The Big Cato Copyright Conference Wrapup: The Debate That Wasn't

from the hello,-straw-men dept

A bunch of people have asked about this week’s copyright conference at the Cato Institute, but I wanted to wait a few days to think about it before writing up a bit of a recap. Overall, it was fun, interesting and educational. If you have half a day to spare, you can now watch the video or listen to the audio of the event. I’m much more used to technology conferences, so spending time with policy people was enlightening in many ways (both good and bad). The “good news” is that a lot of smart people are thinking about these issues — and there are plenty who seem to recognize the important points (even if they go against conventional wisdom). The bad news is that, when it comes to policy issues, it seems that some people are more focused on claiming that they’re right, rather than making sure that they’re actually right. Even worse, at too many points, the debate wasn’t much of a debate. Those who were for stronger IP protection, seemed to continually claim those on the other side said things or stood for things that none of us actually said or stood for. They accused us of just wanting stuff for free, of focusing on the importance of “the commons” and generally hinting repeatedly that we were all somehow “socialists” or “leftists.” The problem was that everyone who spoke took a very free market, capitalistic approach to their arguments, so it wasn’t entirely clear who those who were pushing for stronger IP laws thought they were arguing with. Click on “read more” or on the permalink to read the full (very long) recap.

The discussion opened with presentations from Congresspeople Lamar Smith and Zoe Lofgren giving their overviews of the status of intellectual property issues. Smith, as you may be aware, has been working to make changes to the big three areas of intellectual property: copyright, trademarks and patents. In all three areas, it appears to us that his proposals will make the system worse, not better. That's extremely troublesome, because all three areas already have problems. Smith's talk trotted out the standard lines about intellectual property. He brushed off the complaints of misuse by claiming that the courts seem to be taking care of those cases -- not noting that they seem to take an extremely long period of time and a lot of money. He also ignores the "chilling effects" issue, where many people won't even start to undertake certain actions, knowing that they'll likely face a lawsuit. Smith was in a rush to leave to take care of other things and unfortunately didn't stick around for questions or anyone else's talks. Lofgren responded to Smith's presentation with her position noting that there are serious problems with intellectual property laws on the books. She's hoping that proposed legislation from her and Rick Boucher will help balance out some of the legislation to tilt it back so that it doesn't favor the big content creation industries so much, and recognizes more of the rights of consumers. Unfortunately, she did note that there aren't many members of Congress who recognize how important some of these issues are.

The opening panel started off with conference organizer Jim Harper, who did a nice job laying the framework of the debate, and admitting that there were many open questions -- some of which were controversial. It seemed like the rest of the day bore out that prediction, but perhaps not the way some of us had hoped. Jim DeLong made a fairly odd presentation, bringing up some of the standard claims advocating stronger legislation to protect intellectual property. His argument stems less from the libertarian side of the fence that believes in less regulation and much more from the side that focuses on property rights. For some reason, despite plenty of evidence to the contrary, DeLong insists that there can be no difference between traditional property and intellectual property. He brushed off the economist's response that if marginal cost equals zero, cost in a competitive market will equal zero. But, he brushed it off in a way that suggests he didn't actually understand what it meant (which perhaps explains why his arguments fall apart). He says that economists are claiming since marginal cost equals zero it means producers must price their products at zero. That's not true. What it means is that if marginal cost equals zero, as the market gets increasingly competitive, the price will trend towards zero. That's not a bad thing. That's an efficient market, which we thought someone like Jim DeLong who preaches free markets would approve of. DeLong's claim that if the price was zero, all incentive to create new works would go away is provably false, and extremely problematic to his argument.

In fact, his argument was disproved quite easily by the next speaker (who we wrote about recently), David K. Levine. Levine is an economics professor at UCLA, and has done plenty of research specifically on this issue. He showed a number of examples where intellectual property protection actually decreased intellectual output, rather than increased it. That's because it both increases the cost of production and can lower the incentive to create. One example was the work of Verdi, who produced music early in his career without intellectual property protection, and later with it. Early on, he produced many more works, knowing that he was getting paid for what he produced. Later, once he had the protection, he produced much less, as he lived off the royalties from his past works. This makes sense. Most of us get paid for the work we do going forward -- not the work we've done in the past. What we've done in the past does help establish our value and ability for future work. In other words, what we've done in the past acts as a promotion for our future work. If we all got paid royalties for just a little bit of work we did in our youth, it would seem we'd have a lot less incentive to keep working. Levine showed evidence that this was, in fact, the case.

This is somewhat damning for DeLong's vision of the world, because it completely disproves his argument -- which is entirely based on theory, not fact. Any of the "facts" prove a single case, but not the absolute. And, since they're arguing for the absolute, all it takes is the single case to show there's another way -- and then wonder why he can't let the market decide what the best way will be. Another point from DeLong was that the moderator of the panel, Drew Clark, from the National Journal's Technology Daily, was somehow being hypocritical for not admitting that without copyrights his publication would go out of business and he'd have no job. Again, we run into problems with DeLong's absolute views. When he claims there are no business models and no incentives, all it takes is a single example to disprove the entire point. In the case of a publication like Technology Daily, there are obviously plenty of technology publications (including this one) that make plenty of money without charging for content. Why should we legislate to support just that one business model?

The second panel was the one that I was on. Moderator Kevin Maney from USA Today gave a nice intro, pointing out how he was conflicted as both a consumer of content who wanted to keep his own rights and a producer of content who wanted to protect his works. This led into Greg Lastowka's presentation on his Amateur to Amateur paper (well worth reading). The paper focuses on how the entire chain of content production, distribution, promotion and consumption are changing thanks to the internet, and how these models shake up many of our assumptions concerning intellectual property rights. To me, his argument was simply another way of presenting the idea that the internet is really a communications platform rather than a content delivery platform. Communication is really just people creating content for others, whether on a one-to-one, one-to-many, many-to-one or many-to-many basis. The traditional intellectual property system focuses only on the one-to-many world of content and that distorts the world for the others.

Patrick Ross followed this up with a brief intro claiming that his position was really about giving artists the choice of using things like copy protection. His fear, he claimed, was that those of us advocating less stringent intellectual property protection are trying to dilute intellectual property in an effort to somehow accelerate this world of amateur to amateur content creation. He believed that stronger copy protection was necessary to make sure the two could co-exist. It's an enticing argument, but it's entirely backwards. It would make some sense if the internet had begun as a one-to-many content delivery platform for content producers. However, it's always been a communications platform, and his plans for stronger intellectual property rights dilute the rights to use the system for many legal purposes that have always been a part of the system. In other words, it's trying to accelerate the business model of the big content creation industry that showed up late to the internet at the expense of the rights of everyone who has used it before. That's why it doesn't seem to be about choice. It seems to be about legislating a single business model into being as the prime business model for the internet. That's not just a bad idea, it's bad economics.

Oddly, Ross also claimed that it was impossible that there could be less content produced without stronger IP protection. It was odd because this came right after Levine showed not only that it wasn't impossible, that there was historical evidence that it was the case. Once again, like DeLong, Ross was using an absolute term that was easily disproved. Finally, it's barely worth mentioning, but Ross made a strange attack on me, claiming that it wasn't worth responding to my points because when I've written about him on Techdirt before, I never discuss the issues, but rather attack who his firm is associated with. I've written about Ross twice on Techdirt. You can read the posts here and here. I'll let everyone make their own decision about his claims, but you'll notice I never mention who funds his firm and I think I do focus on the points he was making. Meanwhile, others would point out that who funds their firm actually is an extremely relevant piece of information, but it's not as important as the issues... which I've always been more than willing to discuss.

For my part on the panel, I tried to focus on why Ross and DeLong seemed to start from the same basic free market principles that most of us in the room believed in, but came to the exact opposite conclusions. After looking through a variety views on economics, history and intellectual property, I actually felt I came on the answer by accident -- while reading a book called Zero: The Biography of a Dangerous Idea. It discusses just how much trouble people have in understanding the concept of "zero" and how, historically, that misunderstanding resulted in holding back the development of mathematics and physics -- often stifling innovation. This appears to be the same problem that's holding back many when they look at the economics of intellectual property. They want to believe that once a zero (as in marginal cost and price) show up, that there's market failure, requiring regulation. That's because, traditionally, economics is looked on as the science of scarcity -- and when you have a zero marginal cost, that means there is no scarcity. To people who misunderstand (or even fear) zero, they automatically think the system breaks down and needs regulatory help. But, if you understand zero, traditional economics doesn't actually fall apart at all. You just have to flip how you look at things. Instead of looking at how to sell something whose price is trending towards zero, instead you recognize that it acts as promotion for something else. Then, it's even better than traditional promotions -- because it has a marginal cost of zero as well! In other words, it's free promotions -- which many would claim are the very heart and soul of plenty of capitalistic endeavors.

Someone from NBC Universal asked some questions of both me and Levine, about how NBC Universal could continue to make $200 million movies like King Kong if they're supposed to be selling services instead of content. My answer was that they're already selling services instead of content. They're selling the experience of going to the movie and the convenience of the DVD among other things. However, DeLong's complaint that no one actually answered the question (while completely false), actually highlights an important point. The guy at NBC Universal was asking the wrong question. Go back 100 years, and I'm sure the guy who made buggies for horse drawn buggies asked how he could continue to make buggies as the market moved on to cars. The point is that the markets change. NBC Universal shouldn't be looking on themselves as being in the $200 million blockbuster movie business -- but the overall entertainment business. Then, there are plenty of business models that make sense. Putting in place a regulatory scheme that enforces a situation to keep that one aspect of the business model alive does not make sense. Let the market decide.

The final panel was also quite interesting. Tim Lee (who Zoe Lofgren amusingly mistook for the "other" Tim B. Lee: Tim Berners-Lee) had an excellent discussion of his paper, which we've pointed out before. As we've said, it's a worthwhile read, and in the interest of keeping this already too long recap from being even longer, I suggest you read his paper or listen to his talk, where he highlights some important problems with the DMCA.

Gary Shapiro, from the Consumer Electronics Association, then made an impassioned plea for letting consumer electronics makers innovate, without regulating from above to make those technology companies forced to build into place requirements to support the business model of big content. It seems like the Consumer Electronics industry is taking a much more aggressive stance on this issue -- though Shapiro has been an outspoken advocate on these issues in the past as well. Right now, they seem to be one of the few industry groups whose interests actually do align with consumers', which is a good thing (though, it always pays to keep their overall motives in mind).

Following this, however, were two very problematic presentations. First was Solveig Singleton. She based her entire presentation on a premise she stated at the outset: that you need some "boundaries" to get the critical mass that makes content creation worthwhile. She stated this as if it must be true and wasn't even in question... when all morning there were examples of how it wasn't true at all. Those boundaries are not needed -- and the "critical mass" tends to be much bigger when the content is priced at zero as a promotion. The trick is to just capitalize on that promotional value. Singleton's argument is yet another absolute that is easily disproved with a single example (even though there are many such examples). Once you get rid of that assumption, much of the rest of her presentation no longer makes any sense. Another point she raised was that the courts are sorting all of this out correctly, and getting rid of the bad DMCA actions so that no one is actually harmed. Of course, that ignores the costs of the legal threats and much more importantly, the chilling effects of such lawsuits. No one knows how many people have not produced works because of the threat of innovation -- but studies have shown that there is, indeed, quite a chilling effect. Ed Felten, who Singleton claims had a "happy ending" to his threat of being sued for doing some research, hits back at her claim, pointing out how his result was happy "in the same way one is happy to recover from food poisoning."

Finally, Emery Simon, from the Business Software Alliance, got up to speak. His presentation made me wonder if he had actually attended the rest of the event. If he did, it was clear that he wasn't actually listening to anything we said. He started out by claiming that people claimed the DMCA was a conspiracy between Madonna, Steve Jobs, and Steven Spielberg to "hurt American consumers." He said that what was clear from the event was that there was a "war" going on between consumers and creators -- when that's actually not what was discussed at all. What people said was that the market had changed -- and the old model of big content creators on one side and consumers on the other has completely changed. He then said that those of us who wanted less stringent, more balanced views of intellectual property are only doing so because we want free stuff, we see that we can get free stuff, and then we assume that we're entitled to free stuff. Not a single person at the event made that argument. Not a single person during the day suggested that people were entitled to free stuff. He then claims that the DMCA is just about stopping people from breaking copy protection when used for "pernicious" purposes -- showing that he absolutely was not paying attention. The entire point of the complaints about the DMCA was that it criminalized perfectly legal uses, such as fair use. Simon also claimed that what gas was to cars, DRM was to the VCR or the TV. Seriously. What else is there to say?

In the end, this focus on issues that weren't even raised was the element that disappointed me the most. It would have been great to actually dig into the economics and the issues -- which is what I believe David Levine, Greg Lastowka, Tim Lee and I did. Unfortunately, it seemed like the other side focused on making us out to be something we weren't: "leftists" who feel entitled to free stuff. It's tough to have a serious debate when the people on the other side seem to be arguing against a phantom that we don't represent.

Still, overall, the event was quite enjoyable, and I want to thank Jim Harper and CATO for putting it on and inviting me, and everyone else who attended. It was great to meet many of the people I've only known online in the past. It definitely seemed to stimulate a lot of debate, that I'm sure will go on for quite some time. Hopefully, we'll eventually get around to actually debating the real issues rather than some straw men.