Thursday, June 29, 2017

"to promote the progress of useful Arts"

This is just a quick note to say that anyone who believes the current patent and copyright systems are working "to promote the progress of useful Arts" needs to watch Bunnie Huang's talk to the Stanford EE380 course, and read Bunnie's book The Hardware Hacker. Below the fold, a brief explanation.

Carefully and in detail Bunnie explains "gongkai", the Chinese approach to intellectual property in the technology space. He shows how a focus on capabilities rather than products, on embodiment rather than licensing, has led to a technology ecosystem that is faster and more customer-focused than the Western system. Because it doesn't have the Western focus on legal means to exclude competition, it is much more competitive. It is capable of supporting both large companies, such as Xiaomi, Tencent, Alibaba and Baidu, but also a vibrant mass of smaller and smaller companies, down to one-man garage shops, all making money. Bunnie uses many examples, including:
  • The fact that it is essentially impossible for a small Western company to build a cheap smartphone because of the IP licensing involved, whereas in China a complete smartphone motherboard costs $12 quantity one from any number of manufacturers, ready for the case of your dreams. He compares this with a $29 Arduino, with only a fraction of the capability.
  • The comparison between Ailibaba's Alipay ($700B in 2015) system and Apple Pay ($11B in 2015). Note that Alipay is an open platform, Apple Pay is a walled garden.
  • The difficulty Western companies have in monetizing consumer technology products, because it takes only a few weeks from the product becoming available on Amazon to its being swamped by similar, but cheaper, products from Chinese companies. See, for example, the hoverboard:
    Shane Chen patented a device of this type in January 2013 but in 2015 stated that he had not earned anything from sales and would litigate. Separately Segway Inc. sued various manufacturers for infringement of their patents in 2014, before itself being acquired by one of them, Ninebot, in 2015.
    Note that patent litigation was filed just as the product died in the market; it was basically irrelevant.
This reminds me of John Boyd's OODA loop; observation leads to action in the Chinese ecosystem so much faster than in the Western ecosystem. No need to negotiate for IP, and no exclusion, mean that the gongkai ecosystem is far more competitive, and thus values fast response much more. Note also how much better suited it is to a world of 3D printing.

The function of systems based on legal exclusion, such as patents and copyrights, is to prevent competition and implement monopolies. No system of this kind can survive against a truly competitive system because it cannot respond fast enough. A 20-year patent or a 120-year copyright on technology is guaranteed to be obsolete  long before it expires.

19 comments:

Ian Adams said...

So I'm guilty of not having seen the talk and am relying on your synopsis here... I agree that copyright and patent law is largely borked as-is, but I can understand, from my western perspective, frustration at not being able to eek any profit from an innovation before getting hammered by copy-cats. My personal interactions and observations, in academia at least, that even something as simple as explaining that a piece of work should be cited and not blindly copy-pasted could be a challenging cultural gulf to cross.

David. said...

Ian, you need to watch the talk. It describes a completely different ecosystem that allows for profit (less than monopoly profit, but profit) while delivering much better consumer value without exclusion and with strong competition.

And, as you note, it isn't like the Western system of exclusive rights is actually working to prevent copying. It is, however, creating massive monopolies, driving inequality, destroying citizens rights, and enriching lawyers.

David. said...

See also Mike Masnick's Could You Design A Worse Patent Reform Bill Than The STRONGER Patent Act By Senator Coons? Don't Think So.

David. said...

Glyn Moody's Danish University And Industry Work Together On Open Science Platform Whose Results Will All Be Patent-Free shows that the Danes have figured this out:

"Danish industry loves it:

The idea of collaborating in such a patent-free zone has aroused enormous interest in industry and among companies that otherwise use considerable resources on protecting their intellectual property rights."

Christopher Thorpe said...

This fits well with my world view.

My friend Matt Marx defended his HBS dissertation with a masterful analysis of the effect of Michigan's change in noncompetition enforcement on patent filings. When Michigan allowed big companies to enforce noncompetition agreements, patent filings (his measure of "innovation") went down, even accounting for economic downturns. Anecdotally, noncompete enforcement has been part of the explanation for why Silicon Valley has flourished while Massachusetts' equivalent, Route 128, has languished. It's not the difference between MIT/Harvard and Berkeley/Stanford.

If Bunnie is right, China is going to keep kicking our butts while we fight over who first called dibs on good ideas instead of investing our time and energy in making them better.

To my understanding, patents were supposed to be a bargain between an inventor who had invented something truly novel and would typically keep it a trade secret to prevent others from practicing the invention. So you'd give IP the rest of the world—who benefits from learning how it's done—in exchange for a period of monopoly rights so that you can keep practicing your invention as if it were a trade secret. It makes a lot of sense for something like chemical synthesis or materials engineering, but it makes next to no sense for "one click ordering", which pretty much any practitioner of the art of e-commerce could embody with only that three-word prĂ©cis.

Patents have evolved from "I'll publish my commercially valuable secret in exchange for a period of protection" to "legally binding dibs". John Oliver invented this term, as far as I can tell, discussed here: http://time.com/3827888/watch-john-oliver-patent-trolls-last-week-tonight/

More protection isn't going to make us more competitive in a global economy. The Arduino/smartphone example is a great one.

David. said...

The EFF's Stupid Patent of the Month reports:

"On August 29, 2017, the Patent Office issued U.S. Patent No. 9,747,468 (the ’468 patent) to JP Morgan Chase Bank, titled “System and Method for Communication Among Mobile Applications.” The patent covers the simple idea of a user giving a mobile application permission to communicate with another application. ... The Patent Office handed out a broad software monopoly while ignoring both common sense and the real world."

Because:

"JP Morgan’s “invention” was not just obvious, it had been implemented in practice. At least some mobile applications already followed the basic system claimed by the ’468 patent. In early 2012, after Apple was criticized for allowing apps to access contact data on the iPhone, some apps began requesting user permission before accessing that data. Similarly, Twitter asked for user permission as early as 2011, including on “feature phones”, before allowing other apps access to its data. Since it didn’t consider any real world software, the Patent Office missed these examples."

Exactly how is giving this monopoly to JP Morgan Chase supposed "to promote the progress of useful Arts"?

David. said...

Amanda Chicago Lewis at GQ reports today's patent system dysfunction:

"a secretive company called BioTech Institute LLC had begun registering patents on the cannabis plant. Three have already been granted, and several more are in the pipeline, both in the U.S. and internationally. And these are not narrow patents on individual strains like Sour Diesel. These are utility patents, the strongest intellectual-property protection available for crops. Utility patents are so strict that almost everyone who comes in contact with the plant could be hit with a licensing fee: growers and shops, of course, but also anyone looking to breed new varieties or conduct research. Even after someone pays a royalty, they can’t use the seeds produced by the plants they grow. They can only buy more patented seeds."

David. said...

People complain that USPTO grants many bogus patents. More usefully, Greg Aharonian posted to Dave Farber's IP list an extremely interesting explanation of why the USPTO grants so many bogus patents.

David. said...

Patent holders are evading the patent review process by claiming sovereign immunity, for example by "selling" their patents to Indian tribes:

"The drugmaker Allergan announced Friday that it had transferred its patents on a best-selling eye drug to the Saint Regis Mohawk Tribe in upstate New York — an unusual gambit to protect the drug from a patent dispute.

Under the deal, which involves the dry-eye drug Restasis, Allergan will pay the tribe $13.75 million. In exchange, the tribe will claim sovereign immunity as grounds to dismiss a patent challenge through a unit of the United States Patent and Trademark Office. The tribe will lease the patents back to Allergan, and will receive $15 million in annual royalties as long as the patents remain valid."

David. said...

Rachel Sachs' post on a Harvard Law blog Be Very, Very Concerned About What Allergan Just Did adds a lot of detail to the red flag raised by the New York Times in the previous comment:

"In short, if repeated and taken to its logical conclusion, this transfer has the potential to prevent most invalidity challenges to any drug patents."

But on Dave Farber's IP list Greg Aharonian corrects her:

"In short, if repeated and taken to its logical conclusion, this transfer has the potential to prevent any invalidity challenge to ALL patents."

Greg points out that there's very little specific to drug patents in Rachel's post. It has been updated, which accounts for the mismatch in wording. The update points to further legal scholarship on this issue; none seems reassuring.

David. said...

It didn't take long to find out that Greg Aharonian was right. At Ars Technica, Joe Mullin's Apple is being sued for patent infringement by a Native American tribe reports:

"Apple gets sued for patent infringement dozens of times each year, mostly by little-known shell companies with no products—the types of companies often derided as "patent trolls." But the newest lawsuit seeking royalty payments from iPad sales is likely a first: the recently created plaintiff, MEC Resources LLC, is wholly owned by a Native American tribe. The MEC lawsuit appears to be using Native American legal rights to avoid having the US Patent Office perform an "inter partes review" that could invalidate the patent."

David. said...

The House Committee on Oversight and Government Reform is investigating Allergan's patent transfer to the Regis Mohawk Tribe.

David. said...

Calling it "One of the most brazen and absurd loopholes I’ve ever seen, and it should be illegal.":

"Sen. Claire McCaskill (D-Mo.) has introduced a bill (PDF) that would head off Allergan’s strategy without waiting to see whether the judges at the Patent Trial and Appeals Board will even approve it."

David. said...

Cory Doctorow reports that:

"Section 108h of the Copyright Act gives libraries the power to scan and serve copies of out-of-print books published between 1923 and 1941; it's never been used before but now the mighty Internet Archive is giving it a serious workout, adding them to their brilliantly named Sonny Bono Memorial Collection ... The Archive is working with Tulane's Elizabeth Townsend Gard and her students, who are planning to post "thousands" of books to the Bono Collection (currently they've done 67 of them)."

Brewster Kahle has the details here.

David. said...

The judge in the Allergan patent suit asks:

"whether the Tribe should be joined as a co-plaintiff in this action, or whether the assignment of the patents to the Tribe should be disregarded as a sham."

David. said...

Who knew that authors who have signed away their copyright may be able to get it back? Creative Commons and Authors Alliance have released the Termination of Transfer tool:

"Creators of all kinds routinely transfer rights to their works (by signing publication contracts that assign copyright to their publishers, for example). While many of these agreements last “for the life of copyright” (which under current United States law generally means seventy years after the author dies), the law takes into account that these terms can ultimately be unfair to authors and artists. This is where “termination of transfers” come in.

In the United States, authors can use the termination of transfers laws to regain the rights they have signed away. But because the law is complex, and because it requires that authors wait years or decades to take advantage of it, creators need to be patient, savvy, and persistent to exercise this right."

David. said...

A interestingly different view of the Chinese technology innovation ecosystem from NYU professors Clay Shirky interviewed on video by Scott Galloway, primarily on the sales, marketing, delivery and support aspects. Especially interesting on the Xiaomi flameout.

Hat tip to Barry Ritholtz.

David. said...

Judge throws out Allergan patent, slams company’s Native American deal by Joe Mullins at Ars technica reports:

"A federal judge ruled today that patents protecting Allergan's $1.5 billion blockbuster dry-eye drug, Restasis, are invalid due to obviousness."

and:

"But Judge Bryson's opinion (PDF) on the matter makes clear that he does not endorse or validate the deal to essentially purchase sovereign immunity from the St. Regis Tribe.

"The court has serious concerns about the legitimacy of the tactic that Allergan and the Tribe have employed," Bryson writes. In his view, Allergan has paid the Tribe to "rent" its sovereign immunity at the US Patent Office."

David. said...

Portugal Bans Use of DRM to Limit Access to Public Domain Works by Jeremy Malcolm on the EFF's Deeplinks blog reports on Portugal's new law on DRM:

"Portugal has recently passed a law on copyright that helps to strike a fairer balance between users and copyright holders on DRM. The law doesn't abolish legal protection for DRM altogether ... However, Law No. 36/2017 of June 2, 2017, which entered into force on June 3, 2017, does grant some important new exceptions to the law's anti-circumvention provisions, which make it easier for users to exercise their rights to access content without being treated as criminals."

These include permitting circumvention of DRM for "fair use" (e.g. by libraries and archives), banning DRM-ing of public domain or government-financed works, and requiring authorization from the copyright owner for the use of DRM.