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.

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 hardest part of debating intellectual property is the widespread misconceptions people have.  Many people I talk to who don’t even realize they are copyright holders (of their doodles and term papers) fall into thinking people should own ideas so they can make money without considering why.  Ideas don’t happen in a vacuum. They build on many ideas before.

I became more frustrated by Forbes’ magazine’s praising of Activision Blizzard CEO Bobby Kotick, exacerbating the misconceptions .  Kotick has become a business press darling overseeing the merger of the largest video game company with an obvious eye on profits (to the chagrin of video game fans). Forbes writer Peter Beller explains “EA also teamed with MTV to sell Rock Band, a shameless knockoff of Guitar Hero that added drums, bass and a microphone to the world of make-believe rock stars.”

First, Guitar Hero wasn’t an original idea unto itself. It built on many, many ideas before it from people who enjoy air guitaring to the many previous versions of plastic musical instruments. I had a toy piano when I was a baby only a short, few years ago.  Did Activision shamelessly knock-off all these ideas too?

Second, why not look at what Rock Band did differently. The interface is very similar and even the controller instruments look alike, but Rock Band added many features, namely singing and drums. That’s building on someone else’s idea, just like Guitar Hero did.  Rock Band improved the idea so much, Guitar Hero shamelessly knocked them off with its new edition, featuring singing and drums.

Everyone copies everyone. It’s natural and a major part of how innovation happens – people see what works and make it better. This is why copying is good thing. Everyone does it and it makes everyone else better. The sincerest form of flattery is imitation. Don’t be scared of stealing ideas. Just be scared of not making them better.

You thought you knew Batman.  Apparently the billionaire playboy turned crime fighter is a southeastern city in Turkey.  Mayor Hüseyin Kalkan is suing Christopher Nolan, the director of the “The Dark Knight” and “Batman Begins” for infringing on the city’s name.

“The royalty of the name ‘Batman’ belongs to us … There is only one Batman in the world. The American producers used the name of our city without informing us,” said Kalkan to the Do?an news agency.  He claims citizens are not able to use the town name for businesses.

Kalkan likely has no merit, one because he is suing Nolan, not DC Comics, who own the copyright and trademark on Batman, or Warner Bros. who made the movie; and two because local regions cannot be registered as brand names in Turkey.  Though I do think local businesses should be able to use their town name without legal threats from DC (only one account this might have happened), this is more an example of a major overstating intellectual property rights and suing the wrong person.

Patents and intellectual property are meant to incentives innovation. One person or company gets a limited monopoly on their innovation as reward for teaching everyone else how to do what they did. If that’s the case, why do we need separate government incentives for businesses?

Patents and intellectual property, allegedly, solve one problem but cause another. Even if they create an incentive to produce a new product (which some studies dispute), the resulting product will be more expensive because of the patent.  That shrinks the market and societal benefit. Instead of relying on this exclusionary practice, why not let the market take care of innovation through competition (the basis of capitalism, right) and use government incentives, such as low interest loans, grants, or tax breaks, to build new markets.

The market is enough. Competition forces companies to out innovate each other; they have to keep costs down and value high otherwise customers will find the bigger and better thing.  We’ve seen this work in the fashion industry, restaurant industry, and even in the drug and software industry before both were allowed patents (which courts only recently allowed).  People will always need better technology, drugs, and gadgets and smart companies can and do succeed without strong-arming intellectual property.

But what about things the market won’t support? This is where we already have an incentive system in place: government incentives.  Think about how much the government already pays out for scientific research. A third of drug research money comes from the federal government, but drug companies also get valuable patents and then charge taxpayers monopoly prices for a drug they already paid for.

The key difference is government incentives bring prices down while patents push prices up. For example, alternative fuels are an important leap in technology and currently very expensive and inefficient. It’s not that companies don’t want to do the research, several have formed already. The problem is new fuel systems are too expensive for the market. Oil and coal are cheaper. Patents can’t help this industry when no one wants to pay for it.  With government incentives, instead of patents, the price these companies charge would be lower, expanding the market. As the market grows, the technology improves, prices drop, and eventually the market becomes cost-effective and self-sufficient. Government incentives over.

The same can be applied to drugs. Let designer drugs for weight loss and ED be the cash cows for private firms, but use government funds to develop malaria and HIV medication. The main customers for these drugs are poor and can’t afford the monopoly prices being charged, so let’s think of the greater good, and by greater good, I mean long term financial benefit. If we cure all the illness in poor areas, those people will be able to work and eventually join the global economy. China and India can tell you how that’s a good thing.

Government incentives accomplish what we want patents to accomplish.  Unfortunately, patents are not pushing innovation, but following innovation. After alternative fuels get tons of government incentives and handouts, alternative fuel companies will patent their technology and prevent competition from making the technology better faster, even when taxpayers made the businesses viable in the first place.  If patents were enough, we wouldn’t need the government incentives we have now. And if we need those incentives, why should taxpayers pay twice?

Way back in the early days of U.S.A., copyrights lasted 14 years with a rarely used option to renew. But since conventional wisdom (not fact) says more intellectual property is better, copyrights can now last up to 70 years after the creator dies.

The argument for extending copyright protection often seems aimed at protecting current copyright holders, like Disney trying to keep Mickey Mouse out of the public domain with the 1998 copyright extension act.  The trouble is copyrights are meant to encourage more content creation, using the limited monopoly as a small incentive.  It took more time, money, and work to share and profit from content creation back in the days before publishing houses and movie theaters (think 1776 without the singing or bathing) when the founding fathers thought 14 years was enough reward. Now, it is faster, cheaper, and easier to distribute content.  Content can be seen by millions all at the same time without much additional cost or effort, yet the monopoly reward is even larger.

The speed of business, namely its acceleration, should decrease the length of copyrights (and even patents). While a printed book in the 1800s would take months if not years to spread around the country, a TV episode is finished in a day. Most motion pictures make the majority of their money within three weeks. Popular video games are brushed aside in less than a month. And even novels rely on best-seller lists to stay in prime locations at book stores for more than a few weeks. Money grossed after this small windows is often profit - the marketing budgets are focuses on the quick, early buck. So why the century of copyright protection instead of 14 years or less?

The argument against this logic is the growing reliance on the long tail for smaller content producers. It takes longer for content producers without mega-marketing budgets to make all their profit in a few weeks, sometimes taking a few months or years.  The challenge for us (namely the government) is to balance the length of copyrights fairly with content providers and the consuming public. In the days before Amazon, the long tail was even harder to come by but 14 years was reasonable for the content providers of the time period. Books and poems were published without interruption meaning 14 years was a fair comprise.

The key thing - content producers make money faster thanks to all these new flanged inventions like the internet, computers, and the printing press. Even small publishers can market to a niche a get results. Copyright is not a guarantee for profits - no one has a right to make money.  That’s still the content producers job. I don’t see why they need more than a century to do so.

I’ve had no problem lecturing on intellectual property and shocker, I have no real experience in the field. I’m really excited to formally learn all the stuff I pretend to know already.

Professor Madhavi Sunder has issued a challenge to the students in the class to produce content (yay, content accomplished). It’s not for extra credit or anything, just seeing what comes of the challenge.

This is exactly the kind of experiment that people will produce without obvious incentives like money or even grade. I’ve been writing Prodigeek for more than two years with no attempt at monetary compensation. Instead, I write to not only invest in my career, showing my expertise to potential employers, but also to focus my interests. My interest in intellectual property blossomed thanks to reading and constantly writing about it. I used to think I was just going to study geek culture.

Certainly some brown nosing is incentive to make some great content for this class (good for you, my loyal reader(s)). The six figure law school graduate salaries might help. The key lesson - there’s more incentive than money to creating content. Maybe our IP laws should reflect that.

Just in time to discuss in the intellectual property class I’m way too excited about (and likely way over my head), a terrible decision has come from the Federal Court of Appeals vastly reducing the requirement to prove infringement on design patents.

Design patents cover the visual design of an object rather than its function like regular, utility patents and covers products like jewelry, furniture, and computer icons and fonts.

The decision changes the standard to prove infringement from “point of novelty” to the “ordinary observer” test where a patent is infringing if a ordinary person rather than an expert thinks the design is unique.

The silver lining in this case is the patent holder Egyptian Goddess lost the case even with the reduced burden of proof. But as we’ve seen with the current patent system, reduced burden of proof leads to more patents, more lawsuits, more money wasted, and more innovation lost.

Yeah, be prepared. I’m in IP mode for the next 10 weeks.

The Senate Judiciary Committee passed S. 3325, the Enforcement of Intellectual Property Act of 2008, a scary bill that will make the Justice Department a legal resource for media companies and copyright holders.

The law is the evolution of the PRO-IP Act, which the House passed in May, and the PIRATE Act in the Senate and remains just as one-sided to Big Content as before.  The Enforcement of Intellectual Property Act increases damages for infringement while adding an Intellectual Property Enforcement Coordinator to advise the president and oversee IP enforcement over various federal agencies.

The scariest aspect of this law is granting federal prosecutors the power to bring civil suits against copyright infringers.  This makes the Justice Department, normally in charge with protecting the U.S. and its citizens, will be protecting one industry’s obsolete business model in court, wasting taxpayer money and turning over any awards to those media companies.  What’s worse is if someone is falsely prosecuted, they cannot sue for legal fees like they can against non-government plaintiffs.

Several amendments were removed including raising penalties for circumventing DRM, but the worst still remain and will likely be passed by huge margins.  The reason: Big Copyright funds elections while consumers pay the price.

My many issues with copyrights and patents stem from them being used for reasons beyond their intention.  These government granted monopolies are meant to encourage people to create new works of arts and inventions.

This is why I’m confused by the European Union’s decision to extend copyrights for musicians by 45 years.  If musicians made music before this extension, that means the original copyright deal worked - artists were rewarded with 50 years of control over their work.  But now all those musicians get another 45 years and what does the rest of Europe get? A copyright system used for welfare.

Irish EU commissioner Charlie McCreevy didn’t hide the fact.

I am not talking about featured artists like Cliff Richard or Charles Aznavour. I am talking about the thousands of anonymous session musicians who contributed to sound recordings in the late fifties and sixties. They will no longer get airplay royalties from their recordings. But these royalties are often their sole pension.

It’s not the government’s job to retroactively create a pension system specific to one field. What about the airline workers loosing their agreed upon pensions? I don’t see governments stepping into make airlines pay these workers for every plane they helped run.

The irony is the Gowers Report on Intellectual Property conducted in the United Kingdom found that extending copyrights would be more harmful. The writer of the report, Andrew Gowers, later added that he thought copyrights should be lessened.

The United States had its own copyright laws extended in the Copyright Term Extension Act of 1998.