Last year, we wrote about the importance of the Startup Act 2.0 in helping to create more jobs via startups (the creators of tons of new jobs in our economy), and now there's a new version, the Startup Act 3.0. The Senate bill is truly "bipartisan" -- sponsored by Senators Moran, Warner, Coons and Blunt. The key focus, as in the past, has been on solving the issue in which we are driving some of the best skilled tech workers to other countries to build companies, rather than bringing them to (or keeping them in) the US. Our visa policy for skilled workers has been flawed for way too long, and this takes us a step in a saner direction. With the President and both parties of Congress seemingly (finally) open to the idea of comprehensive immigration reform, hopefully something as basic as better immigration policies for skilled workers is no longer even remotely controversial. In fact, for the most part, it seems like a very large number of folks in Congress support such reforms. The issue that has tied it up in the past has been whether or not this needs to be its own thing, or if it needs to be tied to more comprehensive immigration reform. And, really, I would imagine that's still the same stumbling block this time around, but with more appetite for that, hopefully the Startup Act 3.0 can be a part of all of that.

In terms of specifics, the bill would boost new visas for foreign-born entrepreneurs (these are people who create jobs, not take them from others) as well as for foreign graduates of US universities who have advanced degrees in science, technology, engineering and math. We train them, we might as well get the direct benefit of their work after they graduate. This is different than the issue of H-1B visas for skilled immigrants -- which is also an important program, but one that has been abused too often by companies. In this case, the visas are for the individual, not the company, and it focuses strongly on immigrants who create companies and jobs. As with previous startup visa efforts, I do have one minor quibble, which is that the entrepreneur visas will require you to have raised at least $100,000 in outside investment (or for an investment business, have invested that much). That's lower than we've seen in past proposals, but still seems to predicate the idea of doing a startup with raising outside capital. In this day and age, that's less and less necessary for many types of companies. Similarly, they need to have hired 2 outside full time (non-family) employees, and by the end of four years, increased employment to at least five non-family employees. The bill is useful for many foreign born entrepreneurs, though I still would have liked to have seen a test for entrepreneurs who don't want to raise money, but are building successful bootstrapped businesses.

The bill also has a few other provisions designed to help startups, including making permanent a 100% exemption on capital gains taxes for investments held for at least five years in "qualified small businesses" (i.e., a way to encourage long-term investing in small businesses) and creating an R&D tax credit (up to $250k) for startups less than five years old and with less than $5 million in annual revenue. Basically, small businesses get a tax credit for investing in research and development.

I'm also a bit concerned about section 8, which focuses on "accelerating commercialization of taxpayer-funded research." This one basically provides grants and funding to universities to do more commercialization. In theory, this sounds good, but I worry about it in practice. Most universities have, unfortunately, decided that "commercialization" means getting lots of patents and then selling licenses. In other words, the push to "commercialize" university research hasn't actually led to much commercialization -- but rather an awful lot of universities turning into pseudo-patent trolls. The plan leaves open some of the details to the National Advisory Council on Innovation and Entrepreneurship. Hopefully, they recognize that merely pumping up patenting and "tech transfer offices" is not really about commercialization. In fact, a better way to encourage commercialization might be to make federally funded (i.e., taxpayer-funded) university research public domain, rather than patented. That would actually encourage more usage in industry.

Either way, there's a lot of good stuff in the bill, and this time... they've even put out a snazzy infographic to go with the bill. How can it not pass after that?

National Pie Day is not actually March 14th (although it really should be, if only to make it more memorable). But here's to the number, not the delicious dessert.

• Does pi contain every set of finite number sequences? The answer to that question may not be known, but the first trillion or so digits of pi appear to be statistically random -- with 0-9 appearing with even distributed frequency. [url]
• It's possible to calculate the nth digit of pi without calculating every previous digit. So the gazillionth digit of pi can be verified, if you really need to know it. [url]
• If you're thinking about coming up with a new way to calculate pi, you can check your work for the first several trillion digits. Beyond about 10 trillion digits, you're into record breaking territory, and you'll need to adopt some other strategies. [url]

If you'd like to read more awesome and interesting stuff, check out this unrelated (but not entirely random!) Techdirt post.

This is unfortunate. Despite plenty of research showing that patents do not, in fact, lead to increased innovation (but rather increased patenting), many still assume that there's a direct linkage. Of course, it is true that many successful industries see high rates of patents, but there is evidence that patents tend to lag the actual innovation, rather than predate it. That is, once an area or industry is innovative and successful then everyone rushes in to get patents and try to extract their piece of the pie, often slowing down the pace of innovation.

So it's fairly disappointing that the Brookings Institution, which normally does pretty good work on these kinds of things has put out a study about patents and innovation, and appears to be confusing correlation and causation in saying that patents lead to innovation and even (more ridiculously) that areas that aren't doing enough patenting need to beef up their patents to increase innovation:

Metro areas that produce a lot of patents—and the inventiveness that that implies—are more likely to see above-average gains in population, productivity, jobs, and education, according to a report from the Brookings Institution, a nonprofit research and policy think tank. And the bottom fourth of metro areas, the ones that produce the fewest patents, could gain as much as $4,300 per worker over a decade if they amped up their patent production to match the top fourth.

“If we were able to get the roughly 250 metropolitan areas that do very little patenting up to the level of the 100 that do a great deal of patenting, we’d be richer in an extraordinary way,” says Jonathan Rothwell, a lead researcher on the study. “It would make really a huge difference to economic development.”

Since the report focuses on successful metro areas, it seems that there are many, many other factors that may have resulted in the successful economic situations in those areas, and those other factors may also have led to the increase in patenting. Assuming a causal relationship and (worse) suggesting that all other regions need to do is up their patenting, is a dangerously ill-informed suggestion. While the report claims to account for "reverse" causation, it appears to make little to no effort to really account for the many, many variables that are easy to observe in every day life that lead to a correlation between patents and economic output.

I'd been working on a response to some of the many methodological problems I spotted in the report, and it was growing ever longer and longer... and then I saw that Eli Dourado did a much better and more concise job of it in explaining why the report is bogus. Dourado points to two possible explanations for the correlation, neither of which are accounted for by the paper:

These conclusions are unwarranted given the model and findings expressed in the paper. To see that this is the case, assume temporarily that patents do nothing to incentivize real innovation, and that they merely transfer wealth from consumers at large to the patent holder through firm profits. If this were the case, then we would find that measured output per worker was higher in metropolitan areas with more patents—exactly what the authors found!—because they are gaining profits at the expense of consumers in metropolitan areas with fewer patents. In other words, the authors could be laboring under a fallacy of composition. Just because patents enrich the MSAs that generate them doesn’t mean that they are a source of prosperity for the nation as a whole or that they increase social welfare.

Alternatively, assume temporarily that patents do nothing to incentivize real innovation, but that firms that produce valuable innovations must defensively patent them to avoid being taken to court for using their own inventions. If this were the case, then patents would correlate with real innovation, and therefore with output per worker, but they would not cause an increase in productivity. In addition, at least some of the measured increase in output would come from an influx of highly-paid intellectual property attorneys, which by assumption does not represent real added productivity. Note that the top-patenting MSA in the study is Silicon Valley, the part of the country where people are most concerned about defensive patenting. But the word “defensive” does not appear even one time in the report, the appendix, or the working paper.

The authors have done nothing to identify the effect of patents on productivity, which is to say, nothing to rule out either of the possible assumptions above. They are simply relying on the assumption that more patents means more innovation.

This is a major major flaw in the paper. It seems to assume that a whole bunch of things that simply aren't seen by folks who actually work in the industry, and makes little to no attempt to account for those other variables. In the comments, the lead researcher on the paper, Jonathan Rothwell, tries to defend the paper, by saying (in part) that they're just using patents as a proxy on inventiveness, and the paper should not be seen as supporting patents or the patent system itself:

Right up front, I think it is important to keep in mind that our study aimed to examine the effects of invention rather than the effects of patents themselves. Hundreds of economic papers have been written that use patents as a proxy measure of invention (based on detailed firm and industry level analysis), so I think that is fairly uncontroversial.

Just because lots of folks do it, it doesn't mean it's right. But the bigger issue is that while he claims that the paper is not an endorsement of patents specifically or increasingly patenting activity, that's not what he's telling the press. Just look at the quote we have above from what he told the National Journal. He specifically is saying that we should boost patenting in other metropolitan areas, suggesting that it would make "a huge difference to economic development." In other words, contrary to his claims in the blog comments, when talking to the press, he's pretty clear that he believes there's a direct causal relationship between patents and economic development. Furthermore, if he really believed that, he should have disclaimed, publicly, the title of that National Journal article, which explicitly says that patents (not "inventiveness") "matters to economic and job growth."

Also... if the report really is about "inventiveness" and not "patents," perhaps the paper should not have been called "Patenting Prosperity." Just saying.

Brookings, of course, is quite well-established and respected, and you can bet that pro-patent-system folks will be using this report to claim that "more patents are better" and that any reforms that are designed to push back on bad patents or to start limiting the number of patents we issue, would be a bad thing. Even though the report does, in fact, contain some arguments in favor of limiting certain types of patents and patent system abuse, those nuances will undoubtedly be lost. This report is going to get cited repeatedly as "evidence" that we need more patents and stronger patents, despite the fact that the actual evidence says no such thing.

One of the long-running themes here at Techdirt has been our insistence that the best way to combat any negative effects of piracy is for content creators to connect with fans, buyers, and pirates alike. If you treat people in a congenial, awesome way, the goodwill you garner will not only make up for any piracy negatives, but can actually propel your work to further success. Unfortunately, too few people seem to avoid the understandable but unproductive emotional response that comes with having your work show up on sites like The Pirate Bay. The vast majority of responses are vitriolic. Nevermind that some creators, such as when Hotline Miami's developers decided to embrace pirates, have experienced the boon of goodwill and sales as a result. No, anger and threats of legal action tend to rule the day.

That's why it's so important to offer up every example available that shows how mistaken this methodology is. With that in mind, witness how the developers of an indie RPG called Anodyne embraced the uploader of their game and used the exposure to propel themselves into the internet limelight. It all started, as these stories so often do, when a Pirate Bay user offered up a torrent for the game. Instead of losing their minds, the game's developers decided to be the second commenter on the torrent's page, reaching out to anyone interested in downloading the game and instead offering a better way to do so. The text of that comment follows:

Hi, I'm Sean! I'm one of the two guys who made Anodyne. It's neat that Anodyne's ehre and I'm glad that means more people can play it, though of course we'd love it if you bought the game! We're tryin' to get Greenlit on Steam so we'd really appreciate it if you and your friends gave us an upvote over at http://steamcommunity.com/sharedfiles/filedetails/?id=92921739.

Most importantly let us know what you think of the game and if you like it or if it fills you with burning rage! - we're on Twitter at @seagaia2 and @jonathankittaka.

Then they decided to go over the top in generosity by offering up free download codes for Anodyne and pointing readers to Desura.com to redeem them. They saw their game out there for free, reacted awesomely, and offered up their own way to download it for free. This response hits every major way I would have advised them to react to the torrent. They left all threats in their pockets, embraced those wanting to play the game (even for free), used it as a promotional tool as well as a way to crowdsource market and product data, and even threw in a bit of humor to boot. I don't know that I could have crafted the response better myself.

The response to their actions has been as swift as it has been universally positive. A Reddit discussion broke out almost immediately and Sean Hogan, the developer above, immediately jumped in to prove that his forward-thinking Pirate Bay comment wasn't some one-off bit of clarity.

"Yeah, piracy is inevitable so it's better to embrace it – plus, it gives lots of people who couldn't normally afford the game the opportunity to play it – and I think when you're a small group of developers (only my friend Jon and I made Anodyne), it's better to have lots of people able to experience your game," he wrote.

The publicity is of course a wonderful thing. Anodyne can only benefit from the positive reaction this story is creating, potentially leading to placement within Steam. But the story doesn't stop there. Because if you go searching for that original Anodyne listing on the Pirate Bay, you'll find it doesn't exist any longer. The site is notorious for refusing to remove such links, so the overwhelming likelihood is that it was taken down by the uploader. If so, this case no longer only serves as evidence that treating pirates well can be lucrative, but also that treating them well can cause them to second guess their decision to offer the content in the first place. Which, of course, throws the entire mantra that pirates are evil kids who just want everything for free into a logical tailspin. In any case, this is a textbook example of how to react to piracy.

Fun, dubious, privacy-violating stuff happening out in Texas where the Dept. of Motor Vehicles has made a tidy sum selling the information it collects (including names, addresses and makes/models owned) to a variety of private companies.

The Texas DMV claims its "top priority" is protecting drivers' information, but that hardly seems to be the case when it's pulling in $2.1 million a year selling it off. There are protections in place, but they are flimsy at best.

"The Texas Department of Motor Vehicles is the custodian of over 22 million currently registered vehicles in the state of Texas," Randy Elliston, Director of the Texas DMV, explained. "All of those records that are in our database, however, are protected under the Driver Privacy Protection Act."

Randy Elliston says the Driver Privacy Protection Act (DPPA) limits who can buy your information and what they can do with it.

It would be interesting to see what these "limits" are. The spreadsheet obtained by CBS 11 of Dallas, TX shows that 2,448 different entities purchased this information from the DMV last year. The purchasers listed range from towing companies to debt collectors to university parking lot patrols. Elliston states that the purchasing companies are not allowed to use the information for direct contact or advertising purposes.

A brief look at the spreadsheet seems to indicate the opposite: auto dealers make up the largest percentage of purchasers. Moreover, Elliston seems to have his facts wrong on the Driver Privacy Protection Act, at least as it pertains to Texas drivers.

The Driver Privacy Protection Act is a federal law. And the fine print actually says businesses can use your information for marketing or solicitations if the state has obtained your consent. That means, some drivers can opt in or out of these databases.

Problem is – Texas didn't adopt that portion of the law. So, drivers in the Lone Star State are stuck.

This has opened up driver data to nearly anyone who wants it. The spreadsheet shows insurance companies, debt collection agencies, title loan specialists, towing services and auctioneers all have access to these records. The response from Elliston? If you don't like it, complain about it.

Elliston says if you feel like your information is being abused you can report the company. "It has occurred in the past and when it has we've pulled the company's ability to use that data," Elliston noted.

Well, that is one way to deal with an influx of unsolicited mail after registering your vehicle to comply with state law. Another, better, way to deal with it would be to adopt the opt-in/out language that's currently missing. Registering a vehicle isn't optional, but having your name, address and vehicle info turned over to whoever requests it certainly should be.

We've written a few times about governments around the globe seeking to make use of lower-priced (and often more widely available) generic medicines for responding to serious diseases, rather than sticking with the more expensive name brand. Current international agreements, like TRIPs, allow countries to effectively "opt-out" of promises to respect other country's patent laws for the sake of supplying such medicine and, you know, saving lives. It's pretty clear that breaking the patent on these drugs is quite effective, driving costs down on a massive scale, making this part of healthcare much more cost-effective.

Of course, the pharma companies don't like this at all. So it should hardly be that big of a surprise that Senator Orrin Hatch directly tried to put pressure on Hillary Clinton and the Obama administration to stop efforts to promote more widespread use of generics in the developing world using these methods. The link above highlights that Hatch sent then Secretary of State Hillary Clinton a letter that suggested he's quite upset that the US-funded "Global Fund to Fight AIDS, Tuberculosis and Malaria" was training people in different countries to explore compulsory licenses of drugs or other ways to make use of generics.

Of course, if you just read Hatch's letter (embedded below), you'd be forgiven for being confused. In it, he claims to be outraged that the Global Fund is encouraging various countries to buy more expensive generics of "cheaper" brand name drugs. Huh? In what environment do generic drugs cost more than the brand name? Also, he appears to just be wrong. Part of the data that he based his complaint on comes from a presentation (embedded with the letter) from the Global Fund, in which they have a few graphs showing that (as you would expect if you were anyone but Orrin Hatch) the generic versions are, in fact, cheaper, which is obviously why they were recommending making use of the option.

So, even as Hatch's letter is full of bluster about misspending money, the details actually seem to suggest that they saved money.

In the letter, Hatch also claims that the presentation directly calls on countries to "disregard" the TRIPS Agreement. But, again, the attached presentation appears to tell the opposite story, with a specific call to seek solutions that comply with TRIPs.

Recipients must procure their products in accordance with national and international laws. The Global Fund encourages recipients to apply the flexibilities provided within national laws and in the World Trade Organization's Agreement on Trade-related Aspects of Intellectual Property rights (TRIPS)...

In other words, directly contrasting Hatch's claims, the Global Fund appeared to tell countries to comply with TRIPs, but (correctly) noted that there were some exceptions built within the law that allowed them to seek compulsory licensing and the use of much cheaper generics. Still, there may have been some behind-the-scenes maneuvering as well. As the IP-Watch report notes, soon after all of this, the executive director of the Global Fund, Michel Kazatchkine, resigned. The report suggests this was due to US pressure over Global Fund's daring effort to tell developing countries what their international agreements actually allow. Also: the replacement, Mark Dybul, is a US official, likely to make sure that the Global Fund works in the same manner as Hatch would like -- artificially keeping the big drug makers happily without competition and with artificially high profits, even as healthcare in the developing world might suffer.

Incredibly, Hatch actually seems to be arguing that by suggesting developing countries explore generics, it's putting people at risk because... well, there's a gap in the explanation, but it appears to be due to big pharma companies feeling they need such subsidies to make the drugs in the first place. From the letter:

By advocating for developing countries to disregard the Agreement on Trade-Related Aspects of Intellectual Property Rights (TRIPS) through issuing compulsory licenses to gain access to Global Fund grants, we are abusing the system. Access to these products is vital to our success in fighting the war on HIV/AIDS and actions inconsistent with patent law such as these will only hinder our ability to work in partnership with the companies that have provided the intellectual property rights to develop generic versions of their products.

Got it? If you're a developing nation seeking to stem the AIDS epidemic by making AIDS drugs actually available to those with the disease, you are are actually decreasing the success of the war on AIDS because [something, something, something] big pharma will take their ball and go home. Of course, there's no actual evidence to support this, and tons of evidence that shows that developing countries who actually set a compulsory license on drugs related to critical diseases, actually do help deal with serious problems. There is no evidence that this suddenly scares companies into not making the drugs at all. They still make plenty of money in the developed world off of those drugs.

Just to summarize, though, an actual US Senator, Orrin Hatch argued that, by having the Global Fund advocate for better, cheaper generic medicines, as clearly allowed under international agreements, that the Global Fund is somehow paying more for medicines (they're not) and convincing big pharma to fail in the war against these diseases (they're not). It's no secret that politicians aren't always in sync with the truth, but this is significantly more blatant a misrepresentation than is normal.

Exactly as predicted yesterday, President Obama talked about cybersecurity in last night's State of the Union address, including his plan to sign an executive order on cybersecurity. What's a bit surprising is that the executive order... is actually pretty reasonable. Unlike some earlier drafts, it appears that the White House actually took the privacy concerns fairly seriously. Most of the executive order focuses on the government sharing "threat info" with companies rather than with companies sharing info with the government. There is some support for companies sharing information back, but with some clear privacy standards. As always, how this works in practice will be more important than what's written down now.

That said, this raises a pretty big question: if this is in place, why do we need CISPA (or any other cybersecurity regulations). Well, to be clear, this doesn't raise that question -- that question has been out there all along. Our biggest concern with all of this talk about "cybersecurity" is that no one ever seems to explain why it's actually needed, other than vague threats of evil bogeymen hacking away at our computer systems. But they've never shown what current laws are a problem and what important information sharing is currently blocked because of existing laws. Furthermore, they haven't explained what the real risk we're facing is. The Hollywood inspired stories of evil hackers taking down airplanes make for nice visuals, but have little basis in truth. So now we have a document that lets the government helps companies if there is a real attack. Why do we need anything more?

CISPA, in particular, doesn't seem to add anything of value to what's already in the exec order, other than trying to free up companies from any possible liability when they hand over your info to government agencies based on vague standards concerning "threats" (and then those government agencies can then use that info for pretty much anything). So rather than focusing on legislation, why not watch how well things play out with this executive order in place?

Google, being the undisputed search engine king, is no stranger to concerns over the privacy of its users. Everything from odd fears over their privacy policy to the images on Google maps has been hurled at them, with most of the intelligent analysis of said concerns amounting to indifferent shoulder shrugs. Privacy is important, of course, but there's yet to be any sense of malicious intent or gross oversight in these cases. Rather, they tend to fall into the category of potentially yet unlikely dangers brought about by the very nature of expanded technology.

Perhaps that's why it feels so strange to learn that Google's Play store is so callous with user data, offering up names, street addresses, and email addresses to app developers when their products are purchased. This, according to developer Dan Nolan in Australia.

"Let me make this crystal clear, every App purchase you make on Google Play gives the developer your name, suburb and email address with no indication that this information is actually being transferred," Nolan wrote on his blog. "With the information I have available to me through the checkout portal I could track down and harass users who left negative reviews or refunded the app purchase."

If accurate, Google making that information available is at best stupid. As the selling platform, there's simply no reason to do it. Why does the guy or girl who created the Fat Booth app that so delights my friends need to know where I sleep at night? It might be a case where there's confusion about the roles each one is playing. If Google merely views itself as a platform for others to create a store, then you could kind of see where this made sense. App developers are then setting up their own "store" where there are advantages to them having a direct relationship with their customers. The problem, however, is that users don't view it this way. They think of Google as "the store" and this looks like them handing over their private info to the suppliers. And that certainly feels like a pretty massive privacy breach.

More importantly, as the article notes, the implications on how malware creators could exploit this are even more worrisome.

With Google customers' details just sitting in developers accounts, all it would take is a half decent piece of malware software for that information to be accessed. These personal details could then be used to access the users' bank details. That's also more than enough information to be able to access your other devices which could also be mined for more data - insurance information, other credit cards - which could then be used to access your banking credentials.

Due to these very concerns, Nolan expresses his displeasure and discomfort with having that information at all. Worse, if there's any way to opt out of receiving it, he can't seem to find it. Just as worrisome as the flaw is the fact that no one else bothered to report it. Whether this was laziness, ignorance, or the very real possibility that many developers were doing something underhanded with their customers' information is unclear, but all three possibilities are damning to Google, which certainly should have known better. Worse yet, Google is quite clear in their TOS that it can store this information once you provide it, but there's is no mention of their passing along that data to app developers in their privacy statement.

While there's yet to be any response from Google as of the time of this writing, the original article did note that Google had already requested an amendment to the story, meaning what remains of it is likely accurate. The speed with which Google needs to fix this would be mach-infinity.

Way back 1841, UK politician Thomas Macaulay famously argued against the extension of copyright by saying that such monopolies:

We have, then, only one resource left. We must betake ourselves to copyright, be the inconveniences of copyright what they may. Those inconveniences, in truth, are neither few nor small. Copyright is monopoly, and produces all the effects which the general voice of mankind attributes to monopoly. My honourable and learned friend talks very contemptuously of those who are led away by the theory that monopoly makes things dear. That monopoly makes things dear is certainly a theory, as all the great truths which have been established by the experience of all ages and nations, and which are taken for granted in all reasonings, may be said to be theories. It is a theory in the same sense in which it is a theory that day and night follow each other, that lead is heavier than water, that bread nourishes, that arsenic poisons, that alcohol intoxicates. If, as my honourable and learned friend seems to think, the whole world is in the wrong on this point, if the real effect of monopoly is to make articles good and cheap, why does he stop short in his career of change? Why does he limit the operation of so salutary a principle to sixty years? Why does he consent to anything short of a perpetuity? He told us that in consenting to anything short of a perpetuity he was making a compromise between extreme right and expediency. But if his opinion about monopoly be correct, extreme right and expediency would coincide. Or rather, why should we not restore the monopoly of the East India trade to the East India Company? Why should we not revive all those old monopolies which, in Elizabeth's reign, galled our fathers so severely that, maddened by intolerable wrong, they opposed to their sovereign a resistance before which her haughty spirit quailed for the first and for the last time? Was it the cheapness and excellence of commodities that then so violently stirred the indignation of the English people?

I believe, Sir, that I may with safety take it for granted that the effect of monopoly generally is to make articles scarce, to make them dear, and to make them bad.

Indeed, they do make things scarce and dear. A group of researchers, including Petra Moser, whose excellent work we've covered in the past, have been exploring the impact of copyright term extension on works, and it shows pretty unequivocally, that copyright extension has a pretty massive impact by raising the cost of books (pdf) as the copyright is extended. This important research suggests that other research, arguing in favor of copyright term extension by saying that it has no such impact, may be incorrect.

This is important, because we're quickly approaching the time when we're likely to see renewed efforts towards copyright extension, and we've already begun to see attempts by copyright maximalists to argue for perpetual copyright. Stan Liebowitz, for example, has been trying to argue that copyright extension (or even perpetual copyright) is a sensible position, because the public domain is somehow an unfair "tax."

The truth is the opposite. Copyright extension is an unfair tax on the public by doing the exact opposite of the claimed purpose of copyright. Over and over again, we are told that copyright is important in increasing access and diffusion of knowledge -- but this new research shows the opposite. It shows that for every year of increase in copyright term, the price of an item increased by 8%. Add things up on a 20 year copyright term extension, and we're talking about a rather massive monopoly rent (tax) from the public directed to the heirs of certain creators.

This latest research looked back at the UK Copyright Act of 1814, which has some specific features that made it easier for the researchers to compare different cases and to pretty conclusively exclude other factors as being the causes of the price difference. Much of the paper is taken up explaining the details, and you can dig in if you'd like, but suffice it to say, this appears to be a case where the researchers had enough data that they could isolate the impact of copyright term extension specifically by using the fact that the Act increased copyright term for dead authors, but not the living. And the impact was clear:

Difference-in-difference analyses of these data indicate that extensions in the length of copyright led to a substantial increase in the price of books. Regressions with author and book age fixed effects indicate that – after the length of copyright for dead authors doubled from 14 to 28 years in 1814 - the price of books by dead authors increased by 20.02 additional shillings compared with books by living authors. Compared with an average price of 17.79 shillings for all editions after 1814, this implies an increase of 8 percent for each additional year of copyright, and an elasticity of price with respect to longer copyright of 0.9. These estimates are robust to controlling for genre, literary quality, and physical characteristics (page numbers and book sizes). Estimates of time-varying effects indicate that these effects became statistically significant six years after the Act, with no significant pre-trends.

Simply put, the impact of copyright term extension was to massively increase the cost of books by authors covered by that extension. Comparing it to works not covered by the extension showed no similar increase in price. Furthermore, additional explorations ruled out nearly all other possible explanations, showing that the results here were robust.

In case it's not clear, the argument was that the price of books effectively doubled for those dead authors covered by the extension, all because of a single term extension:

Summary statistics indicate a substantial increase in the average price of books by dead authors compared with books by living authors after 1814. For books that had been in print for 14 years or less (which were affected by a differential increase in the length of copyright for books by dead authors), the price of new editions of books by dead authors nearly doubled from 17.69s between 1790 and 1814 to 33.39s between 1815 and 1840.... By comparison, the price of books by living authors declined from 17.64s until 1814 to 17.13s after 1814.

In case you were wondering, before such copyright term extension, those books by dead authors were actually cheaper than the books by living authors, though the numbers were so close as to suggest the prices were effectively equivalent... until copyright term extension entered the equation.

Baseline regressions confirm the differential price increase for books by dead authors. Estimates for dead indicate that, until 1814, books by dead authors sold for 6s less than books by living authors....

The research further supports this massive cost of copyright extension by showing that books that go off copyright get cheaper:

Price data also confirm that books became cheaper after they went off copyright. The median price of 1,072 editions in the data is 10.5s if the title is on copyright, and 9.0s if the title is off copyright, which implies a 15 percent reduction in price. For example, the price of Reverend William Paley (1743-1805)’s book A View of Evidences of Christianity (first edition in 1794, under copyright until 1808) declined from 12s in 1794 to 9s in 1820 and 4.5s in 1824. Lower prices for books off copyright are confirmed by modern data on the price of early 20th century bestsellers: 20 popular bestsellers first published between 1923 and 1932 and still on copyright sold for an average price of $8.05 in 2006, compared with $4.45 for 20 popular bestsellers first published between 1919 and 1923 and off copyright

What this means is that the deadweight loss to the public is really quite massive. Rather than these books declining in price and making them more affordable to the masses, the exact opposite appears to happen: they tend to double in price. They become more expensive. And this goes exactly against the intent of copyright to make such works more available:

... our findings imply that longer copyrights raise the costs of accessing intellectual assets for consumers and other firms, which may discourage the diffusion of knowledge and decelerate the pace of cumulative innovation and learning-by-doing.

As we begin to see a concerted effort by the entertainment industry to expand copyright terms once again, it's important to question whether or not we really want this sort of clear tax on knowledge and limits on the sharing of ideas and knowledge.

Recently, the American Assembly released Copy Culture In The US & Germany, a report based on an extensive survey about attitudes and practices surrounding media consumption and piracy in the two countries. (Disclosure: We supplied the design and layout work for the report.) It contains lots of interesting facts, and some very surprising ones—such as more support for content blocking than one would expect given the public reaction to things like SOPA and ACTA. We've already discussed one of the important broad takeaways—even more evidence that pirates buy more media—but amidst the smaller details in the survey are several other points that are worthy of a closer look.

First up is a curious trend that emerged in Germany: when asked if copyright infringers should face disconnection of their internet access as a penalty, opinion was roughly split among low-income respondents, while opposition was higher among those who earned more:

Opposition to disconnection also rises sharply with income (which in turn correlates with the propensity to buy media). Among penalty supporters who make more than €3000/month, 20% support disconnection; 74% oppose it.

Should Infringers Face Disconnection? (Germany, By Income)

As the report notes, this could have something to do with the fact that higher earners also buy more media—though that still doesn't make it entirely clear why this should be the case. Even more curiously, high-earners were more likely to support content blocking by ISPs, search engines and social networks, but still more likely to oppose internet monitoring.

It seems like there's a lot of room for conjecture as to what these patterns mean, if anything, so I'm throwing this open to our readers, especially those in Germany: what social, economic or other factors that correlate with income might explain this trend?

Florida legislators are looking to dial back the tax credits they've been handing out to Electronic Arts over the past couple of years, citing concerns that "people sitting at computer terminals" just aren't bringing in enough taxable revenue.

"Can you tell me why video games need a tax incentive?" Sen. Eleanor Sobel, D-Hollywood, asked Department of Economic Opportunity Executive Director Jesse Panuccio at one point.

"I just don't see video games as an issue that's going to bring a lot of people to Florida and [bring] big expenditures," added state Sen. Gwen Margolis, D-Coconut Grove.

They may be right -- these tax incentives aren't paying off. After all, EA received $9.1 million during the 2011-12 fiscal year and is looking to score another $14.5 million to underwrite (full retail price!) roster updates for Madden NFL, NCAA Football and the latest iteration of Tiger Woods PGA Tour. EA, which has been in Central Florida since long before the subsidy train started rolling, defended its grab of state incentives by saying the money has "motivated the company to expand its Central Florida workforce during the last three years." That may be true about the last three years, but as is pointed out elsewhere in the article, EA employs fewer people today than it did in 2007.

Don't get me wrong. I don't think EA should be given tax breaks and other incentives in order to continue operating in Florida. In fact, I'm of the opinion that if a business needs subsidies to get by, it's probably not much of a business. However, they are a fact of life at this point, and giving businesses a tax break to move to your state is a powerful persuader. Many locales compete for the affections (and taxable revenue) of large companies, throwing larger and larger amounts money at them in hopes of a decent return on their investment.

If these legislators want to drop the subsidies, more power to them. Unfortunately, they don't want to get rid of subsidies. They just want to throw the money in another direction.

"To have such a concentration of it going to games — I mean, people sitting at computer terminals — I'm not sure most of us really think that's film," said state Sen. Jack Latvala, R-Clearwater. "Film is movies. … People have to hire a lot of folks and they have meals and have to stay in a hotel room."

"I think we ought to be focused on those kinds of things [rather] than games," he added.

"Do you consider any difference if a company is already situated in Florida and has a stable workforce, compared to a company that comes into the state and hires people that might not be hired otherwise, purchases food for the people they've hired, provides lodging for them?" [Sen. Geraldine] Thompson asked.

Oh, I see. You just want to take these extraneous fiscal crutches and offer them to a different member of the entertainment industry. This doesn't really change anything. Sure, legislators want to believe that a big Hollywood production will boost the local economy for the duration of the shooting, but prior experience shows that Hollywood-aimed subsidies rarely improve the financial situation of anyone other than the studio receiving them.

As was previously covered here, a study showed that nearly every subsidy program developed to attract motion picture studios to various locations has turned out to be a losing proposition. Most of the states studied recovered less than $0.25 on every tax dollar invested. Why? Because when a studio rolls into town to shoot a movie, it brings in a lot of its own talent. Sure, there are some temporary bumps to food and housing income, but when it's all said and done, the studios roll out of town slightly richer, leaving their hosts stuck with the bill.

Despite these losses, states continue to wave ever-increasing amounts of money in the air while shouting "Pick me!" at every passing entertainment concern, gambling away their constituents' tax dollars. Florida's legislators seem to be no different. They've mistaken movie studios for good-natured philanthropists and written off "people sitting at computer terminals" as a drain on the economy. It's a "spend money to make money" plan that has failed to pay off time and time again. All these legislators are arguing over is on which losing horse they should put their money.

This shouldn't be seen as much of a surprise at all, given that the Obama administration previously supported the $1.5 million verdict against Jammie Thomas-Rasset for sharing a mere 24 songs. However, now that an appeals court has reverted back to the original $220,000 ruling (procedural reasons...), and Thomas-Rasset has filed to ask the Supreme Court to hear the case, the Obama administration is back again, saying that there is nothing wrong with $220,000 for 24 songs. The argument is basically what you'd expect. In short: Congress set the statutory rates, the record labels asked for statutory damages, and thus nothing in that range should be considered too high.

The administration does have a point that there is not a real controversy between different circuit courts on the issue at play here, and thus there may not be a need for the Supreme Court to get involved. After the appeals court ruling, we predicted that the Supreme Court would refuse to hear this case, and that still seems likely. That doesn't mean that there aren't problems with the government's analysis. Its focus on using a Supreme Court ruling from a century ago ("Williams") which covered an obscure issue not directly relevant, still seems problematic to me -- but not so problematic that the Supreme Court is likely to weigh in.

Statutory damages are a massive problem with copyright law today. They are way out of proportion with any actual harm, and thus do raise considerable questions, that might amount to interesting Constitutional challenges. That doesn't mean that this case was the right case (in fact, it has many problems). Even so, it's a bit disappointing to see the Obama administration weigh in at all on the issue, giving a de facto thumbs up to massive and ridiculous statutory damages. The basic conclusion of "Congress decides, and that's good enough" is a real problem:

That public interest cannot be realized if the inherent difficulty of proving actual damages leaves the copyright holder without an effective remedy for infringement or precludes an effective means of deterring further copyright violations. The statute reflects a legislative determination of the range of assessments necessary to vindicate those public interests, see 17 U.S.C. 504(c), and Congress’s judgment as to the appropriate amounts is entitled to deference.

If the administration was interested in true leadership in fixing the problems of the copyright system, it would not condone such clearly ridiculous awards. Doing so merely confirms that it remains focused on helping out its friends in legacy industries, rather than reflecting what is actually best for the public.

One of the more benighted moves by the European Union was the introduction of a special kind of copyright for databases in 1996: not for their contents, but for their compilation. This means that even if the contents are in the public domain, the database may not be. Thanks to a recent court judgment in France, this "database right" now threatens to become a real danger for the burgeoning open data movement in Europe (original in French).

The case concerns the site NotreFamille.com ("Our Family"), which wanted to obtain a copy of various public records held in digital form by the department of Vienne in France. These were things like parish records and census information for the 1600s, 1700s and 1800s -- all clearly in the public domain. But the region refused to make the digital versions of the records available, even though NotreFamille.com offered to pay, on the grounds that it had a separate database right in the digitized collection that enabled it to withhold what would otherwise be released as open data:

in order to justify an exclusive right to its database, the department of Vienne told the court it had "committed more than €230,000 [about $300,000] to this project and that the digitization of documents archive had taken eight years." This concerns a normal investment made in the context of the public service mission of the department, but it is sufficient, according to the court, to establish that the department is indeed a "database producer" with an exclusive right on the latter that allows it not to meet the requirement of open data.

That's really bad news, since it effectively guts the requirement to make public information freely available as open data, if held in a database that required some effort to put together, as is usually the case. Moreover, other courts in the European Union may well take a similar view, since the database right is Europe-wide.

This is galling because, unlike most copyright legislation, the database right law was followed up with some research commissioned by the EU in order to examine whether the premise -- that providing an additional intellectual monopoly on the database separate from its contents would stimulate extra investment by European publishers -- was in fact true. The evidence was pretty clear (pdf):

Introduced to stimulate the production of databases in Europe, the new instrument has had no proven impact on the production of databases. Data taken from the GDD (see Section 4.2.3) show that the EU database production in 2004 has fallen back to pre-Directive levels: the number of EU-based database "entries" into the GDD6 was 3095 in 2004 as compared to 3092 in 1998. In 2001, there were 4085 EU-based"entries" while in 2004 there were only 3095.

So this new monopoly turned out to be a complete flop. Worse, as the current case in Vienne shows, it is now starting to have negative effects on other initiatives. Clearly, the time has come to repeal this legislation before it starts to throttle a potentially important new area for growth in Europe.

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