I never heard of this before, an EU tax on blank media to compensate copyright owners that are robbed of the royalties they would otherwise have received from sales lost to illegal copies (techdirt link here). This seems nutty to me. Though the amount cannot be much, say for each CD, what basis is there for deciding who gets how much? It has to be arbitrary, another gravy train and the totals must be large. I buy blank CDs for backups of my computer files and to distribute family photos and surmise many Europeans do as well, so I conclude that much of the tax is a straight handout to people who have not been offended. The story goes on that the Europeans were going to abolish the tax but recipients of this largess appear to have fought it successfully. The more I am exposed to stories like this, the surer I am that the IP system as we know it has to go.

Eweek has a post opposing software patents (link here) but in the end comes up with small ideas for change. No one likes them except lawyers and patent trolls, but what to do? Suggestions included making them easier to challenge, buying them up when they are new and cheap, then offering them freely under a general public license, and getting the public to oppose them with demonstrations, in the fashion of the Europeans.

Here again, it seems to me that secrecy should be the only protection provided a software inventor. In short, get rid of them.

I missed this piece when I first posted (11/30) on the Supreme Court's oral hearing on “obviousness” in the granting of a patent (link here). The court seems to be very upset at the idea that many thousands of patents already granted would be nullified, creating chaos in the intellectual property industry.

There is a (too) simple solution: abolish all patents and depend on trade secrets to create a monopoly and provide sufficient incentive to develop new technology. If an invention cannot be protected by secrecy, it is obvious and fails to meet the constitutional standard. In the interest of making trade secrets a more attractive incentive to invention, one could really prosecute thefts of trade secrets.

A contrary argument is that granting a patent requires that the invention be made public so that further invention can be based on it. From my reading of the record, that simply hasn't happened, so the argument is invalid.

Of course, patents aren't going to be abolished. Too many vested interests in the present system have developed enormous political power.

Any ideas for alternative, less extreme measures that will improve the system and have some chance of acceptance?

The Economist reports on the British Treasury's "Gowers Review of Intellectual Property" (link here). The report itself and other documents are available at (link here).

The Economist says

* its aim was to take a rational, evidence-based view of intellectual property and ways to safeguard it;

* it calls for a balance between the interests of creators and the public;

* it urges reform of the patent system when going to court to uphold a patent costs a company a minimum $1.5 million, often obliging innocent firms to pay to settle and prevents infringed parties from seeking redress. "A system to protect intellectual property is meaningless if only the rich can use (or abuse) it";

* it rejects extension of copyright from 50 to 95 years but supports tougher enforcement and making copying for private use easier;

* it is likely to have international repercussions.

Larry Lessig admits the obvious: if dead musicians can sign a petition, then they can be inspired to create new works. So it seems that retroactive copyright extension is OK after all. Or maybe the musicians just want more money for work they've already done? Nah...

“Should a novel end with a bibliography?” asks an editorial in the NYTimes today (link here). Norman Mailer has apparently included one in a forthcoming book. Is he trying to protect himself from charges of plagiarism or is he saying something specific and suggestive about the roots of fiction and the origin of inspiration? Or maybe both. We have to wait to see. T. S. Eliot did it first and as the editorial points out, it can lead to further reading and enlightenment.

The recent decision by Pfizer to abandon development of the drug Torcetrapib has lead to a drop of about 11% in Pfizer's stock price, corresponding to a loss of roughly $21 billion in market value. Details can be found here and here. Less noted by the press was a second very similar story, in which Bayer's American partner, Onyx, reported that late-stage tests found the cancer drug Nexavar ineffective against advanced melanoma. Onyx stock dropped of almost 30%.

These two stories contain interesting lessons about the damaging effects that the current patent system has on economic welfare and innovation in the pharmaceutical sector. A few of these, related to legal battles, monopolistic marketing and pricing, strategic retardation in the development of substitutes are summarized here, and here. Let me briefly mention two additional aspects pundits seem to have missed.

The first, and most obvious, has to do with the timing of all this. If we have to believe Pfizer's top executives, the information about the ongoing clinical trials changed dramatically in the space of a few (at most: three) days. The trials had been going on for years, Pfizer had kept releasing a continuous stream of positive news, signaling it was monitoring progresses pretty closely. It had even be criticized by the American Heart Association for releasing some results too early, on October 31 instead of two weeks later at the AHA annual meetings in Chicago. Pfizer's stock had rised recently, gaining about 3% during the last week on the basis of information released by Pfizer iteself, according to which the company was ready to file an application with the FDA to commercialize Torcetrapib in 2007. Apparently, the critical statistics that lead to the decision to completely abandon the development of the drug was that the death rate in the group of patients taking Torcetrapib was about 80/N, whereas it was of about 50/N in the control group of not treated or treated with different drugs (Liptor). Did all those 40+ patients needed to turn the sample mean and the t-statistics around die suddenly and all together between Tuesday, November 28, and Friday, December 1?

Even leaving aside the possibility of insider trading, it is quite clear that, because of the very large profits that a single "blockbuster patent" may entail, stock prices sensitivity to patents has become extreme. The patent system tends to turn stock-trading of large pharmaceuticals into a blind lottery, in which the companies executives can time the release of information as they see fit, and shareholders have absolutely no way of monitoring what is going on until the jeux sont faits.

The second point is less obvious and more important. Pfizer reports having invested, and lost, about $1 billion in the development of the drug, including $90 million to build a plant, in Ireland, that had already started producing it. Also according to Pfizer, the cost of the clinical trial program for Torcetrapib, the largest ever, was about $800 million and involved 25,000 patients. In other words, at least 80% of the total cost is due to the clinical trial. This is the rule not the exception in the development of new drugs; in the Onyx case the number are smaller, but the percentages are very similar, see here and here.

Clinical trials are paid by pharma companies only because of the patent system, and strenghtening patent protection for pharma is continuously advocated because of the high and rising cost of trials. As the examples prove, clinical trial costs generate unwelcome and unnecessary volatility in the the market valuation of pharmaceutical companies. Drastically reduce the length of patent protection on drugs (three to five years) and transfer the clinical trial costs to the federal government. If there is one thing even I would approve the government to pay for, it is this. Let me argue why.

The clinical trials produce scientific evidence and information about the effects of a drug. To the extent that there exists something that is a public good, this is it: it is less rivalrous than national defence. Also, the purpose for which such public good is produced is purely regulatory - it may be good regulation, in fact it probably is: drugs that kill are not good to have around - but regulation for the sake of public safety it is. After Phase I trials are taken care of by the innovating company, let Phase II and III be managed by a Federal Clinical Trial Agency, affiliated to the Surgeon General (not to the US-PTO: the risk of capture is too high) under appropriate secrecy rules. Once the drug is released, mandatory licensing after a few years should be required, with a fee equal to the (properly capitalized and partitioned among licencees) cost of Phase I Clinical Trials.

Charles Isherwood writes a funny but serious piece on the P word which makes the point that judging whether something is plagiarism is not so simple (NY Times link here). Unlike the comments on my post of 11/26 where I deliberately conflated plagiarism and copyright violation, I would agree with Isherwood that what matters is what the writer or artist or thinker does with the material he appropriates, whether legally mis- or not. Does it provide interesting, amusing, instructive, or useful material for the reader? A work has to be judged whole, not for some piece that might have roots (or even branches) elsewhere.

In the end, it comes down to the reaction of the observer. Like pornography, another p-word, one knows plagiarism when one sees it. Is it art? Does it offend? But then, not everyone can agree on that. Legal definitions don't meet the needs of the case. Otherwise we are forever condemned to be in the hands of lawyers.

Linda Greenhouse writes a complex account of the Supreme Court's initial argument on a case involving the meaning of "obvious" as an essential element in the granting of a patent (NY Times link here but see also my previous post of 11/15). The court's likely decision is by no means clear from the account of the back and forth, but the fact that it took the case suggests we may get a clarification of the term's meaning. Read the article and stay tuned.

William Patry, a noted copyright lawyer, professor at the Benjamin Cardozo Law School, and senior counsel to Google, publishes an interesting blog covering current issues in copyright law, as well as material of historical interest. He frequently refers to the work of other scholars, such as two Israeli experts in copyright law, Oren Bracha and Dotan Oliar. A Nov. 14 post had some illuminating comments on 18th century English copyright history and recent UK scholarship, which might send you scurrying to the library.