As you may know I am much more favorably inclined towards trademarks than other forms of intellectual property. (Michele is less favorably inclined.) It seems to me a good thing that it is possible to tell who you are doing business with, and no downside monopoly. That may be the purpose of trademark law...but there is another part of creeping IP: the apparent right under trademark law to protect the image of your product. Daniel Monchuk directs us to an article in the WSJ about what seems to me to be trademark abuse. The article is about costume companies that are being sued by trademark holders for providing costumes based on trademarked characters. For the life of me I don't see what this has to do with identity: there is no claim that these costumes are authorized by the trademark holder, nor can a costume based on a comic book be confused for a comic book. Perhaps Justin or someone else who knows more about the law than I do can comment on whether this is a proper use of trademark law as it exists. Certainly if the law allows it, then there is a big problem with trademark law.

via Aleh Tsyvinski

Sergei Guriev and I (together) and Konstantin Sonin (also from the New Economic School) write a bi-weekly column in Russian business daily Vedomosti (jointly published by the Wall Street Journal and FT).

This week Konstantin wrote a very nice column about your book link here

He also has one of the most popular Russian blogs and there is more stuff here link here

Links for the book are Amazon Cambridge University Press and the free online version

This is the translation of Konstantin's article that Babelfish and I came up with:

There are economic questions, on which, it would seem, agreement between scientists is long established. Until recently these firm truths included the need for patents and copyrights. And here matters rested until the book by the economists of Washington University in Saint Louis Michele Boldrin and David Levine in which they reexamine patents and copyrights. They assert that intellectual property is not necessary: that the inventor or the author can profit even in its absence. Moreover the gain to society as a whole from eliminating it - including the users, who will pay less, and other producers - will be significant.

The standard argument of economists in favor of copyrights and patent rights is as follows. In order to provide incentives for invention, it is necessary to provide some reward afterwards. Patents give rise to a short-term monopoly. The problem is that monopoly is always inefficient. In order to force those, who value goods especially highly, to pay a little more, the monopolist restricts supply relative to the amount that would be sold if the market was competitive. Accordingly, the standard argument of economists is that the inefficiency from the temporary monopoly of patent protection is necessary to pay inventors and give them proper incentives.

Boldrin and Levine, relying on the theory they have developed, show based on numerous examples that the costs of intellectual monopoly are greater than necessary for the stimulus of development. Time after time it happens that the great inventors, whose names are known to us from school, after making their first discovery, switch their energy and not less remarkable resourcefulness to fighting for the right to exclusively obtain profit. The activity of James Watt, father of the first steam machine, for a long time slowed the development of more advanced technology and did not bring any special benefit. Watt earned more when his patents expired and he was forced to implement new developments and compete with his followers.

An even more striking example is drawn from recent history - the innovations that have changed the face of the world in the recent decades: especially the development of computer software. (The book also gives a great deal of attention to the pharmaceutical industry.) Until 1981 it was not possible to patent software (in practice is was not really possible until 1994). The success of software, developed freely without patent, shows that even without monopoly the developers have sufficient incentive to actively produce new innovations. Now almost all the large firms cross-license patents with each other and hurry to patent the smallest technological changes in order to be protected from potential rivals.

What would happen, ask Boldrin and Levine, if the latest book of J. K. Rowling was not copyrighted? Without Rowling's copyright it would not earn worldwide six hundred million dollars, but possibly only six million dollars. This would be due to sales during the first few days, during which time the other publishing houses would not yet have time to produce copies. But perhaps for a French teacher this would be more than enough incentive? Whether selling the "first copy" of an idea creates sufficient stimuli for the innovation, is one of the one of the most difficult issues in the book. But to each traditional argument in favor of patents and copyright the authors provide meaningful answers. They do not always disagree: for example, in discussion of the role of commercial secrets.

In the book of Boldrin and Levine very little is said of Russia, beyond mentioning Alexander Popov's priority in the invention of radio. This is discussed in the chapter about how frequently the rewards from the efforts of a large number of people, who work independently of each other, wind up, because of the patent right, in the hands of one person. In our country the question of intellectual monopoly is discussed in the following context. The obvious benefit from the absence of copyright is greater accessibility. If in the 1990's software had been protected from the piracy, the advance of computer literacy would be much slower. In recent years our government has repeatedly moved in the direction of a stricter observance of patent rights and copyright. In other words, in the opinion the authors of the book Against Intellectual Monopoly, in the incorrect direction.

Perhaps nevertheless Boldrin and Levine - both of them among the most highly-paid academic economists in the world - are not right? The book, although based on long-term investigations, and no matter how convincing, has not changed the prevailing view in the economics profession. However, at a minimum there is something to their line of reasoning: I spent 20 dollars and purchased their book, although it - in complete agreement with the persuasions of the authors - can be downloaded free of charge load from their web site.

Crosbie Fitch has been posting interesting comments here for a while, but talk about not blowing your own horn. He hasn't mentioned that he also posts regularly at Digital Productions on IP issues. Check it out.

The Economist (July 19) has two articles on "piracy" and innovation, "Look for the Silver Lining", p. 23, and "Thanks, Me Hearties", p. 74.

Both articles note that record companies are using stats about file-sharing network traffic to learn where new singers are most popular, so they can target their marketing and advertising more effectively. TV programmers can do the same thing.

"Silver Lining" cites Bill Gates' point that "piracy" enables Microsoft to compete more effectively against open source software such as Linux.

It also mentions Matt Mason's book The Pirate's Dilemma, where he mentions a Japanese designer who removed the "whoosh" mark from Nike's Air Force trainers, slapped on his own design, and sold them for a premium price under his own brand. Instead of suing him, Nike saw an opportunity and invested in his firm, then started its own premium remix brand.

Matt Mason says the copied should innovate anew by copying the "pirates" path. Imitation can indeed be a form of innovation, as Michele Boldrin and David K. Levine show in Against Intellectual Monopoly.

Here is Matt Mason speaking about the pirate's dilemma; here is a blog related to his book: "The Pirate's Dilemma".

One of the factors missing from discussions of the cost of out patent system is hard data dollars and cents of what it costs society. Some of us have long known that it was a net loss, but that is hard to argue when you don't have the numbers. That has just changed, according to a book review by Timothy B. Lee link here. The book reviewed is Patent Failure: How Judges, Bureaucrats, and Lawyers Put Innovators at Risk by James Bessen and Michael Meurer .

The hypothesis actually tested was, "Patents are supposed to create a positive incentive for innovation by enhancing the profits of companies that develop new technologies. If the patent system is working properly, the average firm's patent portfolio should generate more profits than the total cost of defending against patent infringement lawsuits from other firms. If, in contrast, litigation costs exceed patent profits, that suggests the patent system is actually creating a net dis-incentive to innovation. In that case, innovative companies would be better off with no patent system at all."

"Their data suggests three broad conclusions. First, patent litigation began rising sharply in the early 1990s. The costs of defending against patent litigation for non-chemical firms held steady at about $2 billion per year during the 1980s, but by 1999 (the last year for which they have reliable data), patent litigation was costing defendants more than $10 billion annually. Second, while the chemical and pharmaceutical industries also experienced increased litigation during the 1990s, the problem was much less dire; the patent system still appeared to offer positive innovation incentives for drug and chemical firms."

"Most shockingly, Bessen and Meurer's data suggest that outside of the chemical and pharmaceutical industries, litigation costs for the average public firm actually exceed profits from their patent portfolio by a wide margin. By 1999, the last year in their sample, defending against patent lawsuits cost non-chemical public firms about $12 billion, while their patent portfolios generated only about $3 billion in profits. This data suggests that outside the chemical and pharmaceutical industries, the patent system actually reduces the net returns to innovation; firms don't earn enough from their patents to offset the costs of defending themselves against patent infringement lawsuits brought by other firms."

There are some caveats to the study, so more work needs to be done. But with that proviso, not just the voter (consumer) needs to think about our busted patent system, but so does business and other patent owners. They should be banging the doors down on the Congress to get this changed.

Apple filed a suit against Psystar Corp., a Mac clone provider, to prevent it from selling its $399 Open Computer with copies of Apple's software. Psystar produces its own computers, which are packaged with copies of software it owns that happened to be produced by Apple.

Read it and resolve not to buy an Apple product:

"Apple Files Suit Over Mac Clones".

The library of Congress, along with others, has carried out a study on the impact of copyright on digital preservation link. The 200 odd page report comes to the conclusion that 1) laws were enacted in an analog era, thus do not understand digital preservation; 2) there is little in the sense of mandatory preservation of digital works, like there is for paper copies at the Library of Congress; 3) archives have resorted to piecemeal agreements to digitize works instead of having blanket approval, due to copyright laws.

The report recommends in particular that the law should define "preservation institutions" that can digitize at risk copyrighted material, that they should be allowed to preserve in various formats, that they should be allowed to harvest material pro-actively, irrespectively of the medium and the type of material. In short, the preservation institutions should be granted privileges that allow them to bypass copyrights in a wholesale manner, for the sake of preservation.

Hat tip: DigitalKoans.

One of the things we do not do is pay enough attention to IP developments in other countries. The Economist has a piece entitled "Sharing the wealth; Artists do battle to enrich their heirs link here." The story brings up a subject new probably to most Americans. The operative paragraph is, "For the past two years 4% of the price of a work by a living artist sold through an auction house or by a dealer has been payable to the artist. Sales of less than €1,000 (£796) are exempt, and the tax is capped for anything worth €500,000 or more. Throughout the European Union the tax is payable on sales of works by living artists or those who have died within 70 years; in Britain it is only works by living artists that qualify. The EU allowed Britain this exemption until 2012..... Damien Hirst, Britain's most commercially successful artist, [and] more than 500 signed a letter to the Telegraph urging the government to give them that right. 'Our loved ones often sacrifice a lot to support an artist in the family," [so that] Hirst and his colleagues would like to make sure it is not extended.'" That is a rich extension of copyright with no obvious benefit to society like encouraging innovation.

The Economist notes that the change will have an adverse effects on the British art market and then goes on to note that the gains are collected by only a relative few. "The artist's resale right (ARR) benefits a far smaller proportion of artists than its supporters might assume. A study sponsored by the Antiques Trade Gazette showed that, in the 18 months to August 2007, 10% of the 1,104 artists benefiting from ARR in Britain (around half of whom are British) got 80% of the pot; the bottom 30% received less than £100 each. The royalty has also proved cumbersome and costly to collect.

Michele's and my book

is now out...sort of. You can order it on Amazon except it appears to be temporarily out of stock. I guess that is a good thing. They have links to a few copies from other sellers. Or the publisher Cambridge University Press although they say it isn't available to August. But we know it exists, we've seen, sold and even signed a few copies. The free online version is available here

Here is the official blurb:

"Intellectual property" - patents and copyrights - have become controversial. We witness teenagers being sued for "pirating" music - and we observe AIDS patients in Africa dying due to lack of ability to pay for drugs that are high priced to satisfy patent holders. Are patents and copyrights essential to thriving creation and innovation - do we need them so that we all may enjoy fine music and good health? Across time and space the resounding answer is: No. So-called intellectual property is in fact an "intellectual monopoly" that hinders rather than helps the competitive free market regime that has delivered wealth and innovation to our doorsteps. This book has broad coverage of both copyrights and patents and is designed for a general audience, focusing on simple examples. The authors conclude that the only sensible policy to follow is to eliminate the patents and copyright systems as they currently exist.

While it is still minor league, the amount of free downloadable material continues to grow. Here is one source, a website called Legal Torrents, which uses the Bittorrent software to distribute Creative Commons licensed material link here. Have a look at what is currently available here. All legal and fast to download.

The more people who come looking and download, the more licensed material is likely to be made available.