We've seen this over and over again: new and innovative startups enter a market in a creative and compelling way, and a combination of incumbents and regulators get in the way of something cool happening. Perhaps the most well known recent example of this is with Uber, but probably a close second is Airbnb. Airbnb is the immensely popular system for letting people rent out their homes/apartments/spare rooms to willing guests for (usually) short stays. Completely coincidentally, just this morning, I tried Airbnb for the very first time, trying to book a stay in Manhattan for an upcoming trip. And... soon after I submitted my request, I saw this report that officials in New York City have deemed Airbnb to violate the city's "illegal hotel law." Basically, they're arguing that people renting out their homes are running illegal hotels. They originally asked the guy who rented his condo out to pay $7,000 for both violating that law and for zoning and building code violations, but then dropped the latter part, and lowered the fine to $2,400 for just the hotel part.

Of course, laws like the illegal hotel law are supposed to be about public safety, and to maintain certain health and safety standards. But, the reality is that, like so much regulation these days, it's turned into a way to keep competition out. Laws to protect hotel visitors certainly made some amount of sense in the past, but most of the reasons why they're in place don't necessarily apply to the way Airbnb functions. Because we can now share information pretty easily, Airbnb's detailed review system and communication process take away most of the "risk" that necessitated a health and safety law.

Just as an example, in my own search for a place to stay, I went through about half a dozen different apartments that were available, and looked over the pictures and carefully read the reviews. I immediately discounted the cheapest one, because multiple reviews mentioned that the apartment had not been cleaned prior to them showing up. Information and the sharing of information made that place undesirable just like that. No laws needed. I also emailed back and forth with a few other apartment/condo owners to find out some details about their places, before finally selecting one that worked for me. Honestly, the experience has been awesome so far, giving me much greater choice, and the likelihood of a much nicer stay than in a hotel.

The new ruling doesn't suddenly make Airbnb itself "illegal," but does suggest that if the city finds out that you're using the service, you could face stiff fines. At the heart of the issue is a really stupid law that was basically designed to make Airbnb impossible: it says you can't rent out your place for less than 29 days. The only purpose of this law is to protect hotels from competition. The backer of the law claims that it was really about landlords illegally converting residential buildings into hotels, but if that was the case, they should have made the bill a lot clearer, because it's being used to punish this Airbnb user. Airbnb, which tried to intervene in the case, is (quite reasonably) disappointed:

This decision runs contrary to the stated intention and the plain text of New York law, so obviously we are disappointed. But more importantly, this decision makes it even more critical that New York law be clarified to make sure regular New Yorkers can occasionally rent out their own homes. There is universal agreement that occasional hosts like Nigel Warren were not the target of the 2010 law, but that agreement provides little comfort to the handful of people, like Nigel, who find themselves targeted by overzealous enforcement officials. It is time to fix this law and protect hosts who occasionally rent out their own homes. Eighty-seven percent of Airbnb hosts in New York list just a home they live in -- they are average New Yorkers trying to make ends meet, not illegal hotels that should be subject to the 2010 law.

As the reports note, this doesn't mean that the city will now be going after the tens of thousands of residents who rent their places out on Airbnb, but if complaints are filed, it can go after them. Hopefully, this doesn't scare off the person whose house I just requested... But, more importantly, this shows, yet again, why bad regulations can do serious harm to innovation, often while serving to protect less innovative incumbents.

For this week's awesome stuff, we've got three different projects that just caught my eye for being different and interesting in a design sense.

• I don't know about you, but I've had a few too many experiencing having to try to inflate an air mattress of some kind or another, and realizing what a freaking total pain it is using regular valves (not to mention the inevitable annoying emptying process as well). So I have to say that the Windcatcher project definitely piqued my curiosity. I don't understand the mechanism behind it, but it certainly looks like an air mattress that you can fill with 4 or 5 breaths -- and all without having to put your mouth on anything. It looks kind of like magic, so check out the video. These guys still have a bit of a way to go on the funding front, having raised only about a quarter of the $50,000 they're seeking, but the product definitely has that neat design factor going for it.
• There's been something of a hipster revival in pinhole cameras lately, it seems, but the ONDU Pinhole cameras are definitely the nicest design I've ever seen. A nice wooden box with no exposed screws. A backplate that's held on by magnets. It just looks cool. Also, bonus points for the cool music in the video (apparently this is the musician. This project has already surged past its goals, so it's definitely going to get funded, and with another 25 days to go, it'll likely end up much, much higher.
• Finally, there are times when someone designs something and you wonder why no one else has done it before -- or even why such things aren't common. That was the feeling I got after seeing the Nuplug, which is basically an extension cord/surge protector/outlet that attaches to furniture. So, rather than having your outlets on the wall and behind furniture, you can connect them in a more convenient way. Given how much stuff folks are charging all the time these days, I could definitely see how this could be handy for many people. The one thing holding me back on this one, frankly, is that it's a bit on the ugly side -- in that it really stands out. Seems like something a little more subtle would be cooler. Maybe future iterations. This one also has a pretty ambitious $75,000 goal, and they're only a little past halfway there with 18 days to go.

That's all for this week...

The big telcos (AT&T and Verizon) have been trying to move more and more to wireless networks over wired networks, in large part because they've realized that, for whatever reason, the FCC more or less gave them pretty free rein to completely ignore net neutrality concepts on their wireless networks. So it really shouldn't come as much of a surprise to see that AT&T has responded to the latest Google Hangouts app, which replaces the standard Google Talk app, by blocking video while on a cellular connection on Android phones (oddly, it works on iPhones). As you may recall, AT&T actually got into trouble for doing the same thing with FaceTime on the iPhone. AT&T's statement about this, as given to The Verge, parses its words very carefully, as if they think everyone is a complete moron:

All AT&T Mobility customers can use any video chat app over cellular that is not pre-loaded on their device, but which they download from the Internet. For video chat apps that come pre-loaded on devices, we offer all OS and device makers the ability for those apps to work over cellular for our customers who are on Mobile Share, Tiered and soon Unlimited plan customers who have LTE devices. It's up to each OS and device makers to enable their systems to allow pre-loaded video chat apps to work over cellular for our customers on those plans.

The whole focus on "pre-loaded" apps was how AT&T tried to tap dance around net neutrality questions last year with FaceTime. And it's completely made up and bogus.

Basically, they're saying if you want to do video, you have to ask permission. That's a broken system. It goes against what makes the internet good and useful: the fact that you can innovate without permission. A mobile carrier -- one who may see video chat apps as competition, for example -- being able to act as a gatekeeper to block the usefulness of such apps is a dangerous situation for those who believe in promoting innovation. We shouldn't stand for an internet where one company gets to pick what you're allowed to do.

And, just to cut this off before anyone brings up a really silly argument to defend AT&T: yes, bandwidth on mobile broadband networks is somewhat more limited (though not as limited as they would have you believe). But, these networks, for the most part, have all done away with unlimited accounts anyway. So if people use up all their broadband quota on video calls, that should be their own decision. AT&T has already made pricing decisions that limit bandwidth to consumers, so further limiting their choice in apps makes no sense on top of that.

There's a lot of buzz about Sen. John McCain's proposed Television Consumer Freedom Act (pdf and embedded below), a bill designed to encourage cable companies to unbundle the TV stations they offer, and force the networks to do the same. It also takes away the weak bargaining chip that some networks have attempted to play against Aereo, in which they threaten to pull their broadcasts from the open air, by making them sacrifice broadcast licenses in order to do so.

Everyone on the consumer side agrees that they'd like to have à la carte choices from cable companies, but beyond that there's no shortage of debate as to how effective the bill is likely to be and whether the end result would actually be any better for those consumers. The television market is badly distorted at all levels by monopoly interests and those whiffs of not-quite-collusion by groups of companies with a shared interest in maintaining the status quo, but is this bill capable of overcoming that? And is the practice of bundling really at the heart of the problem, or just a good public face for the deeper issues?

This is hardly the first attempt to stop the practice at either the network or cable provider level. Some courts have already found bundling by cable providers to be legal and not anticompetitive; meanwhile Cablevision is currently pursuing an antitrust suit against Viacom for the network's bundling of stations that it sells to providers. Most of the details of the latter are under seal, but one notable point is Viacom's claim that it already offers channels individually, they just cost way more. If that's true of all Viacom's content, then it wouldn't be affected by McCain's bill anyway, which still permits bundling as long as there is an à la carte option.

And even if it's not true, it just underlines the core problem of this approach: the bill doesn't give networks any reason to make individual channels affordable or desirable. They either already offer an expensive à la carte menu that nobody orders from, or they could easily do so. Moreover, it's not as though the justification for bundling offered by the networks is completely falsified: they can spend more money on niche channels and programs by subsidizing them with the revenue from more broadly popular fare. Of course, it's not as though that justification isn't exaggerated and twisted to suit their needs either, nor is it true that the same fundamental idea couldn't exist without bundling. Networks get more value from niche programs than just transmission fees: they care about audience reach, brand-building, competing with other forms of content, accumulating accolades for prestige shows and even, believe it or not, making good television. There's no reason their businesses could not be structured to continue subsidizing niche programming with popular programming in a slightly less direct manner.

So the final solution, as always, needs to be found in the market — and that's already happening. Basically every single noticeable trend in media consumption habits, not just in television but in music and publishing and every format, points towards a more à la carte world. It's not news that the networks and cable providers have dragged their heels on this in the hope of milking their incumbent position a bit longer, nor is it news that they are privately a lot more freaked out by the cord-cutting movement than their public statements admit. Ultimately, it will be consumers making choices that force these companies to either adapt or perish.

But for that to happen, innovators do need to be able to actually give the consumers those choices. If the market has become so badly distorted that innovators are being locked out, then legal action and new laws are needed. And that's why the aspect of the bill that is likely to be the most effective (not to mention the most interesting) is the way it all seems to come back to Aereo.

The fight that Aereo started sits at the core of almost everything in the bill. Network owners don't like Aereo because they don't want to lose their retransmission fees from cable providers. Cable providers don't like Aereo because they don't want to lose the appeal of the major networks which, despite the ascendence of cable channels, still sit at the core of their service bundles — and because, generally, they don't want cord-cutters to have more options. McCain's bill basically says: Aereo or no Aereo, consumers need choices, and they're going to get them, whether you like it or not.

Is it a worthwhile step? Yes — or, at least, it's hard to see how it could do any harm, even if it does prove ineffectual. Is it the best approach? No. It almost feels like a bet on Aereo's failure. If Aereo were permitted to innovate, rather than being forced to jump through endless technological hoops and still spend more time in court than in the workshop or the boardroom, then the market would already be giving consumers what they want and pushing the networks and cable providers to become more competitive. If there is to be legal reform, it shouldn't be another layer of conditions and caveats on broadcast licenses and the retransmission fee structure that attempts to force the hand of the networks and cable companies, it should be a clarification (and probably a relaxation) of the rules, removing the legal and regulatory uncertainty that holds disruptive startups back. Television doesn't need a Consumer Freedom Act — consumers already have lots of freedom, they just don't have many choices in how they exercise it. The heart of McCain's bill is in the right place, but a Television Innovator Freedom Act is what we really need.

I've joked before about how Kickstarter seems to have a new type of wallet launched every other day or so, but it also seems to be trying to offer a reinvention for the other thing most people keep in their pockets: their keys. Here are three projects involving rethinking your keyring.

• First up is the Keyprop, a simple kickstand for your smartphone, that is shaped like a key and fits on your keyring. My current phone is an HTC Evo, which has a built in kickstand, and it's amazing how frequently I use it. I'd been dreading the eventual new phone without a kickstand, but there are a bunch of products on the market to make it easy to add a kickstand to your phone, including the keyprop -- which is a bit unique in that it uses the fact that you regularly carry your keys with you to its advantage. The design itself is fairly clever as well, as it uses either the headphone jack or the power port as the place where the keyprop hooks on, and then lets you use your other keys to help position the angle. The one downside: if you're using the headphone jack, you wouldn't be able to use the stand and your headphones at the same time. The price feels a little on the high side for what it is -- and it kind of feels like the kind of thing that someone could make for themselves with a nice 3D printer. But still, the general idea is pretty cool. There are about three weeks left in the project, and it's only raised a little over a third of its goal, so it's probably right on the bubble of whether or not it will be able to hit its goal. In fact, Kicktraq's prediction is that it will just squeak by.
• Next up we've got the Smartkey, which really does aim to reinvent the keychain by making it act more like a pocketknife. You connect your keys to the various posts on either side and can fold them in. Your keys then fit nicely together, with no more jingling or poking and whatnot. If you carry a lot of keys it seems like it could be pretty handy, though not sure it would be that helpful with bulky car keys -- and these days, that's really the only key I carry around. While it might not be what I need, clearly over 2,000 people feel otherwise. The project shot way, way, way, way past its goal of $6,000 and will probably wrack up at least a couple of hundred thousand by the time the project ends.
• Okay, how about we take a step back from all of this futuristic high tech stuff, and get back to basics. What kind of keychain would you want during the zombie apocalypse? Probably something like El Jefe -- the Boss of Keychains. It seems like a no nonsense keychain that will hook to your belt buckle and has a bottle opener but that's nothing special. Lots of stuff has that. This one also has a ferrocerium rod built in, with a "fire scraper" so that you can start a fire very quickly. As they note, survivalists have pointed out that when society collapses and you need to survive, the most important skill will be able to set a fire. This keychain makes it easy. Can you say that about your keychain? Oh yeah, it also has a knife sharpener, because if you're in need of instant fire, you're probably also carrying around a knife, and you probably want it sharp. My favorite part, though, is that they compare this to a smartphone and call this a "smart keychain." I'm not sure they're really quite analogous, but they've got a fun video: Not much time left to get in on this. It's already more than 3x its initial goal of $5,000, so El Jeffe is definitely getting funded. If you want one (or its smaller brother El Nino, with no belt loop hook) apparently now's your chance. And, if you get one, and civilization collapses, let me know, because I'll be sure to hang out with you, since my own fire starting skills are minimal.

Okay, now that we've solved your keychain needs, have a good weekend.

We've pointed out over and over and over again that patents are not a proxy for innovation. In fact, there's little to connect the two at all, except potentially for how patents can hinder and hold back the pace of innovation. A new study really helps to drive home how little patents have to do with innovation. Pointed out to us by James Bessen, the study looks at "R&D 100 Awards" from the academic journal, Research & Development from 1977 to 2004. As you might expect, the R&D 100 Awards are given out each year by the journal in an attempt to name the top 100 innovations of the year. If patents were instrumental in driving innovation, you'd certainly expect most of these innovations to be patented.

But you'd be wrong, as the reports authors, Roberto Fontana, Alessandro Nuvolari, Hiroshi Shimizu and Andrea Vezzulli, quickly discovered.

A stunning 91% of all of the technologies receiving the prize were not actually patented. That's covering approximately 3,000 technologies winning this award as the most innovative advancement of the year over a period of about three decades. What's interesting to me is that this actually matches very closely with one of my favorite studies on patents, from economist Petra Moser, who looked at historical patenting rates from the 19th century using data on products displayed at the Crystal Palace exhibition of 1851 and the Centennial exhibition in Philadelphia in 1876, which against showed very few of the "economically useful" inventions were patented. Over 80% were not patented. Of course, you might think that back in the 1800s there was less interest in patenting, but this new study suggests a rather similar rate to what Moser found from 150 years ago.

The R&D 100 certainly seems to be a good way to look at key innovations. It's judged by a distinguished panel of experts, looking at two key criteria: i) technological significance (i.e., whether the product can be considered a major breakthrough from a technical point of view); ii) competitive significance (i.e., how the performance of the product compares to rival solutions available on the market). Both of these would seem like significant indicators of innovation. And, as the authors note, many big innovations can easily be found on the list:

Throughout the years, key breakthroughs inventions such as Polacolor film (1963), the flashcube (1965), the automated teller machine (1973), the halogen lamp (1974), the fax machine (1975), the liquid crystal display (1980), the printer (1986), the Kodak Photo CD (1991), the Nicoderm antismoking patch (1992), Taxol anticancer drug (1993), lab on a chip (1996), and HDTV (1998) have received the prize.

Tellingly, even to apply for the award, innovators have to show just how much the innovation was an improvement on what else was available on the market, They have to submit a "competitive matrix" showing this. In other words, these prize-winning innovations tend to be actual innovations in the market that drive the state of the art forward. You could suggest that they are innovations that truly "promote the progress," as (unlike our patent system) to get this award you literally have to show how the innovation promotes further progress.

As you can see from the key findings, very, very little of the innovations that won the prize was also patented either three years before or three years after the prize was awarded: Even when you take out "non-corporate" innovations (which have less propensity to be patented), looking at corporate only innovations over 87% were not patented.

Of course there are some differences depending on what industry the innovation happened in, as well as where the innovation was originated. The researchers broke down all of that information as well: As you can see, the US actually has a lower patenting rate than Europe and Asia for the most part, which runs counter to the narrative often being told about how the US's leads the world with our patent system, and that Asian innovators have less respect for patents. Though, on that point, the researchers note that most of the patents in the "Asian" section are Japanese, so it's possible that other countries in Asia, mainly China (along with known tech hubs Taiwan, Hong Kong and Singapore) do, in fact have a much lower propensity to patent.

Of course the point that stood out as most interesting to me was the very low rate of patenting in the "chemistry" industry. This covers pharmaceuticals as well. And, of course, we're always told that this industry really "needs" patents because of the ease of copying as compared to the cost of innovating. That doesn't seem to be supported by the data at all. Yes, it's the highest percentage patented in the US, but still only 14% of such innovations are patented in the US.

All in all, this is a really interesting paper and a significant contribution to the discussion over whether or not patents are really a good judge of innovation. It would seem from the data available that the answer is a very loud "no." In fact, it would appear that very few of the most significant and important innovations are being patented. That should, at the very least, raise considerable questions concerning those who argue that our patent policy is necessary to encourage innovation, or those who argue that numbers from the patent system are a good judge of innovation.

When cameras first came about there was a bit of a moral panic around them. People feared being photographed at all and so there were various concerns raised, moral panics followed, and even an occasional proposed law about how cameras could be used. It would appear that we may be approaching a similar moral panic around the coming launch of Google Glass. There's been a growing buzz about "privacy" concerns around Google Glass -- one that has even led former Homeland Security boss Michael Chertoff to worry about the implications, and suggest Congress and the FTC take a look. A publicity campaign called "Stop the Cyborgs" (seriously guys?) has sprung up offering Google Glass Ban Signs for places that want to ban the as-yet-unreleased technology. And, most recently, someone put together a White House petition urging the White House to ban the devices until "limitations on public surveillance" can be put in place. Not that the White House has that kind of authority, of course.

The whole thing seems to be screaming moral panic around a new technology, which still might not even catch on. Of course, even if Glass doesn't catch on, this is how technology works, and sooner or later, someone will get this kind of product right, such that eventually it won't even look odd like Glass, but will just fit into a contact lens or be directly embedded. That's just how this stuff is likely to go. People can freak out about it all they want and demand that there be a law, but most people recognize that the technology is coming one way or the other, and that's not going to change or go away. The right thing to do is figure out how to deal with it, rather than looking for ways to stop it. Though, just wait until someone at the MPAA wakes up and realizes that with Glass, someone will be able to record a movie...

For this week's awesome stuff post, we've got links to movies about things that we regularly talk about here on Techdirt: the prosecution of Aaron Swartz, the CFAA, patents and piracy.

• First up, is a documentary about Aaron Swartz called The Internet's Own Boy by Brian Knappenberger, who previously did a documentary about Anonymous. Knappenberger's film isn't a "memorial" about Swartz, but rather an "investigative" documentary about his story and the lawsuit against him, as well as the legal structure that led to his arrest and trial. The video that Knappenberger has put together is really compelling and touching: This project has received a lot of attention, so there's no surprise that it's quite close to its $75,000 target with a few weeks to go. It looks like it should be a great project to support.
• From once CFAA case to another. Krystof Andres & George Russell are doing a documentary called The Hedgehog & The Hare, all about the CFAA, but mainly focused on the case against Andrew "Weev" Auernheimer. The documentary will also explore how the CFAA goes way too far in trying to criminalize perfectly reasonable computer activities. The target for this project had much more modest goals than the Swartz one, though the production values definitely look a bit more amateurish. Plus, frankly, the rewards on the Swartz movie are a lot more reasonable. That said, with just a few days left, it looks like this movie is likely to squeak by the target even if it's just slightly under as I write this.
• This next one, I'm a bit less sure about, but the topic could be interesting. It's supposedly a short film, made in South Africa about the big pharmaceutical makers going after generic drug makers, called The Cure. What makes me a bit unsure about is that the filmmakers, Katey Carson and Errol Schwartz, seem a hell of a lot more excited about the fact that (a) they signed up some "Oscar-winning talent" to be in the film and (b) that they're filming the whole thing with an iPhone, than they are about the story, which they barely mention at all. The topic sounds interesting. I just wish they'd actually have said something about that, rather than the other stuff which really isn't that interesting. The project has barely raised any money, and they're pretty ambitious to seek $35,000 for this. But since it's an Indiegogo "flex funding" campaign, they'll get the money even if they don't raise the full amount. Also, the "rewards" you get back seem ridiculously high priced. You have to pay $100 just to get a download of the short film and $50 for the script? Hmmm. Love the idea of a film that highlights problems with drug patents, but not sure this is the best way to do it.
• And, finally, a documentary about piracy. I mean that's what critics insist this site is all about, right? So I figured, why not. Here's a documentary film about a Somali pirate -- you know, one who actually hijacked a ship, called The Smiling Pirate, which aims to tell the story of the one remaining living member of the pirates who hijacked the Maersk Alabama. As the story suggests, despite a forthcoming Tom Hanks movie about this whole thing, there appear to be a lot more questions than answers about what really happened both aboard the ship and then with the captured pirate after the whole thing happened. Sounds like an interesting story, but it hasn't picked up very many backers yet. It's also an Indiegogo flexible funding project, so will receive any money it raises, but it's not clear if it'll get enough to really support the making of the documentary any time soon.

That's it for this week. Next week we'll be back with more awesome stuff.

When Microsoft was preparing its Surface tablet for the market, CEO Steve Ballmer famously -- and ridiculously --- claimed that people didn't really want iPads, but that they craved the Surface much more instead. While you have to respect a CEO believing strongly in his own company's product, there's also something to be said for CEOs who can be realistic. It seems that Blackberry CEO Thorsten Heins is going the Ballmer route on tablets. In a move that appears to be an attempt to pre-defend the company's likely exit from the tablet market (which has not gone well for Blackberry), Heins argues not that Blackberry screwed up, but rather than the market for tablets is dying:

“In five years I don’t think there’ll be a reason to have a tablet anymore,” Heins said in an interview yesterday at the Milken Institute conference in Los Angeles. “Maybe a big screen in your workspace, but not a tablet as such. Tablets themselves are not a good business model.”

That's the sound of denial that you're hearing. It is actually okay for a CEO to admit that his company screwed up (especially when, as in this case, he can dump some of the blame on its strategy on the previous leadership). But to argue that the need for tablets is going away without a more detailed explanation? That just sounds like rationalizing.

To be clear, I could easily see a world in which a tablet does become obsolete, but it would likely be one where we see a rise of eye-displays like Google Glass or further advances beyond that -- and there's no indication that that is the direction that Heins is taking Blackberry. Instead, this just looks like him covering up for the failure of Blackberry to offer a compelling product by claiming that the whole space is going to go away.