'Global IP Markets require Global Consistency': A Reply to a Reply

A little while ago, I published a piece in CIS's publication, Policy, entitled "Locked In: Australia Gets a Bad Intellectual Property Deal" (pdf) (Policy, Summer 2004-05). In Policy Volume 21(1), Tony Healy has offered his response: 'Global IP Markets Require Global Consistency'. (pdf).

One of the benefits of a blog is that I get a chance to 'respond to the response', without having to publish an article about it. I don't want to spend too much time on this, but a few points in response are worth noting, I believe.

An unarticulated assumption

First, the basic assumption that appears to lie at the heart of Healy's piece needs to be articulated: it is that if some IP protection is good for innovation (true statement), then more IP protection is necessarily better (NOT necessarily true - it depends on the kind and scope of IP protection). Healy claims that:

'Stronger laws governing IP recognise the increasing role of intangibles, R&D and intellectual property in the world economy. As such, it [sic] benefits innovative and creative Australians and keeps our economy internationally competitive. It also preserves Australians' access to new medicines and movies'.

Having a good IP system is important for innovation. Continually increasing IP protection does not necessarily lead to more innovation.

As has been long recognised, stronger IP protection has costs - specifically, costs for follow-on innovators. Adopting stronger patent laws which prevent researchers from experimenting on patented inventions (a la the US law, post Madey v Duke) is not going to help innovative Australians, it will hinder the next generation of research and development. As a general rule, it seems to me that we should be applying a basic standard: those arguing for more (stronger) IP protection bear the onus of showing why it is necessary, and that the benefits outweigh the costs.

In simple terms, this process was never carried out for the IP Chapter of the FTA, and it is far from clear that the benefits of the new IP laws outweigh the costs.

I'm not anti-IP. I'm anti the unthinking, unanalysed extension of IP laws.

Copyright term extensions are 'fine'???

According to Healy, 'there are some good reasons for extending copyright terms'. OK, so let's examine those 'good reasons' a little:

term extension compensates for the greater ease of copying, which otherwise undermines the value of copyright holdings. This is particularly appropriate now that CD and DVD burners rae becoming widespread

Hmmmm, pardon me, but aren't most of the things being copied via CD and DVD burners a tad younger than copyright term extension would apply to? It's kind of weird to argue that Britney Spears deserves longer protection because so many people are burning CDs of her music.

although the present value of future term extensions might be small, it might also represent a cross-over point for writers and other creators on marginal incomes, thus encouraging the creation of more works

Frankly, these kinds of arguments are so deeply unconvincing. According to the Economists' Brief in the Eldred litigation - a brief the authors of which included several Nobel prize winners in Economics, the present value of the term extension is TINY - an improvement of less than 1% compared to the pre-extension term. This is a miniscule additional incentive for creators. The amount of additional creativity that such an extension will induce is likely to be very small - so the question is whether that tiny benefit outweighs all the costs of term extension - a point I'll come back to below.

'publishing, movie-making and computer games are businesses that depend on occasional hits. High revenue streams from occasional hits subsidise a large range of additional titles...In this context, the additional revenue from term extensions might be an essential part of the publishing process'

OK, let's skip over the fact that this is completely unproven and should really be the subject of ready examination. Surely we can't skip over the fact that 'occasional hits' in book, movie, and particularly computer game terms are still going to be generating the overwhelming majority of their revenue in the immediate term. I refuse to believe, until I see proof, that movie studios are more willing to take risks with some more movies because they anticipate their hits will still be generating revenues 95 years from now.

'[there is a] problem in the claim of free culturists that greater distribution causes no harm to the creator. There are certain works where it does ... IP plays an important role of stewardship

It's not clear to me how this argument relates to copyright term extension. Is the point that 'stewardship' should last 20 years longer than it does? Why?

The premise of opponents of term extension is the idea that copyright owners should have a defined period of control, in which to reap back the rewards of their creativity and investment - and that, after that, the material should be in the public domain for others to use, and distribute, and build on. Stewardship, like ownership, should not be forever.

Further, stewardship is not always a good thing. The problems of 'stewardship' are well known - Beckett's plays are still difficult to put on because of the 'stewardship' of members of his family. Heirs of James Joyce have caused untold problems in the celebration of the achievement that is Ulysses.

As to claims that term extension would impose harmful costs on Australia, analysis by the Copyright Agency Limited suggests the actual effect would be tiny. At universities, for example, only 4.5 pages in every 10,000 copied would be newly captured by term extensions.

Ah, where to begin on this one. First, extrapolating from CAL's figures to all "costs on Australia" is just a nonsense. CAL deal with some, limited uses of copyright - uses in universities, which are highly likely to involve mostly new works.

Second, the basic point that the costs would be low seems to be a little inconsistent, too, with his argument that term extension does compensate for increased copying and might help 'marginal' authors. If the costs are so low, surely that means that few or none are profiting and the additional incentives or 'compensation' are illusory?

Third, the key point raised by critics of copyright term extension is not the direct economic costs in terms of additional license fees. Any additional license fees for works already created are just a windfall and not rational policy, so in principle they are all bad, but that's not the biggest objection.

The more significant objection is that it creates a whole lot of works that get 'locked up' - subject to permission requirements - even though they are old and no longer being exploited. This is, in part, the 'orphan works' problem, which I've talked about elsewhere (see here, and here). Healy's answer to that issue - that 'copyright ... protects only the implementation, not the idea" is not to the point. Many re-uses of material require use of more than the 'idea' - people wanting to use old films in new documentaries, or existing artworks in new artworks, for example.

Unwarranted Attacks on Important IP mechanisms

My 'blast' of the DMCA provisions in the FTA is, according to Healy, an 'unwarranted attack'. The interesting point about Healy's discussion here is that he tries to defend Lexmark's approach. In the Lexmark case, Lexmark attempted to use US Copyright Law against circumvention of techological measures to enforce its technical restrictions that sought to ensure that only 'genuine' Lexmark cartridges could be used on its printers. Healy says Lexmark should be allowed to do this, because it enabled Lexmark to sell printers cheaply and subsidise the printers through the higher cartridge prices - ensuring that those who print more, pay more.

Let's be clear on this. Lexmark, in this case, attempted to use digital copyright law, which was enacted with the intention of giving copyright owners additional protection against widespread copyright infringement in a digital environment. They tried to use this law to secure control over an aftermarket for print cartridges. This is not what this law is meant to be about - even according to our own government in its comments on the FTA. As one of the judges (concurring) noted in the Lexmark case:

'If we were to adopt Lexmark’s reading of the statute, manufacturers could potentially create monopolies for replacement parts simply by using similar, but more creative, lock-out codes. Automobile manufacturers, for example, could control the entire market of replacement parts for their vehicles by including lock-out chips. Congress did not intend to allow the DMCA to be used offensively in this manner, but rather only sought to reach those who circumvented protective measures “for the purpose” of pirating works protected by the copyright statute. Unless a plaintiff can show that a defendant circumvented protective measures for such a purpose, its claim should not be allowed to go forward. '

Patents need work

Healy claims that:

'America's universally envied software and high technology industry owes a lot to strong patenting, and this is a lesson that can benefit other nations including Australia

Hmmm. You know, I think I prefer to believe Bill Gates, who has been quoted as saying:

'If people had understood how patents would be granted when most of today's ideas were invented and had taken out patents, the industry would be at a complete standstill today. '

Or, more recently, the attitude of IBM on software patents:

'Another development in recent years that pushed IBM to reconsider its patent approach has been the surge in patent filings and lawsuits, including the rise of firms whose only business is to file patent infringement suits, known as "patent trolls".
"It seemed to us the pendulum has swung way too far in the direction of companies blindly chasing patents, and blindly chasing the enforcement of patents", Mr. Kelly said.'

It may be that IBM can be accused of hypocrisy on that one; and Gates' response to the problem he highlighted was to 'get lots of patents' so you can't be shut out of the market (so you have a basis to force negotiations).

The point remains. There is plenty of criticism of software patents, and Healy's argument - that software patents led to the strong industry the US has today - has been rejected by one of the people most involved in the US's high technology industry.

Finally, the sounds of silence

Finally, it is worth noting that Healy has not responded at all to my main criticism of the FTA Chapter. My chief complaint about Chapter 17 has always been this:

'The first thing that strikes you when you look at Chapter 17 is its sheer complexity: at 29 closely typed pages, it is breathtakingly long, detailed, and opaque. … Because Chapter 17 is so detailed, and covers the full gamut of all IP rights, it locks Australia in to one particular model of IP law. We have lost a lot of fexibility to choose and adjust our own IP policy.'

Healy has no answer to that basic argument. That's because there is none.