defending the right to innovate
IP and Protectionism
Monopoly corrupts. Absolute monopoly corrupts absolutely.
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The New York Times David Leonhart drinks the IP piracy Kool Aid when he writes that our most important economic problem with China is its piracy of our intellectual property link here.
Instead, he says "The No. 1 US problem with China's economy is probably intellectual property theft. Technology companies, for example, continue to notice Chinese government agencies downloading software updates for programs they have never bought, at least not legally."
He then goes on to add, "Next on the list, say people who work in China or do business there, is the myriad protectionist barriers China has put up. These barriers make this country's recent efforts at 'buy American' protectionism look minor league. In some cases, Beijing has insisted that products sold in China must not only be made there but be conceived and designed there. The policy goes by the name "indigenous innovation."
Such trade policies don't guarantee an export surplus however. Instead, the yuan still has to be relatively cheap.
Leonhardt is right that the exchange rate isn't the only trade problem. But he ignores the full effect of the rate. When the rate is right, the US not only exports to China but becomes more competitive making import substitutes for Chinese exports to markets in the US and around the world.
Finally he totally ignores the effect of China's intervention to weaken its currency, in leading other big Asian exporters to keep their currencies low. The list of such countries includes Japan, Korea, Taiwan, Singapore and Malaysia, all of which add to the US trade deficit.
The response to a drop in foreign currencies will not be instantaneous, because it will take time for US producers to expand output. Thus, it is unlikely to have a rapid impact on current unemployment, but our exchange rate is important in our current large job losses and in worsening our income distribution.
The Supreme Court on Monday said Costco could be liable for copyright infringement for selling foreign-made watches without the manufacturer's authorization.
True - the Court split 4 to 4 and offered no reasoning for the vote, which technically means that no legal precedent by the high court is created. But on a practical level, it leaves in place the lower court's opinion which said that copyright law prevents Costco from re-selling foreign-made watches that it lawfully purchased.
There is also reason to believe that Justice Kagan might have also sided against Costco had she joined the debate since she once wrote a brief urging the Supreme Court to refuse Costco's appeal.
It will be quite amusing to see the reaction from people who support the current IP-regime but also claim to champion 'free market' principles. Their level of cognitive dissonance seems boundless. There can be no free markets without the freedom to re-sell goods which you have lawfully obtained. I should think that would be obvious, but apparently not to those who like to ape economic talking points without grasping the actual concepts that underlay them.
Nobody is accusing Costco of manufacturing false goods, placing Omega labels on non-Omega watches or making any form of 'copies' whatsoever. They are saying that once Omega sells its goods to party X, it should continue to have the legal right to prevent X from selling such goods to Y if it doesn't approve. To condone such power under the guise of 'free markets' is a perversion - pure and simple. But once you start equating real property with "intellectual property", perversion is sure to follow.
And now you have case where the first-sale doctrine (allowing you to re-sell previously bought goods without the manufacturer's permission) applies to domestic goods, but not overseas goods. More on the first-sale doctrine here:
Meanwhile, you can read up on the details of the case at the links below:
A link to the 9th Circuit's original ruling which provides much of the nitty-gritty legal details and background can be found here:
Audio of the Supreme Court arguments on this case can be found here:
[update] PDF Text transcript here: http://www.supremecourt.gov/oral_arguments/argument_transcripts/08-1423.pdf
UPDATE: More reactions and background from across the web here -
A good analysis of the issues at stake before the decision was handed down here - http://blogs.forbes.com/danielfisher/2010/11/05/costco-v-omega-is-about-much-more-than-cheap-watches/
The IP Policy blog tries to make the case for copyright misuse in this case here - http://188ip.wordpress.com/2010/11/24/costco-v-omega-and-copyright-misuse/
The International Intellectual Property Alliance, the copyright lobby group that includes the MPAA and RIAA among others, is petitioning the US Trade Representative to put Indonesia, Brazil and India on the "301 Special" list. This list defines the countries that are havens for piracy and that should be subject to retaliation for failing to defend copyrights.
The reason they should be put on the list? Their governments encourage (but do not mandate) their administrations to use open source software. Obviously, this reduces the revenue of cost software vendors and publishers, but it is a real stretch to call this piracy. The governments are simply making business decisions, weighing costs and benefits. And given the quality of open source software and operating systems, that decision is rather easy.
Instead of finding new definition for piracy, the IIPA should make sure its members are offering good products at competitive prices, the basic requirement for a firm to survive in a free market. Or is the IIPA also against capitalism?
Intel Will Pay $1.25 Billion to Settle Disputes With Rival reports: "Ending the computer industry's most bitter legal war, the chip maker Intel agreed on Thursday to pay a rival, Advanced Micro Devices, $1.25 billion to settle antitrust and patent disputes."
$1.25 billion in wealth transferred, and untold hundreds of millions spent on litigation, patent acquisition, losses due to strategic adjustments in response to antitrust and patent law ... Yet another example of how the central state's artificial legislative patent and antitrust schemes do nothing but destroy and waste wealth. Well, not only that--they also enrich certain classes who parasitically benefit from the system, e.g. patent lawyers, litigators, and large companies.
See Nokia: Apple iPhone Violates Our Patents: A few choice excerpts:
In a statement, "Nokia said Apple has refused to pay for use of intellectual property developed by Nokia that lets handsets connect to third-generation, or 3G, wireless networks, as well as to wireless local area networks. "Apple is attempting to get a free ride on the back of Nokia's innovation," Ilkka Rahnasto, Nokia vice-president for legal and intellectual property, said in the statement.This implies apple copied their patented inventions. but copying need not be shown for infringement, and you can bet they will not rely on this in pressing their case. They are trying to have it both ways: to darkly hint Apple copied them, while being happy to persecute Apple for non-copying acts that still infringe their patents.
The Finnish handset giant said Oct. 22 it has filed suit against Apple ... in U.S. District Court in Delaware, accusing its California-based rival of infringing patents for core technology that allows the iPhone to make calls and connect to the mobile Internet. Although Nokia ... has sued rivals such as Qualcomm ... over patents in the past, the latest lawsuit came as a surprise and represents an escalation of increasingly contentious competition with Apple.So ... the filing of the lawsuit is how they are engaging in "increasingly contentious competition." How much more clear could it be that these patents are nothing but anti-competitive devices used for protectionism?! It's obvious to everyone.
The loss of smartphone share is doubly frustrating to Nokia because it sold phones with computer-like features years before Apple. During the last two years Nokia has launched a series of handsets with iPhone-like touchscreen interfaces, but none has generated quite the same buzz as Apple's devices....So they are losing out in competition, so using legal weapons instead.
Apple, like all mobile-phone makers, relies on such standards to make its devices compatible with carrier networks. Nokia says it has contributed its intellectual property to global standards bodies, but demands to be compensated for the use of its patents in commercial products. "Apple is expected to follow this principle," Nokia's Rahnasto said in the company's statement.So, Nokia contributed to a standard with the very goal of making a standard that everyone would start using. Apple starts using it--bam, they sue them. Nokia is leveraging the monopoly the state granted them. Horrible.
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