The book The Case for Copyright Reform, by By Pirate MEP Christian Engström & Rick Falkvinge, is now online. Falkvinge is great and the book has some good arguments against the current copyright system. The case it makes is marred by lack of coherent principle, however:

“The Pirate Party does not want to abolish copyright; we want to reform it. We want to keep copyright for commercial purposes, but we want to set all non-commercial copying and use free.”

Of course copyright needs to be completely abolished. And there is nothing wrong with commercial use, money, or profit, as American left-copyright abolitionist Nina Paley notes. Still, this book is pushing in the right direction: less copyright.

The website of the USPTO this morning is triumphantly proclaiming that “IP Contributes $5 Trillion and 40 Million Jobs to Economy.” This is pure Intellectual Properganda. The link is to a US Commerce Department report “Showing Intellectual Property-Intensive Industries Contribute $5 Trillion, 40 Million Jobs to US Economy”. The USPTO says “A new report demonstrates intellectual property is widely used in the economy and the industries that use it most intensively account for a large share of economic activity for jobs, new products and services, and the prospect of longer and better lives.”

Got that? Not IP–but IP-intensive industries. That is, the private companies in certain industries generate $5 trillion and 40 million jobs–and yes, they happen to use IP since the state inflicts this system on them. How bad is this logic? Sure, IP is widely used. Companies have no choice but to waste billions of dollars acquiring patents to use for defensive reasons, which helps them form oligopolies that reduce competition, innovation, consumer welfare, and prosperity.¹

Yes, they “use” IP. And they also pay taxes and are subject to a host of unconstitutional federal regulations. Just because an industry subject to and regulated by IP (and other regulations) generates $5T does not show that IP itself contributes $5T to the economy. This is such obvious propaganda. In fact, IP imposes huge costs on the economy and these industries–likely on the order of hundreds of billions of dollars a year, or more,² plus the devastating financial costs of copyright, not to mention the police state being foisted on us in the name of copyright.³

This argument makes the mistake of equating correlation with causation, just as similar arguments for IP do, such as: Postwar Japan prospered because it had a patent system; countries with the most IP are the most prosperous; America’s prosperity and growth since its inception is due to its patent and copyright systems.

If the USPTO and Commerce Dept. are stooping to such strained arguments in favor of IP, maybe it’s a sign that they know they are on the ropes–and also of how desperate they are, how little real ammunition they really have.

Add this to the list of Absurd Arguments for IP.

Update: Related Techdirt posts by Mike Masnick:

• New Report Challenges The Whole ‘IP Intensive Industries Are Doing Well Because Of Strong IP’ Myth
• Feds Say We Need Stronger IP Laws Because Grocery Stores Employ Lots Of People
• Ridiculous White House Report Pretends Getting Copyrights, Patents & Trademarks Means You Benefit From Them
• Commerce Dept: Steve Jobs Had Patents, Steve Jobs Made Cool Things; Thus Patents Are Great
• Commerce Department’s Own Study Debunks Commerce Department’s Defense Of Said Study

See also Maggie Wittlin, Lisa Larrimore Ouellette & Gregory N. Mandel, “What Causes Polarization on IP Policy“, citing this post:

“Polarization over IP evidence is seen over even an elementary question: Does IP protection provide a net contribution to the U.S. economy? For example, after a report from the U.S. Patent & Trademark Office (“USPTO”) concluded that the most IP-intensive industries contributed $5 trillion and forty million jobs to the U.S. economy in 2010,28 these figures were both touted as a signal of IP’s economic importance29 and derided as misleading.30 One response even claimed that the study “actually suggested that IP-intensive industries are having a decreasing impact on the U.S. economy.”31 The report itself stated that it “does not contain policy recommendations and is not intended to directly advance particular policy issues,”32 but it has been wielded to support contradictory positions in the IP policy wars.33

1. Controls breed controls, Monopolies breed monopolies; Nortel Patents Sold for $4.5 Billion to Consortium Which Includes Apple; Apple vs. Microsoft: Which Benefits more from Intellectual Property?; Patent Cross-Licensing Creates Barriers to Entry. [↩]
2. See, e.g., Software Industry Needs 2 Million Patent Attorneys and $2.7 trillion per year to avoid infringing software patents; Costs of the Patent System Revisited. [↩]
3. Patent vs. Copyright: Which is Worse?; The Ominous PROTECT IP Act and the End of Internet Freedom; Masnick on the Horrible PROTECT IP Act: The Coming IPolice State; ACTA, Executive Agreements, and the Bricker Amendment; As Countries Sign ACTA, Many Finally Admit Their Copyright Laws Will Need To Change; US, EU, Canada, Japan, Australia & Others To Sign ACTA This Weekend, Despite Legal Concerns; SOPA and Section 1201: A Frightening Combination. [↩]

Reason.tv has a nice 9-minute video with Tom Bell (one of the handful of IP attorneys to publicly oppose IP¹ ) and Ben Huh, both skeptical of copyright, and an MPAA flunky, discussing the merits of copyright. My main disagreement is the background presumption that copyright was “intended to” and “used to” promote the creation of creative works: “Copyright exists to “promote the useful arts” according to the Constitution. But is it still doing that?” That is not its purpose, and it certainly was never its effect. But Huh and especially Bell are very good here, as is Reason.TV for highlighting this.

For more on the great work of Tom Bell in opposition to IP:

• his draft book, Intellectual Privilege: Copyright, Common Law, and the Common Good
• The Great Debate on Intellectual Property, in Cato Policy Report (January/February 2002)
• Tom Bell: Copyright Erodes Property?
• Tom W. Bell on Intellectual Property
• other copyright writing by Bell

1. See Patent Lawyers Who Oppose Patent Law. [↩]

Good article from Doug French at Mises Daily:

From Innovation to Rent Seeking

Mises Daily: Wednesday, April 18, 2012 by Doug French

It’s often thought that the technology sector is the least regulated and therefore has been the most productive during the past couple of decades. Famously, Bill Gates had no interest in politics. “In the beginning, Microsoft tried to ignore the powerful political forces arrayed against it, hunkering down in Redmond, Washington, to focus on its core businesses,” William F. Shugart wrote in the Freeman. Of course, the Department of Justice snapped Mr. Gates to attention.

And while Mark Zuckerberg says he doesn’t like to vote, since hiring Sheryl Sandberg, who served in the Clinton administration, Facebook’s DC presence has increased, and President Obama himself stopped by the FB office.

The news of AOL’s patent sale to Microsoft reminds us that there is plenty of government force channeling money toward the coffers of the big tech companies. It’s not all warm and fuzzy corporate slogans, cool workplaces, and upscale company cafeterias in Silicon Valley.

Battalions of intellectual-property (IP) lawyers keep constant watch over the government-erected barriers and monopoly privileges that lock up ideas and create corporate value out of thin air.

AOL is considered so old school, kids snicker if they see someone with an aol.com email address. In 2001, old-school media giant Time Warner consolidated with American Online (AOL), the Internet and email provider of the people, for a whopping $111 billion. However, eight years later, the CEO of Time Warner, Jeff Bewkes, announced that the marriage of AOL and Time Warner was dissolved.

Last year, AOL bought the Huffington Post for $315 million or reportedly five times revenues: the multiple to profits being unknown, as there were none.

But Microsoft had $1 billion burning a hole in its pocket, and AOL had 800 patents it didn’t need; a deal was made, and AOL shareholders loved it. However, this is no aberration. Steve Lohr writes for the New York Times,

The lofty price — $1.3 million a patent — reflects the crucial role that patents are increasingly playing in the business and legal strategies of the world’s major technology companies, including Microsoft, Apple, Google, Samsung and HTC.

Patents that can be applied to both smartphones and tablet computers, which use much the same technology, are valued assets and feared weapons, as the market for those devices booms. Companies are battling in the marketplace and in courtrooms around the world, where patent claims and counterclaims are filed almost daily.

The AOL-Microsoft deal is just a continuation of the red-hot patent market. Last April, Novell sold 880 patents to a consortium of companies, including Microsoft and Apple, for $450 million.

Two months later Apple, RIM, Sony, and others bought 6,000 patents from Nortel Networks for $4.5 billion.

Last August, Google paid $12.5 billion for Motorola Mobility and its 17,000 patents.

Read more>>

A new paper by Yale law professor Christina Mulligan and Timothy B. Lee, Scaling the Patent System, conservatively estimates that if US software industry companies wanted to stay abreast of US software patents to avoid infringing them, it would take roughly 2 million patent attorneys working full time to examine all the software patents. And this assumes these patent attorneys would only need 10 minutes per patent, which “is an unrealistically low amount of time.” And at $100 per hour, this would be $400 billion per year. In an industry that is valued at about $224 billion. (See pp. 15-16 of their paper.) And in a country where there are only about 40,000 patent attorneys. Not two million. Given that $100 is way too low—it’s more like $300 or more; and that 10 minutes is way too low—let’s say, 30 minutes at a minimum. That means it would really cost at least about 9 times more, or $2.7 trillion per year, and maybe about 6 million patent attorneys. That is about 18% of the entire $15 trillion US economy. Just for the software industry alone. And note: spending this money does not give a company freedom to operate. It only allows it to be aware of patents it needs to avoid infringing—by refraining from using certain techniques, even ones the company independently invented on its own.¹

I guess I see why patent shills say that if we made the patent system even stronger it would be a jobs program and “stimulate” the economy.² We’d have a lot more lawyers employed, that’s for sure!

In any case, keep in mind that this multi-trillion dollar annual cost would be on top of the hundred billion dollars-plus the patent system already imposes on the economy every year (Costs of the Patent System Revisited).

And all this is still a conservative estimate since it takes more than 30 minutes to review a patent, and because this is only for the software industry and software patents. If all companies in all industries had to review all relevant patents, the cost would likely be in the hundreds of trillions of dollars per year—multiples of the annual US GDP. Hmm. Maybe I’m wrong. Maybe patent is worse than copyright after all. (Patent vs. Copyright: Which is Worse?)

See also “Patent lawsuits aimed at big and small operators threaten web freedoms,” Charles Arthur, The Guardian (18 April 2012), which discusses Mulligan’s paper:

“Patents definitely threaten the open web,” [Mulligan] said. “Patent owners have sued other companies for such banalities as using jpeg files and transmitting data typed into websites. By locking up the basic building blocks of the internet and obvious software processes, patents hamper the free flow of information and increase the financial risks associated with simple activities, such as having a website. As we discuss in our paper Scaling the Patent System, software writers and web developers couldn’t discover all the patents relevant to their projects if they tried, so they are left at risk of crippling patent lawsuits for any project they do.”

The money spent on patents – either acquiring them or litigating them – distracts from more productive effort, she says. “Resources that could have gone into research and development go into purchasing patents. Google acquired Motorola Mobility for $12.5bn, after Microsoft and Apple spent $4.5bn to purchase 6,000 patents from Nortel Networks. These billions could have been used to develop new products and inventions.”

Mulligan also discusses her paper with Jerry Brito on the Surprisingly Free podcast:

1. Tabarrok: Defending Independent Invention; Common Misconceptions about Plagiarism and Patents: A Call for an Independent Inventor Defense. [↩]
2. See A “Patent Stimulus” to End the Recession?; Patent Shills want to make patents “incontestable”. [↩]

This is quite an amazing development. As noted by the Huffington Post (see excerpt below), “Twitter said on Tuesday that it would structure its patents so they could not be used for offensive litigation purposes without permission from the people who developed them.” Twitter wants to “ensure its patents are not used to ‘impede the innovation of others.'”Heroic!! I have, by the way, suggested something similar before: see my post A Patent “Don’t Be Evil” Policy (also Taiwan’s Defensive “Patent Bank”; The Patent Defense League and Defensive Patent Pooling). Maybe Twitter follows the C4SIF blog?

If only other companies would do this–such as Google, in keeping with its Don’t Be Evil pledge, which it seems likely to break soon, with its acquisition of Motorola patents and ongoing offensive patent lawsuits (see A Patent “Don’t Be Evil” Policy; If Google Is Serious About Reforming Patent Mess, It Should Make A Bold Statement And Stop Using Motorola Patents To Demand Cash; also Not Being Evil? Google patents Google Doodles).

From my quick review: the draft agreement is brilliantly written. Perhaps this approach could be combined by companies in a given industry with some kind of defensive patent pooling or defense league, as I suggest in the post linked above. Update: Isaac Bergmann calls to my attention a discussion between Jason Calacanis and David Sacks in a recent This Week in Startups (at 34:00, or, for more background, 25:50, to about 38:00), discussing something similar to the defensive patent league idea I mentioned above.

Of course, if more companies were to adopt this approach, you would have a situation where companies are spending millions of dollars just to have defensive patent shields that are never used. It would be clear that companies are expending valuable resources just so they don’t sue each other. And then people might start to wonder: why don’t we just stop granting patents in the first place so that we reach the same situation–no one suing anyone–without spending millions of dollars on patent attorney salaries?

As I wrote in a comment to Mike Masnick’s post, Twitter’s Revolutionary Agreement Lets Original Inventors Stop Patent Trolls: I think this is a brilliant approach. It is not perfect, but here is what I think is going on. If they just issue a policy statement that they will never use them defensively, they can change their minds later (just like legislatures cannot do this-they have parliamentary or legislative sovereignty and can repeal earlier laws–as I discuss here). They can’t tie their own hands. So they have to give a right to someone else in some way. The inventor is the safest best. Short of forming some trust or other organization (which might be a better solution, but it’s more complicated and not as easily replicable by other companies; this one just requires you modify your standard inventor assignment agreement).

So to tie its own hands to prevent itself from suing someone aggressively–they are doing it by contractually giving a veto right to inventors, and assuming they would not want to do this. (Note also the agreement says the inventor will not be coerced or threatened into permitting it.) That also means that it runs with the patent if someone else ever acquires the patent from twitter.

Also, I think it protects the management/board of Twitter from complaints by shareholders–otherwise they might be sued for not acting in the shareholders’ best interest if they refuse to sue someone they could extort a billion dollars from, for some “principle” that some managers prefer. This way they can say “well we have no contractual right to–we gave it up previously to the employee-inventors, for purpose of attracting better talent or getting more invention disclosures, a decision protected by the business judgment rule.”

Update: In a comment on Mike Masnick’s post, Twitter’s Revolutionary Agreement Lets Original Inventors Stop Patent Trolls, I had written:

Further, the more companies that adopt this approach, the more their own patents become “poisoned” for future trolls, who often just buy their patents from other companies, e.g. those that go bankrupt. The patents from Twitter-type companies would never be able to be used by trolls.

A perfect example of this is explained in VC Fred Wilson’s post The Twitter “Patent Hack”:

Many years ago now, my prior venture capital firm, Flatiron Partners, invested in a company called Thinking Media. It was an early Internet company. They developed some browser based javascript tracking technology. The company ulimately failed but was sold in a fire sale including the patents. Those patents eventually made their way to an incumbent, the big marketing research company Nielsen. Fast forward ten years or so and Nielsen sued two of my portfolio companies, comScore and TACODA, and a bunch of other companies too, on the basis of the Thinking Media patents. So IP that was partially funded by our firm was used to sue other portfolio companies. It is so galling to have this kind of thing happen and it is one of the many reasons why I have come to believe that software and business method patents are an enemy of innovation in the tech sector.

If Thinking Media had the patent hack in their documents, the story I just told would not have happened. And thanks to Twitter’s leadership, I hope that all future USV portfolio companies will have the patent hack in their documents and stories like that one will be a thing of the past.

However, Wilson’s comment that it “would not have happened”, and my own comment that “The patents from Twitter-type companies would never be able to be used by trolls” are both a bit overconfident. Perhaps Nielsen, in this example, could have found the original inventors and offered them enough cash to get them to grant permission for Nielsen to use the patents offensively. This is another reason that it might be better to establish some kind of agency, a Patent Defense Trust or League, and make the contract with this agency. The agency’s core mission would be to refuse to ever grant permission, so it could not be bribed.

From the Huffington Post:

Twitter Announces Innovator’s Patent Agreement To Limit Patent Use Lawsuits

First Posted: 04/17/2012 5:09 pm Updated: 04/17/2012 7:30 pm

By Alexei Oreskovic

SAN FRANCISCO (Reuters) – Twitter said on Tuesday that it would structure its patents so they could not be used for offensive litigation purposes without permission from the people who developed them.

Twitter said the move would give inventors more control over their creations and ensure its patents are not used to “impede the innovation of others,” the company said in a post on its official blog.

“It is a commitment from Twitter to our employees that patents can only be used for defensive purposes. We will not use the patents from employees’ inventions in offensive litigation without their permission,” Twitter said on the blog.

…

Twitter said that the limits on the use of its patents, which it dubbed the Innovator’s Patent Agreement, will apply to patents even after they are sold.

Eric Goldman, an associate professor at Santa Clara University School of Law, said Twitter’s announcement will burnish the company’s standing among software engineers, some of whom have grumbled at seeing their patents used to sue other companies.

“Unquestionably, it’s an effort to define Twitter’s brand in the marketplace and to signal that its perhaps more engineering-friendly than companies that wouldn’t make such a promise,” said Goldman.

Read more>>

From Twitter’s blog:

Introducing the Innovator’s Patent Agreement

Tuesday, April 17, 2012

Cross-posted on the Twitter Engineering blog.One of the great things about Twitter is working with so many talented folks who dream up and build incredible products day in and day out. Like many companies, we apply for patents on a bunch of these inventions. However, we also think a lot about how those patents may be used in the future; we sometimes worry that they may be used to impede the innovation of others. For that reason, we are publishing a draft of the Innovator’s Patent Agreement, which we informally call the “IPA”.The IPA is a new way to do patent assignment that keeps control in the hands of engineers and designers. It is a commitment from Twitter to our employees that patents can only be used for defensive purposes. We will not use the patents from employees’ inventions in offensive litigation without their permission. What’s more, this control flows with the patents, so if we sold them to others, they could only use them as the inventor intended.This is a significant departure from the current state of affairs in the industry. Typically, engineers and designers sign an agreement with their company that irrevocably gives that company any patents filed related to the employee’s work. The company then has control over the patents and can use them however they want, which may include selling them to others who can also use them however they want. With the IPA, employees can be assured that their patents will be used only as a shield rather than as a weapon.We will implement the IPA later this year, and it will apply to all patents issued to our engineers, both past and present. We are still in early stages, and have just started to reach out to other companies to discuss the IPA and whether it might make sense for them too. In the meantime, we’ve posted the IPA on GitHub with the hope that you will take a look, share your feedback and discuss with your companies. And, of course, you can #jointheflockand have the IPA apply to you.Today is the second day of our quarterly Hack Week, which means employees – engineers, designers, and folks all across the company – are working on projects and tools outside their regular day-to-day work. The goal of this week is to give rise to the most audacious and creative ideas. These ideas will have the greatest impact in a world that fosters innovation, rather than dampening it, and we hope the IPA will play an important part in making that vision a reality.- Adam Messinger, VP of Engineering (@adam_messinger)

From a Huffington Post blogpost by Drew Curtis, Founder and Administrator, Fark.com:

Patent Trolls Are Killing People — Literally

Posted: 04/17/2012 2:50 pm

Since I gave this talk at TED in Long Beach back in the first week of March, a few new items have come to my attention.

My buddy Ray Fisman (badass Columbia professor) wrote a Slate article about the costs to innovation due to patent trolling. Short version: it brings innovation to a complete halt.

But wait, there’s more…

I’ve recently talked with several folks in the high-tech industry who informed me that part of the reason large companies have been stocking up on patents lately is because they view them like nuclear weapons — they’re a deterrent. No one ever plans to use them. The idea is that you hold them in reserve to prevent patent trolls from suing you.

[…]Billions of dollars are being wasted on this bullshit. People are actually dying as a result.

Read more>>

I was interviewed Feb. 23, 2012, by Fabrizio Sitzia of the Italian libertarian group LibertariaNation.org. It was posted today on YouTube. We discussed intellectual property and related issues such as SOPA, plagiarism, IP-by-contract, and other libertarian issues such as prospects for liberty in the future; the importance of technology, the Internet, and globalism; Ron Paul and electoral politics; and libertarian sentiments and receptiveness among today’s young people. The audio file is here, and streamed below. (See also Italian Libertarian IP Debate.)

[podcast]http://www.stephankinsella.com/wp-content/uploads/media/interview-kinsella-libertarianation-2012-03.mp3[/podcast]

More info at the LibertariaNation post Intervista a Stephan Kinsella (English translation from Google translate).

[TLS]

Now at KOL162.

Nice post:

The Use of Free Software as Anti-Copyright Libertarian Activism

By PATRICK MCEWEN | Published: MARCH 29, 2012

Update: See Are anti-IP patent attorneys hypocrites?, collecting various posts about this topic.

***

A few older posts:

Update: see also Rothbard on Lawyers, Accountants, Locks and Safes–and patent lawyers?

Patent Lawyers Who Don’t Toe the Line Should Be Punished!

The Capital Free Press has compiled a list of the top ranked “libertarian websites based on the number of unique visitors in the most recent month according to the data compiled by Compete.” The post is pasted below. Not surprisingly, LewRockwell.com is the most visited libertarian site. Four of my own sites made the list: StephanKinsella.com (#84), Libertarian Papers (#100), The Libertarian Standard (#75), and Center for the Study of Innovative Freedom (C4SIF, #78).

The Most Visited Libertarian Websites

From Cnet:

How much is that patent lawsuit going to cost you?

While the tech industry’s elite are fighting it out with their whopper patent portfolios, a recent survey shows just how scary one lawsuit can be for a small company.

by Jim Kerstetter April 5, 2012 10:00 AM PDT

 

So you’re facing a patent lawsuit. Or maybe you want to sue someone. Get out your checkbook, because this isn’t going to be cheap.

Read more>>