We always hear the record labels and politicians screaming bloody murder over the concept that musicians aren't being paid "what they're owed" due to piracy -- but when there's a situation where musicians might actually not be getting paid what they're owed? Silence. A few weeks back, MySpace "bought" Imeem in a fire sale. But, the details of the deal suggest they didn't actually buy the company, but "certain assets," which means they get to ignore the liabilities. Guess what those liabilities include? You got it: paying artists what they're owed. Now, as the Wired article notes, there's nothing technically wrong with MySpace acquiring just the assets, but it is notable that it's the musicians left without getting paid what they're actually owed (not some theoretical concept like what they might be "owed" due to unauthorized file sharing). And, yet, we don't seem to hear any politicians or record labels screaming about this. Funny, since they keep insisting that they're really just interested in helping artists...

We've discussed in the past the odd idea that any government should be able to copyright anything it produces, but plenty of governments still do maintain things like "crown copyright" or other similar concepts for content they create. Yet, it looks like some countries have gone one step further. They copyright their money. Yes, Michael Scott points us to a blog post from an American law professor, Eric E. Johnson, who was on a trip to Canada and was surprised to discover that they have copyright notices on their paper currency. Of course, this should make you wonder: if you counterfeit some Canadian money are you also on the hook for copyright infringement violations? Or is there some other reason for the copyright notice. Are they afraid other nations might copy the design without compensation?

Finding the whole thing bizarre, but remembering that I have some Canadian currency from my last trip there, I checked -- and, indeed, in tiny print in the lower right-hand corner, there is a copyright notice. And then... bonus. Tucked in with my Canadian cash was a 5 euro bill as well... and it also appears to have a copyright notice on it right at the top in the center (though, it's tiny). I did a quick search, and indeed, it appears that the design of the euro is also covered by copyright with specific limitations on copying. Of course, I thought that was what counterfeiting laws were for -- so why even bother with copyright?

A few years ago, we noticed the troubling trend of private equity firms raising capital solely for the purpose of investing in patent lawsuits. Basically, these private equity guys saw the ridiculous awards being handed out to patent holders who did nothing, and realized they wanted in on the game. So they raised funds of hundreds of millions of dollars, and basically approached different small patent holders, examined their patents, and basically promised to bankroll lawsuits against companies who actually did stuff, in exchange for a cut of the winnings. One of the biggest players in this space (perhaps the largest outside of Intellectual Ventures) is Altitude Capital Partners.

Joe Mullin has uncovered some of the details of how Altitude works (and how some of these lawsuits work), because Altitude is upset with the amount of money it got back from one of the patent holders whose lawsuit it "invested" in. Note, here, that it does not appear that Altitude invested in the company in question, DeepNines, but specifically in the lawsuit. Altitude gave DeepNines $8 million for its lawsuit in the structure of a loan. DeepNines sued security firm McAfee and worked out an eventual $25 million settlement. How much did DeepNines actually get? Less than $800,000 -- and even that's in dispute. (Updated in the next paragraph).

Basically, because Altitude had a "model" of what it felt DeepNines should get in a lawsuit, and that model popped out a $200 million award, it felt that it didn't get enough. But the breakdown suggests it did fine. DeepNines paid back the loan at a 10% interest clip, plus another $700,000 as its "contingency fee" on the winnings, adding up to $10.1 million. Then DeepNines ended up having to pay its lawyers at Fish & Richardson over $11 million in fees, plus another $1.25 million to local lawyer (and former federal judge) Robert Parker. DeepNines also had to pay additional expenses for travel and other legal costs, adding up to another $2.1 million. In the end, it was left with less than $800,000. Doesn't seem quite worth the effort. (Update: Good discussion in the comments suggesting that the math here doesn't quite add up, and DeepNines may have actually ended up with about $8.8 million, because you have to add the original $8 million investment to the $25 million in counting in the inflow. That makes sense, so the numbers may be off. I was initially relying on the report claiming $800k was leftover, but it may have actually been higher. The rest of the story does make sense however).

Especially since Altitude is demanding another $5.3 million, saying that DeepNines should have calculated its contingency fee based on the overall award, not after subtracting legal fees. Of course, if it did that, then DeepNines -- despite having "won" $25 million, will have lost nearly $5 million on the overall deal. Be careful who you partner with. This should be a huge warning to any patent holders who think about accepting money from a firm like Altitude. Even a $25 million "win" can turn into a huge loss, if you're not careful.

A few months back, someone sent over some details about a legal battle involving Peter Boesen, who is both a convicted felon in jail and a patent hoarder who licensed his patents to a "patent troll" firm to assert against tons of tech companies, and Niro Scavone, the law firm representing the patent company (and the law firm famous for, among other things, having been the inspiration for the term "patent troll"). There wasn't much to write about directly, but it looks like Joe Mullin has been keeping on top of things (as always) and has found that via this lawsuit Boesen has exposed some of the underlying details of how much money patent trolls get:

Most intriguing is the sum paid by Apple to settle an SPT suit brought over the iPhone in the Eastern District of Texas in 2008: $865,000. Without any motions being filed after the intial complaint or any substantive discovery, a bit more than 30 percent of that amount, $271,817, went to Niro Scavone, which also billed $46,568 in expenses. Nearly $40,000 went to someone identified as "Ward"--most likely Johnny Ward Jr., who served as local counsel to SPT in the case. Of what was left, almost $109,000 went to SP Technologies, then owned by investor Courtney Sherrer, and $311,400 went to Boesen.

Also noteworthy: a full 10 percent of Apple's payout, $86,500, is marked as going to "LG"--an apparent reference to LG Electronics, which, according to the Boesen receipt, paid $834,964.01 to settle a separate SPT suit in 2006. Why would LG be getting a cut of the settlement in a suit to which it was not a party? And was Apple aware that a piece of that settlement might wind up with one of its competitors? Representatives from Apple and LG did not immediately respond to requests for comment.

There's a lot more in Mullin's post. Not sure how much is worth commenting on, but given that such patent holders and patent hoarding companies tend to be incredibly secretive about all of this stuff, it's still an interesting peek behind the curtain.

Oh yeah, as for Mullin's question about LG receiving 10% of the payout from Apple, that might not be all that surprising really. Last year, we covered how it was becoming increasingly common for patent hoarders to play this neat trick where they sue a bunch of companies and promise the ones who settle quickly a cut of what they can get from the others. This sets up a little an interesting game theory situation, whereby companies have extra incentive to settle quickly, which makes the patent holder very happy, and which they use to tout how "legitimate" their patents must be (yeah, right). It sounds like, perhaps, that's what happened here. Since LG settled earlier, perhaps part of the settlement was the right to 10% of a cut against others.

I was recently having a discussion with a friend where I pointed out one of the biggest mistakes that people make in trying to understand economics is to assume, incorrectly, that "marginal benefit" or "marginal cost" means money. And, yes, this is actually a mistake that many economists themselves make -- and, in part, it's because the marginal benefit is often measured in monetary terms. So, people seem to think that if there isn't a monetary component it doesn't count. This makes for silly statements like "economics doesn't properly understand how people act." Almost every time that's said, when you look at the details, it's wrong. It's just that people assume that because someone does something for a non-monetary reason, economics can't account for it. That's simply not true. If people do things for a non-monetary reason, it's because they're receiving marginal benefits in some other manner, whether it's attention, pride, happiness, joy or "just because I want to." Those are all marginal benefits.

In fact, Clive Thompson points us to a study that highlights this in a really strong way. It's a series of studies that show that when people overestimate the monetary benefits (or costs) and underestimate the nonmonetary ones, they often set up really bad incentives.

For example, they've found that fewer people give blood when they're paid for it. For someone who thinks only in terms of the monetary benefits, this would make no sense. Why would giving people money lead to less of the activity. But the reasoning is that the real marginal benefit that people get from giving blood is the belief that they're doing good in the world and helping to save lives. Getting paid for it, actually hinders that feeling, by making the whole thing feel like a transaction. And the money paid is apparently a lot less than the decreased "good feelings" from the marginal benefit.

On the flip side, other experiments showed that fining people over certain actions (such as picking up their kids from daycare too late), actually increased the number of tardy parents. Again, if you think of this solely in monetary terms, this makes no sense. It now costs more, monetarily, to be late to pick up a kid. But, in making it a monetary transaction, it removed non-monetary costs -- such as the "guilt" of being late. As the article notes:

The fine seems to have reduced their ethical obligation to avoid inconveniencing the teachers and led them to think of lateness as simply a commodity they could purchase.

This is really fascinating stuff that is important for people to understand in setting up any sort of incentive structure. Money -- either on the cost or benefit side -- is not the only incentive. And thinking that it is often leads to miscalculating a series of other, potentially more important, costs and benefits. That doesn't mean that economics is wrong. It can handle all of that. The problem is when people assume that it's only the direct monetary costs and benefits that go into the equation. It is, unfortunately, a common problem, and leads to all sorts of confused thinking both about business models, but also about the economics profession itself.

It's no secret that most of the traditional "recording industry" really is structured almost entirely to help the big name acts, but whenever we write about the collections organizations like ASCAP and BMI we get angry people sending in emails and comments insisting that it's unfair to lump those two in with the RIAA, since they're really out to help the actual musicians, even the small guys. Uh huh. Of course, we've already shown how ASCAP and BMI and their overly aggressive attempts to collect royalties from just about everywhere actually have been known to harm up-and-coming singers, such as by destroying the ability for many venues to host open mic nights. ASCAP has been particularly aggressive lately in making bizarre claims about how embedding YouTube videos requires a license (despite the fact YouTube already pays ASCAP -- so it wants to double count) and how ringtones represent a public performance. These are pure money grabs that make it that much more difficult for anyone to help promote up-and-coming musicians and songwriters. Is it any wonder, in the meantime, that the organization is spending time setting up efforts to try to push back against people who support open culture and content sharing? It apparently would prefer that the songwriters they "represent" not know about these efforts that actually do quite a bit to harm the vast majority of songwriters out there.

But, back to the original point. ASCAP, BMI and their supporters insist that they're not as bad as the big, mean RIAA, and that they're especially focused on providing important royalties to less well known artists. Except... even that may be questionable, at least when it comes to live performance royalties (admittedly, a smaller segment of overall royalties). Reader btr1701 sent in some email exchanges from a mailing list, which I won't share directly since I don't have approval, concerning a jazz musician trying to find out why she doesn't receive any live performance royalties, despite knowing that these organizations collect them, supposedly on her behalf. In response, she's told that ASCAP and BMI only distribute that royalty money to "the top 200 grossing US tours of the year." If you're smaller than that? Too bad. Except... they do have one minor exception. If you play "serious music" (no joke), then they'll pay you your royalties. So, the musician asks what is "serious music" and is told it's "generally considered to be classical music."

The musician tried re-registering her own (jazz) compositions as "serious music" but it "does not appear to have made any difference whatsoever" and she notes that she is "yet to receive a single penny... for any US performance or radio broadcast of any kind" despite the fact that her music has been performed in the US for almost ten years, and "the vast majority of performances of my music take place in the US."

I went looking for some more details, and it appears that, indeed, ASCAP and BMI have a policy in place to only provide performance royalties to the top 200 grossing tours in the US. If you're a "smaller" act, the only way to get paid is to be an opening act on such a tour. Otherwise? Too bad, you're on your own. Aren't you glad you signed with ASCAP or BMI? Update Good clarifications in the comments on this. Despite what the musician was told originally, it appears that it's not that ASCAP and BMI only pay the top 200 tours, but that they only monitor them (it's not explained how they know ahead of time which are the top 200) in order to figure out who to pay. The end result, of course, is functionally quite similar. If they're only monitoring the top 200 grossing tours, then the likelihood of them finding out about songs from less well known composers is close to nil. But those big names? They get more than their fair share.

A bunch of folks have been submitting the story about how Jammie Thomas' new lawyer, Kiwi Camara (a Charlie Nesson protege) and Nesson himself are apparently preparing to file a class action lawsuit against the RIAA in an attempt to get back the $100 million plus that they claim the industry "stole" in its settlements. This may be interesting from an academic standpoint (or from a PR/circus standpoint), but I have difficulty believing it will get very far in terms of actually succeeding. I do find the settlements distasteful, and bordering on extortion ("pay up or we sue" is really questionable), but earlier attempts at similar lawsuits haven't gone very far at all. Still, considering that the RIAA has always insisted that its entire legal campaign was part of a grossly misguided and ultimately self-damaging "PR campaign" perhaps it's okay that someone is effectively doing the same thing on the other side.

The various music collection societies keep insisting that they're just the important middlemen helping make sure artists get the royalties they're due. Except, for some reason, they keep getting caught not actually giving that money to artists, but hanging on to it themselves. Billboard reports that the Dutch collection society, Buma/Stemra, is happily telling people that revenue rose by 2% last year -- though, oddly, the Billboard report leaves out one rather interesting detail. Reader Marcel de Jong notes that Buma/Stemra invested a bunch of the money it collected for artists into the stock market and then lost a chunk of it, so it's paying artists less money than it collected for them. What's unclear is if Buma/Stemra would have paid out more if it had made money... and also why it's gambling on the stock market with money it supposedly collected for artists.

Venture capitalist Fred Wilson has laid out his reasons for why he believes the IPO market is about to come back. It's a worthwhile read if you're interested in the startup ecosystem. While I tend to agree with Fred on many different things, on this one I'm not at all convinced. I do agree that there are a growing number of companies who in the past would have gone public about now, but are held back by the near total lack of willingness to risk running the IPO gauntlet. The one thing that we agree on is that investors are going to start looking to put money into new investments sometime soon (there's way too much money being flooded into the market, and it needs to go somewhere). I'm just not convinced it will go into the traditional IPO market. I think it would be good if the IPO market opened up somewhat, but a flood wouldn't be good. It would create another bubble scenario. My guess (at this point) is that the money will go into something unexpected -- perhaps even new financial instruments. However, I'm curious: where do people think all the money that's being dumped into the economy will flow? What's the next bubble going to be?