Public/Private “No”s and Permissionless Innovation.

Hi all, my apologies for not posting lately (bar review is a pain in my butt). I was wondering if I could implore you all (dear readers and dear co-bloggers) to assault—or otherwise weigh in on—my co-worker’s post about permissionless innovation and contract law. This goes back to our public v private “no” posts. I think Geoff is right on target with regard to public “no”s:

The point is, when we talk about permissionless innovation for Tesla, Uber, Airbnb, commercial drones, online data and the like, we’re talking (or should be) about ex ante government restrictions on these things — the “permission” at issue is permission from the government, it’s the “permission” required to get around regulatory roadblocks imposed via rent-seeking and baseless paternalism.

I think Geoff is right about contract:

Just about all human (commercial) activity requires interaction with others, and that means contracts and licenses. You don’t see anyone complaining about the “permission” required to rent space from a landlord.

And Net Neutrality:

Which is why net neutrality is so misguided. Instead of identifying actual, problematic impediments to innovation, it simply assumes that networks threaten edge innovation, without any corresponding benefit and with such certainty (although no actual evidence) that ex ante common carrier regulations are required.

But I think he glosses over certain issues regarding non-tangible property. I submit that expansive intellectual property is akin to a public “no.”  The weirdness about IP is that, unlike a broadband network or a landlord’s building, overbroad IP claims cannot be notoriously possessed except with costly and non-intuitive state delineation. If I have a patent on “doing escrow through a computer” — as in the recent CLS Bank case — I have no independent , private means of defining and enforcing the boundaries of my claim, none. Any attempt to go out in the world and persuade people to not use my big idea would be met with giggles, disregard, or aggression.

At least in the apartment or the fiber network there is rivalrous physical stuff to point to and say “stay off!” In the case of a patent to a vague idea, however, the only way to exert my claim against the world and put people on notice of my private “no” is to utilize a complex, legalistic regime that seeks to create, from whole cloth, the contours of a private right. The fact that this process is so divorced from the intuitive realities of day to day interaction makes expansive IP more like a public “no.”

It’s something you might accidentally tread over, something you might find standing in your way unexpectedly even if you’d no idea that the idea you are pursuing bears any relationship to some existing patent. Playing catch-up with the PTO and a multitude of private patent holders becomes just as bureaucratic and chaotic as persuading the FDA to license your new meds.  At this point the private right does seem to endanger permissionless innovation.

To be clear, I don’t mean to suggest that this is at stake in ALL intellectual property. If the right is clearly delineated and reasonably defined then licensing shouldn’t be an impediment that draws the ire of the permissionless innovation crowd. The trouble only starts when the metes and bounds of the virtual property are so amorphous as to trap would be innovators in a near endless cycle of negotiations with both the private right holder and the public right definer.  If the intellectual landscape becomes replete with these mine-like private nos, then the would-be innovator is locked into a world where inaction is preferable to the unpredictable consequences of innovating.

Those are my half baked, bar review-addled thoughts. What are yours?  I’m sure Geoff will give me an earful. Feel free to comment on his post as well.

5 thoughts on “Public/Private “No”s and Permissionless Innovation.

  1. 1. A thought I have been having lately is whether this expansive IP is creating “pent-up innovation”, similar to the notion of pent-up demand. In our current mine-field environment, people still get good ideas, but on the margin its better to defer acting lest you get blown up in court.

    2. Another way to think about what “permission-less-ness” is to compare US and Canada’s different approaches to Federalism. In the US the constitution enumerates certain federal powers and then the tenth amendment leaves the rest to the states. In Canada its basically the opposite. Certain specific powers are granted to the provinces, and whatever was left out is under the Fed, who of course can devolve the power if it chooses to. So in one sense the US has a ‘permission-less’ constitution: except for a, b and c, states can do whatever. In Canada, provinces have to ask to do something that uses powers that weren’t explicitly conferred.

    It’s like the difference between negative rights and ‘power conferring rules’. US States are prohibited from doing certain things, but everything else is left open. Whereas everything Canadian do is a “power conferred”.

    The US patent system, from the perspective of a someone with an innovative idea, has evolved from establishing certain negative boundaries, ie. “make anything BUT a, b and c”, to being totally power conferring “its safer to make nothing until we give you an explicit right.”

    This was stream of consciousness so I don’t know if anything I just wrote is germane or makes sense at all 😛

  2. Why is patent enforcement different than contract enforcement, as I think you say in your CLS example? I agree that patent rights wouldn’t exist without gov’t, but enforcement of those rights seems on par with enforcement of any other rights – requiring courts or occurring in the shadow of the law.

    Going one level more meta, I always say that the reason I support IP rights (as opposed, at least, to the philosophical objection that they are gov’t interference in markets) is that, if the gov’t has a useful role in the economy, it is in defining and enforcing property rights. At this more meta level, I share your concern about ill-defined IPRs, but perhaps it’s legit to analogize ill-defined IPRs to rent-sought regulation and well-defined IPRs to gov’t enforcement of contract rights over tangible things.

    In other words, those who object to private, contractual “permissions” are essentially objecting to gov’t enforcement of private rights – just like you object to gov’t enforcement of (at least) “bad” IPRs.

    Sure, the devil is in the details – presumably we disagree on where the line between bad and good IPR is. But that is properly an empirical question (although one that may never be well answered). My main point is that, arguably, there is more in common between IPR opposition and private “permissions” than you think.

    In other, other words, you clearly support net neutrality. QED.

    1. valkenburgh

      @Samuel I didn’t know that about the Canadian constitution, fascinating. It’s an apt metaphor.

      @Geoff yes, it’s legit to analogize ill-defined IPRs to rent-sought regulation. If you ever have the time I’d be interested in your take on the CLS Bank amicus I helped write for Love Bessen and Meurer. Part 1 is empirical (though I think we need more data) Part II is theory. I wrote much of this section (though supreme court rules forbid non-lawyer author credits). It’s available here: http://papers.ssrn.com/sol3/papers.cfm?abstract_id=2402036

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