Lunch Talk: The Economic Foundations of Intellectual Property (@duke)

Nobel Laureate Professor Joseph Stiglitz of Columbia University presents the Sixth Annual Frey Lecture in Intellectual Property.




Update: The Stiglitz' approach to Intellectual Property is fundamentally flawed because he doesn't understand the difference between invention and innovation. He uses the terms interchangeably, without giving much thought to the critical distinction between a) coming up with an idea (invention), and b) making it work on a large scale (innovation). For example, he says that when granting a patent to Basmati rice, "the US patent office thought it was a great innovation." This is untrue, because the patent office only considers the novelty of idea, not its impact on the world. The vast majority of patents are totally useless because they cover novel ideas that fail miserably in the marketplace.

Stiglitz doesn't understand the difference between "knowing what" and "knowing how." Creating an invention that becomes a large-scale innovation is like winning a lottery: lots of futile tries by many people. Nevertheless, we don't force the winner to give up his reward because the winning numbers become public knowledge after the draw.

Stiglitz' example of Microsoft's monopoly power as an abuse of Intellectual Property is also wrong. Microsoft neither invented, nor patented DOS OS, Windows OS, Office, Browser, etc. On the contrary, they used other peoples' ideas (inventions) to implement the technology and gain monopoly market power.
Moreover, Microsoft's monopoly fell apart when new markets were created - Web search, smartphone, etc. Google and Apple prevailed over the Microsoft's monopoly because they found a way to create and protect their own IP. If Google made all aspects of its search algorithm public from the very beginning, Microsoft would be able to move into web search with ease. Luckily, that scenario didn't materialize because Google, as well as Apple, protected their know how.


lunchtalk, intellectual, property

Ripping off for fun and profit - 3

VBeat runs a story on 14 best copycat Internet services/apps in China. Definitely, there's a different understanding of innovation there.

Jan 22, 2012. VBeat -- People outside of China often wonder why the Chinese love to copy things. The answer is that it’s the way they’re taught to learn. Follow the teacher, recite books, and don’t challenge authority.

Not copying would almost represent a missed opportunity.

One trend we noticed is that the best clones are often created by very large Chinese tech companies with existing resources and money. It shows how tough the environment is for grassroots startups trying to compete against the big guys. It is also telling of the health of China’s startup eco-system — big companies can and will simply crush anything they see as a threat.

How is it possible to compete with this business model? Keeping technology secret seems to be the only way to succeed. In other words, globally we are back to the 17th century intellectual property system.

tags: business, model, patents, internet, service, intellectual, property

Top 10 pirated movies of all time.

The Hollywood Reporter has an article about Hollywood's key mistakes in defending SOPA. One of the mistakes is that the content industry has positioned itself as the enemy of innovation. The conflict about copyright is now framed as a Hollywood vs Silicon Valley, which the industry cannot win.

On piracy itself, here's how illegal downloads data looks like:

I'm surprised that the numbers are so small. For example, Avatar grossed $2.2B in sales worldwide. Even at a very generous estimate of lost revenue of $5 per download, the damage is about $100M - less than 5% of the total revenue. The software industry would consider this level of piracy as non-existent.

tags: content, innovation, intellectual, property, information, distribution, control

Lunch Talk: IP rules of the fashion industry (TED)

Copyright law's grip on film, music and software barely touches the fashion industry ... and fashion benefits in both innovation and sales, says Johanna Blakley. At TEDxUSC 2010, she talks about what all creative industries can learn from fashion's free culture.

Direct link.

tags: lunchtalk, intellectual, property, control

Apple is outsourcing patent trolling.

(Dec 10, 11. VBeat). In a clever deal that effectively gives Apple immunity from attack by the troll, Apple agreed to some cross-licensing deals that gave Digitude the ammunition for a heavy attack against Apple’s rivals. Digitude recently filed suit against RIM, HTC, LG, Motorola, Samsung, Sony, Amazon, and Nokia. It did so at the International Trade Commission, a body that can quickly bock the import of products deemed to infringe on patents. Moreover, it included four patents in its claim, two of which were owned by Apple earlier this year, before they were transferred to Digitude.

Finally, the industry is waking up to the fact that patents are not about protecting inventions. Rather, they function as a business asset for improving company's competitive position. It doesn't matter who is using the asset, as long as its purpose is preserved.

tags: patents, business, model, innovation, apple, deontic, intellectual, property

Lunchtalk: Intellectual Property rights, Howard Anawalt

Howard Anawalt discusses his new book Idea Rights. Idea Rights presents a concise and accurate view of United States intellectual property law for the interested general reader, for attorneys, and for classes that introduce or otherwise cover the material.

tags: lunchtalk, intellectual, property, law, 

The Brave New China.

(November 23, 2011. VBeat) - Smartphone sales in China for the third quarter of 2011 surpassed U.S. sales, making China the largest smartphone market by volume, reports Strategy Analytics.

The firm’s research found that smartphone shipments reached 23.9 million units in China during Q3, while the U.S. had 23.3 million units shipped.
Nokia leads China’s smartphone market with a share of 28 percent. HTC, on the other hand, leads the US market with 24 percent .

 It is important to note that China is entering a stage in its technological development when its scale  requires new solutions. That is, over the last thirty years, since the introduction of economic reforms, the country could reuse solutions developed elsewhere. Now, they will be increasingly encountering unsolved problems (see e.g. my earlier post about diabetes II in China.) There's no country on the planet that has experience in solving those problems on China's population scale of 1.3 billion people.

In view of that, I believe, over time China will adopt IP laws and enforcement practices similar to those of the US and Europe. The society will have to provide IP protection incentives to inventors and innovators who take on the new problems.

tags: trend, intellectual, property, scale, infrastructure, china

Open, as "with holes."

One of the biggest holes in the Open Innovation approach is its lack of a working Intellectual Property  model. For example, Google publishes its Android operating system as an Open Source project and mobile device manufacturers, such as HTC, Motorola, Samsung and others pick it up for free. But at the same time, the manufacturers are vulnerable to patent suits because Google does not indemnify them from patent infringement claims when they use Google's technology. Just a few days ago, ITC ruled that HTC infringes on two Apple patents and can be barred from exporting Android smartphones into the US. Similar suits are pending against Motorola and Samsung.

In contrast, Microsoft, which licenses its proprietary mobile OS to device manufacturers, provides a reasonable protection against such legal attacks. It's quite possible that for software developers the uncertainty surrounding Android's future becomes a factor in the decision about the go-to-market application platform. It could also become a barrier to the adoption of Android in the enterprise market.

At the same time, it's important to realize that in countries that don't enforce Intellectual Property rights all kinds of mobile devices can be put together at zero licensing cost. There's a whole cottage industry of youtube videos on how to run Android on iPhone. Further, you can freely buy one of those hybrid smartphones in China at a fraction of their US retail price.

tags: mobile, information, intellectual, property, business, model, control, innovation, technology, patents, google, apple, microsoft

The state of the net: no privacy, no security.

The Wall Street Journal reports:

Hackers in Europe and China successfully broke into computers at nearly 2,500 companies and government agencies over the last 18 months in a coordinated global attack that exposed vast amounts of personal and corporate secrets to theft, according to a computer-security company that discovered the breach.

...hackers gained access to a wide array of data at 2,411 companies, from credit-card transactions to intellectual property.

Note that Facebook has emerged as the number one risk to privacy and security. Our electronic immune system is way behind the new information-based lifestyle.



via CNet.

tags: control, security, problem, evolution, intellectual, property, integrity, information, computers, internet

A CNet video about hacker attacks on Google and other US companies

tags: video, security, information, cloud,  control

An estimate of patent costs

From an WSJ interview with a patent attorney:

...depending on the technology that's being patented, it can take anywhere from two to five years for a patent to issue. As far as costs, expect to spend anywhere from $10,000 to as high as $30,000 for highly complex technologies. Patentability searches account for up to a thousand of that, application fees can add up to another couple thousand, and the rest is attorney fees for patentability opinions, initial patent drafting, and [Patent and Trademark Office] action responses and appeals.

Given that about 1/3 of patent applications is granted and only 5% of patents are worth something, the "retail" price of a decent portfolio (20+ patents)  runs from $600K to $1.8M. This means that for most startups, unless a comprehensive invention and patent strategy is in place, filing patent applications is a crapshoot at best.

It is also a good indicator of the existence of an underserved market.

Dilemma of the Day

Economist Paul Romer:

So with ideas, you have this tension: You want high prices to motivate discovery, but you want low prices to achieve efficient widespread use.