One of my favorite sayings is “Those who can’t innovate, litigate.” Many patent defends claim the patent system protects small inventors, but it more often seems as a way for large businesses to stifle competition. Look at recent lawsuit announcements and it’s a who’s who of no longer relevant companies who ceded their market leads by failing to continue innovating with market.

Apple has seemed like a company more focused on innovation. Even as Jobs proudly announced more than 200 patents related to the iPhone, Apple appeared to want to seriously compete in the mobile space by offering a more compelling product.  Those 200 patents did little to stop the many patent lawsuits lodged by marketplace losers against Apple including most recently Nokia (think, what was the last good Nokia phone).

Now Apple, rather than continuing to fund and innovate on the iPhone, has sued HTC, the maker of many Google Android phones, over several patents.  HTC and Google Android have been stealing much of Apple’s thunder in the mobile space and are both growing very rapidly (thanks, in part, to Google’s free and open-sourced operating system allowing HTC and other phone manufacturers to innovate and create compelling phones). Apple apparently thinks its worth spending millions of dollars on lawyers to sue HTC rather than spend that time and money making an even better iPhone.

Apple suing HTC, and by association Google, is a thinly veiled way of saying they’re scared of competition. Yes, Apple has a legal right to sue over patent infringement (even though most patent lawsuits are not over willful infringement but because two companies came up with the same idea but one patented it first), but what is gained from these lawsuits, aside from making lawyers richer. Rather than out-innovate and compete in the marketplace, as is object of capitalism, Apple would rather sue to keep quality products out of consumers hands. Enjoy that AT&T 3G. We might get stuck with it.

While today’s book publishers, movie makers, and music producers claim the entire creative industry would end without copyright, history proves the opposite. The first copyright statue was introduced in 1710 in Great Britain, several thousand years after the invention of the written word, and almost a full century after Shakespeare produced some of the most influential creative works in history.

Shakespeare wrote 38 plays, 154 sonnets, and several other poems, made a substantial living, and is still widely read, performed, and praised without any copyright protection. Even in the age of copyright, Shakespeare has made more than 420 films, making him the most filed author in any language. This year alone, more than 1,200 editions of Shakespeare’s works have been published, 445 within the last 90 days (according to Amazon).

How, if copyright is so vital to the creation of creative works, did Shakespeare accomplish what he did? And if copyright is even more important now, than why do filmmakers and publishers still reproduce Shakespeare’s works?

Shakespeare, as a genre and even industry unto himself, shows how copyright adds little to no incentive to creating new works, but rather can be seen as an impediment to such creation.

First, let us remember the time Shakespeare wrote in. In the 16th century, writers were valued for their language and style rather than originality. In fact, originality for storytelling is a modern value.  Almost everyone of Shakespeare’s plays was obviously copied from another creative work or historical subject. Groklaw counted more than half a dozen cribbed sources in King Lear that when looked at with modern copyright would have cost the Bard hundreds of thousands of dollars in fines and possibly criminal prosecution. Yet we praise King Lear as a masterpiece, not as an illegal piece of piracy.

Shakespeare made glorious new works by copying other works, both past and present, something he could easily do without copyright. Today, he would need permission from each and every source – permission he might not even get.

Today, we still praise new works that are purposefully based on Shakespeare’s plays, yet innovate in some new way.  West Side Story (Romeo and Juliet), Lion King (Hamlet), Kiss Me Kate (Taming of the Shrew), and Forbidden Planet (Tempest) for example. Or Rosencrantz & Guildenstern are Dead which uses  side characters from Hamlet to tell a new story within Hamlet itself.

Because all of Shakespeare’s plays are in the public domain, a massive amount of creativity can happen building on what Shakespeare. Shakespeare productions and publications compete with each other, encouraging more creativity, whether in casting, interpretation, or other radical approaches. That’s why you can see a musical Romeo & Juliet, a full-text, four hour Hamlet, and a female (Helen Mirren) Prospero (known as Prospera) in this year’s Tempest.

You might think Shakespeare is an anomaly, someone who transcends copyright. That, of course, ignores that Shakespeare’s contemporaries, many of whom were more famous at the time, also wrote without the benefit of copyright (since copyright wasn’t to be invented for another 100 years). And Shakespeare isn’t the only author Hollywood and publishing loves to reproduce. There’s Hans Christian Anderson, the Brothers Grimm, Homer, Charles Dickens, Jane Austen, Mark Twain, and all of mythology and the Bible to name a few.

Music labels (and copyright maximists) often claim they need copyright to benefit the musicians, but their actions more often contradict that. Unlike the U.S., Canada replaced its compulsory license system (where anyone can pay a set amount to use a song) with a permissions based system meaning the copyright holder has to give permission for each use of their music.  Record labels have reportedly been releasing musicians’ music, such as on compilation discs, without permission nor paying any royalties tracing back to the late 1980s.  The labels have even kept a “pending list” of all the musicians they have not paid.  The list includes more than 300,000 songs from major names like Bruce Springsteen and Beyonce.  Jazz musician Chet Baker is leading a lawsuit against the labels claiming at least $50 million is owed to him.

The labels could face liability of $6 billion using the same infringement fines the label seeks from file-sharers ($20,000 per infringement multiplied by 300,000 songs).

David Basskin, the President and CEO of the Canadian Musical Reproduction Rights Agency Ltd., said in an affidavit that “the record labels have devoted insufficient resources to identifying and paying the owners of musical works on the Pending Lists” adding it would be “an unproductive use of their time.”

There are several other examples of record labels and collection agencies collecting money that never makes it to musicians from creative book-keeping, multiplatinum albums make no money, violating contracts to release music without permission, or just holding onto money because they can.

The reason record labels are so desperate to save CD sales is because that’s their main source of income – and the revenue only works when record labels have full control over distribution. When they have full control, they can charge whatever they want, like $20 for 12 songs,  and treat musicians as they always have – badly. Technology has dropped the cost of making and distribution music so cheap that musicians can control their own destinies – they don’t need labels anymore. Labels served a valuable purpose when there was no alternative. They provided the expensive recording, distribution, and marketing required to make a band successful.

With a computer and a website, almost anyone can make a go at being a musician. This means more music – more people making money from their music (whether through merchandise, live performances, or other inventive business models) and more music to listen to and enjoy.  The labels have lost control over the marketplace and this is a good thing as it will allow the marketplace to grow. Don’t believe me? Look at the U.K.

Musicians in the U.K. have been staking out positions for and against a proposed 3-strikes law where after 3-strikes, file-sharers of copyrighted material would be banned from the internet. Lily Allen (a personal favorite of mine) launched a blog in support of the 3-strikes law, but resulted more in a lesson to strong copyright supporters that no longer is copyright just an issue for those creating content.

To summarize the more than week long back-and-forth, Lily Allen began her blog, It’s Not Alright, a few weeks ago arguing file-sharing was stealing and hurting new artists writing “File sharing eats away at opportunity for new artists: by cutting off income at the most crucial, cash-strapped point in their careers and by limiting A&R’s ability to sign new acts outside of the mainstream.”

Allen’s blog quickly gathered a large community of copyleft and copyrighters debating Allen’s arguments and the merits of the laws she endorsed. TorrentFreak pointed out Allen copied an entire post from (another personal favorite) Techdirt without citation or a link. Techdirt’s Michael Masnick explained he didn’t care about the copying, but pointed to how hypocritical Allen’s was being.

A few days later it was revealed that Allen, while a new musician herself, released mixtapes online of her and other artists’ music, music which she did not have the copyright to. These mixtapes were still available on her website – entire songs. Allen defended this as her not understanding copyright law when she made them and that the songs were just excerpts.

Hundred of people commented on her blog and many bloggers posed questions for Allen to justify her position on file-sharing while she herself had no problem copying blog posts and file-sharing songs herself. Further, she used free services like Blogger, MySpace, and Twitter to share her music and connect with fans, turning her from a new artist to a famous artist. And she didn’t respond to questions from Masnick and others asking how Allen balanced her belief that file-sharing was harming music when the U.K.’s music industry’s own study showed the music industry was growing.

Allen discontinued her blog claiming Masnick and other copylefters were bullying and attacking her (one person said Masnick of “leading” his “internet army” to attack her while being angry.

But all this really teaches us that copyright affects more than just musicians. There is a growing fervor among consumers that copyright and the content industry are expanding too far onto individuals and their civil rights. Recording companies keep increasing the penalties for file-sharing, yet file-sharing keeps growing because that’s what technology and the market demands. No amount of government intervention will force people to buy CDs again.

Because Allen stopped blogging and has ended her career does not mean copyright isn’t working. The music industry in the U.K. has significantly grown as technology has made it easier and cheaper to make and share music. Allen herself took advantage of these free and cheap tools to make herself famous, and only when famous does she change her tune (see what I did there) on copyright. While I’ll be very sad to not have any more of her music, there are thousands of new artists eager for space on my iPod.

The entertainment industry declared a huge win after a Swedish court convicted the founders of Pirate Bay of copyright infringement. But a win isn’t always a win. The ruling helped galvanize Sweden’s Pirate Party, increasing their numbers by more than three times and helping them win two seats in the recent European Parliament elections.

The Pirate Party seeks to reform intellectual property laws to be more balanced with consumer and civil rights.  Further support for the party came after Sweden passed a law requiring ISPs to turn over user information upon request (even without a warrant or evidence), leading several ISPs to refuse to save any user records.

The Pirate Party party won its seats with more than 200,000 votes, approximately 7 percent of Sweden’s voting population (and 19 percent of voters under 30).  The party has risen to being the third largest in Sweden.

So even though the entertainment industry can claim a win in the Pirate Bay trial (for now at least, since the judge is being investigated for bias), that win helped awaken a social movement against the industry and its causes. Maybe the entertainment industry will start realizing harsh copyright laws and obsolete business models are not the best ways to build a customer base.

One (of the many) points of contention with copyright law is how much it limits fan-created works.  Last week I wrote about a fan-made sequel to the classic video game Chrono Trigger that publisher Square-Enix forced to stop (only a few weeks before release). This fan-made sequel would never have replaced an official sequel. It was a labor of love from fans eager to promote their love to other people.  Cory Doctorow points out, under copyright law, you’re allowed to criticize a work but not praise it.

Under fair use, I can criticize any copyrighted work. I can use clips or excerpts from it to support my criticism. But if I want to promote or praise the work, it’s considered a derivative work, and I have to get permission the copyright holder.

But as my IP classmates say: “Without copyright law, no one will make Transformers.” And “No good has come from remix culture.” These are the future of IP law.

This is where fan creation gets pushed aside. It’s not only the content providers that over value their content. Consumers also give commercial content a higher value than fan or user-generated content, often recognizing professionals do it better (whatever it is). But this assumption under-values the real benefit of fan content.

Video games are the best example of this. Many games have whole-heartedly embraced fan content, providing free tools for fans to create their own levels and add-ons to games.  Fans help extend the longevity of the game with their own creations, extending the shelf life and value of the game for users. Even with tons of free content, game developers will release their own add-ons and fans will pay for them (sometimes even releasing fan content as official content).  These game developers are not scared of the competition – they know the professionally made content will have a larger, more captivated audience because of the fan content.  Other media are slow to realize how beneficial fan made content is for the lifespan of a project.

Fan content doesn’t compete with official content – it’ enhances it (I say official content because fan content can be commercial).  Only devoted fans of the Lord or the Rings would take time to make “Hunt for Gollum.” And only fans of the franchise will go out of their way to see it. Any non-fans who see it will quickly recognize it is not an official production and if they like it, they’ll find the official versions. And if they don’t like it, no harm done (increased expose nevertheless helps).

And to say no value comes from fan or remix content? Let’s understand what that is: All those Disney movies from Snow White to Cinderella to the Lion King are based on fairy tales, Shakespeare, and other already written stories, remixed by fans to tell new, exciting tales. West Side Story is no less entertain for remaking Romeo and Juliet and yet Romeo and Juliet remains popular to perform. Movie versions of books and plays often increase the popularity of the original work. Letting fans create labors of love cost the content creators nothing, but gives them every opportunity to gain. Let fans be fans.

Just because you have a legal right to something doesn’t mean it’s always the right decision.  Copyright allows the creator of a work to control derivative works – creative works based on the original work.  This is a legal right of content creators, but enforcing it hurts the content creators more by alienating the very fans who keep them in business.

Let’s look at two examples.  First, fans of the Lord of the Rings created an impressive film telling an untold story using the characters and lore from the books.  “Hunt for Gollum” was a labor of love by people who love the Lord of the Rings so much, they spent their own time and money producing a film of amazing quality and storytelling.  Thankfully, Tolkien’s estate allowed the film to be released as long it was always non-profit.  But why only non-profit? These fans made this movie (and others will see it) because they already love the Lord of the Rings.  Fans know it’s not an authorized edition or cannon to the storyline (and if you ask most geeks, being cannon is the most important thing to get our interest).  This means if Tolkien’s estate comes out with their own telling of the same story, it will still have the same audience, plus more who found out about the fan-made film – it’s a win-win situation.

But not all companies see the benefits of fan production.  Video game publisher Square-Enix sent a cease-and-desist notice to a fan-made sequel to the classic game Chrono Trigger.  Square has taken down several fan productions related to Chrono Trigger, this most recent takedown happening mere weeks before the game’s release.  But what is the threat? Square is still free to release their own cannon sequels – this fan production only serves to increase the value and attention on this 15 year old franchise.  The people making this massive game are fans – the people Square should be supporting not suing.

Video games especially have shown how fan labors of love can help the series.  Many video games include modification tools to allow fans to create their own games and stories, either expanding on the official material or creating worlds of their own.  While Square has the legal right to stop these fan-games, they are hurting the very people who keep them in business.

After my IP class last week, a classmate and I continued our debate.  He said something that stuck with me: “Companies won’t leave money on the table.”  But in many cases, companies do leave money on the table. Sometimes the risk isn’t worth the reward, but sometimes it’s sheer stubbornness.

I mentioned Farhad Manjoo’s article about why there is no iTunes for a movies a few weeks ago.  The reason, according to Manjoo, is there are too many contracts to renegotiate and too many people to get permission from to make an all-you-can-download movie service cost effective.  This is not because it’s actually expensive to make (all those BitTorrent sites seem to manage). It’s because the variety of rights holders demand too much money.  Rights holders over value their copyright (or patent other cases).  They demand more money than someone can make selling another product (like a download service).  Instead of getting paid, nothing gets done or sold, meaning everyone leaves money on the table.

Want a nice, clean consumer example? iTunes introduced variable pricing for music at the demand of the record companies.  Record companies could choose a lower 69 cent price, the regular 99 cent price, and a $1.29. Few chose the lower price, pushing popular and new songs to the higher $1.29.  Early results show the labels are losing money from the decrease in sales – unit sales have dropped to the point where actual revenue is lower than when prices were 99 cents. Don’t say they weren’t warned.

The examples are numerous, from newspapers threatening Google even though its sends them tons of free traffic to monetize to Warner Music demanding more money from YouTube and music games like Guitar Hero, ignoring the huge promotional benefit they get from both.  TV shows like the Wonder Years can’t appear on DVD or TV because of the over-priced music. Other shows have changed the music, from Dawson’s Creek to WKRP in Cincinnati.

In the patent world, having too many patents in one area is called a patent thicket and can make it hard for research because it requires so many different licenses (and too many companies over valuing their intellectual property) that it becomes cost-prohibitive to research either from licensing or lawsuits.  Some companies collect their patents to allow products to be made, but these patent pools often do more harm than good. This is even hampering drug research:

Peter Ringrose, chief scientific officer at Bristol-Myers, has said there are more than 50 proteins possibly involved in cancer that the company was not working on because the patent holders either would not allow it or were demanding unreasonable royalties.

Yes, I went there. You might die because greedy companies refuse to take money.

In all seriousness, intellectual property not only gives monopoly rights to a single entity, but it also comes a sense of entitlement that seems to hurt the rights holder and everyone down the supply chain, including consumers.  This is because rights holders significant over-value their own intellectual property.  Much of the value from content comes from how it reaches the consumer, whether on DVD, TV, or some innovative package.  Pricing yourself out of these products does not make your content more valuable – it devalues it because consumers don’t experience it.  Companies are leaving money on the table, not just from the initial royalties, but from the future revenue made by future sales of products based on new fans or new innovations.

The Author’s Guild, made up of many brilliant fiction writers, made up some fiction of its own and have pressured Amazon to remove a key feature of its eBook reader upgrade.  The Kindle 2 included a text-to-speech feature like many computer programs do.  The Author’s Guild president, Roy Blount, claimed turning text-to-speech in this fashion was copyright infringement, undermining the billion dollar audio book industry.

Um, no. Reading text out loud is not copyright infringement.  Blount has been pushing this issue, most recently in an op-ed in the New York Times, offering no legitimate argument for why text-to-speech is bad or illegal.  He says Amazon is not paying for audio rights, but there’s no need.  Michael Masnick points out the text-to-speech feature is not a fixed work, which is a requirement for copyrightable material. It’s the same as someone reading the book out loud, as much as Blount wants to pretend it isn’t.  Masnick says the only way this violates copyrights is if someone records the computerized voice, and then tries to sell it. Blount says he doesn’t want this to prevent parents reading to their children or the blind, but for no other reason than doing so would sound bad.

As for Amazon, shame on you. You come out with this innovative and successful product that makes people want to read more books, helping these very authors. But instead, without any legal basis, you cave.  It makes the product less valuable to consumers and even ebooks lose some value.  This is a lose-lose-lose situation (the third being consumers) where authors are decreasing the value of their books, Amazon is decreasing the value of Kindle, and consumers have less valuable products to buy – for the same price.  It’s sad Amazon was scared away from this legal fight. Instead it sets a scary precedent that groups can raise a little hell and make this retail giant fall.

The Guardian posts an interesting theory that for Amazon’s Kindle to be more successful, it needs more widespread piracy.  Unlike Apple’s iPod, Kindle users can’t transfer their book collections onto the hardware like CD-to-MP3s.  Every book must be purchased or downloaded. And while book piracy does exist, it relies on devoted fans copying every page – not as easy as an automated CD ripper.

The Kindle is selling quite well for Amazon, but hardly on the road to travel dominance like the iPod. This might show the market is not as ready for the iPod of books as it is for the iPod of music.  As I’ve (and others) have written, piracy shows what the market wants and at this point, digital books are not in high demand.

Book and content producers need to understand why this is the case. Right now, books are more valuable to consumers for any variety of reasons, like convenience, habit, and collecting.  We know reading online/on the computer is a preference for many for short features, like news articles, but books are still preferred in tangible form.  The Kindle isn’t going to change the habits of consumers, but it’s a forward looking option that knows paper’s days are numbered.

Unfortunately, the book industry is leaving clues they are more likely to follow the close-minded music industry approach.  Paul Aiken, the executive director of the Author’s Guild claimed the Kindle’s new text-to-speech feature was an act of copyright infringement by allowing any book to be read aloud saying literally: “They don’t have the right to read a book out loud…That’s an audio right, which is derivative under copyright law”. According to his logic, reading any book out loud, even a bedtime story for your kids, is a derivative work and thus copyright infringement.  Or, maybe, this feature is just a way to make the Kindle, and thus digital downloads, more valuable to consumers. It’s unlikely a computerized voice is going to replace emotional actors on audio tapes.

For book publishers, they need to plan for a future where books are digital and readily pirated. It’s already happening on a very small scale.  Instead of fighting the inevitable future, book publishers can embrace the change and profit from it. First, embrace the cheap distribution of digital goods and include digital downloads of books with the purchase of a hard copy. Even spread full, free downloads online – several examples of free eBooks show huge increases in tangible book sales.  These sales come because the hard copy is more valuable than the digital copy.  Book publishers need to increase the quality of the published books, recognizing why people buy them.  Small, soft cover travel copies are perfect for convenience customers (and should be cheap, impulse buys). For collectors, like everyone I know with huge bookshelves to fill, increase the value of hard covers with gorgeous art, author’s notes (the paper form of commentary tracks), and high-end binding.

These features give customers a reason to buy the hard copy.  This way, when book piracy explodes, book publishers are already offering compelling alternatives that give customers a reason to spend their money.