Some thoughts:

The real justification for IP protection is not practical, but moral: stealing another's work is THEFT, and theft is wrong.

***If you believe that copyright is justified by appeal to some moral principle we cannot argue as we are not moral philosophers. The U.S. Constitution agrees with us however: the only justification is that it increases innovation and creation. The issue of theft is a red herring. Copying is not stealing. Why is it self-evident that because I have created a unique work I should have the right to tell other people what to do with it? Why do I have a right to tell other people from whom they may buy things?

B&L list numerous examples of works that brought their authors remunerative return in the absence of copyright laws...but [in the absence of copyright] struggling writers would be pushed from barely eking out an existence into giving up writing...

***Is it true that "struggling writers" will be pushed from barely eking out an existence? Do we care? After all if people do not care much for these works, then nobody will much care if they aren't created. More to the point, "struggling writers" do not benefit a great deal from copyright, and do not face much threat from "piracy". The technology that makes it easy to copy also creates great opportunities for "struggling writers" and the internet has been a boon for nascent creators of music and comic strips.

[In the discussion of the amount of money that would be earned by J. K. Rowling without copyright] one might ask, [what] is the relevance of the fact that Rowling worked as a "part-time French teacher"?

***The relevance is that there is no economic reason to pay her more than necessary to convince her to devote her time to writing books rather than her best alternative activity.

Many software writers choose to make their work available for free. So what? I don't belong to the cadre who claim that such a choice is subversive in some way, but this is not the equivalent of saying, "Therefore nobody should be paid for copies of their work whether they want to be or not."

***The point of course is that software writers earn money by giving software away for free. We are not opposed to software writers earning a living; in fact we are strongly in favor of it.

The actual worth of a work can be calculated as the sum of what each person on earth would willingly pay for a copy, if it could be obtained in no other way...

***This argument is pure theory, and unfortunately defective theory. For most reasonable specifications of production technologies, adding up the total contribution of each individual results in a number larger than the social total. A simple example suffices: there are two of us. There is a book that cannot be produced without both of our contributions. The book is worth $100. By the calculation above I have created a value of $100 which is what everyone in the world is willing to pay for something that will not exist without my effort. Ditto for you. So apparently the total payments for a book worth $100 are to be $200. Good work if you can get it. This is a very common confusion among non-economists. Fortunately from an economic perspective it is not necessary to pay everyone the total social value of everything that could not be accomplished without their contribution; it is necessary only to pay them the marginal cost of their effort (their "opportunity cost").

Full disclosure: I am a software author, whose work is available online for a price. It would be possible for any number of clever people to hack my program's security, and thus I have a personal reason for resenting any suggestion that the law should encourage such behavior. I can't help but wonder whether most opposition to IP protection comes from people who have produced nothing of value and who feel entitled to steal from anybody who has. That kind of attitude represents, to my mind, the decay of society, the equivalent of governments believing they are entitled to tax without limit from the productive because of the alleged "need" of recipients for the stolen loot.

***I also am a software author whose work is available online for a price. A number of clever people have hacked my program and made improvements, and I am very grateful to them for doing so.

And now Jeffry Tucker is live blogging our book.

Jeffrey Tucker has been blogging up a storm. As he said to me in an email "I keep trying to live blog your book and instead end up writing articles." And that is exactly the point...innovation and creation is about value added. It isn't that we don't like having copies of our book made available - but having other people add value is far more significant.

I met Larry Lessig for the first time early this month at a lunch of people interested in IP issues. Inevitably as the discussion of the increasingly draconian legal measures passed by Congress were compared to their decreasing effectiveness comparison to the "War on Drugs" was made. Larry brought up an interesting point, which I will paraphrase in the form of my own example. I am personally in favor of legalizing heroin - I think illegalization has been a horrible failure that has done far more harm than good. I am also strongly opposed to people using heroin - I know heroin addicts, and it is not a fate I would wish on anyone. So I approve the goal implicit in illegalizing heroin, even while I think it is a bad law. Copying is completely different. Copying and imitation are unambiguously a good thing that produce rather than destroy value. This is especially important when imitation adds value...the "remix culture." There is no "symbolic value" in making copying illegal...and our prohibition against file sharing is not only useless, the message it sends is that intrinsically good activities - sharing, remixing, copying, imitating - are somehow wrong. EFF attorney Fred von Lohmann, who was also at the lunch, said that the first thing parents tell him when their children are being sued by the RIAA is "We know what he did was wrong..." It is sad that people should think that culture - sharing, remixing, copying and imitating - are wrong.

So let us instead work to abolish copyright and patents and celebrate Jeffrey's remix of our book.

Dear Colleague,

I am pleased to share a new paper, "Intellectual Property Rights Protection in China: Trends in Litigation and Economic Damages," http://reaction.nera.com/rs/ct.aspx? ct=24F768199BEA43ECC4D881ABD62D9954A4920990EDA138EA670 written by NERA Senior Consultant Kristina Sepetys and Senior Vice President Dr. Alan Cox. The paper describes the changing role of Intellectual Property Rights (IPR) enforcement in an evolving economy such as China's, as well as the judicial and administrative procedures available for IPR enforcement. Drawing upon a unique dataset compiled by the authors, the paper also examines trends in damage awards in IPR cases in China. The authors conclude that IPR damages in China are generally too low to compensate IPR owners for their losses or to have any meaningful deterrent effect.

However, the paper's findings also suggest that significant damage awards are being awarded and that the frequency of such awards continues to increase. This conclusion is corroborated by recent events. For example, in a recent decision by the Intermediate People's Court of Hangzhou, Korean electronics maker Samsung was ordered to pay 50 million Yuan (approximately US$7.3 million) in compensation to Holley Communications for infringing Holley's handset patent. This patent infringement case decision is the largest ever compensation amount in China's mobile phone industry. In another important development, the Standing Committee of China's National People's Congress recently approved the third Amendment to China's Patent Law. The revised Law will take effect on 1 October 2009 and includes, among other features, a provision to increase the upper limit of statutory damages to 1 million Yuan (about US$150,000).

This paper will also be available in Chinese. Please contact the authors if you would like to receive a copy.

Please visit our website at http://reaction.nera.com/rs/ct.aspx? ct=24F768199BEA43ECC4D881ABD62D9954 AEAD5B90E3A33CEC7E9255565CC9E038FF417 to browse other papers produced by our Intellectual Property Practice.

As always, we welcome your feedback.

Regards,

Phillip A. Beutel Senior Vice President and Chair of Global Intellectual Property Practice +1 914 448 4014 phil.beutel@nera.com www.nera.com

NERA Economic Consulting 50 Main Street White Plains, NY 10606

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If I'd posted this when I thought I did, I'd probably seem prescient now...but better late than never. Today brought bad news for Microsoft, with forecasts of future problems. Bad news for Intel and IBM too...the recession is bad for business all around. But I think it is going to be much worse for Microsoft than people think. They are living off of familiarity, network externalities, and installed base. Vista was a disaster, Windows 7 will probably be a help, but they burned a lot of credibility with Vista. The new versions of Word with the "ribbon" don't seem to have been compelling.

The central thing however is that free software, commoditized software, has caught up to proprietary software in quality, and is likely to increase the lead over time. Nobody is going to tinker or experiment with computer systems when orders are flowing through the door. But in a recession, there isn't much to lose, there tends to be a lot of slack as nobody want to lay off more people than absolutely necessary - so it's a good time to experiment with cheap software. In general innovation picks up a lot during recessions. I expect a lot of businesses will be trying linux and openoffice, and its market share will increase substantially.

Here is the prediction I'm hesitant about. Always in the past when software with substantial installed base has finally been supplanted the fall has not been gradual: Lotus and Wordperfect went from world-beaters to also rans in just a few years. I think Microsoft may surprise us by falling equally fast. There may not be much left in two years time.

It's easy to find "inventors" who are enthusiastic about patents. It's not so easy to find actual innovators. This article - which is about innovation, not intellectual property - might give an idea why that is. This team has built a prototype product. It might go to market, it might not - but here is the thing: nobody is going to bring it to market without paying them. They can show it off, everyone can see how it works, but until and unless they get paid what they want, nobody can make it. The devil is in all the details. Even if they go to production, it is not the case the a rival is going to be able to jump right in with an identical product. Intellectual property just isn't part of the picture here.

Over at the Mises Blog Jeffrey Tucker is reviewing and blogging about Michele's and my book Against Intellectual Monopoly. Here's a direct link to his article. As Jeffrey says: the discussion is getting pretty wild...we are being accused of being socialists in favor of some sort of common ownership among other things, presumably by someone who didn't read the book. If you have a few minutes, go take a look. You can also buy it from them link here

Sorry, we have been deficient in updating our blogroll. The Von Mises institute is a libertarian think tank in east Alabama. They do research and publishing - check out Stephan's book Against Intellectual Property - only six bucks. The also have a blog Mises Blog on libertarian issues, including IP. Plus they are doing a special on Michele's and my book - probably later this week.