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.

You know you are making progress when you are attacked by lobbyists. Michele's presentation yesterday at Cato was attacked by the Copyright Alliance. Apparently there was a discussant named Robert Atkinson, who, unfortunately, appears not to have read the book carefully. Well here are some of the claims along with my responses

1) While the book contained some proposals for reform, it was explicitly calling for elimination of intellectual property, and in fact the book repeatedly claimed that studies suggested all parties would benefit from its removal, although Atkinson found no study that truly documented that claim. Boldrin replied that he is politically realistic and knows you must start with reform before you can get to full elimination.

*Apparently Atkinson missed Chapter 8 of the book which that the best available data shows that intellectual property has little or no effect on innovation. As there are many harms, also well documented throughout the book, a policy with no social benefits and many harms would seem ripe for elimination. I don't know, by the way, of any study or assertion that elimination of intellectual property would benefit everybody - I'm pretty sure, for example, that some authors, movies stars, and others, would make less money without IP than they do with it. The stated goal of IP however, is to promote innovation and progress, not to enrich specific individuals.

2) There is no focus on incentives for innovation in the book, essential if you are to discuss IP. Boldrin replied that innovation occurs often without incentives, a position Atkinson strongly disputed.

*The central theme of the book is that innovation requires incentives. We spend chapter after chapter documenting what the incentives are when there is no intellectual property, so this increases our doubt that Atkinson read the book carefully.

3) It was backwards to claim the Internet means creators should have to extract rents more quickly now after release, as the digital age shows it's even harder to do so as pirated works produce that much more quickly.

*I can't even parse what is being claimed here, but we've devoted a lot of time to the issue of how rents are extracted in the presence of cheap internet copying. While it is certainly possible to charge and profit with rapid copying and no intellectual property, the evidence suggests that the best business model in many cases is that of giving the recorded/copiable product away for free over the internet and selling complimentary products, for example, in the case of musicians, live performances.

4) The book sees price falling to zero but ignores the fact that in that scenario, revenues fall to zero.

*This statement is mathematically incorrect. As a practical matter, as price falls revenue can go up or down, depending on how much sales increase.

5) The book has an unfortunate tendency toward diatribe, such as calling IP evil, referring to US Supreme Court justices as having double-digit IQs and suggesting that those who support copyright don't appreciate facts.

*I admit the book has an aggressive tone, although I'm not sure all these assertions about what we say are correct. But speaking of diatribe, we are not the ones who refer to our opponents as thieves and pirates.

As a Schumpeterian myself...I think Atkinson is right on the money. Copyright, and IP in general, is all about incentives. Rights are given, a limited monopoly is created, to encourage authors and inventors to produce writings and discoveries. This comes from the Progress Clause of the US Constitution, aptly named, as a focus only on use of end-products will soon leave you with fewer end-products.

*We are not Schumpeterian because Schumpeter created a theory for which there is no evidence. Notice how it is simply asserted that IP incentives achieve the desired effect. It is funny how those people who decry theory (we are theorists) assert their own theories as if they were evidence. We are extremely concerned with innovation as the engine of modern economies; we started as did most economists thinking that limited monopoly was a necessary incentive for innovation. Based on evidence we no longer believe that. The evidence can be found in our book. On the face of it the proposition that monopoly (even limited monopoly) is somehow the friend of innovation is not terribly plausible.

This post is based on a discussion Lonnie and I had by email. As you know he is more favorably inclined towards patents than I am, although both of us agree on a lot of middle ground regarding things that are wrong with the current system. In effect Lonnie said "What would a modern world without patents really be like."

You could start a new blog, setting up a pseudo-world scenario where we begin life without patents and see what happens. I am getting enthused about this. Your world has a town, farms, etc. Initially your world is unpopulated, but citizens move to your world by being registered on the blog. You might be able to recruit citizens from TechDirt and other similar blogs, explaining that your goal is to see whether how a world would evolve without IP protection.

While your world is small, your world has lots of technology. So, people will build businesses and industry, and eventually competition will kick in. So, as your world grows, two people will be producing product X, and one will "invent" a product. It might be interesting to see how people behave in this world and whether the world continues to grow without IP protections or whether there comes a point where someone demands them. Then you can have town hall meetings to debate the merits (if it gets to that point). It would be quite an experiment.

I admit I'm too lazy to actually do such a thing, but it is an interesting idea. As the basis for further discussion, I pointed out that there is one experiment ongoing, and another that may be upcoming:

The virtual world without patents is an interesting idea. There is one experiment going on right now in the non-virtual world, and perhaps soon to be one in the virtual world. Both highlight some problems with the idea. In the non-virtual world open source/free software effectively does not use either patents or copyright. It competes pretty successfully with the closed source/proprietary world and is a serious business drawing in companies such as Sun and IBM. It does well in the business world, less well in the consumer world. At the most extreme end of the consumer world is the computer game world which is heavily dominated by proprietary software - mostly protected by technical means, though, not so much by legal means.

In the virtual world, the world you describe is somewhat like the MMORPG secondlife. However, secondlife has some sort of IP implemented through technical means. Apparently though they are opening up their software to competitors, which raises the possibility of compatible worlds which don't have IP. [I don't know much about how all this works - if there is someone out there familiar with secondlife, post a comment.]

Let me point out the problems with these types of experiments:

1. Industries are different. That the open source business model works well for software tell us little about pharmaceuticals. It's hard to find anyone in the software industry who defends software patents. Innovations in software are inexpensive and relatively easy to protect anyway so the upside effect of patents is weak; software builds a lot on existing software, so the downside effect of patents is very strong. It is possible in a virtual world it would be possible to do a more controlled experiment; for example by introducing an industry with development costs more like pharmaceuticals. Much as I'd like to wave the flag and say "see patents don't work for software, let's get rid of them all" this is a non-sequiter.

2. People can choose which world to participate in. On the one hand this favors the patent free world, because people who are most altruistic are drawn to that world; a world in which nobody had patents would have a lower proportion of altruists. On the other hand, as an innovator if I had to choose between a patent free and world with patents, I might well choose the world of patents in hopes I could earn more. Historically this was the major use for patents: not so much to promote innovations, as to encourage skilled artisans to immigrate by promising them short-term monopolies.

The email notification system is still active only for the "blog authors" listed on the masthead. If there is demand, once we have it working I can extend it to commentators as well. Two improvements. The notification email should now have a link to the thread that received the comment. Second...following suggestions from Crosbie, the code for email notifications is either ending your email address with *, or you can end it with ! which means not to reveal your email address to the public at large.

In an op-ed, James Gibson castigates Google's deal with authors and publishers to pay for its right to scan their copyrighted books link here. Although Google had initially argued that scanning was fair use, it has now caved in to the copyright holders, apparently preferring to pay rather than litigate. Gibson argues that the deal gives Google a monopoly on scanning because no other companies will be in a position to scan library collections. He hopes the court will not agree to this anti-competitive deal.

Subsequently, Harvard's library which has a deal with Google to scan its books, is pulling out on books still under copyright, arguing that it went with Google initially because it expanded access to its collection link here.

It is depressing how copyright's power keeps getting extended and the monopoly, expanded.

And what has happened to "do no wrong"?

Via Lonnie Holder

While I am pro-intellectual property, I am against patents that appear to be, in my opinion, ludicrous. Please find a link below to a patent application that, in my opinion, appears to be beyond ludicrous. The application is from Halliburton Energy Services and is for "Patent Acquisition and Assertion by a (Non-Inventor) First Party Against a Second Party."

This application should fail for several reasons. First, it appears to me to be silly or even absurd. The essence of this patent is sort of like having a patented method for making use of your refrigerator. After all, one of the purposes of a patent is to "prevent," and the claims of the application as filed say essentially that someone should buy a patent from someone else and assert it against a third party to "prevent" them from making, using or selling their invention. Therefore, if this patent would issue, it would hamper the ability of others from exercising their right to "prevent."

Now, Halliburton has cleverly pointed out that a person may use a computer to perform research on a "secret aspect" of the second party's software to make the "secret aspect" observable, or non-secret, and that portion of their claim appears to be the novel feature.

So, the intent of this patent application is to buy a patent, hack (seems like hacking to me!) into someone's software, write a claim using knowledge of the hacked software, getting the patent to issue, and then asserting the patent against the second party. The only difference is making the "secret aspect" non-secret.

Hopefully the USPTO will find references in patent law that point out that Halliburton's "novel" idea is already embodied in the law and is therefore not novel. Reverse engineering, especially hacking someone's software, is certainly not new. Indeed, Halliburton might even find itself up against the formidable DMCA since the DMCA specifically prohibits bypassing security protocols, and Halliburton's claims appear to be perilously close to requiring an illegal act (turning the hidden aspect into an observable aspect) in order to be operative. That would assuredly be a USPTO no-no as the claim would not be useful as defined by 35 U.S.C. 101, since a portion of the claim would require an illegal action.

The second issue I already discussed above, and that is that people have taken these steps (almost assuredly including figuring out whether software code could be covered by a patent application) before. So this technique is not new and should also fail under 35 U.S.C. 102 or 35 U.S.C. 103.

Third, Bilski should sink this one like a rock. After all, nearly all of these steps are purely mental steps except for the reverse engineering part. Even the reverse engineering part is mostly mental process, except for exposing the code, which does require a computer. However, the computer would usually be a general purpose computer and Bilski should apply.

This application has yet to go to an examiner, so it might be a while before we see how the USPTO deals with it.

link to the patent here

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.

For the folks in the Washington DC area: next Monday, November 10th, the Cato Institute will be hosting a presentation of the book by David K. Levine and myself, Against Intellectual Monopoly.

I will be presenting the book, and Robert D. Atkinson, Ph.D., Founder and president, Information Technology and Innovation Foundation, will debate it. To be moderated by Jim Harper, Director of Information Policy Studies, Cato Institute.

The event takes place at 12:00 p.m. and it is followed by a luncheon. Please go here to register.