Tech Policy Seminar

Compulsory Licenses as a Method of Proportionality

I enjoyed reading Merges’ book. His solutions to some practical problems seemed reasonable to me. However, I have some reservations about his exposition of the “proportionality principle.” Of course, it may be that I just don’t understand his ideas well enough. But his idea of proportionality being an active, deciding principle in IP doesn’t appear practicable to me. He bases it largely on an idea of fairness — it would be unfair for Al to extract 40 percent of the profits of a very valuable bridge just because he has the good fortune of owning the best spot to build it. But in the real world, determining fairness is a slippery concept. (For example, see the mess of contemporary fair-use doctrine application and the commentary that it has generated on this blog.)

Here’s my initial response: Merges says court intervention into disproportionate leverage cases should be a highly unusual event,[1] but it seems that any time a dispute arises and the parties can’t settle, a judge is going to have to determine what is “fair” compensation for the rights-holder. That determination is complicated and based on variable ideas of moral behavior. So this doesn’t seem to me a practicable principle in the real world.

But it may be that Merges is proposing something slightly more practicable: a wider use of mandatory licenses, like those used in some areas of copyright law. “[I]n these cases, the market cannot be relied on to set an appropriate price for the relevant transaction. Or, perhaps more accurately, intervention is required to reset the market. … A court is needed to recalibrate the starting point for market negotiation and transactions.”[2] He says this process does not require the court to perform its own valuation, but just to compare the “intrinsic” value of the property right with the actual market value that comes from its disproportionate leverage. But where does the intrinsic value of a right come from, if not from the market? And how are judges to ascertain this intrinsic value, for purposes of comparing it with the market?

For example, in 2010, after more than four years of litigation, a jury in Utah decided that Vitamix had been infringing on Blendtec’s patented “fifth-wall” technology for blender jars.[3] Ultimately, the judge awarded $22 million in damages, doubling the jury’s $11 million reward.[4] By truncating one corner of his blender jar to create a fifth wall, Blendtec inventor Tom Dickson[5] solved the problem of cavitation, which causes an air bubble to form around the blender blade and halt the blending process. Vitamix willfully copied Dickson’s design until ordered to stop doing so.

Suppose that some troll had patented the fifth wall prior to Dickson discovering it. In order to maximize his product and capture the commercial blending market, Dickson needs to use the fifth-wall technology. The troll holds out for an enormous sum, Dickson infringes, and the case goes to court. Under Merges’ theory, a judge would have to make a binary decision between the actual value of the invention and its market value — which is probably somewhere near what the troll is asking for. But how to determine the actual intrinsic value? The fifth-wall idea is very simple, and part of a system of hundreds of patents. So, like Al’s land-holding in the book’s example, the troll’s right is pretty small compared to the whole. But it is a vital part of the design. It does more for the blender than many of the other patents. How to value that? As a percentage of the price of an individual jar? As a percentage of the total expected value of capturing the blending market?

A decision in that case would be binary. Either Dickson gets the fair price he wants, or the troll gets the exorbitant price he wants. One or the other captures the excess value, depending on the court’s decision. Merges doesn’t seem to be calling for such a system, however. What he wants is to reset the market and allow the parties to bargain on a fair ground. Presumably, the way to do this is set a “fair” price at or near the right’s intrinsic value. Copyright law does this with music. So The Rural Alberta Advantage can use Survivor’s “Eye of the Tiger,” they just need to pay a compulsory licensing fee under 17 U.S.C. § 115. This resets the market so that the parties can bargain “fairly,” which often happens either through another mechanical process like the Harry Fox Agency or through an individual bargaining process.

In patent law, one could imagine a compulsory licensing scheme that sets a price for technological innovations that are added to a product. Congress could even devise a complicated formula for determining objectively the “intrinsic” value of a patent. Any bargaining would begin at that price. It seems to me that this is the type of system Merges wants. It prevents disproportionate compensation for relatively minor rights-holders who hold out. It still allows the market to function. It results in limited intervention by courts. (I realize that this is perhaps an unfair extension of his ideas, and readily admit that it’s based on my interpretation of his ideas.)

I think another solution to the proportionality problem that Merges addresses is to slice IP rights more thinly: decrease the duration of copyright, limit the right to exclude, allow for more fair use. If the market is to be trusted, thinner slices should get rights into the hands of those who value them most, and society should benefit.[6]

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[1] Merges, p. 198

[2] Id.

[3] See http://www.cleveland.com/business/index.ssf/2010/06/vita-mix_loses.html

[4] K-Tec v. Vita-Mix, 765 F.Supp.2d 1304 (2011).

[5] The “Will It Blend?” guy.

[6] See Lee Anne Fennell, Slice and Lumps, U of Chicago Law & Economics, Olin Working Paper No. 395 (2008) (available at http://papers.ssrn.com/sol3/papers.cfm?abstract_id=1106421) for more on the slicing of lumpy property rights.

Thank you for trying Mr. Merges, really.

After completing this very well-written, and extremely insightful book, I believe I owe Mr. Merges some congratulations. He has made as good an argument as I have been exposed to in favor of justifying intellectual property rights in the new media. He grounds his theory deep in property philosophy, and emerges from the depths with enough air to explain the modern applications of that theory. I respect everything that he explicated in the second half of the book. He made a convinving argument that the creative profession (from bottom to top) is better served by property rights, and that what's at stake is not just the creative output, but the fundamental livelihoods of creative people (Pedro gives an excellent overview of how artists, like lawyers should be entitled to their products as those may be the lone sources of income). He combats the Digital Determinism theory with a well-rounded incentive-driven argument (although this is somewhat combatted by Christian's ghostwriter example). He provides a property regime that seems fairly acceptable on its face: "accomodate the needs of consumers and users by (a) facilitating and ecouraging cheap and easy IP permission and licensing mechanisms, together with (b) simply waiver techniques that permit bidng dedication of rights to the public." (Location 4175 of 6102, Ipad). He highlights the benefits of IP rights for large, multi-person works that take signficant time and resources to create (and Jen does a nice job of giving more concrete examples in the video game world about this truth). He even makes a convincing argument that "IP properly conceived and constructed, makes sense on distributive justice grounds," essentially that it is fair.

But, how many "creative professionals" or "independent artists" were consulted when writing this book? How many are quoted in the book? How many real world, real life stories does he share? Unfortunately, I believe Merges has created a vacuum with his own laws of physics here. 

The world is changing and will continue to change drastically. I understand that academics and philosophers would like to have some grasp about where this whole "technology thing" is headed. We all would. The nature of the beast prevents us from doing so. Any property rights we try to attach to creative works from here on out will act as paper leashes on a carnivorous wild animal. We can try to justify spending the resources trying to improve the leash, making it stronger, longer, more flexible. Unfortunately, the animal is but in its infant stages, and with each day, it grows stronger, more resourceful. Over time that animal will require more food, more space, more independence, until finally we must set it free to act out its wild, natural instincts. Maybe, just maybe, after some time the animal will return to its caretakers and will seek protection, but maybe not. If it does we should be ready. If it does not, we shouldn't be scared of the things we create, for after all, we create them with human hands and human minds. For some like Merges, that may be troubling, but for others like myself, that fact is beautiful.Trying to restrain our animal, domesticating it, will only serve to make a growing number of us ask: what if? 

Let's accept the things we do not understand Mr. Merges. I know you make the exactly opposite point in your book, but Let it Be. What is fair isn't always right, and what's distributive justice for some maybe be a complete injustice for others. The academics will continue to wage this war over IP. The arguments will continue in the same fashion, with some new and interesting twists as Merges has given us, but ultimately we must accept the reality if not the inevitable: we do not have the resources to create, enforce, and adjudicate IP rights anymore. We must instead find a transitional system between what was and what will be. We can surely use some of the foundational philosophies Merges advocates in his book to help bridge the gap between our current regime and the regime which must exist in the near future, but we should also keep in mind that such a solution is to pave the way for an IP free world (at least with regard to the digital medium). We must change the investment-backed expectations of creators to serve the expectations of society, and increasingly, society expects the freedom of both information and art. Mr. Merges makes a valiant effort in trying to justify intellectual property going forward, and I believe we are all better for having heard the strong words of a strong and worthy opposition, but ultimately the idea will fail. It has to. The internet movement is too strong a countercurrent. 

I have no idea what is to be expected after the death of IP, but if we want to get into foundational philosophy Mr. Merges, let's turn to Socrates who said: 

"For the fear of death is indeed the pretence of wisdom, and not real wisdom, being a pretence of knowing the unkown; and no one knows whether death, which men in their fear apprehend to be the greatest evil, may not be the greatest good. Is not this ignorance of a disgraceful sort, the ignorance which is the conceit that a man knows what he does not know?" (Plato, The Apology). 

UnFair Use: Attacking Freedom

Freedom was attacked from two very different points of view: from the state interventionism (social planner proposition) and from the Anti IP movement (don’t attack me yet, let me explain).

 

I won’t belabor the second point, which has already been pontificated:

 

Importantly, unique art cannot be copied and digitally distributed. That is, the substance might be copied, but not the original thing, art resides with the act of the artist, which cannot be replicated, except by the artist herself. This is evident from the fact that record labels are not profitable, and unique live performances are what win musicians their bread.

 

Oops[1]...  Should I have been using quotation marks?

 

As I hinted last class, I have at least sympathy for the “social planner” regime in countries like France.[2]  Professor Picker mentioned last class that to endorse such an option entails a foundational shift in though, but if Professor Merges’ book is not an opportunity to think big-picture, what is?

 

Here are some examples of France’s attack on freedom:

 

1. France set quotas on foreign film screenings after World War II, while funding it’s own film production through quality-rewarding programs.[3]
2. 1% of France’s budget goes to supporting the arts.
3. The French government supports artists who devote 507 hours of their year to a specific art.[4]
4. The French government recently (2009) combated homophobia by sponsoring a series of films.[5]
5. Last, the French have considered a tax on websites including Google and Facebook, the proceeds of which would support the web presence of French artists.[6]

 

I share some of Pedro’s concerns about the single-entity decision-making many of these programs represent.  The French government is choosing to combat homophobia and fund only certain arts—clearly policy decisions.  But we might be less concerned about single-entity decisions in a context like France’s—a smaller country with a multitude of equally pretentious neighbors—than in a context like China’s.  Further, some of these programs seem less political if we are concerned with efficiency and artistic progress.  Much of the 1% of France’s budget that goes towards the arts goes towards museums, for example, which draw millions of visitors to the capitol each year and ensure that French art maintain its status in the world.[7]  And contrary to Ryan’s position that charity is accomplished more efficiently through private parties than through government spending, any firm assertion of either position in the art world would be too bold to consider.[8]

 

My first long-winded point is thus: at least in the realm of art, there are viable social-planning alternatives to enforced copyright regimes.  Those alternatives could equally protect and encourage the creative professionals Professor Merges wants to reward, while allowing for the “art qua art” that Angus seems so interested in.

 

The bigger, unanswered question: do any of Merges’ primers—that property should be treated as a right, that we should consider transaction costs and distributional effects, and that we should err in favor of allowing transactions and waiver—actually suggest that strong IP laws and litigated outcomes are normatively better than some government sponsorship and government-overseen IP transactions?  For me the evidence is lacking and the answer uncertain.    

 

 

 

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[1] looks pretty replicated to me.  apologies to pedro and angus for my theft.

[2] http://www.guardian.co.uk/world/2011/mar/24/france-arts-revolution

[3] http://fgimello.free.fr/documents/1950(US).pdf

[4] http://fr.wikipedia.org/wiki/Intermittent, couldn’t find it in English.

[5] http://www.queerty.com/french-government-combats-homophobia-by-sponsoring-films-now-brought-to-nyc-by-a-queer-arts-foundation-20110610/

[6] http://www.zeropaid.com/news/87612/french-pres-considers-google-tax-to-help-artists/

[7] http://www.artinfo.com/news/story/33619/louvre-remains-attendance-champion/

[8] On the side of private party patronage, see the Renaissance.  On the other hand, see the best State-sponsored poster ever: http://digital.library.unt.edu/ark:/67531/metadc517/m1/1/

 

Some thoughts on Fair Use

    As expected, in the second half of Justifying Intellectual Property, Merges shifts away from the discussion of foundational principles towards a more practical and normative policy discussion of IP law. While the first half of the book was interesting to a certain extent, it seemed like a very academic exercise, the purpose of which was questionable from the start ("In the vast majority of cases, the new normative grounding does not affect my view of correct policy in any way." p.11). I found the second half to be, in contrast, rooted in realistic practical considerations and therefore much more interesting and thought-provoking.

    I was particularly interested in Merges' defense of a strong IP that focuses on protecting "creative professionals" (and notably, the big media companies) rather than amateurs, with the underlying assumption that creativity on the part of amateurs will not be adversely affected by such a regime. This view, which I found to have a lot of merit, is not uncontroversial: in fact, a lot of the online discourse on IP focuses on promoting the rights of the amateur individual creators at the expense of the large media companies who struggle to perpetuate an unsustainable business model.

    Overall, I think I was persuaded by the author's basic idea--that is to focus on the creative professionals--even though I would not initially have considered crafting an IP policy on the basis of a distinction between paid professionals and amateurs. I do agree with the author's observation that "amateur culture in all its forms and all myriad glories can and will thrive even in the presence of strong property rights that support a creative professional class." (p.248). 

    The only part where I would disagree with the author seems to be on the creation of "add-on" content, and the activities of "remixers" and "mashup artists." While the author does go into a fairly detailed discussion of "Fair Use" doctrine, which could provide the basis for protecting add-on or remixing content, the author gives compelling reasons (but do we really need to bring up Locke and Kant again?) to side with the original content creators. Yet I think there are equally good reasons to defend Fair Use when applied to secondary works derived from original content.

    There is plenty of content that, despite relying on previous content, is highly original. This is true even of some very ancient content. Sometimes the new content is more popular than the old, and probably desirable for society. I cannot help but think that there is a way to promote such new derivative content, while still protecting the rights of the original creators. I would take two questions into consideration when determining what to protect and what not to protect: first, how creative is the new material? second, how does it affect the old material? 

    The first question is admittedly the most difficult. Judging how creative something is seems subjective and not very amenable to a bright line legal rule. Yet in many cases, it would simply be a matter of assessing how similar the new content is to the old. Only if it is very similar to the old do we have a problem. In most cases, this might be a question of labor: how much labor did the secondary author contribute?

    The second question is probably easier to resolve, and I think quite important. What I mean by it is primarily whether the new content adversely affects the original creator by competing against him. If the new content competes as a substitute with the old content, there are strong reasons for protecting the original owner. But where the new content does not cannibalize sales of the old, I tend to think that the old can only benefit from the greater exposure. As an example, consider Aerosmith's song "Dream On" and Eminem's rap song "Sing for the Moment," which uses samples from Aerosmith's song. I doubt that anyone listens to Eminem's song as a substitute for Aerosmith's song. If anything, I suspect that sales of Aerosmith's "Dream On" surged when Eminem's song came out.

    I understand that Merges would still want the decision to allow such use to fall with the original author, Aerosmith in the example above. The author's position is easy to embrace and support: if one agrees that the original owner has a property right to his creation, one might agree that he has the right to be capricious and refuse any use of his content, for any reason. Yet if one thinks that the secondary content is valuable to society, one might want to consider whether the original content creator is economically harmed by the new content, rather than whether his feelings are hurt. There are other areas of law where we apply an objective measure of harm, rather than an individual's idiosyncratic preferences. I think we could do the same when it comes to IP.

    One consideration remains: the secondary creator should be--to some extent--limited in his ability to profit off of the original creator's work without attribution. I'm not sure how this should be structured in terms of the law. Perhaps it should be enough that the secondary creator recognizes the work of the original creator, without having to pay a license fee.

    The biggest problem with Fair Use lies in the transaction costs. Currently, the presumption is that the original content owner has a strong property right, and a Fair Use defense only serves to rebut an infringement claim. For a lot of artists, locating the owner of the original content and negotiating a license would be so costly as to deter creation of secondary content. The author's observation that IP rights are often not enforced does not really change the fact that, when they are, they present a serious problem for the creators of secondary content who must incur very big legal fees to defend against infringement claims. Basing a presumption of Fair Use on the two criteria above (i.e. originality and harm to original author) might be difficult through a bright line legal rule, but it would do away with the transaction cost of locating the original IP owner. Furthermore, it would make the original IP owner less likely to bring suit, if he had to prove that he was being harmed by the alleged "infringer's" content.

    In conclusion, I am not convinced that one cannot achieve the  proclaimed objectives of strengthening IP protection and reducing transaction costs (for the most part costs of locating IP owners and negotiating licenses) while still embracing a strong Fair Use policy that promotes secondary content. Such a Fair Use policy would admittedly deprive authors of absolute property rights--but maybe we should be willing to accept that.

Why strong moral rights? The ghostwriter case.

In his book Merges propose a stronger enforceability of the moral rights. For Merges a copyright or patent holder should have some rights over his creation even after transferring it to another person. Those rights should include, among others, the right to be mentioned as the creator or author.

I agree with Merges in the importance of such a right. The right to be mentioned as the creator of an idea, when it is being used by others, is an important incentive for creation. In a market for ideas it is essential to be recognized as a creator because that’s a way to be acknowledge in the field and to obtain a better position in the market (in terms of competition). Nevertheless, I disagree with Merger in the extension of these so called moral rights.

For Merger these rights have two important features: (a) they can’t be alienated; (b) they give the right holder some control over his creation even after the transfer. Merger is so strict with this point of view that, for him, it should be prohibited for a right holder to alienate these rights even by a free willing transaction.

Unfortunately, Merger doesn’t give us any explanation or justification for this. And more important, Merger doesn’t explain how this idea plays with another important idea of the IP system: generate incentives for new creations. Indeed, allowing the free transfer of these rights can create an important market that, at the same time, would allow authors and creators to obtain finance for their work (and survival!). An example could help us to understand this idea.

In the writing and music industry there is a very interesting figure known as the ghostwriter[1]. In simple words, a ghostwriter is a professional writer who is paid to write books, articles, or songs for other persons (who are going to be credited as the authors). As an example, a ghostwriter is usually hired for celebrities to write their biographies[2].

Why a person could agree to accept this kind of job? Because for new writers is a very good way to finance his own activities and creations. Indeed, while working for other people, new writers can obtain the funds they need to live and work in their own material. In this sense, the possibility to transfer the right to be credited as an author could be a very important way for new artists to keep in business. Only in this way they could afford their living costs and continue with their own work. In some way, this possibility allows them to create more ideas.

In this context, why the regulation should prohibit these kind of free transactions? Isn’t this going against the idea of generating incentives for new creations? Isn’t this going against Kant’s idea of waiving rights (at least on some way) that Merges proposed?

Probably a romantic view of acknowledge lead Merges to this proposal. Nevertheless, reality shows us the importance of these kinds of agreements. Indeed, we shouldn’t see these agreements as something unfair or immoral, but as something that at the end benefits artists.

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[1] For more information see http://en.wikipedia.org/wiki/Ghostwriter

[2] A good example of this could be saw in the film “The Ghost Writer”, by Roman Polanski. See http://www.youtube.com/watch?v=L_AerBW0EcI

 

Intellectual Property: It Matters

After finishing reading the book, I still don’t get it. I am still convinced that the strongest foundations of Intellectual Property (“IP”), and the most unquestionable ones, are economics and maximization of social welfare (utilitarianism). The basic principles and necessary limitations proposed by Professor Merges can be found in those foundations and in other commonly agreed morality principles that are part of the society’s utility function.

Even though the author defends a solid philosophical foundation for IP, I think that his main weapons are utilitarian. In an important part of his argumentation, the solid principles where he bases his proposals are efficiency, use of incentives, and avoidance of free riding. The author recognizes efficiency as a “Midlevel Principle”, but, from my point of view, he applies it as a foundation.

Nevertheless, the creative proposition of the author is that even this kind of strong divergences on foundations do not matter, as long as we agree on the basic principle “that IP policy should be about rewarding creative professionals while reducing transaction costs”[1] of complete waivers and exchange of rights[2] (seems utilitarian to me…). The good news is that we agree on this basic principle, so I can forget the philosophical differences and focus on a value that was strongly attacked in our last class: freedom.

Freedom was attacked from two very different points of view: from the state interventionism (social planner proposition) and from the Anti IP movement (don’t attack me yet, let me explain).

State interventionism, or the idea of a social planner that can maximize social welfare, sounds promising but it is unfeasible or at least even more imperfect than the “market”. The amount of information that the social planner needs to manage in order to maximize social welfare (and not only welfare of a political party or government officials) is unmanageable[3].

The example of China[4] is useful. Even if we assume that the planning is in some way doable and in some degree successful, the sole fact that the “the government decides something is desirable” shocks the essence of freedom. Someone can sustain that freedom as a valuable principle is overrated (certainly not me), but in this case the restraint on freedom also implies inefficiencies. On the one hand, the inefficiency on allocating resources due the unmanageability of consumers’ information (desires, tastes, willingness to pay, etc.). If the consumers’ valuation is not perfectly known and managed, it is going to produce overinvestment or underinvestment in certain industries and products. On the other hand, government intervention is also inefficient because of the dead weight loss produced by the taxation necessary for collecting “unlimited resources” for research and development. Finally, I think that this model also restricts personal freedom of the creative professionals and harms their personal welfare, by eliminating any kind of market for their services and forcing them to a full-on state patronage (“recognized as perhaps the worst of all possible worlds"[5]).

The other attack on freedom was in terms of an Anti IP movement. At first, this movement appears as a warden of freedom ("information wants to be free"[6]), but I think that this view is not completely true. For exercising freedom we need choices. As a consumer I am free to choose between an inexpensive and simple cell phone, and a hi-tech Iphone 4s; between watching a free movie on YouTube and paying to see a Hollywood style movie on the theaters; or between using an open source word processor and buying Microsoft Office. As long as we have options of different qualities and prices we can exercise our freedom. In this sense, eliminating IP rights or reducing its enforcement to a minimum restricts the choices available on the market.

Maybe it is true that without IP rights innovation and creativity will flourish, choices may increase in quantity, but not always in quality. Innovation and creativity in products that require enormous investments or full-time dedication will disappear[7].

If companies know that they will not recoup their investments without an IP protection because they will be forced by the competitive market to charge their marginal costs, they are not going to invest in the first place. Without those investments, consumers will be unjustifiably limited in their choices, even when they were willing to pay the corresponding price. If I want to pay for a Hollywood style movie or I want to pay for the most effective antihistamine, why shouldn’t I have access to it?

The same will occur with those creative or innovative works that require a full-time dedication and are not protected by a physical unique output. Without IP rights we may have millions of bloggers, but are we going to have serious literature? We may have millions of homemade science experiments with Mentos and Coke, but are we going to have serious scientists looking for new medications?

If we think that as lawyers we deserve to get paid, why shouldn’t creative professionals deserve the profits of their work? “The ability to make a real living from creative works is what IP is all about”[8]. Without creating a market for creativity and innovation, full-time creative professionals will disappear or they will be forced to look for employments in organizations that are willing to get the non-pecuniary benefits of their creations in exchange of a salary (patronage?).

Even though I disagree with the Anti IP movement, I should recognize that freedom can be enhanced in the IP market. After all, freedom for the creative professionals also means an effective and cost efficient waiver system. Instead of suppressing IP as a whole, with the abovementioned consequences, maybe we can follow Merges’s idea and create a “waiver mechanism directly into copyright (and patent) law, and to create a central online registry that would record waivers and allow them to be searched and verified easily”[9], facilitating collaborative creativity when the right holders agree.

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[1] Robert P. Merges, Justifying Intellectual Property, Kindle Edition., 2011, Kindle Location 3175.

[2] Ibid., Kindle Locations 3309–3311.

[3] Friedrich A. von (Friedrich August) Hayek and Institute for Humane Studies, The use of knowledge in society, vol. 5, Reprint (Menlo Park, Calif.: Institute for Humane Studies, Inc., 197AD).

[4] http://picker.typepad.com/picker_seminar/2012/01/lesser-bloggers-address-great-bloggers-pontificate-1.html

[5] Merges, Justifying Intellectual Property, Kindle Location 2976.

[6] Ibid., Kindle Locations 3482–3483.

[7] Ibid., Kindle Locations 3250–3252.

[8] Ibid., Kindle Location 3221.

[9] Ibid., Kindle Locations 3347–3348.

Criticism Sandwich

So, I think the best way to do this post is as a criticism sandwich (you know, compliment + criticism + compliment) -- partially because I'm hungry, partially because I think it's nicer that way, and partially because I like symmetry.

I am glad I read this book; I liked how broadly it covered the principles and justifications for intellectual property protection, and I enjoyed thinking through their implications on trending topics in IP. Furthermore, I found it very readable, and I simply enjoyed it. 

That said (here comes the criticism), I do think the analysis of the topics didn't fully delve into many of the principles, provisos and other guides that were covered in the first half of the book; instead it seemed these arguments were simply used as things that were "invoked" when it corroborated with his viewpoint and ignored when inconvenient. In the first half, Merges discusses transaction costs and acknowledges their impact -- increasing "friction" -- on IP and the need to weigh the costs and benefits. I was surprised, then, when the discussion regarding the digital revolution failed to trigger a discussion of transaction costs. In my mind, the biggest difference from then to now is that the costs and benefits have changed. Transmission costs are now much lower, the cost of enforcement is much higher, and the potential benefits of swarming masses of people wanting to create are very high. To ignore this difference results in a somewhat unsatifying coverage of the topic. 

Furthermore, while there were a number of arguments and uses of logic I disagreed with, my more basic issue with the discussion on digital rights was the lack of self-awareness. It seems the fundamental difference between Merges and his opposition is that he discounts the value of a lot of what is being created by amateurs and they do not. This basic valuation difference is important especially given his reliance upon Kant's Universal Principle which requires a balancing of people's interests; the balance will always seem "off" when people simply disagree on valuation.

The discussion of Locke, Rawls, fair use, etcetera, all seems kind of moot when the basic assumptions underpinning the arguments are simply at odds with one another. He praises creative professionals, states that "nothing critical is lost if a particular work is placed outside the reach of the remixer," seems unconcerned with chilling effects because the internet simply abounds with stuff anyway, etc -- his disdain for the amateur is readily apparent. So, to the extent he truly wants to make his argument, it seems his first priority should be to justify his position and then to build upon that. For someone who begins a book on intellectual property with the creation of earth, it's surprising he missed that fundamental step. 

But to finish off this post, I should say that still found the book very illuminating. For example, any diehard fan of old school adventure games probably laments the mass of IP rights to games like Monkey Island which spent years (and years!) languishing away in the hands of companies like Sierra and LucasArts. In some cases, it resulted in the development of fan games, but they were often subject to much uncertainty. For example, King's Quest: The Silver Lining spent ten years in stop-and-start development, waiting for official approval...only to have it rescinded and later re-approved^[1]. In other cases, when original creators were separated from control over their intellectual property as creative differences arose, it resulted in disgruntled creators^[2] who never had their visions come to fruition (the true secret of Monkey Island will never be known!) and very disappointed fans who still hope for a "true" sequel to the series.

In Merges presenting his discussions of various topics, I found myself thinking about how different conceptions of IP rights would have impacted those situations -- it seems the use of waiver failed, but a more formalized approach could have been successful for the King's Quest game; the failure of the corporate ownership shows why IP is personal to some extent and perhaps the failure could have been circumvented through Lessig's differentiation of control vs. compensation for IP; or, perhaps fair use could have been made to apply in both cases? And so on.  In reading Justifying Intellectual Property, I found a new set of concepts to and ideas to apply to my views on intellectual property and digital rights. 

Could Stronger IP Rights Actually Lead to a Better Life for the Poor in Developing Countries?

    When reading Merges' chapter entitled Developing World Drugs, I could not help thinking that maybe developing countries are better off with strong IP protection, and not just for the intergenerational effect of more drugs being discovered because of increased investments that Merges mentioned. My argument is that strong IP protection leads to concentrated wealth which then finds its way into private charities that tend to be more efficient than government run programs. Although I obviously do not have sufficient statistical evidence to support my hypothesis, I think it is at least something worth considering.

    For starters, I think it safe to assume that strong IP protection will lead to a larger concentration of wealth than would be seen in a world with weaker IP rights. Actors could not request multimillion-dollar salaries without strong copyright protection, and individual inventors would have far less "million dollar ideas" if they could not protect those ideas with patents. Without IP protection, Bill Gates and Bono, two of the worlds' best not philanthropists, simply would not exist.

Many individuals, who make their billions by IP rights, eventually end up giving large amount of their fortunes to charities that help developing countries. For example, Bill Gates just donated another $750 million to help those with AIDS in Africa. His fortune and the resulting Gates Foundation would not have been possible without strong IP rights. In addition, Gates, along with other's whose fortunes depended on IP rights, such as George Lucas and Mark Zuckerberg have pledged to give away over half of their wealth upon their death. Although one might argue in an alternative universe, overall charity would have been higher if the public did not have to pay monopoly prices for copyrighted and patented goods, I do not think this would actually happen. If it costs the average American $50 less to buy a computer, I am skeptical that this will have a huge increase in the amount he donates to charities. Part of the reason the ultra-rich are willing to donate such large percentages of their incomes is preciously because they are ultra-rich and simply have more money than they or their immediate descendants can ever spend. In essence, the concentration of wealth may help the poor in developing counties at the expense of middle-class consumers in the United States.

Although aid to developing countries is also accomplished by government taxation, there is ample evidence suggesting that private charities are more efficient than government programs. In fact, today 70% of every tax dollar designated to helping to poor actually pays for government bureaucrats. Another reason why we might prefer paying a "tax" to holders of IP rights is that Congress, which needs to consider its constituencies and diplomatic relationships when deciding where to send aid, might not be able to help those with the greatest need. For example, there is currently a large pushback against government-backed foreign aid because of the national debt, however a private philanthropists is free to give to what he deems to be the most deserving cause even if it is in another country.

    Obviously, this proposal is not without its flaws. For starters, I have no hard evidence that the resulting aid received by those in developing countries is larger because of concentrated wealth created by IP rights (although I have strong hunch it is). Also, the theory falls apart if the IP right are held by corporations and do not lead to the creation of an ultra-rich class. Furthermore, there is no guarantee that the philanthropic craze that has currently taken hold of many of our country's richest citizens will last or is just a fad. In addition, our IP philanthropists might have odd choices of what charities to donate to and as a result funding might not end up where it could do the most good.

The Pontification Sallies Forth, and Flourishes Into A Manifesto

Let us develop the critique of IP somewhat by wading into reality. I begin with sarcasm: I don’t really care if you believe what I say, because it doesn’t matter if you believe it, I believe it. I must be right.

I would like to preface this with a few understandings. I am not a communist, in fact I quite oppose communism. I believe in the profit motive, and the drive to better oneself, hard work, and succeeding by striving, but coming from a somewhat socialist country (Canada), I don’t believe in the maximization of profit to the exclusion of all else, that is, a pure free market. 

Having read through the more applicable, second half of the book, I am only more committed to the position of opposing IP. I will defend myself by addressing concerns that could be raised: the most instinctively appealing real-life outcome that can be raised against my position would be to ask what becomes of the creative artists that are essentially unable to protect their works against copying? My first response would be to reference my premise: I believe that art is for the sake of art alone. Thus, maybe at the point an artist has become big enough to sign with a record label in hopes of massive profits they’ve become profit seekers and not artists that are simply in it for the art, and the value of that art diminishes. Maybe we also do not want to encourage exorbitant profits for individual musicians? This is the moral argument. Secondly, and more importantly, unique art cannot be copied and digitally distributed. That is, the substance might be copied, but not the original thing, art resides with the act of the artist, which cannot be replicated, except by the artist herself. This is evident from the fact that record labels are not profitable, and unique live performances are what win musicians their bread.

Some cite the individualizing force and empowerment that copyrights grant. I point again to my above second point, and drive my point further by noting that the empowerment of an artist comes from the uniqueness of their art and the desire of people to witness that uniqueness, that originality. This is why copies of famous paintings do not sell, only originals. This, I believe, would hold true whether or not IP or copyrights existed. People would continue to pay to see an artist they love live, and pay to buy only a painting they know to be original. In China, art is thriving, and contemporary Chinese art command some of the highest prices today in international art auctions. The copyright does not bring the value, it only creates monopolies. Without them, an artist could conceivably be able to gain more notoriety faster, through more free distribution of copies, which have no value inherently, but are attributed artificial value by copyrights. 

Some argue that the removal of IP will cause distortions to the market. I would say that it is human nature to create, and it is the imposition of IP over preexisting human incentives that have wrought the distortions, its removal will remove those distortions. If we believe that art is worthy for its own sake, and that dedicated artists will create for art’s sake either way, why worry about “distortions”? The question comes down to how do we value art? Art created by greedy artists that want to concentrate wealth and profit immensely, or art simply? When the IP premium is removed, incentive changes will happen, but dedicated/extremely popular artists will attract the market power to continue creating. I see the premium as the distortion, its removal a return to nature. Some may think that writers would suffer the most, as their works are easiest to copy: the originality of the writer lies in the printed word, which is easily copied. In response to this, I have faith that while competition from copies would drive prices down, people will place a certain premium on rewarding the writer. They will buy the original author’s work so long as the premium she exacts is not exorbitant. J.K Rowling may not become a billionaire in my world, but I don’t know if anyone should be. Of course, there would also be franchising, movies (maybe), merchandise, etc.

Then there is reverse engineering, and the argument that this would chill innovation. As I stated in class before, reverse engineering does not, in the end, deter profit incentives. In fact, fiercer competition and the pressure to be better than your mimics will encourage innovation. Indeed, one sees constantly American executives arguing that innovation is the only way America out-competes China, using this as justification for their sales of advanced products into China, where they shall inevitably be copied. A cynical explanation would be that they value short-term profits over long-term competitiveness. But faith in the ability to continue innovating must play a role.

As a final attack on IP, I would argue that for specific industries such as pharmaceuticals, it only really encourages disproportionate concentration of resources into niche areas. A popular complaint about big pharma in America today is the over-concentration of resources into developing profitable but rare diseases affecting small populations but affordable to the wealthy or well insured, to the neglect of drugs for more endemic illnesses. In a world without IP, this mode of medical research would simply collapse as pharmaceutical companies would have no reason to invest so heavily in research and development. I believe that this is a good thing, and that drug development should be a social service provided by the government. A good example is Artemisia, the best malaria drug on the market today, discovered under the guidance and direction of the communist Chinese government under Mao, which wanted to target a 3^rd world disease that had huge socio-economic consequences. These massively costly illnesses are where the resources should be directed. The treatment of disease, a social undertaking, should not be dictated by profit motives.

Finally, some might say that my vision for an IP free world is brutal and inhospitable, as ruthless competition is visited upon all creative participants in the market. I believe that in a world where everything competes down to marginal cost, society gains—through distillation—truth. The true price, the true cost, the true value of things and ideas exchanged.

But here the sad part begins. Looking at everything, I don’t have a shred of hope that what I am advocating will succeed, or even convince anyone. Because I see the IP megalith as driven by and founded upon one of the most basic of human instincts: greed. For every artist creating for art’s sake, there’s an equally starved one who wants more than art, who sees at the end of his exertions, profit, huge amounts of it.

And so, the Chinese government, hitherto fore uninterested in IP protections, begins paying it heed when it realizes there’s massive profits to net, even though a system without IP was producing innovation aplenty, entertainment galore, and a perfectly functional, highly competitive economy free of the transaction costs exacted by IP, and free of concentration of massive profits to mega-conglomerates.

Greed, in the end, enables that. The instinct to crave massive profits is what the idea of IP feeds off of. It renders possible the beguiling prospect of turning individual acts of creativity into a windfall. It monetizes creativity, something we all possess to some degree. It therefore makes everyone think that a windfall might be possible, through the exercise of something they already innately possess. This is inevitably appealing to every human being.

I recognize that this instinct cannot be overcome. So while my version of an IP free society might be appealing to some, it isn’t possible in a world driven by desire to maximize profits, and indeed stands in utter contradiction to it. Maybe I’m the misguided one then, unable to accept the reality that the book is defending? This makes Professor Merges no better off though, as he’s just spent a whole book morally justifying something greed already makes self-evident, inevitable, and incontrovertible. This is why so much of the book had to be spent postulating moderating philosophies (charity, etc), in an attempt to restrain the baser instincts conjured up by the foundational propellant behind the IP idea: lust for money. 

But hey, who am I to talk? I’m going into corporate law.

 

Circumventing the subject

Merges’ discussion of IP in the digital age poses an almost Zen koan-like question – what, if anything, is the relevance of a book on IP in the modern era without mention of the Digital Millennium Copyright Act?

While it would be unfair to say that Merges never once utters the name of the statute (he does – twice, even! – in the footnotes), that omission speaks more about the focus of his work than do its 300 pages of scholarship. The DMCA, though not a copyright statute in the strict sense, has so greatly impacted the reality of IP in the digital age that ignoring it does a disservice both to his readers and his analysis.

The DMCA, though not a copyright statute per se, creates a separate right of action for any copyright holder who puts a digital barrier around his work in an effort to control access to it. If any user circumvents this barrier, he is liable to the copyright holder, regardless of whether he committed any wrong against the copyrighted work itself. This system, divorced from the proportionality of the copyright assigned to the protected work, casts doubt upon the usefulness of Merges’ parable of the bridge when applied to most of today’s consumable IP. If we were to factor the DMCA into Merges’ parable, it might look something like this:

Al owns a small plot of land along the river. His land occupies the southernmost point at which the land can be built; to the north there is a good mile or more of usable land, just as well-suited as his upon which the bridge can be built. This land is not Al’s; it is public land, owned by no-one. However, the country in question has recently passed a statute that makes it illegal to cut through fences in all situations. Al, in the middle of the night, erects a fence that blocks off the un-owned usable land along the river. The land inside the fence is not Al’s; in fact, he owns a relatively small portion of it. But the bridge-builders, upon arriving in the morning, cannot legally cut through the fence, even to access those parts of the land that are rightfully public.^[1]

Just as the fence allows Al to extend his functional ownership of the land around his own, the DMCA anti-circumvention provisions allow copyright holders to put up “No Trespassing” signs well outside the property lines of what the court has deemed theirs.

The DMCA, it seems, throws a monkey wrench into Merges’ philosophical analysis. Anti-circumvention protection has become the unavoidable reality in digital IP, some pushback (such as Amazon’s DRM-free mp3 store) notwithstanding.

While Merges might brand me a Digital Determinist, it’s hard to deny that the genie is out of the bottle when it comes to copyright online. Even strong IP rights become almost unenforceable when creative works find their way to the internet. Rather than restructuring the underlying IP rights to reassess the relative value of creative protection and the new technological reality, Congress instead created a secondary set of rights which ease enforcement. Unfortunately, the availability of these enforcement rights is utterly unrelated to the extent of the underlying copyright, and thus to Merges’ notion of proportionality. The resulting reality is that IP enforcement is often disproportionate to the scope of the relevant contribution. Unsurprisingly, this inconvenient truth is omitted from Merges’ analysis. 

I find Merges’ theory of proportionality to be optimistic, at best. Because it relies on the courts as a mitigating force, it presupposes the ability and willingness of affected parties to bring suit. However, the notion of proportionality, while great in theory, has little to do with the state of modern IP in practice.

 

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[1] Because I’m fond of indulging in creative analogy, I’ll throw this in as well. Some may recall the story of Yertle the turtle. Yertle (whom we shall refer to by another, completely randomly-selected name – say, “Walt” – in order to avoid running afoul of Dr. Seuss’ estate) is king of a rather small pond. For a long time, the tiny rock that serves as his throne allows him to only see the extent of his own pond, and all turtles agree that, his sight and his kingdom being coextensive, Walt is king of all he surveys. One day, however, Walt theorizes that if he could only see the land beyond the pond, he would rule that as well. So Walt orders the other turtles in the pond to form a giant stack, upon which he perches himself proudly, claiming – without any actual justification – everything for miles around him. Suddenly, this stack of turtles has let him expand his kingdom from a tiny pond to (in his mind) the entire surface of the earth! (Before he can exercise dominion over his newfound territory, however, a turtle at the bottom sneezes, and the stack comes tumbling down, leaving him “king of the mud.”)