Browsed by
Tag: patent law

Star Wars: Intellectual Property Strikes Back – Article by Matthew McCaffrey

Star Wars: Intellectual Property Strikes Back – Article by Matthew McCaffrey

Comments 0 Comment
The New Renaissance HatMatthew McCaffrey
******************************

IP Deflates the Expanded Universe

Star Wars: The Force Awakens is already one of the most successful films of all time, and the Star Wars franchise is poised to grow at .5 past light speed for the foreseeable future. Yet, while Disney rapidly develops new chapters for the saga, it’s also quietly deleting some old ones: in 2014, Lucasfilm announced that to make way for the new films, the Star Wars Expanded Universe (or EU) would no longer be considered canon, a decision that disappointed many longtime fans.

The EU refers to the vast number of novels, short stories, comics, and games that explore the Star Wars universe outside the major films. These works enjoy an enormous following but are now consigned to a kind of alternate universe called Star Wars Legends. In other words, they will be disregarded by Lucasfilm’s officially licensed material, and any new Star Wars stories will have to fit the new canon. The original EU is discontinued, which understandably has fans feeling abandoned.

Why should the EU pose a problem, though? Why can’t artists and fans simply continue developing the canon they love, while Lucasfilm does the same? The answer is simple: intellectual property law.

Disney’s ownership of Lucasfilm allows it to license the Star Wars brand and all related intellectual property rights, especially its copyrights and trademarks. Anyone adding to the universe can only do so with permission, giving Lucasfilm power over any content within the universe or even similar to it.

In fact, Lucasfilm has a long history of aggressively litigating its IP, suing everyone from small businesses to major corporations. One of the most infamous cases was brought against the original Battlestar Galactica TV series, which was accused of copying at least 34 distinct ideas from Star Wars. These included such astonishingly original concepts as a friendly robot, an imprisoned heroine, and a movie ending with an awards ceremony.

Returning to the EU, it does make some artistic and financial sense for Disney to steer the franchise in a new direction by discontinuing older content. At the same time, artists and fans want to enjoy the EU they already know and love, something Lucasfilm legally prohibits by enforcing its IP.

My point is not that one stream of content is objectively better, but that it’s vital for all involved to freely choose the kind of content they want to create and sell. By increasing costs to both consumers and innovators, IP has already played a role in the decline of art forms like classical music, and copyrights and trademarks have similar effects in the world of pop art.

For Star Wars, original content mainly revolves around trademark rights, of which Lucasfilm owns many. Its usual defense of these properties is that unlicensed content causes confusion: without legally enforceable restrictions, consumers might think they’re buying “genuine” products when they’re actually getting cheap imitations. Furthermore, products similar to those created by Lucasfilm might be used to earn profits for noncreators who capitalize on confusion. A licensing deal from the original source ensures people won’t be taken in by unskilled or unscrupulous artists.

Assuming this is the real motivation for trademark protection, the argument is still weak. Like many consumer-oriented regulations, trademark law is patronizing: its basic assumption is that people are too dim to distinguish between official products and knockoffs or other free riders on the brand. But consumers, especially the kind of devoted fans Star Wars inspires, are perfectly capable of figuring out for themselves which content they prefer. The real issue boils down to revenue: Lucasfilm doesn’t want other businesses profiting from ideas it “owns,” and it’s perfectly happy to use monopoly privileges to protect its bottom line.

But Lucasfilm doesn’t need to litigate its trademarks to preserve profits or brand identity, which would likely be stronger in the long run without IP. For example, without trademarks, Lucasfilm would continue to officially sanction content it approves of and let consumers know which works are not “official.” If fans respect its judgment, the official Star Wars brand would thrive as people adopted Lucasfilm’s endorsement as a benchmark for quality and narrative continuity.

Competition for fan loyalty would drive official and unofficial creators alike to produce high-quality content. Different groups of creators would specialize in their own alternate universes that would succeed or fail based on their ability to satisfy fans. This would also eliminate the uncertainty surrounding fan fiction, which exists in the complex gray area of “fair use” laws. Most importantly, we’d all be able to decide for ourselves which works we treat as canon and which we abandon to the garbage masher of history.

The only truly expanded universe — one that’s creative, innovative, and prosperous — is one without IP protectionism. When we embrace genuine competition in ideas instead of competition through legal privilege, then, as Obi-Wan Kenobi would say, we’ve “taken a first step into a larger world.”

Matthew McCaffrey is assistant professor of enterprise at the University of Manchester and editor of Libertarian Papers.

This article was published by The Foundation for Economic Education and may be freely distributed, subject to a Creative Commons Attribution 4.0 International License, which requires that credit be given to the author.

The Hoverboard’s Patent Problem – Article by Jeffrey A. Tucker

The Hoverboard’s Patent Problem – Article by Jeffrey A. Tucker

Comments 0 Comment
The New Renaissance HatJeffrey A. Tucker
******************************

Who has the right to make a “hoverboard”?

Shane Chen of Portland, Oregon, owns the patent to one of the hottest holiday gifts this season. It is a kind of hoverboard, a small item that keeps its user upright using infrared sensors, gyroscopes, and motors. You have probably seen them all over your city. You might even have been approached by a street seller.

The authorized version — licensed by Chen himself — is being made and distributed by Razor USA. Prices started at $1,000 and up, but competition from cheap knockoffs, selling for as low as $200, has brought the price for the authorized version to $600. Still, there are places online where you can get them for $200. If experience in new products in a guide to the future, in a year, they will be available for less than $100.

And truly, these knockoffs are everywhere. Small entrepreneurs are importing them from small manufacturers by the thousands and selling them on the streets. They are making and selling so fast that quality control has been… lax. There are anecdotal reports of explosions and sudden acceleration (parodies on this Saturday night live skit). Amazon has refused to sell many brands.

The patent has proven difficult to enforce. Razor is spending up to $1 million per week to sue unauthorized manufactures. It’s a reminder: it’s never enough just own the government-granted monopoly rights to produce something. It always costs money to enforce it. You have to investigate. You have to litigate. You have to win. And by the time that day comes, you might have lost vast market share.

If the product is popular enough, the task is essentially hopeless. The resources and time expended on patent enforcement might instead of gone to innovation and marketing toward actually making profits. Enforcing a monopoly isn’t necessarily the same as making money. Indeed, it is the opposite.

The Case of Eli Whitney
The hoverboard saga brings to mind the history of one of the 19th-century’s most famous inventions: the cotton gin. The holder of the patent was Eli Whitney. A year after his graduation from Yale, he designed and constructed an improvement in the cotton gin — a technology that had existed since the ancient world. He obtained the patent on a single feature, a brush-like extension that improved the way the seeds were extracted from the cotton.

According to Boldrin and Levine, Eli and his partner Phineas Miller has dreams of getting rich with a monopoly pricing scheme. They would install their machines throughout the South and ask a royalty of two fifths, payable in ginned cotton. This prospect seriously annoyed farmers throughout the region, understandably.

So it became a common practice for farmers to reverse engineer the innovation — not a difficult thing to do. Rather than lease the Whitney machine, they would just make their own. Does this violate anyone’s rights? Of course not. A design of a contraption is made scarce and “owned” only by legislation. To forcibly prevent farmers from making their own machines is actually an invasion of their rights.

Still, with the prospect of riches dancing in his head, Eli and Phineas set out to sue every farmer who reverse engineered their design. “Whitney and Miller spent a lot of time and money trying to enforce their patent on the cotton gin, but with little success,” write Boldrin and Levine. “Between 1794 and 1807 they went around the South bringing to court everyone in sight, yet received little compensation for their strenuous efforts.”

Meanwhile, the gin led to vast increases in productivity. The cotton industry boomed. But the holders of the patent became ever poorer.

Fortunately, the story ends well. Whitney learned that suing people is less profitable than actually marketing products. His next project was to invent a machine that created interchangeable parts for muskets. Having learned his lesson, he did not seek a patent for his innovation. He just got busy right away and began selling. (His main customer, as it turns out, became the US Army.)

He finally did strike it big. As Boldrin and Levine summarize the lesson: “It was not as a monopolist of the cotton gin, but rather as the competitive manufacturer of muskets that Whitney finally became rich.”

Will Shane Chen Learn the Lesson?
The hoverboard, like the cotton gin, is in enormous demand. All the government power is the world will not prevent hundreds of manufacturers from making them, driving the price down and down until everyone can afford one. That one million per week that Razor is spending on trying to stop copycats is probably better spent on marketing and innovation — actually selling stuff rather than trying to prevent others from selling stuff.

Absent the government regulation, how can innovators make money? They have the first-mover advantage. This is what provides a period of high profitability before others get in on the act. This is the competitive market at work, inspiring everyone to serve the customer ever more faithfully through lower prices and better products.

Another factor that gives advantage to the innovators is trust. Even now, you can go to the drug store and see name-brand products living alongside store-branded products. Both make money. Both appeal to certain market segments. One producer’s gain does not necessarily come at the expense of other producers, unless the government intervenes.

It is common wisdom to say that the patent system is broken. But what is broken about it? It’s not that the system is abused. It is that it is used at all. Industrial monopolies achieved through government grants of special privileges create waste — and the ongoing lawsuits concerning the hoverboard are a case in point.

Whether it is ginning cotton or zipping around on city sidewalks, a true innovative society encourages as much production and innovation as possible, in service of the masses who love the newest and coolest thing.

Jeffrey Tucker is Director of Digital Development at FEE, CLO of the startup Liberty.me, and editor at Laissez Faire Books. Author of five books, he speaks at FEE summer seminars and other events. His latest book is Bit by Bit: How P2P Is Freeing the World.  Follow on Twitter and Like on Facebook. 

This article was published by The Foundation for Economic Education and may be freely distributed, subject to a Creative Commons Attribution United States License, which requires that credit be given to the author.

The Poison Apple Called TPP – Article by Jeffrey Tucker

The Poison Apple Called TPP – Article by Jeffrey Tucker

Comments 1 comment
The New Renaissance HatJeffrey A. Tucker
October 14, 2015
******************************

Let’s say you have a trade deal that completely eliminates 18,000 existing tariffs between 12 countries that are otherwise hectoring each other with punishing trade barriers. To a person with a brain, this sounds amazing. Unless you are a luddite, a nativist, or a unionist, there seems to be every reason to support it. Trade is good. Global commerce is good. Fewer trade barriers are a good thing.

But let’s say that this same treaty binds all 12 signatory nations to an egregious imposition of government privileges for reactionary corporations who are paying to keep their cartels in place. I’m speaking here of big media, big music, and big pharma. They all live and breath to keep their “intellectual property” and to crush and destroy what they call “piracy,” which is actually the same thing as free-market competition.

What if this wonderful trade treaty was just a stalking horse for the dramatic expansion of these corporate monopolies? What if the whole point of the treaty were to use the language of growth and globalism to fight and crush the pressures toward universal information sharing that are inherent in the digital age?

I’m speaking here of the Trans-Pacific Partnership. Like the Nafta and WTO battles before it, the TPP is being marketed as a free-trade agreement. The partisans have lined up for and against it on that basis. But this is all so much distraction. The true core of the treaty is protectionist in the extreme. It protects a handful of powerful industry players against genuine market competition.

The rumors about the Intellectual Property provisions have been flying for years. But no one had seen the results of the endless and secretive negotiations. Then Wikileaks got involved. It released the full draft text of the IP sections. It turns out to be far more than the usual prattle and the expected sop to a few deep-pocketed industries.

The IP sections of the TPP attempt to impose — by force of blackmail  — the worst of American law as it applies to copyright, patent, and trademark, and do so in industries where there is otherwise some freedom left in the system.

The Digital Millennium Copyright Act, for example, puts the burden of proof on websites and internet service providers to make sure their content does not violate copyright. The book could be 75 years old and completely out of print but if a web bot discovers a PDF on the site, the government can force its immediate shutdown. This system pertains in the US right now but the TPP guarantees its enforcement in 12 countries in the Pacific Rim — some of whom host sites that are major sources of free information on the planet today.

The biggest revelation from the leaked document concerns big pharma. Their dream is pretty simple: they want to end generic drugs and the manner in which they distribute copies of named-brand products at much lower prices. In foreign countries, generics are a key to life. They are the way that people benefit from improved medical technology without paying exorbitant US prices.

The TPP would go a long way toward illegalizing generics for a whole class of pharmaceuticals. It all comes down to the rules that are used to decide whether generics can be produced at all. In the US, there is a practice called “linkage” that makes it impossible to produce drugs if there are any unresolved patent disputes. Linkage does not apply in most nations party to the TPP.

Politico explains:

Some of the most contentious provisions involve “patent linkage,” which would prevent regulators in TPP nations from approving generic drugs whenever there are any unresolved patent issues. The TPP draft would make this linkage mandatory, which could help drug companies fend off generics just by claiming an infringement…. In an April 15 letter to Froman, Heather Bresch, the CEO of the generic drug company Mylan, warned that mandatory patent linkage would be “a recipe for indefinite evergreening of pharmaceutical monopolies,” leading to the automatic rejection of generic applications. The U.S. already has mandatory linkage, but most other TPP countries do not, and Bresch argued that U.S. law includes a number of safeguards and incentives for generic companies that have not made it into TPP.

What’s even more remarkable is how the TPP would actually expand linkage to cover new classes of drugs in the US.

Politico explains again:

The opponents are also worried about the treaty’s effect on the U.S. market, because its draft language would extend mandatory patent linkage to biologics, the next big thing in the pharmaceutical world. Biologics can cost hundreds of thousands of dollars a year for patients with illnesses like rheumatoid arthritis, hepatitis B and cancer, and the first knockoffs have not yet reached pharmacies. The critics say that extending linkage to biologics—which can have hundreds of patents—would help insulate them from competition forever.

The costs of this treaty, then, will not just be felt abroad. The costs will further institutionalize the pharmaceutical monopoly in the US, making people pay far more for drugs than they currently do, and even curbing research and development beyond what the major industry players are willing to endure to bring a product to market.

And it’s not just about the US. It’s about the countries party to this agreement. They are being blackmailed by the American ruling class, badgered and bribed to accept bad law in exchange for market access. This is not how trade is supposed to work.

But from the ruling-class point of view, this is the whole point of trade treaties. Any country can have free trade anytime it wants. It only needs to stop punishing imports and start making good stuff that others want to buy. You have to ask yourself: what is the real point of these thousand-page documents, the years of negotiations, and all this secrecy? Why did the first public appearance of any aspect of the TPP have to be released on Wikileaks?

What is it that they don’t want us to know?

Patent attorney Stephan Kinsella explains: “What is happening here is that the US, at the behest of the American RIAA (music industry), MPAA (Hollywood), and Big Pharma industry, is using its hegemonic/superpower status to foist American-style IP law onto other countries, for the benefit of these special interests. This has been going on for decades now… Once TPP is ratified, as I expect it will be, US-style draconian IP law will be put into force in countries that comprise about 40% of world GDP.”

Adam Smith nailed it: “People of the same trade seldom meet together, even for merriment and diversion, but the conversation ends in a conspiracy against the public, or in some contrivance to raise prices.”

Those who have watched these negotiations say that the American negotiators have basically operated as lobbyists from the American pharmaceutical industry. This is why Doctors without Borders has come out so strongly against TPP. And this is also why the Electronic Freedom Foundation has come out so strongly against it as well.

The best case for the TPP is that many bad guys are against it. But that doesn’t mean that true liberals should be for it. In politics, what looks like a shiny red delicious apple can be poisoned to the very core.

Jeffrey Tucker is Chief Liberty Officer of Liberty.me (http://liberty.me/join), a subscription-based, action-focused social and publishing platform for the liberty-minded. He is also distinguished fellow of the Foundation for Economic Education (http://fee.org), executive editor of Laissez-Faire Books, research fellow of the Acton Institute, founder of the CryptoCurrency Conference, and author of six books. He is available for speaking and interviews via tucker@liberty.me.