Topic: Telecom, Internet & Information Policy

Are Copyrights and Patents Property Rights?

The latest issue of Regulation magazine has a fantastic article by Peter Menell discussing the divisions in libertarian theory on copyright and patent issues. One one side is what Menel dubs the Property Rights Movement, of which Richard Epstein is a leading theoretician. They see intellectual property and more traditional property rights as fundamentally similar, and apply libertarian insights about the importance of strong property rights in tangible goods to debates over patent and copyright law. For theorists like Epstein, the need to reward the fruits of labor lie at the heart of the libertarian case for property rights, and as a consequence the argument for strong intellectual property rights is identical to the argument for tangible property rights.

The other camp sees copyright and patent law as fundamentally different from tangible property rights. It includes F.A. Hayek, many “cyberlibertarians,” and Menell himself. For this camp, the fundamental argument for property rights is not about rewarding creativity so much as managing scarcity. We need strong property rights in tangible property so people can make plans about the use of scarce resources. Since inventions and creative works are non-rivalrous once created, the argument goes, property-like restrictions on their use are at best a necessary evil.

As I’ve written before, my sympathies are with the latter camp. One difference that’s particularly important—and which Menell mentions only in passing—is the issue of clear boundaries. It’s almost always easy to determine who owns which parcel of land and where the boundary lies. In contrast, both copyright and patent law suffer from vexing line-drawing issues. For example, the legal principles governing what constitutes fair use of copyrighted materials is notoriously vague. The result is endless litigation that can hamper technological progress. Patent law can be even worse. Microsoft, for example, has vaguely hinted that the Linux operating system has infringed several hundred of its patents, but no one has been able to figure out which of Microsoft’s 6000 patents they might be referring to. It’s hard to imagine a company complaining that its competitor is trespassing on its land but refusing to give any specifics.

Ultimately, I think that lumping copyright and patent law together with traditional property law obscures more than it illuminates. There may very well be good arguments for expansive interpretations of copyright and patent law, but they’re likely to be rather different from the arguments for robust property rights in tangible goods. It makes more sense to debate those arguments on their own terms rather than confusing the issue by lumping together legal regimes that have relatively little in common.

A Bad Copyright Reform Proposal

Matt Yglesias points to this Dean Baker piece arguing for sweeping reforms of the copyright system. I think he correctly identifies some of the problems with the copyright laws on the books today, but I think his conclusions reflect a poor understanding of the nature of the problem:

There are many other mechanisms for supporting creative work, such as university funding (most professors are expected to publish in addition to their teaching), foundation funding, or direct public support. It is easy to design alternative mechanisms to expand this pool of non-copyright funding, such as the Artistic Freedom Voucher, which would give each person a small tax credit to support creative work of their choosing.

The fundamental problem with copyright is that it gives copyright holders too much control over the works they create. Terms are too long, the rules regarding derivative works are too restrictive, penalties for infringement are too high, secondary liability is too broad, copyright formalities have been unwisely abandoned, and so forth. The first-order solution is to fix those problems: copyrights should last for 14 years. Authors shouldn’t be able to stop people from using their characters in fan fiction. Maximum penalties for infringement should be reduced by an order of magnitude. And so forth.

A sensible copyright system—perhaps similar to the one we had for most of the 20th century—would work just fine for the 21st century. It would ensure artists are fairly compensated while greatly reducing the deadweight losses Baker identifies in the status quo. The reasons these reforms haven’t happened (and indeed, the reason that copyright rules keep getting more and more draconian) is that the copyright industries are one of the most powerful special interest groups on Capitol Hill. This is the old story of concentrated benefits and dispersed costs. There’s no shortage of good reform proposals, there’s just no one with the clout to push any of those reform proposals through Congress.

Baker seems to be presenting his plan for taxpayer subsidies to artists as an alternative to the copyright system, but this fails to appreciate the way Capitol Hill works. The copyright interests who have been pushing ever-more-draconian copyright policies are not going to give up those benefits in exchange for taxpayer handouts. Similar schemes have been tried in other countries, and it didn’t lead to a more sensible copyright system. Instead, the industry just scooped up the subsidies and continued to lobbying for bad copyright policies as enthusiastically as ever.

Moreover, taxpayer handouts for artists has the long-run potential to hurt consumers a lot more than bad copyright policies ever could. Whatever the flaws of today’s overly-broad copyright rules, the extent of the damage is at least limited to the value of the items being sold. Bad copyright policy can allow copyright holders to capture an unfairly large share of the surplus value created by the purchase of creative works, but they can’t ever capture more than the total value of those works. In contrast, once we start putting artists on the dole, there’s every reason to think they’ll start lobbying for larger and larger welfare checks, the same way farmers do today. Whatever the flaws of the current copyright system, a system in which every rock star in the country is dependent on the dole would certainly be a lot worse.

Governor Spitzer Gets It Right

In a Cato TechKnowledge newsletter issued today, I’ve updated the world on the status of the REAL ID Act.

One of the more interesting recent developments is the decision by New York Governor Eliot Spitzer to break the link between driver licensing and immigration status. He and the Department of Motor Vehicles commissioner announced the policy September 21st.

De-linking driver licensing and immigration will reduce unlicensed driving, uninsured driving, hit-and-run driving, insurance costs for legal drivers, and roadway injuries. Linking driving and immigration status is a requirement of REAL ID, and Spitzer’s move is another nail in the coffin of this national ID law.

In my TechKnowledge piece, I laud the governor’s action as follows:

Spitzer is not willing to shed the blood of New Yorkers to “take a stand” on immigration, which is not a problem state governments are supposed to solve anyway.It’s a welcome — and somewhat surprising — move, to see a Democrat and law-and-order-type former attorney general resist mission creep in a state bureau and hold fast to the federal system devised in the constitution. But he’s done the right thing. Thanks most recently to Governor Spitzer, and to state leaders from across the ideological spectrum, REAL ID is in collapse.

The move has subjected Spitzer to withering political attacks from Republicans. The attack most embarassing to witness, though, comes from “relatives of 9/11 victims.”

Freedom to Unlock

Tim Wu has a great article chronicling his decision to unlock his iPhone (which allows him to use it with carriers other than AT&T and run applications not authorized by Apple). He then considers the legal and ethical implications of his actions:

Did I do anything wrong? When you buy an iPhone, Apple might argue that you’ve made an implicit promise to become an AT&T customer. But I did no such thing. I told the employees at the Apple Store that I wanted to unlock it, and at no stage of the purchasing process did I explicitly agree to be an AT&T customer. There was no sneakiness; I just did something they didn’t like.

Meanwhile, lest we forget, I did just throw down more than $400 for this little toy. I’m no property-rights freak, but that iPhone is now my personal property, and that ought to stand for something. General Motors advises its customers to use “genuine parts,” but it can’t force you to buy gas from Exxon. Honda probably hates it when you put some crazy spoiler on your Civic, but no one says it’s illegal or wrong.

The worst thing that you can say about me is that I’ve messed with Apple’s right to run its business exactly the way it wants. But to my mind, that’s not a right you get in the free market or in our legal system. Instead, Apple is facing trade-offs rightly beyond its control. When people unlock phones, Apple loses revenue it was hoping for, but also gains customers who would have never bought an iPhone in the first place. That’s life.

This is exactly right. Apple, it should be emphasized, was entirely within its rights to sign a contract promising that the iPhone would only be sold in conjunction with AT&T’s wireless service. But that contract binds Apple and AT&T; it doesn’t bind Apple’s customers. Absent any explicit contractual agreement, customers are under no legal or moral obligation to use their iPhones only in the ways Steve Jobs wants them to. Hence, unlocking your iPhone is, as Wu puts it, “legal, ethical, and just plain fun.”

It’s also worth highlighting that part of the reason Wu concludes that unlocking the iPhone is legal is that the Copyright Office included cell phone unlocking as one of its explicit exemptions to the Digital Millennium Copyright Act, the law that I’ve argued is holding back innovation in other parts of the consumer electronics industry. It’s great that the Copyright Office has recognized that using your iPhone with the carrier of your choice has nothing to do with copyright infringement, but it’s still not legal to (for example) build a DVD player that will fast-forward through commercials, or to build an MP3 player that will play songs purchased from iTunes. It would be better if the DMCA’s anti-circumvention provisions were repealed, so that inventors didn’t have to go begging to the bureaucrats at the Copyright Office for permission to engage in this kind of beneficial tinkering.

So Many Reasons Government Shouldn’t Fund Newspapers

The Columbia Journalism Review has an article suggesting that the government should step in and stop the red ink at the nation’s leading newspapers. Declan McCullagh has a great post enumerating all the many reasons that’s a bad idea. Here’s one of the most important:

Government money tends to come with strings attached. Sure, at first, a handout may seem free. But over time, that tends to change.

Look at the ongoing controversies over the National Endowment for the Arts. In response to controversial photographs (including a provocative retrospective of photographer Robert Mapplethorpe’s work) in an NEA-funded exhibit, Congress did two things. It reduced the NEA’s budget for the next fiscal year and then slapped a new restriction on the agency, saying that its grants must take “into consideration general standards of decency and respect for the diverse beliefs and values of the American public.”

Mapplethorpe was, of course, a brilliant photographer, and some of his work has inspired my own modest efforts. But the U.S. Supreme Court upheld the NEA funding restrictions as constitutional, concluding that they’re perfectly OK “when the government is acting as patron rather than as sovereign.”

That patrons can muzzle the recipients of their largesse should be no surprise. Last decade, librarians lobbied Congress to create the E-rate program, which levied taxes on Americans’ phone bills to pay for wiring schools to the Internet. It was an unalloyed, billion-dollar political win for the librarians — until Congress decided to force them to filter out porn if they wanted the cash.

They howled, they complained, they sued. They lost. The Supreme Court ruled in 2003 that the law “is a valid exercise of Congress’ spending power.”

It’s also worth noting that, as Mike Masnick has pointed out repeatedly, news gathering isn’t in decline. Only the portion of the news business that involves shipping people reams of ink-stained paper is having trouble. Most other parts of the news business are thriving. Cable and satellite news channels are thriving, news websites are seeing record traffic, and the blogosphere is providing hundreds of thousands of new sources for news and analysis. The trends in journalism are only alarming for people who think that journalism is synonymous with the print edition of the New York Times. Ironically, that attitude seems to be over-represented among the people in charge of educating the next generation of journalists.

TechCrunch Exposes D.C. Trade Association Advocacy for REAL ID

In an excellent post, Michael Arrington at TechCrunch notes the advocacy of the Information Technology Association of America in favor of the REAL ID Act, our nation’s moribund national ID law.

His title “Conflicts of Interest: …” draws out nicely the schism that ITAA’s advocacy for REAL ID creates for its membership. They work to serve us when they sell products directly, but work to hurt us when they sell surveillance infrastructure to the government. Helpfully, he also provides links to information about the House and Senate bills to repeal REAL ID.

Asked in the comments how he would characterize himself politically, Arrington replies, “hard core libertarian.”

Open Networks and Regulation

Thomas Hazlett, professor at George Mason and one of the smartest people writing about telecom regulation today, has an interesting column about the iPhone that’s largely framed as a rebuttal to this Slate column by Columbia law professor Tim Wu. Wu’s column, published the week of the iPhone launch, argues that the iPhone isn’t truly revolutionary because like other cell phones, it’s a “walled garden.” It only works with AT&T’s wireless service, and it only offers the features that Apple and AT&T have approved ahead of time. A truly revolutionary phone, Wu says, would be an open platform that would allow third parties to develop new applications and services.

Hazlett, in contrast, feels that Apple’s walled garden represents the ingenuity of the market process:

Apple could have offered its device as an “open” platform, but instead chose (as with iTunes, iPods and Apple computers) to control how it builds, and how buyers use, its product. It aims for competitive superiority. Quashing its model bops the innovator on the head.

Unbundling phones from networks is suggested as a policy fix in the US. European phones, working with different Sim cards across carriers and borders, are the model. Innovation in the European Union is said to flourish. But the iPhone came first to the US, as did the BlackBerry and advanced broadband networks using CDMA data formats. That is not surprising given that US networks are afforded wide latitude in designing their systems. Licences in the EU mandate a GSM standard. What is recommended as “open” in fact deprives customers of a most basic cellular choice: technology.

Personally, I think they’re both right. Hazlett is right that government regulation of spectrum is a bad idea, and that robust property rights are far preferable. But Wu is right that open platforms tend to be more innovative than closed platforms. For example, during the 1990s the Internet’s open architecture allowed the creation of dozens of innovative startups like Netscape, Yahoo, and Google. The closed networks of companies like AOL and Compuserve simply couldn’t compete. There’s every reason to think a similar explosion of innovation would happen if it became easier for third parties to build new wireless devices and applications.

And indeed, if you read Wu’s article closely, nowhere does it advocate government regulation. Wu’s article is about technology and economics, not public policy. It doesn’t say anything a libertarian couldn’t whole-heartedly endorse. Of course, Wu has argued elsewhere in support of government regulations to force wireless networks more open. And I think he’s wrong about that—you can listen to a conversation Wu and I had on the subject back in June here. But it’s entirely possible to agree with his technological point about the merits of open networks without jumping to the conclusion that government regulations are called for.

Indeed, I think it’s important that when libertarians argue in opposition to some government regulation, that we not fall into the trap of reflexively opposing the goal the regulation is trying to achieve. There are a lot of computer geeks who are passionate advocates of open networks because they believe (correctly in my view) that open networks tend to provide greater opportunities for entrepreneurship. The argument that closed networks are superior is not only dubious on its merits, but it’s also guaranteed to drive a lot of people into the arms of the pro-regulatory side. I think it’s far better to leave debates about network architecture to the geeks, and focus on the more fundamental point that government regulations inevitably have unintended consequences such as regulatory capture.