Intellectual Property Is Bad for Business

Interesting post from Eric Ingram:

Intellectual Property Is Bad for Business

Intellectual property is one of those subjects that gets me into frequent debates. You know, copyrights, software patents, and trademarks. One’s opinion of whether IP is “good” or “bad” tends to change depending on which side of the Intellectual Property fence they sit on at any one moment. My opinion?

Intellectual Property is bad for business, and bad for consumers.

Let’s use an example — say you are a hacker looking for new antivirus software. What’s your first move? Do you rush to the store and throw down $100 for the first big yellow Norton box you come across? Or, do you hit your favorite bittorrent site, run a search and have it installed for free before you could’ve put your shoes on?

That’s one side of the fence.

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Now let’s say you just finished designing the most incredible iPad App on the planet. It’s beautiful, unique, and simple. It gets into the App store and sales start to climb. Suddenly, a near perfect copy of your beautiful App hits the market. They copied your UI! Stole your idea! Stealing your sales! WTF, isn’t this illegal?

That’s the other side of the fence.

So what exactly is Intellectual Property, and what’s the big deal?

Copyrights are given to authors of original works, such as books, articles, movies, and software programs. Copyright gives the exclusive right to reproduce the work, prepare derivative works, or to present the work publicly. Copyright protects only the form or expression of ideas, not the underlying ideas themselves.

Patents are property rights of inventions, that is, of devices or processes that perform a “useful” function. A new or improved mousetrap is an example of a device that may be patented. A patent effectively grants the inventor a limited monopoly on the manufacture, use, or sale of the invention.

If you’re a software developer, your mouth is probably watering at this point.

Of additional interest are Trademarks and Trade Secrets, but for now we’re going to focus on the mouth watering monopoly power of copyrights and patents.

Arguments for Intellectual Property usually go something like, if we protect inventors and creators, give them government guaranteed monopolies, they will have a stronger incentive to create more, and society will be better served as a whole. So then, I suppose inventors have no stronger motivation to create, other than to get rich being the only one able to reproduce their works, right?

It would stand to reason, then, that if we examine industries or business models that rely heavily on Intellectual Property, we should find rampant creativity and quality, of the kind to better society for all. How about the movie industry? They get rich selling theatre tickets and copies in the form of DVD sales, and rely tremendously on their monopoly power to reproduce and present their work publicly. It seems reasonable, and we’re all used to this model, but let’s compare it to another well known business model that enjoys almost no copyright protection: the fashion industry.

The fashion market dwarfs the movie market in scale.

Did you know that fashion designers steal from each other’s ideas constantly? That fashions you see on sale in Target for $19.99 are in some way ripped off of a trend that started with a $10,000 runway dress? I’m oversimplifying, but the fact is that the fashion business has thrived and experienced far more creativity and progress than the movie business. The same is true for all industries of similar age and opposing views on intellectual property. I dare you to prove me wrong.

IP is loosely based on the legal concept of Property rights, which states that you have a right to tangible goods acquired through lawful trade. This makes sense, because tangible goods are scarce, in that there is a limited supply of them. There is only so much of any tangible item to go around, so if you take one for yourself, you reduce the available supply for others.

This is untrue for Intellectual Property rights, which put claim on ideas that are not scarce. There is no tangible cost to reproduce an idea. When you have an idea, intellectually, does it reduce the supply of ideas for others? Of course not.

Software patents are a big deal. Some organizations are overrun with attorneys who find nothing more innovative to do than to find loosely related software ideas and sue the pants of them in an effort to maintain dominance. Are these organizations the most innovative and creative thinkers, out to serve humanity with the best intentions? It’s almost laughable. No, the “software patent trolls” we’ll call them, spend more time developing threats in court, than they spend developing ideas in software.

So then, I guess Intellectual Property does not necessarily encourage creativity.

It encourages lawsuits.

And when those lawsuits win, we all lose. We lose the innovations of a small group of hackers who came up with a better mousetrap, because it was squashed by Microsoft, or another IP beast. Intellectual Property destroys creativity, destroys value, and makes lawyers rich. I have nothing against lawyers, but I wish they would leave the innovation to the hackers, and stop fighting for innovation-destroying monopolies.

My advice to hackers and startups everywhere: If you are building a better mousetrap, don’t rely on lawyers and legalese to create and protect value. Rely on service, and other benefits that are truly scarce. Your customers will love you for it, and you will better humanity with your free ideas.

Oh, and for a deeper insight on the fashion industry and it’s free culture, take the time to watch this TED presentation by Johanna Blakley. I couldn’t agree with her more.

Bonus: Read the book that first changed my outlook, Against Intellectual Property, by N. Stephan Kinsella, who won’t mind that I stole a couple ideas from his book.

Feel free to steal mine, and notice this blog is not bound by copyright.