Copyright and patents are great threats to digital innovation
Jan 23, 2012
Digital innovation threatened by copyright, patents, and lobbying; challenges faced by the entertainment industry and innovation hindered by the patent system.
Last week, the biggest online protest in history mobilized millions of people to pressure the American Congress not to surrender to the lobby of the decaying entertainment industry of Hollywood to impose legal censorship on the Internet. However, as Dan Gillmor observed in the Guardian, the fight is far from over. The producers of Hollywood's crude blockbusters (no longer a hub of cinema creation for at least two decades) have very strong connections in Washington and will fight to the end to ensure their privileges. The Copyright Battle is one of the risks that the integrity of the Internet will face in the coming years, along with the risk of another war, the patent war. Just like the two great wars, these are fundamental to deciding what will happen to the Internet.
One of the curious things about the copyright issue is that the fight is almost exclusively the fault of the big studios. Almost two years ago, a Canadian study showed what has long been obvious: the exchange of digital content without copyright payment (a.k.a. "piracy") is not a legal problem, but rather a market one. When the prices imposed by the owners of the products (a.k.a. "crude Hollywood studios") far exceed the market equilibrium value, consumers prefer not to pay (similar to what happens in countries that raise the tax on cigarettes too much, for example, encouraging smuggling). When the product is sold at a fair price, the consumer prefers to pay for the convenience it can provide. There are also indications that "piracy" occurs when the content offer is inadequate or scarce. A Swiss study even went further and suggests that piracy benefits the artists (which shows how compliant the artists who participate in the laughable campaigns against piracy are).
The problem exists because the decaying industry (a.k.a., "the Empire") does not accept that it will not be able to sell its content at the price it pleases, thus maintaining the profits of the numerous categories that suck up millions annually and have nothing to do with the core of the industry (lawyers, advertisers, insurers, unions, etc). Even pathetically poorly done studies tried to show the million-dollar damages to the economy (this Forbes article shows that Hollywood's "bills" were made in absolute bad faith).
Therefore, in the last decade, the "Empire" gradually increased the pressure and began to furiously sue for increasingly absurd reasons anyone who "violated copyright. The repression became so insane that it reached the point where singing a Michael Jackson song in a YouTube video became grounds for compensation. This radicalization, the policy of unreasonable prices (the subject of the Canadian study) and an inability to renew typical of structures doomed to disappear (which, for example, affects a good part of the major journalistic media) led Hollywood and its fascist-like lobby to pay politicians to propose SOPA and PIPA. Despite being resoundingly defeated, Hollywood's dictatorial lobby will continue and will always threaten the Internet, at least until the industry renews its ruling classes so that they realize that they can continue to make hundreds of millions of dollars, as long as they accept that they are no longer the feudal lords of the sector.
The real piracy is in another field, that of patents. A distortion that has been applied for a little over a decade in the American patent system has caused innovation to be hampered by (these yes) "pirates" of patents. Roughly explaining, individuals who have nothing to do with innovation have been registering patents that are generic enough to encompass anything. For example: a patent that assures its owner "a software that distributes music digitally" (the example is exaggerated to illustrate better). When an innovator brings his patent project to the U.S., the "pirate" says that patent is his and that he has the right to receive copyrights, when in fact, he invented nothing. Some of these "pirates" have been winning hundreds of millions of dollars in lawsuits along with large law firms and preventing the establishment of legitimate patents. The Spotify, probably the most successful digital music distribution system of recent years, had serious problems entering the U.S. because a "pirate" had a patent for a system with the same proposal (but which did not exist in practice).
Perhaps it sounds harmless, but the corruption of the American patent system is extremely serious for the whole world. The U.S. is the major center of technological development in regard to the digital world, far ahead of anyone else. With the problem, digital giants (like Microsoft, Blackberry, Google and Apple and others) are investing large sums to simply buy patents and thus be able to threaten any competitor who wants to use one of the patents from their inventory. Worse: this money spent on the Patent War is not being invested in research. Besides the "pirates" and their lawyers, nobody wins. Products are limited in innovation, they become more expensive because of the copyrights of the patents, and small companies have more difficulties to consolidate. Of course, there is the issue of China, which disregards any type of patent, but as the planet depends on the products made with semi-slave labor in China, the issue of patents will not come to the agenda in a visible future unless this can mean revenue also for China.
Everything indicates that the issue, globally speaking, would need a legal and market rearrangement to revamp the processes. Hollywood studios can even continue making crude action movies addressed to people with a mental age of 12 years - and make money from it, as long as they accept that they can no longer use the elements of coercion that they used for decades (distribution, advertising, TV channel monopoly, etc). On the patent side, legislation needs to be rewritten to protect the inventor and research and not a handful of opportunists who take advantage of a loophole to extort money from someone who developed a really new idea. The digital industry has a lot to grow, as long as it wins these two battles. Otherwise, it will only maintain the privileges of an elite that strictly has nothing more to offer.