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Monthly Archives: October 2008

If patents are incentives, why do we have separate incentive programs?

Patents and intellectual property are meant to incentives innovation. One person or company gets a limited monopoly on their innovation as reward for teaching everyone else how to do what they did. If that’s the case, why do we need separate government incentives for businesses?

Patents and intellectual property, allegedly, solve one problem but cause another. Even if they create an incentive to produce a new product (which some studies dispute), the resulting product will be more expensive because of the patent.  That shrinks the market and societal benefit. Instead of relying on this exclusionary practice, why not let the market take care of innovation through competition (the basis of capitalism, right) and use government incentives, such as low interest loans, grants, or tax breaks, to build new markets.

The market is enough. Competition forces companies to out innovate each other; they have to keep costs down and value high otherwise customers will find the bigger and better thing.  We’ve seen this work in the fashion industry, restaurant industry, and even in the drug and software industry before both were allowed patents (which courts only recently allowed).  People will always need better technology, drugs, and gadgets and smart companies can and do succeed without strong-arming intellectual property.

But what about things the market won’t support? This is where we already have an incentive system in place: government incentives.  Think about how much the government already pays out for scientific research. A third of drug research money comes from the federal government, but drug companies also get valuable patents and then charge taxpayers monopoly prices for a drug they already paid for.

The key difference is government incentives bring prices down while patents push prices up. For example, alternative fuels are an important leap in technology and currently very expensive and inefficient. It’s not that companies don’t want to do the research, several have formed already. The problem is new fuel systems are too expensive for the market. Oil and coal are cheaper. Patents can’t help this industry when no one wants to pay for it.  With government incentives, instead of patents, the price these companies charge would be lower, expanding the market. As the market grows, the technology improves, prices drop, and eventually the market becomes cost-effective and self-sufficient. Government incentives over.

The same can be applied to drugs. Let designer drugs for weight loss and ED be the cash cows for private firms, but use government funds to develop malaria and HIV medication. The main customers for these drugs are poor and can’t afford the monopoly prices being charged, so let’s think of the greater good, and by greater good, I mean long term financial benefit. If we cure all the illness in poor areas, those people will be able to work and eventually join the global economy. China and India can tell you how that’s a good thing.

Government incentives accomplish what we want patents to accomplish.  Unfortunately, patents are not pushing innovation, but following innovation. After alternative fuels get tons of government incentives and handouts, alternative fuel companies will patent their technology and prevent competition from making the technology better faster, even when taxpayers made the businesses viable in the first place.  If patents were enough, we wouldn’t need the government incentives we have now. And if we need those incentives, why should taxpayers pay twice?

It’s a hard time of year

School’s in full swing and sadly my blog is the first thing to suffer. Classes are obviously hard, but mostly due to reading and a few writing assignments (on theorists that would not be fun for this blog).  The next few months will be a trying time, so I’m aiming for posts at least once a week.  Geek-Out Moments will eventually get published, but that might not happen till Winter break.  Hopefully next semester will be better as I’ll be posting on my thesis ideas.  For now, I thank everyone for their support.  Always check out my Shared Google Reader items for articles I enjoy but don’t have time to write about and I’m still keeping Twitter updated as much as possible.

Proof politicians have no idea what they’re voting for

YouTube has rejected Senator John McCain’s request for the video website  to consider fair use when responding to DMCA takedown requests.

McCain posted campaign ads with clips from CBS and Fox news broadcasts. The two networks sent YouTube takedown notices, which according to the DMCA, they are legally obliged to respond to immediately in order to maintain safe harbor protections.  McCain voted for the DMCA in 1998 and now has to deal with the consequences.

This shows McCain and few in Congress truly understood the effects of the DMCA and likely the same can be said for most complex laws put on their desks.  The DMCA includes the excellent safe harbor provision that protects platforms from being liable for what users do (like YouTube shouldn’t be liable for copyright infringement of its users).  But the takedown notices have become an abused system stifling free expression and negative opinions. This is not to mention how anti-circumvention laws violate upheld fair use rights and stifle innovation.

When first passed, Congress probably thought they were protecting intellectual property. Their intentions might even have been noble. But these under-thought, one-sided laws are going to hurt innovation and creativity. And you could argue it’s hurting democracy. McCain can’t even get his own campaign ads on YouTube because the site is too scared of being sued over copyright infringement (too late).

Too often laws are passed to pander “look what I did” rather than look what we accomplished.  Did the admittedly rushed Patriot Act (which many politicians never finished reading) compromise our rights too much to keep us safe? How much is the new PRO-IP law’s Copyright Czar going to stop piracy? And when is this bailout bill going to turn my 401k into 401 million?

McCain shouldn’t be looking for special treatment from YouTube.  He wants to be president, so why doesn’t he act like a leader and champion changing a bad law? I don’t want a politician to have their own class of laws; I want them to make the laws we all have better.  We’ve got to stop and smell the roses, before we accidently ban them.

Live-Twittering the Flow Conference

So the Flow Conference might be over (making the live part of the live-Twittering a little out-dated) but you can see some of the discussion topics at the panels I attended here: http://twitter.com/prodigeek

I’ll hopefully get some more fleshed out posts over the week. For now, I need to catch up on the reading and class work I decided to blow off for this “business” trip.

Flying to Austin for Flow Conference

It’s been a busy week (gonna be a busy semester).  I’m flying to Austin tonight after class for the Flow Conference.  I’ll be presenting at the Music and Copy Protection roundtable on Friday (noon CDT) and have very little idea of what to expect. It’s my first academic conference why my professor wasn’t running the show.

I’ll either be blogging or Twittering throughout the week, depending on Wi-Fi coverage (if I’m Twittering, it’s probably on my cell phone).  Let’s hope I don’t make too much of a fool of myself.

Geek-Out Moment: Dead fathers make great comedy

Westley and Buttercup emerge from the Fire Swamp.

Image via Wikipedia

Princess Bride earned that coveted cult classic title with its hilarious fantasy and romance fable.  Westley must rescue his love from the evil Prince Humperdinck (awesome names are only the start) and meets dastardly villains, huge giants, hideous rats, and an old Jewish couple hiding in the forest.  Best of all, Mandy Patinkin plays the unforgettable Inigo Montoya who sought to avenge his father’s murder on the six fingered man.  It’s a revenge best served again and again and again.

Lesson plan against open source

A paper written by Haim Mendelson from Stanford Graduate School of Business and Deishin Lee from Harvard Business School guides students and businesses on how to fight open source business models and technology.

The two professors say being first to market, improving product features, and keeping the product closed are needed to combat the open source market – the way to make money against competitors who sell their products for free.  By keeping the product closed, open source networks can’t use the product to improve their own.

It’s sad to see such misguided lessons coming from two smart people and worse, teachers in a business school.  While it’s fine for commercial companies to compete with open source initiatives, Mendelson and Lee seem to recommend commercial as superior to open source even though several business models show free can be very profitable (e.g. Linux, Mozilla, MySQL, WordPress).  Their example of a good commercial release, Microsoft Office, ignores how Office didn’t compete with open source upon release and further ignores how Microsoft is adapting to compete now with Open Office, Google Docs, and Zoho (all are free, only Open Office is fully open source).  Microsoft has released new specifications on its format types for anyone to include in software and is considering a subscription-based model for future releases.

Mendelson and Lee’s emphasis on being first to market is always good, no matter your business model, and improving product features is likewise necessity.  The problem commercial software has and will continue to have is open source, or at least open platforms, just offer more for less. Apple’s iPhone, another example of Mendelson and Lee’s, began by refusing developers any access to the system, telling them build for the web browser. A year later developers get to build applications with harsh restrictions, sometimes issued after applications are finished being built.  Google Android is coming out, fully open source and free for phone manufactures, has already attracted sour iPhone developers and has a huge software library waiting for its clientele – the first Android phone is still three weeks away from release.

Closed systems are a dying breed. It’s a slow death.  Trade secrets will always exist and there’s nothing wrong with that. What business students and professors should recognize is the landscape is evolving. Free and open aren’t bad words, but should be embraced by the next generation of business leaders.  Encouraging more of the same closed, walled garden thinking only slows innovation (see Microsoft) while free and open are winning the market and the profits (see Google).

Speed of business an argument against business

Way back in the early days of U.S.A., copyrights lasted 14 years with a rarely used option to renew. But since conventional wisdom (not fact) says more intellectual property is better, copyrights can now last up to 70 years after the creator dies.

The argument for extending copyright protection often seems aimed at protecting current copyright holders, like Disney trying to keep Mickey Mouse out of the public domain with the 1998 copyright extension act.  The trouble is copyrights are meant to encourage more content creation, using the limited monopoly as a small incentive.  It took more time, money, and work to share and profit from content creation back in the days before publishing houses and movie theaters (think 1776 without the singing or bathing) when the founding fathers thought 14 years was enough reward. Now, it is faster, cheaper, and easier to distribute content.  Content can be seen by millions all at the same time without much additional cost or effort, yet the monopoly reward is even larger.

The speed of business, namely its acceleration, should decrease the length of copyrights (and even patents). While a printed book in the 1800s would take months if not years to spread around the country, a TV episode is finished in a day. Most motion pictures make the majority of their money within three weeks. Popular video games are brushed aside in less than a month. And even novels rely on best-seller lists to stay in prime locations at book stores for more than a few weeks. Money grossed after this small windows is often profit – the marketing budgets are focuses on the quick, early buck. So why the century of copyright protection instead of 14 years or less?

The argument against this logic is the growing reliance on the long tail for smaller content producers. It takes longer for content producers without mega-marketing budgets to make all their profit in a few weeks, sometimes taking a few months or years.  The challenge for us (namely the government) is to balance the length of copyrights fairly with content providers and the consuming public. In the days before Amazon, the long tail was even harder to come by but 14 years was reasonable for the content providers of the time period. Books and poems were published without interruption meaning 14 years was a fair comprise.

The key thing – content producers make money faster thanks to all these new flanged inventions like the internet, computers, and the printing press. Even small publishers can market to a niche a get results. Copyright is not a guarantee for profits – no one has a right to make money.  That’s still the content producers job. I don’t see why they need more than a century to do so.

Geek-Out Moment: 3D movie fad

The ability to create 3D movie images existed since the 1890s when William Friese-Greene patented an overly complex system of showing two movies side-by-side and watching them through a stereoscope. Thankfully, how we only have wear annoying, cheap glasses that give us headaches. 3D movies have been hyped well since the 1953, starting the first feature-length 3D flick Man in the Dark, as the savior of Hollywood, bringing new experiences to theaters with realistic experiences and lots of stuff flying in people’s faces. 3D movies have been exciting events (Nightmare Before Christmas in 3D is a better movie if that were even possible) and continue to evolve into better technology for better movies and less headaches.