Yes, The US Industrial Revolution Was Built On Piracy And Fraud

from the a-little-history-lesson dept

Missed this when it first came out, but Bloomberg ran a fantastic report at the beginning of February, highlighting how piracy and fraud were key components to helping America catapult into the industrial revolution. In fact, there are reasonable arguments to be made that if the US was not a “pirate” nation, it would not have had the kind of success that it has had as the industrial world leader. We’ve discussed some of this in the past, and have highlighted how Eric Schiff’s research showed how other countries (the Netherlands and Switzerland) industrialized by explicitly rejecting patents. The US didn’t go that far, but it did involve quite frequent copying of the efforts of others and then improving on them, without fear of repercussions.

In its adolescent years, the U.S. was a hotbed of intellectual piracy and technology smuggling, particularly in the textile industry, acquiring both machines and skilled machinists in violation of British export and emigration laws. Only after it had become a mature industrial power did the country vigorously campaign for intellectual-property protection.

This is a point we’ve made many times as well. Patent and copyright system supporters frequently argue that stronger laws are needed to create incentives for creation and innovation. But, there are a ton of studies that show the actual pattern runs the other way. When you look at the pace of innovation before and after a change to patent laws, or if you do cross-country comparisons at the same time for similar types of economies, you quickly see that those with weaker laws show more innovation. The ratcheting up of patents is rarely about increasing incentives to innovate. Patents are put in place with the support of incumbents, knowing that it allows them to “exclude” competitors and upstarts. It is not a tool of innovation, but a tool to suppress disruptive innovation. Not having those laws (or having them widely ignored) leads to a situation in which people continually improve what’s out there — which is how the US economy took over the world during the industrial revolution.

The most candid mission statement in this regard was Alexander Hamilton’s “Report on Manufactures,” submitted to Congress in December 1791. “To procure all such machines as are known in any part of Europe can only require a proper provision and due pains,” Hamilton wrote. “The knowledge of several of the most important of them is already possessed. The preparation of them here is, in most cases, practicable on nearly equal terms.”

Notice that Hamilton wasn’t urging the development of indigenous inventions to compete with Europe but rather the direct procurement of European technologies through “proper provision and due pains” — meaning, breaking the laws of other countries. As the report acknowledged, most manufacturing nations “prohibit, under severe penalties, the exportation of implements and machines, which they have either invented or improved.” At least part of the “Report on Manufactures” can therefore be read as a manifesto calling for state-sponsored theft and smuggling.

In fact, as the article notes, our own original Patent Act recognized this very fact, by refusing to cover foreign inventions.

Of course, the idea that loose patent and copryight laws can help nations develop economically is not a new idea. Over a decade ago, we were writing about how various officials were admitting that strong IP laws probably did more harm than good for developing nations. And, yet, the US continues to try to push its extreme maximalism for copyright and patent laws around the globe. Either they are doing this out of ignorance (a real possibility) or because they actually understand the truth, which is that other countries with IP laws like the ones in the US will see a slow down in their economic development.

Either way, those who insist that the US was founded on the principles of strong respect for “intellectual property” haven’t paid that much attention to the actual history of American industrialization.

Filed Under: copying, fraud, industrial revolution, inventions, patents, piracy, us

Video Shows How Patent Trolls Kill Innovation

from the uniloc-again dept

The good folks at Reason TV have put together a new video called How Patent Trolls Kill Innovation:

It more or less rehashes the story that we’ve covered in the past concerning patent troll Uniloc suing the indie developer of X-Plane over a ridiculous patent (6,857,067) that never should have been granted in the first place, and is now being claimed to broadly apply to pretty much anyone who sells apps in mobile app stores. The video has a bunch of great quotes from Julie Samuels, the newly appointed “Mark Cuban Chair to Eliminate Stupid Patents”, highlighting just how screwed up the system is.

“You can’t separate the problem with the patent troll from the problem with software patents,” says Samuels. “There are hundreds of thousands of software patents floating around that are really broad, that are really vague … and a lot of them are bought up by patent trolls.”

Nothing in the story or the video will really be all that new to regular Techdirt readers, but it’s great to see more attention being given to the problems of patent trolls and how they harm innovation. It’s also great to see it come from Reason.TV, a part of the libertarian Reason Foundation — as there is still some dispute among the wider “libertarian” crowd as to whether or not the patent system is good or bad. It’s felt like there’s been a growing recognition that the answer is “bad,” and hopefully videos like this represent a recognition that the scale is tipping.

Filed Under: innovation, patent trolling, patents

Why Does The Entertainment Industry Insist That It Can Veto Any Innovation It Doesn't Like?

from the over-and-over-and-over-again dept

For years, we’ve seen that the entertainment industry honestly seems to think that it has the right to veto and kill off any new technology that doesn’t fit into its own business model plans. Of course, they’ve had some support in this from copyright maximalists, like former head of the Copyright Office, Ralph Oman, who recently declared that all new technologies that impact content should be presumed illegal until Congress decides otherwise. Can you imagine what sort of innovation we’d have in the consumer electronics space if we had to wait for Congress’ approval for each new device? Especially given the power to lobby against such approvals?

I’m reminded of this thanks to News Corp. (via Fox) filing for a new injunction against Dish Networks for the latest version of its DVR, the Dish Hopper with Sling. Now, you may recall that Fox already tried to get an injunction against Dish’s Hopper with Sling and lost pretty badly (even as it pretended that it had won). Fox is appealing that decision, but also filed a new request for an injunction against the updated device, claiming that the key new feature, Hopper Transfers, goes beyond anything else and (once again), must be stopped.

This is the same old story over and over again. The last century plus of copyright law has been driven by the entertainment industry flipping out time and time again over new innovations that they don’t think should be allowed. The 1909 Copyright Act was driven, in large part, by the introduction of the evil player piano, leading many to insist that this would kill the demand for live music and put musicians out of work.

Around that time, there was also the invention of the gramophone, or, as John Philip Sousa called it, “that infernal machine.” He famously claimed, “these talking machines are going to ruin the artistic development of music in this country,” and that “we will not have a vocal cord left,” because evolution will deem them not necessary due to “talking machines.”

Then along came radio, and it too, was destined to wipe out the industry, with ASCAP demanding that any song that was to be played on the radio first needed to (a) get permission from the rights holder and (b) have the DJ state clearly before each song that it was being played “by special permission” from the rightsholder. When people started mocking that phrase (and someone even wrote a song about it), ASCAP stated that the permission line had to be spoken by DJs with “no facetious trifling.”

Moving on, along came cable TV to add some competition to the TV market. And what happened? Lawsuits of course. “It would be difficult to imagine a more flagrant violation of the Copyright Act,” we were told.

And you may have heard what happened when the original VCR was invented. Why the MPAA’s Jack Valenti had a thing or two to say about that:

I say to you that the VCR is to the American film producer and the American public as the Boston strangler is to the woman home alone.

Cassette recorder? “Home taping is killing music.”

DVR? Must be illegal. According to the head of Turner Broadcasting: “People who watch TV without commercials are stealing from the entertainment producers.”

How about the first real MP3 player, the Diamond Rio? Lawsuit filed in which it was stated that allowing the device, “will injure not only the record companies and artists whose work will be pirated, but also the music publishers, musicians, background singers, songwriters and others whose existence is dependent on revenue earned by record sales.”

YouTube? Viacom’s lawsuit is still ongoing, but Viacom insisted that, if allowed, YouTube would “severely impair, if not completely destroy, the value of many copyrighted creations.”

And lets not even get into all of the technologies that the entertainment industry has been shutting down over the past few years. Zediva? Dead. ivi? Gone. Aereo? Still here, but fighting. Veoh? Dead (even though it won its lawsuit). MP3Tunes? Bankrupt due to lawsuit (even though it won too). There are many more as well.

See a pattern yet? This pattern repeats over and over and over and over again. The entertainment industry, aided by the Copyright Office, seems to think that there’s some sort of role it has to play in giving the yay or nay vote to any new technological innovation that concerns content consumption. And, of course, the vote is always “nay.” In the long run, that always turns out to be the wrong vote. So why do we constantly allow the entertainment industry to get away with this nonsense? This filing from Fox is merely the latest in a very long line of these kinds of actions, and it should be immensely troubling to those who recognize that the best way for the entertainment industry itself to thrive in the modern world is to embrace these new services, which increase value to consumers and make them more interested in watching/listening to the content being produced.

You would think that, after a century of these examples, those in the entertainment industry might finally realize that looking for the opportunities in these innovations is a more productive strategy than trying to kill every new technology. Apparently, however, the industry is still run by people who have no sense of history, other than the history of always ratcheting up copyright enforcement.

Filed Under: copyright, dish hopper with sling, hopper transfers, injunction, innovation, veto
Companies: dish, fox

Chinese Junk Patents Flood Into Australia, Allowing Chinese Companies To Strategically Block Innovation

from the perverse-incentives dept

Techdirt has been writing for a while about China’s policy of providing incentives to file patents — regardless of whether those patents have any worth. That’s led to a naïve celebration of the large numbers now being granted, as if more patents corresponded to more innovation.

Until now, this problem of junk patents has been confined to China, and the companies that operate there. But last year China went even further with its subsidy system, offering to pay the fees for filing overseas, presumably to encourage Chinese companies to build up patent portfolios in foreign markets that can be used for defensive or even offensive purposes. We’re now beginning to see the effects of this further distortion to the patent system, as Australian businesses struggle with the flood of new patents there. The Patentology blog explains:

A Chinese government scheme providing financial incentives for small and medium sized enterprises, public institutions or scientific research institutions appears to be resulting in abuse of the Australian patent system, and the ‘dumping’ of numerous low-quality innovation patents on the Australian Register.

These ‘junk’ patents are not being examined or certified. They therefore represent no more than potential enforceable rights. Even so, they generate costs to companies operating legitimately in Australia, which may need to obtain advice on the likely scope and validity of these patents in order to avoid possible infringement. In extreme cases, the existence of junk patents could result in an Australian business choosing not to take the risk of bringing a new product to market, even though the Chinese owner of a patent is not itself offering any products or services in this country.

This is a perfect example of how granting more patents actively harms innovation. Thanks to China’s incentive scheme, which encourages patent quantity rather than quality, Australian businesses must now spend more time searching through them all to see if they are likely to affect their own products, deciding if they are a threat, and what to do about it. All that costs money that could have been spent on real innovation, developing new products. Thanks to the patent system, and China’s new incentives, that money will now go to the lawyers.

Follow me @glynmoody on Twitter or identi.ca, and on Google+

Filed Under: australia, china, innovation, junk, patents

Uber's CEO: Innovators Shouldn't Have To Ask For Permission Or Forgiveness

from the just-innovate dept

We’ve written a bunch about the disruptively innovative transportation company Uber, which has been running into regulatory issues with multiple local regulators. Andy Kessler recently had a fantastic interview with Travis Kalanick, Uber’s CEO, concerning the regulatory battles he keeps running into. If you’ve followed Uber over time, very little in the interview will be surprising. It tells of Kalanick’s past — he was sued for $250 billion at one point for running Scour.com, an early file sharing site — but also of his belief that these regulations are protectionism for legacy industries.

One bit that struck me however, was his response to Kessler posing an expected question concerning Uber’s penchant for launching first and dealing with the regulatory fallout later (well, and reaping the publicity rewards of complaining about being stifled by regulations):

When I suggest to Mr. Kalanick that Uber, in the fine startup tradition, was using the “don’t ask for permission, beg for forgiveness” approach, he interrupts the question halfway through. “We don’t have to beg for forgiveness because we are legal,” he says. “But there’s been so much corruption and so much cronyism in the taxi industry and so much regulatory capture that if you ask for permission upfront for something that’s already legal, you’ll never get it. There’s no upside to them.”

I think this is actually pretty important. There’s been plenty of talk about the importance of permissionless innovation and permissionless creativity. That is very important. But, somehow, we rarely talk about the flipside, which is that those engaged in creating wonderful and innovative things also should be proud of what they’re doing, rather than feeling like they need to ask forgiveness for upsetting the apple cart. Disruption is a messy business, but in the end it creates tremendous benefits for nearly everyone (except those who relied on the old way, and refused to change). It’s great to see a company like Uber leading the way.

Filed Under: forgiveness, innovation, permission, travis kalanick
Companies: uber

Congress & Silicon Valley Billionaires Separately Launch Contests To Drive Forward Innovation

from the seems-like-a-good-idea dept

There’s been a growing movement among some to suggest that it would be a lot more practical and useful for students to learn how to code as a part of their education, rather than some other “mandatory” curriculum items. It looks like the House of Representatives is working on a cool little plan to at least incentivize some code learning in schools: a nationwide technology contest for students, encouraging them to develop brand new apps for mobile devices. The hope is that it will help more students not just learn to code, but to learn that they enjoy it and are interested in learning more and going into the technology field. While this may be a “small” program, it’s good to see general encouragement towards having people learn to code at a young age.

On the other end of the spectrum, three of Silicon Valley’s richest techies, Mark Zuckerberg, Sergey Brin and Yuri Milner, have teamed up for a much larger program a “Breakthrough Prize” for life sciences that will award 11 grants of $3 million each year for major breakthroughs in science.

These are two different approaches towards encouraging more innovation in technology and sciences — one at the “low” end and one at the “high” end — but it will be interesting to watch how these kinds of incentive programs develop over time. It would be great to also see more “innovation prizes” that offer up rewards for reaching specific goals, rather than the sort of random “we pick a list of winners” that the Breakthrough Prize functions under. Still, more incentives for innovation can only be a good thing.

Filed Under: app development, innovation, life sciences, mark zuckerber, mobile apps, prizes, sergey brin, yuri milner

Yet Another Example Of Our Bad Immigrations Laws Hurting Innovation And Jobs

from the and-leading-to-dangerous-pollution dept

We see stories like this one over and over again, but that’s because they’re not exceptions. The Washington Post has a profile of two MIT postgrads who have created a water-decontamination system that was dubbed by Scientific American as a world changing idea, based on the fact that it could revolutionize the controversial practice of fracking by decontaminating all of the contaminated water that is output by the process. Such technology is in high demand, and the two engineers, Anurag Bajpayee and Prakash Narayan Govindan, are trying to create a company that will hire an awful lot of people (beyond cleaning up our water). They have people willing to give them millions of dollars to do this.

There’s just one simple problem. They’re about to get kicked out of the country because their student visas are expiring, and the US has no reasonable system for keeping such highly skilled engineers here, rather than sending them back to their home countries.

But their student visas expire soon, both before summer, and because of the restrictive U.S. visa system, they may have to move their company to India or another country. “We love it here,” said Bajpayee, a cheerful 27-year-old in an argyle sweater and jeans. “But there are so many hoops you have to jump through. And you risk getting deported while you are creating jobs.”

Stories like this are so prevalent these days, and yet Congress remains unwilling to take the most basic steps to fix the problem — in part because the wider immigration debate raises so many other issues. Yet again, it seems that we’re letting silly politics get in the way of actually doing what’s right.

And, of course, the more that we fail to keep these skilled folks here, the more other countries are opening their arms to them:

Countries from Canada to Germany to Australia to Singapore are enthusiastically courting foreign entrepreneurs with relatively easy visas. Some offer cash.

China has given bonuses of up to $150,000 to thousands of highly skilled expatriates who have come home to work or start businesses. Chile is luring top talent with $40,000 in capital, free office space and a quick visa through its “Start-up Chile” program.

We’re training the best and the brightest, and helping them to make breakthrough innovations that can change the world… and then kicking them out of the country and into the open arms of other countries. Can anyone explain how that makes sense? In the article, the only person they could find to argue against letting these kinds of skilled immigrants stay is a guy who works at an anti-immigration “think tank,” whose argument is so empty of substance that, well, you just have to read it.

“It’s a stupid idea,” said Mark Krikorian of the Center for Immigration Studies, which supports tighter immigration controls. “What is an entrepreneur? Businesses come and go.”

Yeah. The Center for Immigration Studies might want to look into bringing on spokespeople who can communicate complete thoughts in the future, because that argument seems to amount to “we hate it because bad.” Hopefully, people who actually understand the impact of entrepreneurship and startup businesses have on the economy can finally get these kinds of needed reforms through Congress, and we can stop kicking skilled job creators out of the country.

Filed Under: immigration, skilled immigrants, startup visas

Third Time's A Charm? Startup Act 3.0 Introduced… This Time With An Infographic

from the maybe-maybe dept

Last year, we wrote about the importance of the Startup Act 2.0 in helping to create more jobs via startups (the creators of tons of new jobs in our economy), and now there’s a new version, the Startup Act 3.0. The Senate bill is truly “bipartisan” — sponsored by Senators Moran, Warner, Coons and Blunt. The key focus, as in the past, has been on solving the issue in which we are driving some of the best skilled tech workers to other countries to build companies, rather than bringing them to (or keeping them in) the US. Our visa policy for skilled workers has been flawed for way too long, and this takes us a step in a saner direction. With the President and both parties of Congress seemingly (finally) open to the idea of comprehensive immigration reform, hopefully something as basic as better immigration policies for skilled workers is no longer even remotely controversial. In fact, for the most part, it seems like a very large number of folks in Congress support such reforms. The issue that has tied it up in the past has been whether or not this needs to be its own thing, or if it needs to be tied to more comprehensive immigration reform. And, really, I would imagine that’s still the same stumbling block this time around, but with more appetite for that, hopefully the Startup Act 3.0 can be a part of all of that.

In terms of specifics, the bill would boost new visas for foreign-born entrepreneurs (these are people who create jobs, not take them from others) as well as for foreign graduates of US universities who have advanced degrees in science, technology, engineering and math. We train them, we might as well get the direct benefit of their work after they graduate. This is different than the issue of H-1B visas for skilled immigrants — which is also an important program, but one that has been abused too often by companies. In this case, the visas are for the individual, not the company, and it focuses strongly on immigrants who create companies and jobs. As with previous startup visa efforts, I do have one minor quibble, which is that the entrepreneur visas will require you to have raised at least $100,000 in outside investment (or for an investment business, have invested that much). That’s lower than we’ve seen in past proposals, but still seems to predicate the idea of doing a startup with raising outside capital. In this day and age, that’s less and less necessary for many types of companies. Similarly, they need to have hired 2 outside full time (non-family) employees, and by the end of four years, increased employment to at least five non-family employees. The bill is useful for many foreign born entrepreneurs, though I still would have liked to have seen a test for entrepreneurs who don’t want to raise money, but are building successful bootstrapped businesses.

The bill also has a few other provisions designed to help startups, including making permanent a 100% exemption on capital gains taxes for investments held for at least five years in “qualified small businesses” (i.e., a way to encourage long-term investing in small businesses) and creating an R&D tax credit (up to $250k) for startups less than five years old and with less than $5 million in annual revenue. Basically, small businesses get a tax credit for investing in research and development.

I’m also a bit concerned about section 8, which focuses on “accelerating commercialization of taxpayer-funded research.” This one basically provides grants and funding to universities to do more commercialization. In theory, this sounds good, but I worry about it in practice. Most universities have, unfortunately, decided that “commercialization” means getting lots of patents and then selling licenses. In other words, the push to “commercialize” university research hasn’t actually led to much commercialization — but rather an awful lot of universities turning into pseudo-patent trolls. The plan leaves open some of the details to the National Advisory Council on Innovation and Entrepreneurship. Hopefully, they recognize that merely pumping up patenting and “tech transfer offices” is not really about commercialization. In fact, a better way to encourage commercialization might be to make federally funded (i.e., taxpayer-funded) university research public domain, rather than patented. That would actually encourage more usage in industry.

Either way, there’s a lot of good stuff in the bill, and this time… they’ve even put out a snazzy infographic to go with the bill. How can it not pass after that?

Filed Under: jerry moran, startup act