The Lexra Story--"An example of how Patent law hurts innovation", according to my friend Max Chiz.

Also note the same old error creeping in of thinking that creation is an independent source of property rights (for more, see Libertarian Creationism, Inventors ... are like unto ... GODS...., Rethinking IP Completely, and Objectivist Law Prof Mossoff on Copyright; or, the Misuse of Labor, Value, and Creation Metaphors).

Notes Johnson, "the creator of a piece of intellectual property owns the product of his work." His argument? "If a baker bakes a loaf of bread, he therefore owns it." And likewise, for "music, movies, software." But note the mistake here Johson makes: "If a baker bakes a loaf of bread, he therefore owns it." The "therefore" is the giveaway: he says this because he thinks of the creation of the loaf as the act that gives rise to ownership. Then this leads to the analogy with other created things, like music. But creation of the loaf is not the reason why the baker owns it. He owns the loaf because he owned the dough that he baked. He already owned the dough, before any act of "creation"--before he transformed it with his labor. If he owned the dough, then he owns whatever he transforms his property into; the act of creation is an act of transformation that does not generate any new property rights. So creation is not necessary for him to own the resulting baked bread. Likewise, if he used someone else's dough--say, his employer's--then he does not own the loaf, but the owner of the dough does. So creation is not sufficient for ownership.

The rest of the argument is confused as well. Johnson argues that there are property rights in creations, and glorifies the (utilitarian) Constitution that enshrines them--why, then, ought they last only for a finite time, instead of forever, like other types of property rights do? And take this argument:

The pirate deprives the creator not only of the relatively small amount of money to be paid for the product. He deprives the creator of his very means of living, his ability to control, trade and profit from the work of his mind. That is a crime legally, morally, and on the deepest philosophical level, metaphysically. It is a matter of the creator's ability to maintain his own existence.

But this implies that property owners have a right not only in the physical integrity of their property but in the value of their property; they do not: value lies in the way others esteem your property. (See Rethinking IP Completely, and Objectivist Law Prof Mossoff on Copyright; or, the Misuse of Labor, Value, and Creation Metaphors for further comment on this.)

Finally, when he notes, "The PRO-IP Act ... is a welcome law and a welcome message," he accepts the idea that law can be or ought to be made by legislation. Of course, this is wrong, for several reasons--see my post Regret: The Glory of State Law for elaboration.

Update: see the vigorous debate in the comments section of the parallel post at Mises.org.

In Global Online Effort To Ascertain Validity of Patents, Eric Sinrod notes the effort of startup Article One Partners to improve the quality of issued patents. (See also Online startup aims to improve patent quality.) The company seeks to do this by offering substantial payments to people who submit relevant prior art that helps to determine whether a given patent is valid or not. The resulting prior art can help to show a patent is invalid--or enhance the validity of others. Now I'm suspicious of the idea of trying to "legitimize the validity of patents"--but this is probably just PR. I suspect that on balance more patents will be sunk than strengthened by this type of crowdsourcing. Sunshine makes a good disinfectant!

Just because current IP law needs reform--to say the least--does not diminish the need to understand existing IP law so as to be aware of it and navigate around it. With this in mind, I'd like to mention four excellent new IP law books I've acquired. Each of these was published in 2008 by Oxford University Press (my publisher as well) as part of its expansion of its IP offerings.

The first two are useful for patent practitioners and companies: Intellectual Property Culture: Strategies to Foster Successful Patent and Trade Secret Practices in Everyday Business, by Eric M Dobrusin and Ronald A Krasnow (reviewed here); and The Business of Intellectual Property, by Christopher M. Arena & Eduardo M. Carreras.

Patent Appeals: The Elements of Effective Advocacy in the Federal Circuit, by Mark Simon Davies, will be most useful for patent litigators, and Publishing Forms and Contracts, by Roy Kaufman, will be of interest to media, entertainment, and copyright attorneys as well as media companies. All four of these books are handsome and nicely done, and, although I have not read all of them in detail yet, they all look to be very well-done and useful to their respective audiences.

As noted here here, one of Obama's transition "team members is Reed Hundt, who was Bill Clinton's FCC Chair from 1993 through 1997. Hundt is slated to work on the agency review team in charge of international trade and economics agencies." In a 2006 Forbes op-ed, Hundt had various suggestions for patent reform. They are not all terrible, but they continue to miss the point by struggling to find some way to make the system work better. Part of his proposal is to reduce the number of patents granted, increase fees, and increase funding of the USPTO. Writes Hundt: "First, we should slash the number of patents granted each year by 90%. In 2004 the U.S. Patent &Trademark Office issued 165,000 patents. Sixteen thousand is more like an optimal number." He proposes a $500k fee companies can pay for a "fast-track" one-year patent application review.

Typical bureaucratic hubris to think he knows the "optimal" number of patents--though technically he is right that 16,000 is "more like" an optimal number than is 165,000, since the optimal number is zero. This is not dissimilar to another recent proposal to improve patent quality and reduce the number of patents granted by radically increasing filing fees from the $1000 level to about $50,000. As Manuel Lora noted to me, this is like the Laffer Curve of Patents (see Rothbard's evisceration of the Laffer Curve). Such high fees would of course reduce the number of patents, but would also tend to benefit large corporations.

These guys ought to give up trying to fine-tune an inherently unjust system and just admit it ought to be scrapped. Hundt writes, "We have a horribly expensive system, with huge backlogs and a daunting litigation risk. No wonder the Chinese don't want to adopt it. Let's get rid of it and start from scratch." Well, he's half-right.

***

A few more responses to selected comments by Hundt:

Second, we need to spend more money on the system. The budget of the U.S. Patent & Trademark Office is $1.5 billion. That ought to be tripled to $4.5 billion . . .

Who do you mean, "we," kemosabe? Not if it requires taxpayer funding.

We don't want grossly overworked professionals trying to figure out whether specific algorithms used to refresh the pixels on a computer monitor screen ought to be patented.

No, we want bright young Clintonite master bureaucrats!

Fourth, all patent case awards should be forward looking and linked to lost sales. In other words, plaintiffs who win patent-infringement challenges should be able to enjoin only future competition.

I thought he was onto something with his first sentence, but then he shys away from radical reform by not urging the abolution of all patent injunctions.

Recent headlines speak volumes about the hypocrisy of the state. On the one hand, we have state persecution of private firms for collusion, price-fixing, monopolization, etc., e.g. LG, Sharp plead guilty to LCD price-fixing, take $585m fine; antitrust actions against Microsoft, both in the US and Europe (EU hits Microsoft with record 899 million euro antitrust fine); and as I noted in The Schizo Feds: Patent Monopolies and the FTC, the state grants patent monopolies and then uses antitrust law to attack the beneficiaries of those monopolies.

And on the other hand, we have state monopoly-granting patent office collusion: Blueprint Laid Out for Work-Sharing Among Five Intellectual Property Offices, reporting that "The United States Patent and Trademark Office (USPTO) announced the development of a blueprint for work sharing among five major intellectual property offices (IP5) to address the common challenges they are currently facing. The heads of the IP5 met at Jeju, Korea, on October 27 and 28, 2008, to discuss a shared vision for work sharing and collaboration."

And we have the G20 nations colluding ("US President George W. Bush said Thursday that world leaders will 'lay the foundation for reforms' at global economic crisis talks this week...."), not to mention "coordination" by the world's central banks (Fed, European Banks Coordinate Interest Rate Cut; Central Banks Coordinate Global Cut in Interest Rates; EU Leaders Vow to Coordinate Response to Finance Crisis).

Utter hypocrisy--and, as usual, exactly backwards: the state outlaws private "collusion" while engaging in global collusion itself, when, as Rothbard shows, only states are able to form genuine monopolies in the first place. (See Man, Economy, and State, ch. 10; also Hoppe, A Theory of Socialism and Capitalism, ch. 9.)

The November 2008 Intellectual Property Colloquium discusses the recent In re Bilski patent decision by the CAFC. In that case, the court abandoned State Street's "useful, concrete and tangible result" test for the patentability of methods, and reaffirmed the "machine-or-transformation" test. Under this test, a method or process claim in a patent is patentable subject matter only if (a) it is tied to a particular machine or apparatus, or (b) it transforms a particular article into a different state or thing. (For further details, see Appeals Court Smacks Down Software And Business Method Patents without Apparatus or Transformative Powers, Patent Baristas; In re Bilski: Patentable Process Must Either (1) be Tied to a particular machine or (2) Transform a Particular Article, Patently-O.)

Now this is mostly gobbledygook, of course, as you'd expect when a court attempts to find an objective or just rule when interpreting an unjust, non-objective, legislated scheme (on the problems with use of legislation to "make" law, see my Legislation and the Discovery of Law in a Free Society). A nice illustration of this can be found in the interchange between one of the lawyers and the CAFC judges during oral argument, which is excerpted in the podcast. See, e.g., 2:33 to 6:15 or so.

The attorney argues that "useful, concrete and tangible result" The judge asks the attorney what is the basis for this tripartite test, and what "concrete" and "tangible" mean, exactly. The attorney struggles to define these terms objectively--he says "concrete" means "reduced to a practical," "useful" "result"; and that "tangible" means "being in the real world, doing something physical, active". The judge notes that this is redundant with the "useful" part; so you really have "concrete" and "tangible"--he asks the lawyer, "and what does 'concrete' add"? "I don't know," replies the lawyer, exasperated, to much laughter in the courtroom. "I don't either!" says the judge (around 6:00-6:15).

So much for objective law. Legislators introduce squishy terms with no objective meaning, no mooring in objective property boundaries and genuine justice, as the result of political compromise. Of course there is no way for courts to eke out just and objective rules that are based on such legal abominations.

In Troll Tracker Lands Job Fighting Patent Trolls!, I noted the defamation suits filed against "Troll Tracker," aka Rick Frenkel, by two Texas lawyers, in the aftermath of Frenkel's identity being revealed, after bounties put up by one of the subjects of his criticism, patent attorney Ray Niro. (Whew! It's convoluted, but all you need to know is that Frenkel is the good guy here.)

An update on the status of those two (to my mind, ridiculous) cases can be found in Troll Tracker defamation update: Cisco wants to see tax returns, evidence of 'mental anguish'. Reading through all this--it's hard to see how anyone can believe (a) patent law is grounded in justice; or (b) a state-run "justice" system can ever be, well, just.

Copyright Alliance Begs Supreme Court To Make Remote DVRs Illegal-- great post by Mike Masnick at TechDirt. He notes there that

"back in August there was an extremely important Appeals Court ruling that noted that Cablevision's remote DVR setup did not infringe on copyrights. The ruling pointed out the rather obvious troubles that would occur if we interpreted copyright laws the way copyright holders wanted to. It's clear that DVRs, like TiVo, are perfectly legal in the home. Time shifting shows has been found, quite clearly, to be legal. Cablevision's remote DVR is effectively the same exact thing. The only difference is that the DVR is stored at Cablevision data center, rather than at someone's home. The ruling, quite clearly, demonstrated how twisted copyright law has become, as it is patched up each time some new technology comes along.

"The importance of this ruling cannot be understated, however, as it will enable many important online services that will be tremendously useful. Needless to say, copyright maximalists in the entertainment industry don't like that."

... The district court found Cablevision analogous to a copy shop that makes course packs for college professors. In the leading case involving such a shop, for example, "[t]he professor [gave] the copyshop the materials of which the coursepack [was] to be made up, and the copyshop [did] the rest." ... There did not appear to be any serious dispute in that case that the shop itself was directly liable for reproducing copyrighted works. The district court here found that Cablevision, like this copy shop, would be "doing" the copying, albeit "at the customer's behest."

"But because volitional conduct is an important element of direct liability, the district court's analogy is flawed. In determining who actually "makes" a copy, a significant difference exists between making a request to a human employee, who then volitionally operates the copying system to make the copy, and issuing a command directly to a system, which automatically obeys commands and engages in no volitional conduct.

Now analysis of causation is important--I've written on this before in my article Causation and Aggression. In this piece, my co-author Pat Tinsley and I note the importance of the Austrian concept of "praxeology"--the science of human action--to provide a framework to properly classify actions, to determine whether an action is aggression (and what type and degree), who is responsible for actions, etc. For example, this view of action helps to clear up the confusion among libertarians about whether, and why, Presidents and mob bosses are indeed responsible for the actions of their underlings.

Now, in my blogposts Causation, Spam, and Worms, Spam, Spyware, Spiders and Trespass, Spas as a Nuuisance, and Spammers face "mail fraud" charges and 20 years in the federal pen!, I apply this basic understanding of causation to argue that "spam and related activities can in principle be a crime--a type of trespass--since it is a means by which the spammer uninvitedly uses another's property". This reasoning is similar to that employed by the court in the DVR case, since they are saying the customer is the one actually "controlling" (via electronic signals etc.) the equipment of Cablevision (albeit with Cablevision's consent, unlike in the spam case).

That said, the decision in the DVR case reveals how irrational copyright law is. You could analogize Cablevision to the photocopy shop; or to the use of one's own personal DVR/VCR.

The problem is that over time technology will stretch these analogies to the breaking point. The court, for example, emphasizes that the customer can instruct the RS-DVR system to record a TV show, and if he does, then the transitory data in the buffer is "move[d] from the primary buffer into a secondary buffer, and then onto a portion of one of the hard disks allocated to that customer." Thus, if no customer requests a given show be recorded, the information in the "primary ingest buffer" is lost--it is overwritten every 01 seconds (per channel). For this reason, "A customer cannot, however, record the earlier portion of a program once it has begun."

Thus, the system is set up so that it mimics the operation of a DVR. Presumably if 25,000 customers all want to record "Lost," then 25,000 separate copies of Lost are made on Cablevision's "Arroyo" server--one for each customer. And presumably there is a limit on the number of channels one can record simultaneously, and the total amount of hours of recorded material that can be maintained--similar to the way a personal DVR works--one's own DVR has only 20 or so hours of space, and can only record two channels at a time. But in theory a DVR could have 100 tuners, and terabytes of space. So in theory, Cablevision could adjust the RS-DVR system to permit users to simply give a blanket instruction on day 1: "Please record all channels [or the following 50 channels] at all times, and maintain them for a trailing 1 year period." Thus, the buffers for the various channels are always recording for each user basically everything that is transmitted. It's like an always-on DVR, with all (or dozens of) channels. And why does Cablevision need to waste space by making 50,000 copies of Lost? Why not just keep one copy around, so long as at least one user still "has" "a copy" of it in "his" RS-DVR "space," and serve up from that one copy? What's the difference, really? The difference is that at this point the RS-DVR would not look as much like a DVR, and the courts would have a harder time analogizing to one (unless, in the future, DVRs in the home get petabytes of capacity and dozens of tuners, which is technically feasible). So in the meantime, expect Cablevision to employ artificial limits and inefficiently use its equipment just to get around the arbitrary contours of copyright law.

I've posted before on the phenomenon of publishers offering free, online versions of works in addition to printed versions. In A Short History of Mises Institute Publishing (available in audio too), Jeff Tucker provides an absolutely fascinating, riveting account of the monumental work for liberty and sound economics done by the Mises Institute. They have become a publishing phenomenon: putting literally thousands of books, speeches and articles free online--7 terabytes so far, and many more added daily! As Tucker notes:

With 300 books in our catalog, the overwhelming majority of which have been internally published; with an online store that is second to none in the world of pro-liberty publishing;with a website delivering nearly 7 terabytes of data out the door every month to one million unique visitors per month; with nearly the entire corpus of Mises, Rothbard, Hazlitt, Röpke, Hayek, Hutt, Spadaro, Chodorov, Nock, Garrett, Ron Paul, John T. Flynn, Böhm-Bawerk, Menger, Bastiat, Hahn, Say, and Wicksell, among many others, in print and available for free download or purchase in hardcopy; with the complete run of seven journals online, many of which would have otherwise sunk without a trace; and with 30,000 rare books in this physical library begging to be scanned; it is fair to say that the Mises Institute has achieved a level of productivity and effectiveness that none of us imagined possible in the past.

By the way, people wonder what 7 terabytes means. To get an idea of how much that is, this is nearly equivalent to the entire printed collection of the Library of Congress. Another measure: it is 335,000 trees made into paper and printed. This is a volume of information in the material world that would have been inconceivable even a decade ago.

This is why I consider Lew Rockwell and the Mises Institute (and all its wonderful, enthusiastic, sincere, liberty-loving people, including Jeff Tucker) to be, without exaggeration, the most important force for liberty in the world today.