Rob H alerts us to an article that starts out sounding reasonable... pointing out that politicians in the EU are meeting because they're worried about intellectual property laws holding back innovation in Europe... but then it goes off the rails. You see, they're not worried that the laws are holding back innovation because they're too strict, but because they're too weak. As you look, though, you realize that these politicians have basically been lobbied by businesses that want protectionist policies. The "report" they discuss talks not about how to better incentivize innovation, but how to "better favour business." What that means is they went and spoke with a bunch of incumbent businesses, not innovative startups, and those businesses said they want more patents. Someone should send them a copy of Boldrin and Levine's book...

Over the years, we've found that every single industry "figure" or "study" on the harm done by unauthorized file sharing wasn't supported by anything factual once you started to dig into the details. So, when we saw yet another report claiming huge "costs" associated with file sharing in the UK we dismissed it pretty quickly noting it made many of the same mistakes as previous studies had. Apparently, it's even worse than that. Ben Goldacre, known for his excellent Bad Science blog has now taken the time to pick through the details of that awfully bad UK report, and found it laughable.

The big numbers being quoted, such as the £10 billion in losses? Not from any actual study. It's from an IP lawyer's press release, with nothing backing it up, other than "Rights owners have estimated" and that number includes both counterfeiting and "piracy" which are related, but different.

The other big figure quoted in the media? £120 billion worth of downloaded materials per year? Yeah, turns out that's based on (a) using a ridiculously high price of £25 per downloaded item and (b) totally and completely made up. You see, the number was already questionable, but the actual number in the report was not £120 billion, but £12 billion. Yet, the group blasting the report out to the press put the wrong numbers (just an order of magnitude off) in the press release, and only quietly changed it after one reporter caught the error. Goldacre asked the group what it was doing to alert the many, many reporters who went with the bogus number, and the group suddenly told him the interview was off the record.

One point that often comes up (from all sides) in discussions about draconian copyright laws is the fact that, rather than worrying about copyright, new musicians can just ignore the legalities with no one being harmed. If only that were true. Earlier this year, we wrote about how those licensing policies in the US and overly aggressive enforcement by ASCAP and BMI meant that fewer and fewer venues were willing to host open mic nights, significantly harming how many young musicians get their start. Over in the UK, where venue licensing rules have reached such ridiculous levels that a woman playing the radio for her horses has to buy a performance license from PRS, it appears that politicians are finally recognizing there's a problem. A new government report is saying that such aggressive licensing policies are holding back young musicians by making it too difficult for venues to allow live performance of music:

"The licensing requirements are still too bureaucratic and costly, particularly for non-commercial groups such as sports clubs, not-for-profit establishments and organisers of occasional events. Our report calls on the government to relax restrictions in this area, which in some cases are unnecessarily draconian, and in others simply absurd."

So, it's important to remember that while you'd like to think those who recognize such draconian laws are bad can just "opt-out," it's not always so easy. The wider impact of these laws can seriously stifle opportunities for new musicians.

There is a growing number of scholars questioning how to align the First Amendment's rule that "Congress shall make no law... abridging the freedom of speech...." with intellectual property law that often does, in fact, abridge freedoms of speech. I'm in the middle of reading an entire book on the subject -- which I'll be reviewing here shortly. And, just recently, we saw a court (for the first time) note that parts of copyright law were unconstitutional due to the First Amendment. Law professor Peter Friedman points us to the latest of many recent treatises on the subject, by Christina Bohannan, entitled Copyright Harm and the First Amendment, which questions why copyright law does not require any showing of "harm" to get around the First Amendment issue.

Other laws -- such as defamation -- require that in order to adbridge the freedom of speech, harm needs to be shown. And that seems like a reasonable condition. Bohanan agrees and suggests, not just that copyright law should be changed to include a burden on those declaring infringement to show that actual harm has been done, but that the First Amendment requires this. In fact, she finds it troubling that rather than putting the burden on the accuser to show harm, it's often flipped around, and the burden is placed on the defendant to prove a lack of harm -- which creates the chilling effects so many people warn about. It is these "chilling effects" that seem to go entirely against the First Amendment.

This article argues that copyright law, at least as it is applied in many cases, is unconstitutional. When there is no harm to the copyright holder's incentives, copyright law burdens speech without serving any countervailing governmental interest. Thus, the First Amendment requires proof of harm in copyright infringement cases. Consistent with the government interest in encouraging innovation, the harm requirement would allow a finding of infringement only where the copyright holder can show that the defendant's use is likely to cause real harm to the copyright holder's incentives to create or distribute copyrighted works. As such, the harm requirement would allow restrictions on speech only when necessary to keep the "engine of free expression" running. Although the harm requirement is no panacea for all speech issues in copyright law, it would help courts to identify and eliminate cases involving false conflicts between the First Amendment and copyright -- that is, cases in which there is arguably a speech interest in allowing the defendant's use and no speech interest in prohibiting it.

It's definitely a worthwhile read. Combined with some other recent scholarship, it seems likely that these issues are likely to get tested in court in the relatively near future. It would be great to see the courts recognize that copyright law has expanded so far as to violate the First Amendment in more and more situations.

Back in June, we mentioned that the FCC was exploring whether or not to require any product placement be more clearly labeled. This didn't make much sense, as we couldn't see who was "harmed" without the disclosure and who was helped by it. It basically treats most people as if they're idiots who can't take into account that products seen on TV may have been paid for placement. It appears that Adam Thierer agrees, and has filed comments with the FCC questioning the wisdom of such a move. While some may insist that Americans are being "tricked" by this, it would seem like there should be some proof that there's actual harm before we go about regulating it. Also, there seems to be little recognition of the impact that reputation can have on this as well. With so many sites ready to pounce on any commercial action that appears to be trickery or misleading in some form or another, companies would be well-advised to be as upfront as possible in their advertising efforts. Those caught "tricking" consumers will feel significant backlash for their efforts, making it not worthwhile. It seems that this ability to shine an automatic light on questionable practices should limit the worst abuses of any "trickery."

TorrentFreak alerts us to the latest in a long line of research that highlights just how damaging the intellectual property system has been to innovation. This isn't new, of course. We've been pointing to tons of research on this subject for years, but it's great to see some more to add to the pile. And this isn't just a couple of folks with an opinion either -- but a seven year study, involving a large interdisciplinary team of folks examining all aspects of intellectual property, with the main focus being on the biotech industry. The report hits on a few key themes we've highlighted over the years:

The current era of intellectual property is waning. It has been based on two faulty assumptions made nearly three decades ago: that since some intellectual property (IP) is good, more must be better; and that IP is about controlling knowledge rather than sharing it. These assumptions are as inaccurate in biotechnology – the field of science covered by this report – as they are in other fields from music to software.

The full report is a good read. It's well researched and documented, and points out that listening to IP lawyers alone, or just looking at IP laws is a huge mistake in analyzing the overall impact of IP:

An analysis of IP laws alone gives a distorted understanding of how IP facilitates innovation and dissemination. Such an analysis must be complemented by an understanding of business and governmental practice as well as the public and private institutions and entities that create, grant and govern IP.

There's plenty more in the report, and it's all footnoted, and some of the additional research is new to me and will be fun to explore over the next few weeks.

However, while the report's description of the problems is dead on, the report runs into trouble when it gets to the "and what do we do about it" section. It talks a lot about "new IP" which is vaguely defined, and involves a lot of wishy-washy statements about trust and collaboration and openness. It basically suggests that a bunch of different parties all have to start acting differently but doesn't necessarily explain why or how that will work. That seems... difficult, and a tad idealistic. This is really too bad, given how solid the earlier part of the report is. It's almost as if the group putting together the report saw all the problems, but couldn't come up with really concrete solutions. That's unfortunate, given that plenty of folks have shown real world examples of how the system can work just fine by simply removing IP from the equation, and watching the business models that result. Overall, this is an excellent addition to the literature in looking at the problems, but comes up short when it gets to the solutions side of the discussion.

Continuing my series of posts on some of the basics behind intellectual property, I wanted to delve further into the discussion I kicked off last week about judging the harm vs. benefit of intellectual property, and being able to properly balance the two. As we pointed out last week, nearly all of the economic evidence shows that patents tend to do more harm than good. Researchers James Bessen and Michael J. Meurer (perfect timing again) have gone into a little more detail as to how much damage is done, but I wanted to focus on why the downsides to patents are so often worse than the upsides.

At one level, it goes back to basic fundamental economics. Any given monopoly is going to be bad. There are economic rents associated with a monopoly. It limits the supply available and increases the cost, acting as a deadweight loss to society. That's absolutely true with patents as well (as much of the research has shown). However, there are a few more reasons why patents tend to be a net negative. First, let's focus on why the reasons in favor of patents aren't particularly strong.

The first is that it should act as an incentive to create the product. Yet, as the research has shown, that's almost never true in practice. More innovation tends to happen with weaker patent laws, and when stronger patent laws are put in place, the pace of innovation decreases. The reason is that real innovation almost never happens because of patents. Very few people invent stuff "to get a patent," but because there's a need in the market and they can help solve it. That's true with, or without, patents. Furthermore, it's that need in the market that is the real incentive for innovation. If you can serve a market, there's a way to make money from that market, and that acts as plenty of incentive.

The fears that an "easily copied" product will damage the original inventor are also wildly overblown. Study after study after study has shown that there is a distinct first mover advantage, and even things that are easily "copied" doesn't mean that the copycats get success in the market. People put a premium on buying from the original creator. Furthermore, they often believe (correctly in many cases) that the original creator has a better understanding of the market, and is likely to continue to innovate faster and with better solutions. Finally, in the worst case scenario, where a copycat is able to do a better job, that's also not a bad thing, because the societal benefit is still a better product. It's called competition, and is generally considered a good thing in a market economy.

Another popular claim is that patent benefit us via "disclosure." Because patents require the inventor to "disclose" the invention, the idea is that these patents will spur additional innovation as others learn from the patents and build on them. The idea is that there's obvious benefit in keeping the idea secret, so in exchange for disclosing the idea, the government gives the inventor a monopoly. However, this is easily shown to be false. First, very few patents these days are written to the point where they actually disclose enough to be useful. They tend to be broadly written in a way that can cover as much as possible. However, there's an even better simple logical rationale for why disclosure is a myth when it comes to patents. If the inventor truly believes there's tremendous value in keeping the idea secret, he or she will still keep it secret. There's no real benefit to disclosing it to get the patent. You get just as much benefit from keeping it secret. The only benefit is if you think that others will be able to figure out the same concept in less time than it takes for the patent to expire. In other words, if you realize that others will be able to come up with the same thing in that amount of time. So getting a patent prevents others from doing that. But if you truly believe that it would take longer than the length of the patent to figure out its secrets, then you'll keep it quiet anyway.

As for why the downsides to patents are almost always present, it's based on a fundamental understanding of how innovation works. If most innovation was a single burst of inspiration, then patents could make sense. However, in a scenario where innovation is an ongoing process of building, trying, adjusting, building, trying, adjusting -- then patents are likely to be harmful. They add a cost and a hassle at many of the steps along the way. They add a series of hurdles that involve time, money and effort for each step of that process. That, alone, significantly slows down innovation. Studies have shown, in fact, that most innovation is an ongoing series of innovations rather than a single burst of inspiration. Furthermore, great breakthroughs tend to come not from a single mind, but in different people looking at the same problem, learning from each other and building on each other's work. By throwing tollbooths into that process, you slow down the innovation.

Thus, the supposed benefits of patents rarely are all that beneficial, and yet the downsides to patents are quite large and show up quite often. So, it should be no surprise that the research shows patents tend to do quite a bit to slow down innovation, rather than accelerate it.

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Links to other posts in the series:

• On The Constitutional Reasons Behind Copyright And Patents
• Patents, Copyrights And Trademarks, Oh My!
• If Intellectual Property Is Neither Intellectual, Nor Property, What Is It?
• What Kind Of Progress Are We Promoting?
• Why Do Patents Tend To Cause More Harm Than Good?
• The Case For And Against Software And Business Model Patents