Techdirt. Stories filed under "incentives"

Why Even Good Hospitals And Doctors Are An Obstacle To Better, Cheaper Healthcare

Glyn Moody — Tue, 21 May 2013 03:33:00 PDT

As we noted in the context of antibiotics, it's well recognized that financial incentives cause the pharmaceutical industry to engage in research that tends to maximize profits rather than maximizing the health of the public. But a widely-circulated article in the Washington Post reveals another kind of bias that may stop us from adopting better ways of keeping people healthy that would also reduce healthcare costs.

This flows from the fact that countries with advanced healthcare systems are no longer dealing mainly with infectious diseases like turberculosis, as they once did, but with chronic ones like heart disease, diabetes, AIDS and many cancers. The key here is how best to manage the disease, particularly among elderly patients, and for that, doctors in hospitals aren't necessarily the best way:

Medicine has been so focused on what doctors can do in the hospital that it has barely even begun to figure out what can be done in the home. But the home is where elderly patients spend most of their time. It's where they take their medicine and eat their meals, and it's where they fall into funks and trip over the corner of the carpet. It's where a trained medical professional can see a bad turn before it turns into a catastrophe. Medicine, however, has been reluctant to intrude into homes.

One company, Health Quality Partners, has focused on doing precisely that: The program enrolls Medicare patients with at least one chronic illness and one hospitalization in the past year. It then sends a trained nurse to see them every week, or every month, whether they're healthy or sick. It sounds simple and, in a way, it is. But simple things can be revolutionary.
The results certainly are: According to an independent analysis by the consulting firm Mathematica, HQP has reduced hospitalizations by 33 percent and cut Medicare costs by 22 percent.
And yet Medicare is planning to shelve this pilot program, citing various bureaucratic reasons why it can't continue. Although some supporters of the home-based system maintain that it would be possible to overcome these problems, there remains a more fundamental obstacle to rolling out the Health Quality Partners approach more widely: Hospitals make money when they do more to patients. They lose money when their beds are empty. Put simply, Health Quality Partners makes hospitals lose money.
So again we seem to be confronted by perverse incentives at the heart of our current healthcare. The better and cheaper way would mean scaling back key parts of the system by instituting regular home visits by nurses, thus reducing the number people sent into hospitals to be treated by physicians. That implies taking on very profitable and thus very powerful business interests, including the doctors themselves. Given that resistance, and Medicare's apparent reluctance to force change by backing the Health Quality Partners system, it seems likely that we will be stuck with an inferior, more costly approach to treating chronic diseases despite knowing what looks like a much better way to do it. Some might call that pretty sick.

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Leaked! MPAA Talking Points On Copyright Reform: Copyright Is Awesome For Everyone!

Mike Masnick — Fri, 22 Mar 2013 10:21:48 PDT

With the possibility of comprehensive copyright reform in the US in the air, we warned that lobbyists from all sides were about to be very, very busy on Capitol Hill, and it has already begun. We've heard from very reliable sources that the MPAA has basically been blanketing Congress with the attached document, visiting as many offices as possible and leaving it behind as their talking points on why copyright is just freaking awesome.

Of course, since this is the MPAA, the document is all sorts of misleading. Let's dig in a bit, shall we?

From the printing press, to motion pictures, to recorded sound, to the Internet, for its entire history, copyright law has evolved and developed in response to new developments in technology and the marketplace.

Well, that's one way to look at. Another would be, from the player piano, to radio, to TV, to the photocopier, to cable TV, to the VCR, to the MP3 player, to the DVR, to internet video, the entertainment industry has flipped out and used copyright law to try to block the development of new technology and marketplaces, often against their own best interests. Given that, you'd think that we'd know by now to take the entertainment industry's claims about copyright law and new technologies with a rather large grain of salt.

The result is that today the U.S. copyright system is a cornerstone of a vibrant creative economy that is unparalleled in the world – adding $631 billion and over 7.5 million direct and indirect jobs in 2010 [Department of Commerce, IP and the U.S. Economy study], and making the United States a world leader in creativity, technological innovation and economic growth.

It wouldn't be the MPAA if it didn't come chock full of bogus stats. First up, the Commerce Department report -- also known as the grocery store report, because it counts all 2.5 million employees of grocery stores as being the single largest employer in the "IP intensive industry." Because, you know, without strong IP laws, that checkout bagger wouldn't have a job. Of course, this highlights why the whole Commerce Department report is useless. It first broadly defines "IP intensive industries" in ways that are simply not credible (see above: Stores, Grocery), and then, ridiculously, suggests that all of the jobs in those industries exist because of existing IP laws, despite no proof of any causal link.

When you look specifically at "copyright," you see they lump in all sorts of stuff that would be made without copyright -- including advertising, public relations, scientific services, performing arts companies, newspaper reporting, "internet sites" and computer system design. Yes, some of those probably involve the use of copyright, but how much? The MPAA doesn't care, it counts them all for its team.

Second, note the claim that these are "direct and indirect jobs"? This is a standard trick of the MPAA. For years they go around citing "2.1 million jobs" implying that's how many the movie industry employs. Except, it's not. The actual number is 374,000. So they started adding in a hell of a lot of "indirect jobs," taking credit for the florists and hairdressers and food delivery folks and all of that. As if "copyright" had anything to do with any of that.

As for the US being "the leader" in this arena, as recently noted, many of the biggest entertainment companies are actually foreign owned, meaning that a significant portion of any profits is likely flowing out of the US.

MPAA member companies welcome a continuation of the ongoing discussion of the importance of copyright. We welcome a discussion based on facts, experience, and rational analysis.

Coming right after the bogus numbers and claims, that's a pretty rich statement.

And we are confident that such a discussion will result in a renewed affirmation of the benefits to all of a copyright law that encourages and rewards creativity and breakthrough innovation, promotes distribution and enjoyment of America’s most beloved stories and characters, and takes a firm stand against the criminals who would rob us of those.

I'm still waiting to see where copyright rewarded breakthrough innovation. I can give you a long list of where it hindered it. It's also not at all clear that today's copyright "encourages and rewards creativity." It clearly rewards some aspect of creativity, but as we've seen a decline in respect, and an increase in infringement, we've also seen a massive increase in content created. That, at the very least, suggests that there are other incentives at play. Furthermore, we reported on a recent study showing musicians making approximately 6% of their revenue from efforts that directly involve the sale of copyrighted works -- suggesting that there are numerous ways of "rewarding creativity" that have little to do with copyright. In fact, a strong argument can be made that with a focus on copyright, you end up with many fewer creators rewarded. But when you focus on other methods of supporting artists, the numbers go way up.

Also, really, if we're going to be talking about a discussion based on "facts" and "rational analysis," we really could do without the bogus and misleading use of words like "criminals" and "rob" for actions that are most frequently civil law issues, at best, and are potentially about infringement, not stealing. It's the little things like this that determine whether the debate will be an honest one or pure propaganda.

Copyright Empowers Creativity, Innovation and the Dissemination of Knowledge
The promise of the opportunity to make a living doing what they love is what gives a creator incentive to transform his or her new ideas into reality and to take that new creation to the public. Creators deserve to be secure in the knowledge that they have a fair chance to earn a wage from their work and investment -- the works that contribute both to our shared culture and our national economy. The Constitution itself recognizes that the public’s interest in creativity and the dissemination of knowledge is best served by the incentives that result from recognizing authors’ and creators’ rights. If our creative sector is to remain the envy of the world, the law must ensure these public-interest purposes of copyright are not undercut.

The promise of the opportunity to make a living gives creators an incentive to create and distribute their works. But just one incentive. And there's fairly strong evidence that it's actually fairly far down the list of incentives that lead to the creation and distribution of creative content. We have a pretty big wide internet filled with content that was created for no direct remuneration. For many, many people, the incentive to create is not because of money, but because they can't not create.

Second, this entire paragraph assumes -- wholly without support -- that copyright is the only way to make money from creation. That's ridiculous, and easily shown to be false (as noted above with the 6% number). Lots and lots of people make money via their content without ever needing to make use of the power to exclude granted to them under copyright.

As for creators deserving a "fair chance to earn a wage from their work and investment," that's absolutely true, but what does that have to do with copyright? After all, under the "old" system that the MPAA used, the vast, vast, vast, vast, vast majority of people who wanted to become filmmakers had no chance at all to earn a wage from their work, because the only way to make a movie was to have one of the MPAA gatekeepers grant you permission. The fact is that most people who want to earn a living making content have failed at it. This has always been the nature of the content business -- and it's a point that the MPAA and other copyright maximalists never want to admit. Also, considering that thanks to the infamous practice of Hollywood accounting, we're told that most films lose money, then, it seems that the existing system isn't working to the level that the MPAA claims is necessary.

Finally, the Constitution says no such thing. It makes no claim that the public's interest is "best served" by copyright. All it does is allow Congress to create monopoly privileges such as copyright if it believes those serve the public. That's it.

Take Digital Rights Management technology, for example. Without the protection of effective DRMs, the business incentive to develop new and innovative distribution models, like UltraViolet, across multiple devices and platforms is lost. The technological and legal protections provided by current law allow content to be portable, enabling consumer flexibility on how to access it. Under current copyright law, the choice and cost curves are both bending in the consumer’s direction.

Try to hold back the laughter here. After all, we're having a discussion based on "facts, experience and rational analysis." And, yes, the MPAA is trying to argue that DRM itself is a form of innovation, and they're highlighting Ultraviolet, a crappy DRM system that no one wants, that tries to enable a tiny portion of the benefits that everyone else on the internet figured out how to get for themselves a decade earlier. That's not innovation. No one needed UltraViolet DRM to distribute content "across multiple devices and platforms."

Limiting what consumers can do is never innovation. It's about trying to limit the impact of actual innovation.

Copyright Benefits Consumers by Promoting Free Markets and Competition
Copyright as it is reflected in both the Constitution and in current law recognizes that the public benefits from a competitive environment in which clearly-defined property rights enable the market to drive the creation and dissemination of creative woks. These rights foster competition because they incentivize creators to take risks. They encourage economic development and economic diversity. That’s good for the consumer and good for the economy.

Yet another trope. As was aptly discussed in Derek Khanna's report for the Republican Study Committee, copyright is the antithesis of promoting a free market. The problem, here, is that the MPAA is pretending that any monopoly makes sense as "property" to create a market. But any competent economist will tell you that's hogwash. We can create all sorts of artificial monopolies to create markets to prove how ridiculous this is. For example, how about we put a pricing mechanism and the ability to exclude people from accessing air to breathe? We've now created "property rights" and a "market" for air -- and I'd imagine it would be quite a lucrative one, given the demand.

And, of course, that would create "a competitive environment" that would "foster competition" by "incentivizing air creators to take risks."

But, of course, most sensible people would recognize that creating such an exclusionary right for something that is abundant is not a form of a free market, but rather is a massive inefficiency in a functioning free market.

The MPAA can argue, perhaps with (or perhaps not) reasonable support, that a system of artificial limited scarcity is a better net result, but it's not a free market by any means. They really should stop pretending it is one, because it really takes away from their point. They should be arguing the facts: that copyright is basically a mercantilist system of monopolies, emerging from the mercantilist era of protectionism. They can then make the argument for why that works better than an actual free market, and that would be an interesting debate. But pretending that the exact opposite of a free market is a free market is just silly.

Enforcement of existing copyright laws is also essential to ensure that illegitimate websites that profit from the illegal sale of content do not have an economic advantage over the innovative platforms that our companies develop to deliver high-quality content to consumers. Undermining copyright law would serve as a disincentive for future technological development and would harm consumers.

As has been shown time and time again, infringement is generally a leading indicator of innovation. The reason that there are so-called "illegitimate websites" that are succeeding is based on one factor alone: the industry's own failure to provide convenient services that consumers want. So they seek other convenient services. If the industry focused on providing more value (as they grudgingly do over time) they'd easily compete with and beat those illegitimate sites and many more people would pay. That is, enforcement has been shown to do very little in terms of encouraging technological development. Infringement, on the other hand, has had a major role in driving many key innovations that are incredibly consumer friendly.

Look, for example, at the music industry. The labels fought any digital distribution for years, as newer, more innovative and increasingly convenient "unauthorized" offerings showed up. Left to their own devices, the labels created two of the worst music distribution services imaginable, MusicNet and PressPlay, which no one bothered to use. It was only when pushed by competition from better online offerings that the industry finally allowed innovation to happen, leading to increasingly innovative solutions, including things like Spotify today, which owes its history to things like Napster.

If not for such infringement, consumers would still be living in the dark ages, with the labels trying to keep any serious digital distribution from happening at all.

Copyright Supports an Internet that Works For Everyone
There are those who would place the value of the Internet at odds with copyright. We reject that false choice. Freedom of expression is at the bedrock of both the Internet and the creative community. In considering policies surrounding the Internet, we need to recognize what the Supreme Court has stated repeatedly – that copyright is itself an “engine of free expression.” Not only does copyright itself promote creativity, but creative content has plays an important role in helping to promote the growth of the Internet. As we look at policy affecting the Internet, we must advance policies to promote an Internet that reflects the values that have been fundamental to us for hundreds of years, including freedom of expression, property rights, and protection of the rights of individuals. Good policy stays true to these values, resisting efforts that would pit one against another and recognizing instead that these values are mutually reinforcing.

I don't think that copyright is at odds with the value of the internet. It seems to me that it's the MPAA setting up a strawman here. However, certain aspects and uses of copyright almost certainly do go against the values of the internet, which can be seen in the way people use the internet to inadvertently infringe all the time. Just look around at how many YouTube videos say "no copyright intended" while clearly infringing on someone's copyright.

As for "the engine of free expression," just because the Supreme Court says something, does not make it a reality. If we look at the last 100 years of history, and look at how much "expression" was created because of copyright, and compare it to how much "expression" was created because of technology (or, hell, limit it to just the internet), the technology/internet will win by a long shot.

The internet is, at its core, a tool for expression. That is undeniable. And, if we're going to talk about "property rights" and "protection of the rights of individuals" it needs to start with our rights to express ourselves, along with our rights to own what we legally posses. Copyright has gone against those rights in so many ways. It stops us from actually owning the music we thought we'd "purchased." It stops us from modifying our phones or video game consoles. It stops us from shifting a movie we purchased on DVD to our computer. So, sure, if we're going to protect "property rights" and the "rights of individuals" let's actually do that.

The reality, of course, is that's not what the MPAA is asking for at all. They want to to protect copyrights, not actual property rights. And they want to protect the exclusionary privileges of the large copyright holders, not the rights of individuals. However, if they're going to claim that they want to support free expression, property rights and protection of the rights of individuals, then I agree. I just doubt they'll agree with what that really means.

Copyright Provides Creators with Modern Protections
Copyright law evolves over time. The last major overhaul of copyright law was the result of decades of Congressional work, much of it focused on fashioning a law that would be flexible enough to accommodate future technological change. But technology and the marketplace often evolve faster than the law. Fortunately, copyright law also provides the space for the private sector to collaborate to develop more immediate solutions. Content creators and intermediaries can and do engage in meaningful conversations about how to protect a secure, legitimate online environment for both creators and audiences. Any discussion of copyright law must include recognition of the critically important role that voluntary agreements play in ensuring the content and tech industries can both remain nimble in a rapidly-changing world.

The whole basis for this point is misleading. The role of any system of copyright should not be about protections, but about what creates the greatest overall benefit. The overall incentives should be aligned. The public wants great creativity, and creators want to create. So let's focus on what leads to that result, rather than jumping to the conclusion that "protection" is the key. Protectionism is often a way of limiting markets, rather than helping them grow to their full potential. So, why aren't we looking at what will incentivize the most innovation and creativity, rather than what will do the best job of protecting and locking things up?

As for flexibility -- we agree that any law needs flexibility to adapt to changes in technology, but it's laughable to think that's true today, given how often we've seen the MPAA flip out about changes in technology, and run screaming to Congress that the law isn't working for them. 15 new anti-piracy laws in the past 30 years? That's not a flexible system. A flexible system is one that doesn't insist that every bit of content must automatically be put under a copyright regime. A flexible system is one that doesn't mean a generation never got to see new works enter the public domain. A flexible system is one that doesn't tell people that downloading 24 songs may make them liable for over a million dollars. That's a broken system.

Copyright Provides for Incentives and Accountability
The public interest in the creation of and dissemination of creative and innovative products cannot be served in an environment in which some are free to build businesses based on the infringement of the rights of others. As infringement grows more widespread, sound copyright policy must recognize that the solution to such problems is in society’s broad interest. Any review of copyright must focus on whether the system as a whole provides for meaningful accountability on the part of those who infringe the rights of others, and whether there are adequate incentives for cooperation and accountability among other stakeholders.

A meaningful system recognizes that infringement is not the problem -- a failure to serve the public with what they want is the problem. A meaningful system recognizes that spending time, resources and efforts on stopping the unstoppable -- especially when it has little long term impact on the bottom line -- is not a sound or reasonable policy. The public's interest is being served all the time -- in large parts by innovation that is often driven by these services that the MPAA hates so much.

And, again, this is the same MPAA that argued that the public's interest would be harmed by the VCR. And by TV. And by the DVR. And by YouTube. So it is hard to take these claims seriously.

Hopefully, most of the folks in Congress receiving this particular document will do some research on what's being said, and will realize that the MPAA's position is not one to take seriously. It is not one based on facts, experience or rational analysis. It is, instead, based on self-interest of a small sector of the economy -- a few large movie studios with a history of exploiting content creators for their own benefit. If we're going to have a real discussion on copyright reform, it has to be based on actual facts, not MPAA-style theatrics.

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European Patent Office Gives Staff Bonus For Issuing Bumper Crop Of Patents: What Could Possibly Go Wrong?

Glyn Moody — Fri, 15 Feb 2013 00:10:56 PST

The European Patent Office (EPO) is a curious body. Despite its name, it is not the patent office for the European Union (EU) in the same way that the USPTO handles patents in the US. As its history page explains:

In addition to all 27 EU member states, Albania, Croatia, Iceland, Liechtenstein, the Former Yugoslav Republic of Macedonia, Monaco, Norway, San Marino, Serbia, Switzerland and Turkey belong to the European Patent Organisation.

This gives it an independence from the European Union that is problematic for patent law there. For example, back in 2005, the European Parliament voted definitively not to allow software patents in Europe. And yet as an excellent analysis published on the IPKat site explains, the EPO has continued to move steadily towards granting more and broader software patents in Europe.

Given the largely uncontrolled way the EPO has been issuing patents, this story in Intellectual Property Watch is noteworthy:

The European Patent Office Administrative Council in December agreed to award a controversial bonus of tens of millions of euros to EPO staff at the end of 2012, with 24 positive votes and 8 negative votes. Several stakeholders had protested the proposal and encouraged contracting states in the Administrative Council to vote against the measure.

The reason for the bonus? Because of all the extra money the EPO had made recently as the result of granting so many patents. But as a letter written to representatives of the 38 EPO contracting states in the Administration Council, and obtained by Intellectual Property Watch, pointed out (doc): [The bonus] contributes to adverse incentive structures and conflicts of interest for the employees of the EPO. In linking the staff's wallet to the Office's surplus, it undermines the efforts to raise the bar in patent examination and fosters a mentality to increase fee revenues for the EPO by granting applications of low quality.
The bonus is effectively rewarding the fact that the EPO's employees issued a particularly large number of patents in 2011. Human nature being what it is, the danger is that this will encourage them to issue even more patents in the hope of receiving another similar bonus.

As the letter goes on:

The EPO should not celebrate increases in patent filing rates as a success story but react to the worldwide critique of a global overheating of the patent system jeopardizing innovation and the proper functioning of the social contract with society upon which the patent system rests.

That is, rather than implicitly making the false equation that more patents automatically mean more innovation -- something that Techdirt has written about several times -- the EPO should strive to reduce the number, but increase the quality, and maybe offer bonuses for those who achieve that.

Sadly, it's in the EPO's interests to have more patents issued, regardless of their quality, since this will encourage yet more companies to apply for patents so as not to get "left behind" in the Great Patent Race. And that will produce yet more surpluses for the EPO, and presumably more bonuses for its staff. Everyone wins -- except, of course European businesses and citizens who have to suffer the knock-on effects of yet more unjustified intellectual monopolies.

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Rather Than Punishing Moviegoing Texters, Why Not Provide Incentives For Them To Put Down Their Phones?

Mike Masnick — Fri, 21 Dec 2012 00:13:00 PST

One of the areas of economics I'm most interested in is focused on incentives. While it's a simplification of things, there are so many areas where people seem to naturally gravitate towards negative reinforcement as an incentive system -- that is, punishing people for things they believe are wrong. While that does work in some cases, it's amazing just how frequently positive reinforcement to nudge behavior in a better direction works much, much, much more effectively. Aaron DeOliveira points us to an interesting example of a company focusing on positive reinforcement in an area where most people have long-assumed that punishment was the only possible option: dealing with the annoyance of people texting during a movie. The first response that many theaters (and theater goers!) have, is to "punish" this behavior by outlawing it. They set up rules and put up signs. They have silly commercials before the show about how annoying it is. But it's all based on the idea of negative reinforcement: punishing or shaming those who engage in the behavior. But, quite frequently, that does little to actually get people to stop.

So, it appears that the Cinemark chain of theaters is trying a system of positive reinforcement. Within its normal movie app for iOS and Android is a separate "mini-app" allowing users to put their phones into "CineMode." It automatically makes the screens on the phones dim, and puts them into vibrate mode -- sort of like an equivalent to airplane mode. But here's the kicker: since the app knows what you're doing, it can keep track of whether or not you actually follow through and leave CineMode enabled throughout the entire flick. For the users who do that, they get rewarded:

When the movie ends and the guest exits CineMode, Cinemark will automatically send a reward (digital coupon) through the app and store it in the Rewards section.

Who knows how well it will work in practice, but it's great to see people realizing that technology can help enable this kind of positive reinforcement, rather than always doubling down on the negative reinforcement/punishment.

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Dan Pink Offers 'Access' As A Reward For Helping Promote His Book

Mike Masnick — Fri, 16 Nov 2012 16:27:00 PST

We've written about Dan Pink's last work, Drive before. It's a fascinating book that explores some counterintuitive concepts about how money incentivizes people. His new book, To Sell is Human appears to build on these concepts, as it specifically relates to salespeople (who many people assume are only incentivized by money). An HBR article appears to summarize the thesis:

Some things in life we know are true. The sun rises in the east and sets in the west. A body in motion will remain in motion unless acted on by an outside force. And the best way to motivate salespeople is by offering them commissions.

But what if we’re wrong, at least about that last one? What if paying salespeople commissions is rooted more in tradition than logic? What if it’s a practice so cemented into orthodoxy that it’s no longer an actual decision? That’s what a handful of companies have begun discovering. To the surprise of many, these firms are showing that commissions can sometimes do more harm than good—and that getting rid of them can open a path to higher profits.

Either way, it should come as little surprise that Pink is also trying unique ideas for the selling of his own book, including recruiting a "launch team" made up of 96 people who promise to share the ideas in the book (and, no, I'm not a part of that). He's offering up "rewards" for people who are willing to do this:

Advance galley copy of To Sell is Human – there’s only a couple hundred of these ever printed.
Signed 1st edition hardcover of To Sell is Human.
A public Thank You on my blog along with links to your website and Twitter.
Exclusive access to me – and each other – via a private Facebook group.

It's that last one that I find most interesting. It's not all that different than some of the offerings we've put together for people on Techdirt as well, who wish to support the site, and can get greater access in exchange (which has been really fun in practice!). It will be interesting to see how well this works (and hopefully Pink will report back on the success or failure of the program as it goes on).

What do people have to do in order to be included? Well, first they have to apply (and applications close tonight at midnight eastern) and be chosen. But then, it's pretty straightforward:

Spread the word about the book on your platform during the weeks before and after publication.
Leave a short, honest review of To Sell is Human at Amazon.com or BN.com on December 31.
Join us in the Facebook group to brainstorm and share ideas on how we might spread the word about To Sell is Human.

I would imagine that, under current FTC rules, anyone in this program would actually need to disclose their participation in the program whenever they talk about the book -- which hopefully Pink is telling those who sign up for this. I also wonder if those who don't get "in" to the program will walk away feeling negative about it. Hopefully not. Either way, it's an interesting experiment and hopefully he'll share how well it works. I've always been a big fan of "access" to content creators as a possible unique form of "reward" -- and it's the kind of experience that can't be copied, which is what makes it so valuable.

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Panama Considering Legislation That Allows The Copyright Office To Pursue Filesharers Directly -- And Keep All The Fines

Tim Cushing — Fri, 21 Sep 2012 07:16:02 PDT

From SOPA/PIPA to the Digital Economy Act to ACTA to the DMCA, there's no shortage of bad legislation built to serve various copyright-driven industries. But just when you thought you'd seen the very edge of how far legislators were willing to go, someone comes along and tops it.

Technollama brings news that Panama is attempting to raise/lower the "bad legislation" bar (not sure which direction the bar would actually be traveling...) with its Proyecto 510-2012 bill, dealing with copyright and related rights.

The 510 Bill gives new powers to an administrative branch of the Ministry of Commerce and Industry called the General Copyright Directorate (Dirección General de Derecho de Autor, henceforth DGDA). Unlike similar copyright administrative offices around the world, the DGDA will have the power to impose fines on infringers without prejudice of further criminal or civil actions.

It's exactly what it looks like: the Panamanian copyright office is being given the power to chase down filesharers and fine them up to $100,000 PAB ($100,000 USD). In addition, the "without prejudice" portion means that filesharers can still be pursued by rights holders, even if the government has already levied a fine.

The bill goes even further than this astounding bit of rent-seeking:

[T]he DGDA has the power to unilaterally haul any alleged infringer, ask them to mount a defence within 15 days, impose fines of up to $100k USD ($200k for re-offenders), and on top of that this person may still have another civil case against them added to the administrative fine. Adding insult to injury, they also have to pay for the publication of the fine so that everyone knows what a nasty pirate they are.

So, you have a government entity pursuing citizens for copyright infringement (a civil matter, or so it used to be...), an act which opens them up to further civil action from the rightsholders. With this kind of enforcement, the Panamanian creative industries should be rolling in extracted filesharer dough. Or so you would think, if this bit of wording wasn't present in the bill:

The funds accrued by the General Copyright Directorate from the fees for the services it provides and the fines imposed in the exercise of its powers, will be aimed at improving its operational infrastructure and to boost the performance of its officers, complementary to the funds that the State Budget reserves for the operation of the entity[...]. The amounts corresponding to each official, shall not exceed fifty percent (50%) of the total basic salary monthly remuneration.

That's right, none of it goes back to the rightsholders. These fines get fed right back into the system that levied them. Not even back into the government in general, but directly back to the DGDA. Wow. How could that possibly be abused?

This is what I think will happen if the law passes as it stands. The DGDA will immediately try to monitor all torrent use in Panama, be it legitimate or not, and all people identified with IP addresses will be summoned and summarily fined. After all, the institution and its employees will have a direct financial incentive to assume guilt. Then those same people will be sent again and again, as there will be clear incentive to fine re-offenders.

Well, that's sounds like all the fun of copyright trolls combined with the "answer to no one" power of the government all rolled up into big ball of perverse incentives. I suppose the government will turn these filesharers over to the rightsholders once it's drained them of money to toy with the drained corpse through civil proceedings.

Meanwhile, the industries seeking this sort of protection will find that no one has any money left to purchase their products, much less pay off another set of hefty fees. While this may provide the rightsholders with some sort of second-hand vindictive high, it's hard to see how this betters their financial situation in the least.

Technollama calls the legislation "toxic." It is. And more than that, it's completely perverse in every sense of the word. It hooks an agency up to an IV full of money and trusts it not to repeatedly press the "dispense" button. Sure, it may cut down on infringement, but once a government agency is hooked on steady income, it usually comes up with new (and worse) ways to keep the buzz going. The dollar amount of the fines will be ratcheted up and the definition of "infringing activity" will become broader, perhaps encompassing such maximalist wet dreams as embedded video. It's ugly, any way you slice it.

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Execs From Bankrupt Kodak To Make Millions For Giving The Company's Patents To Trolls

Mike Masnick — Tue, 7 Aug 2012 14:35:00 PDT

We've written about the ridiculousness of the ongoing auction over Kodak's patents -- the final sad legacy for the once giant company. However, it's getting even more ridiculous. On Monday, a bankruptcy court judge approved about $6 million in "performance" bonuses for execs, including some that are based on how much the company gets from these auctions. Think about the ridiculous incentive structure here. You have executives who are running a bankrupt company, who are set to make millions (in a court approved manner), for handing off the company's patents to trolls, so they can go out and sue the actual innovators.

The execs make out like bandits. The buyers likely make out like bandits after shaking down some companies. The lawyers (of course) make out like bandits. And... who gets screwed? Oh yeah, the companies who are actually innovating successfully in the market and the public (who we thought the patent system was supposed to benefit).

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Would We Have Art Without Copyright Law?

Nina Paley — Tue, 30 Aug 2011 06:34:57 PDT

Stupid, right? But I hear this argument for copyright law all the time.

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Copyright Is An Incentive... To Create Lawsuits

Nina Paley — Fri, 25 Feb 2011 18:33:00 PST

I can't really add to this.

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Discussing The Music Industry Comically Speaking, With Mimi & Eunice

Nina Paley — Wed, 22 Dec 2010 02:36:43 PST

Mike's recent post about OK Go is just crying out for some Mimi & Eunice cartoons. Rather than make him go back and edit it, I'll just illustrate it here:

Actually this miniseries began with this strip, which sums up an argument used by many copyright advocates:

There are lots more new Intellectual Pooperty cartoons to see - please copy them freely.

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TSA's Failure Based On The Myth Of Perfect Security

Mike Masnick — Wed, 24 Nov 2010 18:33:32 PST

As the complaints against the TSA ratchet up, various people are finally starting to point out why the whole concept of security theater is a farce. The entire setup is based on the idea that you can have "perfect security." But, if you wanted perfect security, the only way to do that is to not let anyone fly, ever. As James Fallows notes it doesn't make much sense to "spend limitlessly toward the impossible end of reducing the risk to zero." As he notes:

Every society accepts some risks as part of its overall social contract. People die when they drive cars, they die when they drink, they die from crime, they die when planes go down, they die on bikes. The only way to eliminate the risks would be to eliminate the activities -- no driving, no drinking, no weapons of any kind, no planes or bikes. While risk/reward tradeoffs vary between, say, Sweden and China, no nation accepts the total social controls that would be necessary to eliminate risk altogether.

Yet when it comes to dealing with terrorism, politicians know that they will not be judged on the basis of an "acceptable level of risk." They know that they can't even use that term when discussing the issue. ("Senator Flaccid thinks it's 'acceptable' for terrorists to blow up planes. On Election Day, show him that politicians who give in to terror are 'unacceptable' to us.") And they know for certain that if -- when -- a plane blows up with Americans aboard, then cable news, their political opponents, Congressional investigators, and everyone else will hunt down any person who ever said that any security measure should be relaxed.

This is the political tragedy of "security theater."

Along those lines, the Unqualified Offerings blog (via Julian Sanchez) does a nice job explaining how the incentives line up to create this ridiculous situation. Basically, he notes that a terrorist attack on an airplane will happen. Some day. No matter what we do to try to prevent it. But once that happens, the response is going to be obvious: those who pushed hard for more ridiculous security theater that wasn't implemented will keep their jobs and retain power. Those who pushed for more reasonable solutions will be vilified.

100% success is usually impossible in the real world. Given that eventually, one way or another, a terrorist will almost certainly take down a plane, the only question that management has to ask itself is what position they want to be in when that happens. And that answer is simple: Safe in their jobs, and poised to inherit a bigger budget.

And that's why we get security theater.

The goal isn't so much actual safety. After all, as Jim Harper notes, if you look at the actual "risk" of a terrorist attack on an airplane today, it's pretty close to zero. But the whole process is built around trying to bring it all the way to zero, which is an impossibility, but leads to ridiculous extremes. And, he notes, this is exactly how the terrorists planned it:

This is apostasy in Washington -- where the political imperative is zero risk. But risk is a reality of life. We take risks when we drive, when we walk across a street and when we go to the fridge for that two-day-old slice of pizza.

This illusory quest for zero risk helps terrorism achieve its goals. As news of "Operation Hemorrhage" -- smaller, low-cost attacks aimed to disrupt commerce and stoke fears -- demonstrates clearly, terrorism works by inducing target states to overreact. That's the only mode terrorists have for affecting major powers like the United States.

We've been nothing if not a patsy to their strategy. The element of surprise, central to terrorism, forces us to defend everything against every mode of attack -- a logic that naturally bleeds us.

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Patents Create Incentives For More Patents, Not Innovation

Mike Masnick — Tue, 19 Oct 2010 09:24:48 PDT

While many people (especially politicians and the press) like to equate patents and innovation (often falsely suggesting that fewer patents means less innovation), studies have shown that patents are actually a really bad proxy for innovation, in that there's simply no direct link between the two. And that's a problem, considering that the patent system is supposed to be about creating more incentives for innovation. In fact, however, it often appears that the patent system is actually creating incentives to get more patents.

If you want a clear example of this, just look to China. Just recently, we noted that patenting was on the rise by Chinese companies, but a closer look at what's happening in China suggests that it's very much about incentives to increase patents, rather than incentives for greater innovation. In fact, it's quite direct:

The Chinese government has created an ecosystem of incentives for its people to file patents.

Professors who do so are more likely to win tenure. Workers and students who file patents are more likely to earn a hukou (residence permit) to live in a desirable city. For some patents the government pays cash bonuses; for others it covers the substantial cost of filing. Corporate income tax can be cut from 25% to 15% for firms that file many patents. They are also more likely to win lucrative government contracts. Many companies therefore offer incentives to their employees to come up with patentable ideas.

And, as in the US at times, the incentives for the patent examiners is also skewed towards simply approving more patents (which has a snowball effect, in encouraging more people to file weaker and weaker patents):

The bureaucrats in Chinese patent offices are paid more if they approve more patents, say local lawyers. That must tempt them to say yes to ideas of dubious originality.

Incentives are funny things. If you actually believe that patents are correlated to innovation, then such strategies make sense. But if the reality is that patents are simply correlated to patents, then it's a huge dead weight loss to focus so much on patenting, rather than actual innovation.

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Vodo Sets Up Currency To Encourage More Promotion

Mike Masnick — Mon, 4 Oct 2010 15:21:46 PDT

In the debate over business models that embrace file sharing networks, one of the more interesting projects to watch has been Vodo, which is a platform for filmmakers who wish to release their works via file sharing setups, and to enjoy a promotional boost for doing so. Movies released via Vodo have done quite well, both in getting attention and in getting monetary support. The company has now updated its system and has added an interesting element: an internal currency, called "Do," to encourage people to promote the works.

That is, if you point people to a download -- you can earn some "Do" every time someone visits an artist's website or downloads the work or even agrees to give money to a content creator. This could be interesting to watch, though I do wonder how well it will work. On the positive side, as we were just discussing in our Dark Helmet case study, one of the most important things in getting modern business models to work is to get your biggest fans to help promote you. However, at the same time, we've also warned about the risks of artificial incentives to promote some content, you run the risk of people questioning the motives for the promotion. If Vodo can balance this, it could be quite nice, but that balance is very much an open question. I agree that it's important to make people comfortable promoting you, but I worry that creating such incentives leaves it very much open to gaming, rather than legitimate advocacy.

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Why Must Patent Supporters Rewrite History In Attempt To Have The Feds Subsidize Patents

Mike Masnick — Fri, 1 Oct 2010 10:27:34 PDT

Hank Northhaft is the CEO of a patent licensing firm. He likes to claim that he's the CEO of a technology miniaturization firm, but the majority of the company's actual revenue comes from patent licensing, not actual product sales. He's got a book coming out next year that's all about making it even easier and cheaper to get patents, which he insists will create hundreds of thousands, if not millions, of new jobs, and has been making the rounds writing opinion pieces for various publications pitching this plan. Unfortunately, each of his opinion pieces seems to rewrite history or misinterpret studies to make his argument. Frankly, that's pretty sad.

Earlier this year, for example, he (along with his co-author for the book, David Kline), wrote a piece for the Harvard Business Review, claiming that patent system delays are costing millions of jobs. To support the claim that patents do create jobs, there's the following:

In contrast, we know that patents create jobs -- sometimes many thousands of them. Just consider the job-creating effects of Steve Wozniak's 1979 patent for a microcomputer, for example, or Larry Page's 1998 patent for Google's search engine. Then there's Jack Kilby's 1959 patent on the semiconductor integrated circuit, which gave birth to a semiconductor industry that directly employs 185,000 people just in the U.S. today, as well as contributing to jobs throughout the larger $1.1 trillion global electronics industry.

Note the implicit (totally false) assumption made there: that these products and jobs were entirely a result of these patents. This is false. In all three areas, there was tremendous work being done among competitors in the same fields, and the innovation that happened was not because of the patents (in fact, all of the patents discussed had almost nothing to do with the later success of the technologies in question). If you look at the history of the semiconductor industry, the PC industry and the search business -- all were built on widespread sharing of ideas among different researchers, rather than hoarding it and using patents to keep others from the market.

Larry Page's search engine work was really based on Jon Kleinberg's research at MIT & Cornell which was openly shared, and which Page built on. When others copied Google's ranking mechanism, Google never sued or, as far as I can tell, even threatened to sue. And most of the "jobs" created by Google came about not because of the patented search ranking mechanism, but because of Google's execution in the marketplace, and its creative decisions on how to implement more "user-friendly" advertising. It appears as if Google barely valued the patent at all.

As for the the PC industry, Wozniak's "microcomputer," was very much based on a sharing culture around the Homebrew Computing Club in Silicon Valley, where plenty of development was going on entirely outside of what was happening in the patent world. What made Apple a success wasn't its patents, but the incredible focus and salesmanship of Steve Jobs. And, of course, it's notable that it wasn't long before the big jump Apple made was due to Steve Jobs directly copying the graphical user interface that was first invented at SRI and then redone at Xerox PARC (by folks who had seen it/worked on it at SRI). Jobs saw it at PARC and copied it. Note what was important here: the real revolution and job growth came from the open sharing of info, and better execution, not from patents or patent licensing.

Finally, as for the example of Jack Kilby, that may be the worst of them all. After all, while Kilby patented the integrated circuit in 1959, his integrated circuit, was based on germanium. Just a couple months later, Robert Noyce came out with his patent application for the integrated circuit... based on silicon. The fact that I live in Silicon Valley rather than Germanium Valley should suggest how much the world actually valued Kilby's original patent. Separately, the fact that multiple inventors (and there were more) were reaching the same conclusion shows that it wasn't patents that drove this innovation and the corresponding job growth, but the natural progression of the needs of the market.

We see this all the time. Patent system supporters want to credit patents for things that had nothing to do with patents. Just because a company that innovates gets a patent, it doesn't mean that it was only because of the patent that the innovation occurred. Quite frequently, the patent has absolutely nothing to do with it. Northhaft quotes some company execs who claim that they can't move forward with a product without a patent, but that's entirely self-serving. Who doesn't want a gov't granted artificial monopoly on their product? But the idea that they can't move forward? Hogwash. Separately, the main guy that Northhaft quotes to support this claim, talks about the need to get money to bring a drug to market, claiming that "It can cost a billion dollars to bring a new drug to market." First of all, this myth of how much it really costs to bring a drug to market has been debunked multiple times -- and the biggest reason for the specific cost is a separate regulatory issue, which has nothing to do with patents.

More recently, Northhaft, along with former CAFC (the appeals court that tends to love patents) judge Paul Michel wrote an equally ridiculous op-ed piece for the NY Times where they suggested not just having the USPTO hire a bunch more workers, but also a plan to federally subsidize all patents for "small companies", such as patent trolls. I'm not joking:

To encourage still more entrepreneurship, Congress should also offer small businesses a tax credit of up to $19,000 for every patent they receive, enabling them to recoup half of the average $38,000 in patent office and lawyers' fees spent to obtain a patent.

They also claim that hiring more patent examiners to approve more bad patents would "create, over the next three years, at least 675,000 and as many as 2.25 million jobs." What's this based on? "Our guess." Uh huh. Notice that they don't bother to point out the massive amount of research showing that patents have been a net negative on the economy and jobs for quite some time now.

In both articles, Northhaft relies heavily on the Berkeley Patent Survey, which asked a bunch of companies about the importance of patents. We wrote about this study a few months ago, highlighting how it showed that most tech companies don't find patents all that valuable at all. Northhaft twists the study around, claiming that it shows that patents are necessary. That's based on a subtle misreading of the study, where many entrepreneurs did claim that they believed their patents were important in securing funding. Not in their success, mind you. Not in the actual innovation. But just in securing funding. Thankfully, Brad Feld, Jason Mendelson and Paul Kedrosky -- who are actually involved in the venture capital industry -- wrote a response in the Wall Street Journal, where they pointed out that Northhaft was quoting the study out of context, and even quoted Pam Samuelson, who was the co-principal investigator of the study, and said:

"Two-thirds of the approximately 700 software entrepreneurs who participated in the 2008 Berkeley Patent Survey report that they neither have nor are seeking patents for innovations embodied in their products and services. These entrepreneurs rate patents as the least important mechanism among seven options for attaining competitive advantage in the marketplace. Even software startups that hold patents regard them as providing only a slight incentive to invest in innovation."

Separately, they point out that Northhaft carefully quotes the study only showing what entrepreneurs think investors want, rather than looking at what investors actually value or what was actually instrumental to companies' successes.

So yet again, it appears that Northhaft is claiming things that don't match up with reality. There's no doubt that patents have helped Northhaft make money. But getting a gov't granted monopoly is a market-limiting function, not a market enhancing one. Competition is what drives innovation, and patents only serve to drive out competition. Of course, that's good for patent holders, but bad for everyone else. If we want to encourage the economy to grow, the last thing we should be doing is subsidizing even more bad patents and monopolies on the building blocks of innovation.

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Software Firms Overwhelmingly Against Patents

Mike Masnick — Thu, 29 Jul 2010 10:05:57 PDT

There's been plenty of talk about whether or not software patents should be legal, and one of the "debates" we often run into in the comments is over whether or not the "software industry" really believes in patents or not. Some patent system supporters claim that most of the industry does, in fact, support patents, but it's a noisy bunch who is against them. Unfortunately for those who believe that, some new research is suggesting quite a different picture. It seems that a rather large majority of software firms don't seek patents and don't believe they're helpful or provide any real incentives:

Three-quarters of the D&B firms had no patents and were not seeking them. Because the D&B firms are, we believe, typical of the population of software startup firms in the U.S., their responses may be representative of patenting rates among software startups generally. It is, in fact, possible that the overall percentage of software startup patenting is lower than this, insofar as patent holders may have been more likely than other software entrepreneurs to take time to fill out a Berkeley Patent Survey.

For the most part, these firms just didn't think getting a patent was worth it. For all the talk of how patents protect companies and act as an incentive for investment in big projects, most software execs seem to disagree:

One of the most striking findings of our study is that software firms ranked patents dead last among seven strategies for attaining competitive advantage identified by the survey

Instead, they believe that a first mover advantage is a lot more important followed by "complementary assets," which is basically offering scarce services to complement the software.

The execs were also asked how much incentive patents provided for developing software, and the answer was about as close to none as you could expect. On a scale from 0 to 5, software execs said that patents were a 0.96 as an incentive for inventing something new and a 0.93 in commercializing a product and bringing it to market (innovating). And, before you say that this was skewed by people without patents, the report notes:

the results did not change significantly even when focusing only on responses from software entrepreneurs whose firms hold at least one patent or application. Even patent-holding software entrepreneurs reported that patents provide just above a weak incentive for engaging in these innovation-related activities.

The other interesting finding? If a firm is venture-backed, it's more likely to get patents, but this doesn't appear to suggest that the patents are valuable. It seems to indicate that entrepreneurs still believe the old claim that venture capitalists want to see patents, so they feel the need to get patents just to show to investors.

On the whole, it certainly appears that the vast majority of the software industry isn't interested in patents, don't find them useful or important, and certainly don't see them as creating an incentive. Even those who get patents don't see much value in them, and appear to only get them because they feel pressured to get the patents for external reasons. All in all, this is a pretty damning bit of research for those who suggest patents help the software industry.

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Judge Says The First Amendment Protects You If You Lie About Receiving A Purple Heart

Mike Masnick — Tue, 20 Jul 2010 17:34:21 PDT

Does the First Amendment protect your ability to lie? Apparently, to some extent, it does. A court has ruled that a law that makes it a crime (with the potential for a year in prison) for falsely claiming to have been awarded military medals such as the Purple Heart, is an unconstitutional violation of free speech rights. Of course, this doesn't mean it's okay to lie about getting a Purple Heart. It just means that the government can't charge you with a crime for that specific act.

While lying about receiving military medals is pretty sleazy, that doesn't mean that it should automatically be illegal. The government (who is thinking about appealing) makes this bizarre argument:

"By allowing anyone to claim to possess such decorations, could impact the motivation of soldiers to engage in valorous, and extremely dangerous, behavior on the battlefield."

Really? Because some jackass back home pretends to have won a Purple Heart, real soldiers will be less motivated to perform on the battlefield? If so, that seems to say more about the soldier's existing motivation. Besides, it seems like even without this law, social mores already limit this kind of activity. If you're found out lying about military medals, it seems like your reputation would already take a pretty big hit.

Thankfully, the judge in the case found the statement above equally as preposterous:

"This wholly unsubstantiated assertion is, frankly, shocking, and indeed, unintentionally insulting to the profound sacrifices of military personnel the Stolen Valor Act purports to honor," the judge ruled. "To suggest that the battlefield heroism of our servicemen and women is motivated in any way, let alone in a compelling way, by considerations of whether a medal may be awarded simply defies my comprehension."

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Woman Sues Theater For Pressing Charges Over Filming Twilight Snippets At Birthday Party

Mike Masnick — Fri, 2 Jul 2010 07:39:19 PDT

You may recall the story from late last year of the young woman whose sister had a birthday party, where part of the festivities was going to see the Twilight: New Moon movie. Since it's pretty common for people to record part of events such as birthday parties, this woman, Samantha Tumpach, kept filming part of the party, and that included some snippets from the movie. Because of that, the theater had her arrested under the MPAA's favorite anti-camcording laws. She ended up spending two nights in jail, and and even the movie's director claimed the whole thing was "terribly unfair." The theater and prosecutors stood by the arrest for a while... until finally dropping the charges.

At the time, Tumpach suggested she might sue the theater, but it looks like it took seven months to get everything in order to do just that. Tumpach is now suing the theater company, Muvico, over the arrest, saying that she wasn't warned, and that even the MPAA had told the theater to just delete the content and file a report. But, the lawsuit claims, the theater went further in pressing charges because of the possibility of collecting a monetary reward that was promised to theaters that provide info on bootleggers:

"Buckus signed the criminal complaint in hopes of collecting a reward for providing information that leads to the arrest and conviction of a person engaged in video piracy when he very well knew that she was guilty of no such act."

When rumors of her planned lawsuit first came out, we pointed out that the Illinois law in quesiton appears to make the theater's actions perfectly legal, so there's probably not much chance of the lawsuit succeeding. However, it does highlight the perverse incentives created by the MPAA in its mad rush to both pass anti-camcording laws like this one, and then to incentivize theaters to press charges against anyone, no matter what the circumstances.

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Instead Of Bad Drivers, What If Speed Cameras 'Caught' Good Drivers Instead?

Dennis Yang — Fri, 18 Jun 2010 18:34:00 PDT

We've written at length here about the multitude of problems with speed cameras. What if, instead of focusing on punishing speeders, the speed cameras were used to reward good behavior? Drivers who obey the speed limit are automatically entered into a lottery and then notified by mail if they've won. So, you might pick up your mail one day with a letter from local law enforcement and a check for good driving behavior, rather than a fine for bad driving behavior. This is somewhat reminiscent of the idea from a few years ago where police would pull over good drivers and "reward" them with free coffee coupons -- but avoids the whole "pull over" part, which certainly upset some drivers.

The idea is that the jackpot could come from the fines that were paid from speeders -- so not only do you get rewarded, you get rewarded from the pockets of worse drivers. This method may also serve to make a speeding ticket feel even more painful than just a fine alone. After all, a $500 ticket definitely stings, but a $500 ticket PLUS a little note that had you not been speeding, you could have won $10,000 instead? Ouch, that hurts a lot more.

The idea was the winning entry to VW's "The Fun Theory" competition, where applicants were tasked to design ways to change people's behavior through fun. This is a brilliantly viral campaign that showcases the fact that advertising is content, and if you make engaging content, people will beat a path to your door to watch it. The "piano stairs" entry alone has amassed over 12 million views.

Of course, rewarding good drivers with cash awards does not help governments rake in quite as much in revenue, but speed cameras are supposed to be about safety and not money, right?

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Big Time Patent Attorney Jumps Into The Patent Trolling Game By Buying 4,500 Patents From Micron

Mike Masnick — Fri, 4 Jun 2010 15:24:54 PDT

I recently had a conversation with a patent litigator for a big name law firm. He tends to work on the "defense" side of things -- defending tech companies against lawsuits from patent hoarders, who he felt were causing serious problems for innovation. That said... he admitted that watching how much money folks make by hoarding patents and suing big companies for actually innovating, it's really tempting to get into the game. At some point, your resolve wares down, and you realize there's just so much money to be made abusing the system, that it's difficult to resist. We've seen that a lot. In fact, two years ago, we wrote about how many of the new generation of "patent trolls" were former patent lawyers themselves, who felt it was better to make money abusing the system directly, rather than being a hired gun for some other patent hoarder.

In our recent post about Erich Spangenberg, he admitted that was part of his reasoning. After working for a big law firm for a bit, he decided it was more lucrative to own the patents and sue everyone himself, rather than just being a lawyer working for others. In that article, Spangenberg also mentioned that Micron had recently sold a bunch of patents to a well-known patent attorney, John Desmarais. That story is now getting more attention, as Bloomberg has an entire article about Desmarais jumping ship from his big law firm to buy 4,500 patents from Micron and put them into a new firm that will be used to demand money from lots of tech companies.

It's hard to read the article and not be depressed. Here's someone who clearly knows how the system is being abused, and rather than fight for a better system, he decides to abuse the system himself. Such is the state of our broken patent system.

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No, Copyright Has Never Been About Protecting Labor

Mike Masnick — Fri, 5 Feb 2010 12:39:02 PST

Ugh. So, we recently wrote about Matthew Yglesias' quite accurate economic explanation for why the price of music was going to get pushed to zero, no matter what the industry said or what happened with copyright law. Andrew Sullivan spotted it, and also a response from a guy named Sonny Bunch who apparently has decided to totally reinterpret the history of copyright law in a post he entitled Piracy. Is. Stealing.:

No! False! The purpose of intellectual property law has very little to do with Matt Yglesias being able to enjoy a wide variety of new music. The purpose of intellectual property law is to protect the intellectual property created by artists so they are rewarded for their efforts. The purpose of intellectual property law is to punish people who steal that which isn't theirs.

Yes, copyright was created in part because there were concerns that authors wouldn't bother creating new work if they were consistently stolen from, leading to Yglesias's oddly solipsistic reading of intellectual property law. But, more importantly, copyright law evolved because we think that artists, writers, musicians, and others have a right to profit from their labors. It's a crazy idea, I know.

Also, Yglesias's cute little bit about the marginal distribution cost being zero ignores the fact that the production cost of music is far from zero -- leaving aside the artists (who Yglesias clearly doesn't care about being paid for their work), there are studio technicians who mix the music, producers who craft the songs, and all sorts of other people involved with the creation of music. I suppose they shouldn't be paid either? That we should just rob them of their labor too?

First, on the title, let's get serious. Every time someone claims "piracy is stealing" it suddenly becomes that much more difficult to take them seriously, because it shows they've put no thought into their argument and are parroting specious arguments that have nothing to do with reality. Stealing means taking something away. Making a copy of something means there's two such things, not one, and nothing is missing. It's not stealing, and even the Supreme Court knows this:

Since the statutorily defined property rights of a copyright holder have a character distinct from the possessory interest of the owner of simple "goods, wares, [or] merchandise," interference with copyright does not easily equate with theft, conversion, or fraud. The infringer of a copyright does not assume physical control over the copyright nor wholly deprive its owner of its use. Infringement implicates a more complex set of property interests than does run-of-the-mill theft, conversion, or fraud.

But that's old hat. What's really problematic is the claim that copyright law was designed to "protect" the creator. False. Copyright law has one purpose and one purpose only: and it's to promote the progress of science and the useful arts. Yes, the method for doing that included some limited protection but only for the sake of promoting the progress. If it is not promoting the progress, then the protection should not be allowed.

But Bunch goes on and makes a "sweat of the brow" argument or the "labor theory" of copyright that has been rejected over and over and over again. Not only has it been rejected, but it has been soundly rejected in clear language -- again, by the Supreme Court:

It may seem unfair that much of the fruit of the compiler's labor may be used by others without compensation. As Justice Brennan has correctly observed, however, this is not "some unforeseen byproduct of a statutory scheme."... It is, rather, "the essence of copyright," ... and a constitutional requirement. The primary objective of copyright is not to reward the labor of authors, but "to promote the Progress of Science and useful Arts."

And if the Supreme Court isn't enough for Bunch, how's about Congress:

"The enactment of copyright legislation by Congress under the terms of the Constitution is not based on any natural right that the author has in his writings... but on the grounds that the welfare of the public will be served and progress of science and useful arts will be promoted.... Not primarily for the benefit of the author, but primarily for the benefit of the public such rights are given."

Everyone is allowed to have their own opinion on copyright law. But not their own facts.

The next paragraph by Bunch is also wrong and misleading. In talking about basic economics, no one is saying that they don't want people to get paid. If you explained why telephone switching technology was going to make the everyday phone operator obsolete did that mean you didn't want operators to get paid? Of course not. You're just explaining the basic functioning of the market, and what it means. It's got nothing to do with what anyone wants. It's about what's happening.

Furthermore, the claim that any of this means people don't get paid is also pure folly. As we've described in great detail, plenty of business models that don't require copyright are working quite well in the industry.

I'm always quite amazed at people who clearly have no experience with copyright law or the history of copyright law insisting they know all about what it's about.

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Editorial On Why The Patent System Should Be Abolished

Mike Masnick — Thu, 10 Dec 2009 07:00:00 PST

We've certainly discussed the work of David Levine and Michele Boldrin plenty of times before -- and both were kind enough to participate in our CwF+RtB experiment earlier this year. If you haven't read their book, then you are missing out. Now, Levine and Boldrin have a new editorial up in the CSMonitor, explaining why they think the patent system should be abolished. If you've read their work, there's nothing surprising, but if you have not, it's a quick summary of the key points:

As a matter of theory, intellectual property is a double-edged sword. On the one hand, giving a reward increases the incentive to innovate. On the other, allowing the monopolization of existing ideas taxes the creation of new ones, thereby decreasing the incentive to innovate. The bottom line: Contrary to widespread belief, economic theory does not provide support for the continuous extension of IP. The only answer to the question of whether IP serves the desired purpose must be empirical. Does it work in practice?

A great deal of applied economic research has tried to answer this question. The short answer is that intellectual property does not increase innovation and creation. Extending IP rights may modestly boost the incentive for innovation, but this positive effect is wiped away by the negative effect of creating monopolies. There is simply no evidence that strengthening patent regimes increases innovation or economic productivity. In fact, some evidence shows that increased protection even decreases innovation. The main finding is that making it easier to get patents increases ... patenting!

No matter what your stance on this topic is, you have to admit it's impressive to see it getting attention in a mainstream publication like the CSMonitor.

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Lessons Learned From DARPA Balloon Challenge

Mike Masnick — Wed, 9 Dec 2009 17:52:00 PST

By now, you've probably heard that a team from MIT won the DARPA balloon challenge, whereby DARPA put 10 red balloons in the air around the country and wanted to see what people could do to find all 10 balloons. The rules were pretty loose, and the team at MIT took all of nine hours or so to locate all ten balloons, through an interesting "crowdsourcing" method. They basically quickly set themselves up as a clearinghouse of information, and made it easily shareable across different social networking platforms, and employed something of an affiliate program to encourage people to get their friends to sign up with the MIT team as well. If you signed up people who helped find the balloons, you got some of the prize money according to your friend network, and so on down through the social pyramid. The team claims that what was most important was the recursive nature of the pyramid, which gave people incentive to participate, even if they knew they couldn't find the balloons.

While some other DARPA challenges, like the autonomous vehicle challenge (to get a totally driverless vehicle to drive a few hundred miles with no help), are cool but seem limited in terms of application outside of the core area it was built for, this one actually does seem to hold a lot of useful lessons that can be picked up on right away, and which can be applied across a lot of different business, policy, IT, public good and many other areas. Some of the key elements:

Recognize that there's power in numbers: Recognize that for certain projects, you need a lot of different minds (and eyes) working on things, and that certain tasks shouldn't just be done by "the one best" individual.
Make it easy for more people to participate: Once you realize that you need a lot of people, you need to make it easy for them to participate.
Give people multiple reasons to participate: Different people have different motivations. Some people just want to belong to a successful project or a leading team to bask in the glow. Others need additional types of incentive. The MIT team offered up monetary compensation in addition to recognition for participation.
Give people a reason to get others involved: Sort of a corollary to recognizing the power in numbers, the MIT team worked hard to give people incentive not just to participate and to promote their participation, but also to recruit others to the team as well. This even made it so those who couldn't help finding the balloons directly could still participate in better finding the people who could find the balloons.
Align incentives properly: Make sure that everyone is driving towards the same goal, and that the incentives work on top of one another to all push towards that same goal.
Look beyond your immediate "group": One of the coolest things I thought about the MIT group was that there was nothing in there that limited it to MIT or the folks at MIT. They immediately recognized that it made the most sense to reach out to folks beyond their immediate circle, which is what helped them get the people they needed involved quickly.

Now, a lot of these may sound obvious, but it's often important to remind yourself of these basic concepts, and it's impressive to see how well (and how fast) these worked in the case of the MIT balloon team. I could see these lessons being applied in a lot of other areas as well. There is a separate issue that the team hasn't discussed yet, but promises to eventually: which is that it also had to deal with a number of bogus entries -- including at least some from a competing team trying to throw the MIT team off the scent. Finding out how they got around such problems would also be quite interesting in terms of better managing these sorts of group efforts.

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Is Balance The Right Standard For Judging Copyright Law?

Mike Masnick — Fri, 9 Oct 2009 19:30:00 PDT

For many years, I've pointed out that I tend to disagree with many folks -- who I otherwise agree with -- in copyright debates, who argue that we should be looking for the "right balance" of copyright holder rights vs. user rights. I've long thought that balance is the wrong way to look at it. The purpose of copyright law is to incentivize the creation of new content, and thus the standard on which copyright law should be judged is one where the creation of content is maximized. As such, there shouldn't be a question of balance, because the ideal situation where content is maximized should make everyone better off. Talking about balance is figuring out how both sides should compromise to meet in the middle. Talking about maximizing content creation, on the other hand, is talking about ways to improve the marketplace of options for everyone.

Still -- especially among so called "copyfighters" -- the concept of "balance" is quite commonly used. However, it appears that at least some others are also concerned about this use of "balance." Copycense alerts us to a paper that was published recently by Abraham Drassinower, of the University of Toronto Law School, which also argues that balance is the wrong way to view copyright policy. Unfortunately, the paper is not the most... lucid thing out there. It's quite academic and, tragically, does not do a particularly good job clearly and concisely making its point. It's not what I would call an easy read. Instead, it rambles at times, and uses overly complex (and at times circular) language, rather than just coming out and stating a clear and concise thesis. This is unfortunate, because if you can get through the language used in the paper, it does make some very valuable points.

The argument is, effectively, that "balance" as a concept in copyright law really only makes sense if you believe that copyright law is designed to reward a content creator for their labor -- in legal terms, the "sweat of the brow" argument. However, courts in both the US and Canada have rejected a "sweat of the brow" standard for copyright law, as being separate from the purpose of copyright law. If you believe that "sweat of the brow" is appropriate, then you are starting from a position that a content creator naturally deserves rewards from all benefits that result from his or her work. And, thus, the "balance" is in slowly removing some of those rewards and giving them to the public, until things are seen as "fair" for both sides.

The sweat of the brow standard affirms a view of copyright law on the basis of what we might call a misappropriation paradigm--that is, a paradigm that grants copyright in the products of a person's mental effort so as to preclude others from reaping where they have not sown. The mischief copyright law aims at in this paradigm is the misappropriation of value through copying. Copying a phone directory gives rise to copyright liability because such copying amounts to an unauthorized transfer of value from the author to the copyist, the plaintiff to the defendant. It is to correct this "grievous injustice"--to use the words of a classic House of Lords judgment in this tradition--that copyright law operates. Its target is the injustice of misappropriation.

But, without a "sweat of the brow" standard, then the whole concept of balance makes a lot less sense. Instead, Drassinower notes that copyright is actually based on a "skill and judgment or creativity" standard, which focuses just on the creative elements of the work, rather than the effort put into the work. In other words, the standard we have set for copyright focuses on the value of creativity rather than the value of effort. Drassinower argues that balance, as a concept, does not, and cannot take that difference into account.

Again, while I agree that balance is the wrong way to look at things, I was quite disappointed by the way Drassinower sets out to make this case. It's interesting, but not presented in a compelling way. There are times when it makes good points (though, again, using overly dense language in most cases), but never seems to fully come out and just state the clear conclusion of focusing too much on balance: that it falsely implies that when one loses the other wins. That it falsely implies that this is a zero sum game. At times, he gets close, as in the following passage:

[Once] the metaphor of balance is assumed as the integrating mechanism holding authors and users together, integration properly so-called can never occur. And that is because once value-balancing is the ordering mechanism, then the relation between authors and users is but a perennial struggle for value, such that claims of authors are but minimizations of the value-entitlements of users, and similarly, the claims of users are but minimizations of the value-entitlements of authors. The upshot is that successful haggling about price masquerades as the foundation of a truly public domain. The failure to elucidate authorship as anything other than value-origination generates an impoverished vision of the public domain as nothing other than a lower or lowered price.

But he fails to take that final step of pointing out that it's not a zero sum game, and the goal of copyright should be maximizing the creation of content overall, such that everyone is better off. Still, if you can get through the rather dense language, the paper does raise some good points, even if I felt it misses the true problems over "balance" in the copyright debate.

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Why Fining People Can Actually Increase That Activity... An Economics Lesson

Mike Masnick — Tue, 6 Oct 2009 12:27:00 PDT

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.

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The Placebo Effect: Things Pharma Prefers You Not Worry About

Mike Masnick — Thu, 3 Sep 2009 10:10:00 PDT

There's a fascinating article in the latest issue of Wired about the placebo effect and pharmaceutical companies. It's fascinating for a few reasons: First, because it shows the thought process of pharma firms and why "what's best for pharma" is often not what's best for your health (which is a line often trotted out by those who believe in protecting pharma). Second, because it suggests that some (potentially significant) parts of pharmaceutical science -- the stuff we hear over and over again is so important to protect via patents -- is bunk. And, finally, just because it may surprise you to know just how powerful the placebo effect appears to be -- and that it's only getting stronger.

The critical point is that final one. Basically, the placebo effect (the impact had on a patient taking a sugar pill under the false impression that it's medicine) seems to be quite real and, at times, quite powerful and lasting. Even more surprising is that, over time, the placebo effect has only become stronger and stronger.

Now, if pharmaceutical companies were actually interested in your health, then this would be a ripe area of study, well worth exploring to see if the placebo effect could be better understood and somehow harnessed to make people healthy. But, of course, you can't patent a sugar pill, so pharma research dollars have gone into drugs that can be patented.

However, a serious problem has arisen: with the placebo effect getting stronger and stronger, these "wonder drugs" that pharma has been spending millions of dollars "developing" have increasingly been failing clinical trials, because they can't out-perform placebos. The theory behind testing against placebos is that if a drug doesn't outperform the placebo, you have to question what good the actual drug is and why it should be approved. So, if a drug fails to outperform a placebo, then (the thinking goes) the drug is useless. But that's partly based on the idea that the effect of taking a placebo is weak.

This leaves out an important part of the equation: If the placebo is really effective in dealing with certain issues, then why not examine how to utilize that fact to make people healthy? Some in the pharma world have been pushing for this for a long time, and have repeatedly asked the big pharma companies to release their data on clinical trials, in order to better understand the impact of placebos and to see if there's a way to harness their power. But the pharma companies have resisted and don't want to release the data -- in part because they're scared to death of what this all means. If sugar pills are effective, that's a very different business, and the claims of all of the drugs that are on the market would be called into serious question. Instead, they've apparently spent their time writing out detailed marketing plans that convince doctors to prescribe medicine that doesn't work any better than alternatives.

Now, let's be quite clear here: I am not saying that drugs don't do any good. There are plenty of pharmaceuticals that certainly help deal with certain conditions, and there are plenty of people who lead better lives (or are alive at all) solely because of modern medicine. But, these findings about the placebo effect certainly suggest that -- at least in many cases -- rather than dumping chemicals into the human system via a pill, your brain may actually be a lot more effective at concocting the proper chemicals itself.

If we had a healthcare system built on incentives to actually keep people healthy -- rather than just to sell more pills -- this would be the beginning of a very important field of study. Instead, it's been resisted and the data has been hidden away for years.

The incentive system is clearly screwed up. It's based on patents and hoarding information, rather than on actually keeping people as healthy as possible. If you could craft a healthcare system that actually rewards those who keep patients healthy, then perhaps we'd actually know a lot more about the placebo effect and, beyond it, our own brains' ability to produce important, potentially life-saving or life-improving chemicals on its own. In fact, in such a system, the incentives would be less about hoarding information, and more about sharing it, since, through collaboration, it would be more likely that more people could be kept healthier, allowing greater overall profits. The problem today is that the system is based on incentives that are misaligned... and thus, it's a struggle to get anyone to care about the fact that the placebo effect actually seems to help some people.

Update: As pointed out in the comments, Skeptic Magazine recently had an article that provides some more thoughts on placebos.

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