether "fair use" was violated.