Feds Say We Need Stronger IP Laws Because Grocery Stores Employ Lots Of People

from the but-think-of-the-poor-can-stackers dept

You may recall that, back in April, we criticized a Department of Commerce/US Patent and Trademark Office "study" that claimed it was trying to "better understand" intellectual property by adding up all the jobs in "IP-intensive" industries. We had significant concerns about the report, in particular the reasoning behind the methodology of how it chose "IP-intensive" jobs (and why it thought that had anything to do with stronger IP laws).

The folks over at KEI have put the problems of the report into plain view by digging into the details of the methodology, and realizing that the vast, vast majority of these "IP-intensive" industries are actually coming from the trademark side of things. Now, that's fine, but trademark is an entirely different issue than copyrights and patents. And, even if we dig into the trademark side of things some big questions are raised about the methodology. For example, in counting up all these jobs, what "IP intensive" industry employs the most people? Grocery stores.

According to the report, the number one IP intensive industry in terms of employment is “grocery stores,” with 2.5 million jobs. The six industries with more than a million jobs are the following:

1. Grocery stores, 2.5 million
2. Depository credit intermediation, 1.7 million
3. Computer systems and designs,. 1.6 million
4. Insurance carriers, 1.4 million
5. Management and technical consultants, 1.2 million
6. Clothing stores, 1.1 million

These are just a few of the industries the Department of Commerce calls IP-Intensive: Oil and gas extraction, Residential building construction, Grain and oilseed milling, Dairy product manufacturing, Lessors of real estate, Gambling industries, Household and institutional furniture, Pulp, paper, and paperboard mills, Sporting goods and musical instrument stores, Travel arrangement and reservation, etc.
Now, we can argue over just how much grocery stores rely on IP protection, but I think most normal people would agree that even if we abolished IP laws, grocery stores would likely still exist. Would they employ a different number of people? Possibly, though I'm not sure the difference would be significant. The simple fact is that even if grocery stores do benefit from trademark law, the number of jobs at grocery stores that exist because of trademark laws is minimal. And yet all of them are counted towards this total number -- which is regularly being touted by the entertainment industry as proof as to how important stricter IP laws are.

But, you might be saying, you know what's missing from the list above? Yes, that's right: the entertainment industry. In fact, as KEI points out, the only sector in that list above that can "honestly" be described as "IP-intensive" is "computer systems and designs," and if you look, those were some of the folks arguing most vociferously against copyright law expansions like SOPA and for patent reform that reduced the impact of patents. To use those jobs as evidence of the need for a stronger IP regime is downright misleading.

KEI points out that when you look at the number of jobs in the industries that people normally think of as relying on IP, the numbers are much smaller... and even then are potentially misleading in terms of the need and reliance on actual IP laws:
Industries like these overwhelm the statistics on jobs for the more legitimate choices, such as Sound recording industries (just 36.4 thousand jobs), or Software publishers (259.8 thousand), making it seem as though the IP-Intensive industries are truly enormous employers.


It was also pointed out that while the Software publishing sector was a high wage sector, it was a relatively small employer of the professionals in its key occupations. For example, less than 5 percent of computer programmers work for Software publishers. What do the other 95+ percent of computer programmers do? Quite a few build applications and services than use various open source free software platforms, which are both inexpensive and easy to customize.

And, where is the growth for employment? For the computer, mathematical science occupations, the rate of growth is three times higher outside of the Software Publishers Sector than inside the sector. So what can USPTO or the Economics and Statistics Administration tell us about the relationship between IP and employment? Not much, other than grocery stores, insurance companies and oil companies use a lot of trademarks, and not many people work in the sound recording industry.
The report itself explicitly states that it is not designed to be used to support any particular policy. Yet since it's come out, and despite this ridiculous methodology, it is regularly cited by the MPAA, the RIAA and supporters of things like SOPA and ACTA as "proof" that we need these laws. In fact, Jamie Love from KEI notes that right after the event where they discussed these problems with the methodology of the report, and the fact that all these grocery store employees have been unwillingly drafted to claim they need more IP laws to protect the small number of jobs under the RIAA umbrella, he went to a meeting where a US trade official used the report to claim that it showed we needed to adopt ACTA:
After we left the TACD plenary where the IP and employment report was discussed, the TACD IP Policy Committee met with four US IP/Trade agencies, and three Directorates of the European Union. The meeting began with a US trade official telling us about this new employment study that showed the need for ACTA. No kidding. And, we will certainly continue to hear about this report, with very little understanding of how it was put together.
Before the report came out, the White House had reached out to me, and said that since they knew I was interested in these issues, they could set up an interview with the "economic experts" who put together the report. I tried to take them up on the offer. The response was so ridiculous and so embarrassing for the Department of Commerce that I have actually emailed them back asking them to make sure they really wanted me to run a story based on what was said. I'll have a follow up story soon, either with that response or (hopefully) with a more substantive discussion, should they reconsider.

Filed Under: acta, department of commerce, grocery stores, kei, methodology, sopa, uspto
Companies: mpaa

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  1. identicon
    Androgynous Cowherd, 7 Jun 2012 @ 8:59pm

    It's even worse than the article suggests.

    Grocery stores, for example, would employ more people without IP. Without trademark, in particular, brand premiums would disappear. Beyond basic staple foods, demand for groceries is moderately elastic, so a drop in prices would increase volume. They might lose one or two trademark lawyers on retainer, but they'd gain a fair number of clerks, loader/unloaders, shelf-stockers, etc. to service the increased volume of product being moved.

    Musical instruments is another clear growth case. A much larger amount of public domain music would make the instruments more valuable. Also, institutional buyers such as schools would have music department budgets that suddenly no longer had big expenses in licensing or purchasing extremely overpriced sheet music, and no more ASCAP/BMI/etc. fees. All that freed-up budget might well be folded into buying more useful things for the students, and newer/better instruments could obviously be expected to capture at least a part of that money.

    More generally, we should expect that the removal of monopolies of any kind would increase employment. Consumers stop paying the hidden tax composed of the monopoly rents on anything they buy that has monopoly rents folded into its price, and that freed-up money will, by and large, be spent somewhere, often on more of the same things -- meaning the more "IP-intensive" a sector likely the more job growth in that sector if IP were abolished. Certainly, everything with elastic demand and a price tag concealing substantial monopoly rents would grow, and employment in its manufacture and distribution would grow correspondingly.

    Another cost imposed by IP and similar government-granted monopolies is less direct than the monopoly rents: the lawyers' fees. Even if you buy a generic product with no monopoly rents hidden in its price whatsoever, the manufacturer (and the middlemen in the distribution chain) probably employ some IP lawyers to deal with patent trolls, DMCA notices, trademark disputes, and/or other types of incoming IP-related complaints, threats, and suits, baseless though these may be. They may also be paying now and again to quietly settle a patent suit or to license a questionable patent, in particular, and to obtain defensive patents and to obtain and maintain trademarks (even while not leveraging their marks to charge a name-brand premium, which would constitute a monopoly rent).

    Without IP, all of these costs that inflate the prices of generic products would disappear as well as all IP-enabled monopoly rents. And those vanishing costs would also result in volume increases in cases where demand was elastic.

    Or, the tl;dr version: "Monopoly makes a thing scarce, dear, and bad". By implication, its removal makes the thing less scarce, i.e. increases volume. Increased volume, not increased price, is what drives increased employment. Employment increases when they do more work, not when they do the same work but make more money. The latter just results in fatcats pocketing more money and poorer, less active consumers suffering under higher unemployment.

    If I had the power I would abolish all IP in a heartbeat -- not just because of the free speech, innovation-hindering, access-to-lifesaving-medicines, and other issues IP raises, but because our economy is in dire straits and we clearly need a lot more of two things in particular: jobs and consumer confidence/spending power. Getting rid of IP is something that would give a substantial boost to those things at a stroke of a pen, at least after weathering a brief period of fairly serious upheaval.

    And because of the innovation-promoting effects of competition and lack of chilling effects from patent trolls, in particular, it would be the gift that kept on giving. A more vibrant startup economy would keep producing new jobs at a higher rate than now.

    Want to fix the economy? Abolish IP.

    Maybe amend the definition of fraud to clearly include passing off one product as another -- if I pay for Coca-Cola and get Bob's Cola instead, I've been ripped off (unless Bob's cola is better, anyway). Certainly I haven't gotten what I paid for. That should suffice for everything trademark law was ever good for on the consumer-protection front, and would move the right of action from the company being mimicked to the state and complaining consumers and consumer organizations, the parties actually potentially harmed by deceptive labeling.

    As for patents and copyright, I'm convinced by now that they're all bathwater, no baby.

    Want to bail out the economy? Abolish IP.

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