There was a fascinating panel of pharmaceutical patents yesterday evening. It was hard to walk away with the idea that they are a terribly good idea. It really seems that patents are not a subsidy for innovation, but rather a subsidy for marketing effort. I learned some interesting things I hadn't about how Hatch-Waxman works: there is five years protection independent of patent following successful clinical trials. After that firms face patent challenges - and it seems that generic producers have begun to very aggressively and successfully challenge patents after the five year period is over. The patent holders of course have various legal tricks they use to delay things, but basically I think this is good news. However, Hatch-Waxman applies only to chemical entities, not to biotech. Apparently there is a move in Congress to extend Hatch-Waxman to biotech - needless to say big pharam is aggressively opposing this, but it seems it may actually come off.

Basically five years monopoly is the reward for carrying out clinical trials that everyone can use for free. Left open is why other users of the clinical trials should get them for free; and why on earth we have the pharmaceutical companies carrying out the clinical trials in the first place.

Perhaps also not surprising, but still a very nicely done paper by Petra Moser: inventors patent things when they can't keep them secret. Not stunning support for the idea that patent systems are good because they get inventors to reveal their secrets.

FDI = foreign direct investment

This afternoon we learned that if you give monopolies to foreign investors they will invest more in your country. Historically this was widely used to lure skilled artisans from one country to another. Of course another widely used method was to kidnap them...perhaps as an alternative to developing countries introducing patents under the TRIPS, they should just kidnap foreign investors.

On the bus on the way to the conference we were talking about what Microsoft is up to with the waving of patents and signing of licensing agreements with open source companies. The lunch keynote talk was by Brad Smith senior vice president and general counsel for Microsoft. I'm still catching my breath - at least as I read between the lines Microsoft's plan is to impose a tax on the commercial open source market. Historically the Microsoft model has been one of a broad-based tax - deals with computer manufacturers to pay a fee on every computer sold. Although the short-term revenue from Vista is good Microsoft I believe rightfully fears commoditization of the operating system market. A tax on all operating systems seems like a sure bet for long-term revenues. I'm not at all convinced it will work, but I can understand why they think it is worth a shot.

I am in Berkeley for a conference on the economics of competition and innovation - mostly about patents. It's a good conference, organized by Richard Gilbert, so I thought I'd try my hand at live-blogging. You can access information about the conference, including the papers here. I was a discussant at the morning session, which was quite lively. There were two papers, one a nice clean paper by Carl Shapiro showing how giving stays of injunctions to allow the redesign of products can substantially reduce the hold up problem, and a second paper by Anne Layne-Farrar attacking the Shapiro paper - mostly pointing out that the analysis doesn't apply in many cases. Since Carl didn't argue that it did in those cases, I'm not sure why this was an issue.

The discussion was quite lively. Strangely, I was the quiet one - Carl's model of downstream innovation is one in which patents are completely neutral, which I found useful for pointing out what we should be looking for to determine whether patent systems are a good idea or a bad idea. The wild discussant turned out to be Aaron Edlin who I hadn't met before, but is highly entertaining. He also appears to have no higher regard for the patent system than I do - and said so in no uncertain terms. Interestingly he comes at this from a business perspective - he runs a successful publishing business, BEPress. I think he is part of the majority of the R&D surveys in which they say that patents are only a hindrance to business.

Alex Tabarrok calls our attention to prizes as a means to foster innovation in drugs here. In this case, Bernie Sanders has introduced the Medical Innovation Prize Fund Act of 2007 which provides $80 billion a year to pharmaceutical companies to place their patents in the public domain, thus allowing anybody to make the drug. Drugs developed without patents would also be eligible for prize money.

Tabarrok has some doubts about politicization of the awards but comes down in favor. More details on the bill are here

This blog has posted about prizes before. They still seem like a good idea for drugs because of the wide public benefits.

Nate Anderson has an interesting piece on the lack of understanding among teachers of fair use link here. Researchers wanted to know if confusion over using copyrighted material in the classroom was affecting teachers' attempts to train students to be critical of media link here. The answer was "yes." The study, by the Center for Social Media at American University cites fear of law suits, lack of understanding of the vague rules for fair use, and a desire to avoid controversy.

One example: a teacher had his students create mashups of pop music and news clips to comment on the world around them. The school refused to show them on the school's closed-circuit TV system because "it might be a copyright violation."

Is there a good short clear guide to fair use? Fair use gets 1.7 million Google entries, so there seems to be a need for greater clarity.

Every day brings new outrageous stories concerning intellectual property. Today's by Jordana Lewis involves something this blog reported on in the last few days, publicity rights, and adds a new wrinkle, California's Dead Celebrities Law link here.

You have to read the whole story to get how "property" can be created from nothing more than a memory. It is a stretch to go from saying that permission is required to invade some dead person's privacy to saying that it can be sold. Then one must ask what public purpose is served by this monstrosity. Perhaps the welfare of lawyers? Or the widow of a dead acting coach? link here

Martin Crutsinger writes that the US today started a world wide effort to expand enforcement of copyright link here. "U.S. Trade Representative Susan Schwab said the administration planned to join with other countries to negotiate an Anti-Counterfeiting Trade Agreement that would toughen efforts to confront copyright piracy." The move is initially directed at Canada, the 27-nation European Union, Japan, South Korea, Mexico, New Zealand and Switzerland. Schwab is quoted, "Today launches our joint efforts to confront counterfeiters and pirates across the global marketplace."

Her statement raises a lot of questions. Where do most of the violations occur? I suspect in poor developing countries which are not immediately the target here. But if we rope in the developed countries, copyright enforcement is likely to be part of more free trade agreements, extending the power of the new effort.

Schwab said the new agreement, which the administration hopes to negotiate quickly, would set a higher benchmark for enforcement that countries will be able to join on a voluntary basis voluntary if they want access to US markets. If the wording has to be negotiated among that large a group of countries, one wonders how quickly it can be done.

Schwab is also quoted, "Global counterfeiting and piracy steal billions of dollars from workers, artists and entrepreneurs each year and jeopardize the health and safety of citizens across the world." One may ask who benefits from copyright other than the owner of the copyright, typically a big company. Think Disney and Mickey Mouse, created by the long dead Walt.

So here we go with another effort to expand the reach of our state created monopolies.

Here is the Wikipedia article "Personality Rights" , which covers the so-called right of publicity. Note that in the U.S. this latter right developed out of the "right of privacy," which I think was pioneered by Louis Brandeis in a Supreme Court decision and later elaborated in a famous 1962 Supreme Court case, Griswold v. Connecticut .

Among the many inner contradictions of the right of publicity is the fact that, contrary to what I posted in a previous comment, in the U.S. it applies in only 28 states, not in all 50. So here we have an alleged right that doesn't apply universally. Where is John Locke when we need him? At least "fair use" applies across the board to all copyrighted material in all jurisdictions. (Excuse me while I sneak into your garage and take your car out for a spin around the neighborhood. It's just fair use and I promise to bring it back. And then I'll be hitting a few serves with your tennis racket. And then to sample some food in your fridge. If I don't like it my dog will put a sample on your carpet. :-)

Indiana, a state I spent part of my misspent youth in, is the league leader in this right. Not surprisingly, California and New York have been in the forefront of pushing this right, thanks undoubtedly to the prominence of the entertainment industry (and entertainment attorneys) in these states.

The right of publicity boils down to the alleged right not to have one's image or likeness commercially used without permission or compensation. Although I don't think Tom G. Palmer considered this aspect of "IP" in his 1990 Harvard Journal of Law & Public Policy essay "Are Patents and Copyrights Morally Justified? The Philosophy of Property Rights and Ideal Objects" [PDF], you can probably substitute "publicity right" for "copyright" and understand why this right is a non sequitur.

I'm putting this post under the topic "IP as a Joke."