Intellectual Property and Commensurability

We now return from that detour to our regularly scheduled blogging.

From the trenches of the intellectual property debate, Peter planted a flag: over expansive intellectual property regime has gone from glorious property as usual to inglorious taxation by regulation as usual.

The terms of this debate are set in an economic-theoretical frame. This frame attempts to create a commensurable value scale where there isn’t one, but provides something useful in the meantime.

I’d like to suggest that copyright in particular is where the problems with this point of view become more acute.

What do we gain by allowing filmmakers to have the legal right to restrict the copying of their creation?

If enforced perfectly, it would mean that no one would view the film at all unless the filmmaker allowed it; in a market setting this would generally mean unless the filmmaker was paid. So the filmmaker can ex ante expect that if a lot of people want to see the film, he will make a lot of money. This encourages him (or more likely, a studio which is able to pool the risk across many films) to invest more in the film; hiring better known actors, creating more detailed sets, and so on.

What is the value of this extra investment? The logic of econ says that the value is equal to the extra amount that people are willing to pay. But this is the problem with forcing commensurability where there isn’t any. Say that in the absence of a mechanism for forcing people to pay if they want to access copies of a film, people would spend more time outdoors with their families (a common accusation made about the effect of TV in particular). Surely time spent with our loved ones is more valuable than time spent watching movies or TV?

The example is tongue in cheek but meant to provoke some thought about what, exactly, it is that we are seeking to protect, when we seek to protect copyright with criminal prosecution and extreme measures like civil asset forfeiture.

Now, I like Eli’s pragmatic approach taken up here—it makes use of the valuable concepts from economics, but its assumptions about value are very minimal. On the latter score, it is mostly just respectful—Eli acknowledges (implicitly) that there are people in the film industry, as well as economists and intellectuals, who value the products being created under the current copyright regime and fear that reform would threaten those products. Using some very minimal assumptions from economics, he shows that we could radically reduce copyright terms and expect only very small changes in the income of rightsholders.

What I like about this argument is that it doesn’t appeal to the authority of Economics or Truth but instead respects the values of the other side and uses the tools of economics to attempt to persuade them. Tools are meant to be used—they are not meant to be all encompassing theories of everything.

Determining What Intellectual Property is and Should Be

Peter picks up the thread with a discussion of IP-as-rent-seeking, or IP-as-regulation.

I’m actually what you might call an IP agnostic. I can see some situations where IP is having effects I like (especially giving unknown creators some leverage in negotiating with big content companies, for instance) but I definitely think that, whatever your IP ideal, we’ve gone way too far.

However I don’t think the particulars are nearly as important as the process for determining those particulars. As Thomas Sowell put it in Knowledge and Decisions:

The unifying theme of Knowledge and Decisions is that the specific mechanics of decision-making processes and institutions determine what kinds of knowledge can be brought to bear and with what effectiveness. In a world where people are preoccupied with arguing about what decision should be made on a sweeping range of issues, this book argues that the most fundamental question is not what decision to make but who is to make it–through what processes and under what incentives and constraints, and with what feedback mechanisms to correct the decision if it proves to be wrong.

Who decides, and under what circumstances, is more important than what they should decide.

The way Eli puts it is that good property institutions are more important than any specific property right.

If intellectual property had continued to evolve casuistically through common law courts, I don’t think we’d be in the situation we’re in. But the Copyright Act of 1976 ruined this centuries-old dynamic, probably forever. Now the particulars must be determined by statute, and there’s a big central law-making body vulnerable to rent-seeking from industry. As a result we get insane scenarios like copyright getting enforced as criminal law instead of civil law, and civil asset forfeiture being deployed to destroy suspected offenders before they even go to trial.

The debate should not, in my opinion, focus on what particular form we believe intellectual property should take. The debate should center on what procedural reforms should go into place in order to move us towards a healthier process of determining the particulars.

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.