July 2011

The Supreme Court’s 6-3 decision in Sorrell v. IMS Health has been heralded as a major victory for commercial free speech rights and raised serious questions about how to reconcile privacy regulations with the First Amendment. The high Court struck down a Vermont law requiring that doctors opt in before drug companies could use data about their prescription patterns to market (generally name-brand) drugs to them. But what does the Court’s decision really mean for the regulation of advertising, marketing, and data flows across the economy? Has free speech doctrine fundamentally changed? Will existing privacy laws be subject to new legal challenges? How might the decision affect the ongoing debate about privacy regulation in Congress and at the FTC? Continue reading →

Copyrights and patents differ from tangible property in fundamental ways. Economically speaking, copyrights and patents are not rivalrous in consumption; whereas all the world can sing the same beautiful song, for instance, only one person can swallow a cool gulp of iced tea. Legally speaking, copyrights and patents exist only thanks to the express terms of the U.S. Constitution and various statutory enactments. In contrast, we enjoy tangible property thanks to common law, customary practices, and nature itself. Even birds recognize property rights in nests. They do not, however, copyright their songs.

Those represent but some of the reasons I have argued that we should call copyright an intellectual privilege, reserving property for things that deserve the label. Another, related reason: Calling copyright property risks eroding that valuable service mark.

Property as a service mark, like FedEx or Hooters? Yes. Thanks to long use, property has come to represent a distinct set of legal relations, including hard and fast rules relating to exclusion, use, alienation, and so forth. Copyright embodies those characteristics imperfectly, if at all. To call it intellectual property risks confusing consumers of legal services—citizens, attorneys, academics, judges, and lawmakers—about the nature of copyright. Worse yet, it confuses them about the nature of property. The property service mark suffers not merely dilution from copyright’s infringing use, but tarnishment, too.

As proof of how copyright threatens to erode property, consider Ben Depooter, Fair Trespass, 111 Col. L. Rev. 1090 (2011). From the abstract:

Trespass law is commonly presented as a relatively straightforward doctrine that protects landowners against intrusions by opportunistic trespassers. . . . This Essay . . . develops a new doctrinal framework for determining the limits of a property owner’s right to exclude. Adopting the doctrine of fair use from copyright law, the Essay introduces the concept of “fair trespass” to property law doctrine. When deciding trespass disputes, courts should evaluate the following factors: (1) the nature and character of the trespass; (2) the nature of the protected property; (3) the amount and substantiality of the trespass; and (4) the impact of the trespass on the owner’s property interest. . . . [T]his novel doctrine more carefully weighs the interests of society in access against the interests of property owners in exclusion.

Although I do not agree with every aspect of Prof. Depooter’s doctrinal analysis, he correctly observes that trespass law includes some fuzzy bits. Nor do I complain about his overall form of argument. It is not a tack I would take, but it was near-inevitable that some legal scholar would eventually argue back from copyright to claim that real property, too, should fall prey to a multi-factor, fact-intensive “fair use” defense. I merely take this opportunity to remind fellow friends of liberty that they can expect more of the same—and more erosion of the property service mark—if they fail to recognize copyrights and patents as no more than intellectual privileges.

[Crossposted at Agoraphilia, Technology Liberation Front, and Intellectual Privilege.]

By Larry Downes & Geoffrey A. Manne
Published in BNA’s  Daily Report for Executives

The FCC published in June its annual report on the state of competition in the mobile services marketplace. Under ordinary circumstances, this 300-plus page tome would sit quietly on the shelf, since, like last year’s report, it ‘‘makes no formal finding as to whether there is, or is not, effective competition in the industry.’’

But these are not ordinary circumstances. Thanks to innovations including new smartphones and tablet computers, application (app) stores and the mania for games such as ‘‘Angry Birds,’’ the mobile industry is perhaps the only sector of the economy where consumer demand is growing explosively.

Meanwhile, the pending merger between AT&T and T-Mobile USA, valued at more than $39 billion, has the potential to accelerate development of the mobile ecosystem. All eyes, including many in Congress, are on the FCC and the Department of Justice. Their review of the deal could take the rest of the year. So the FCC’s refusal to make a definitive finding on the competitive state of the industry has left analysts poring through the report, reading the tea leaves for clues as to how the FCC will evaluate the proposed merger.

Make no mistake: this is some seriously expensive tea. If the deal is rejected, AT&T is reported to have agreed to pay T-Mobile $3 billion in cash for its troubles. Some competitors, notably Sprint, have declared full-scale war, marshaling an army of interest groups and friendly journalists.

But the deal makes good economic sense for consumers. Most important, T-Mobile’s spectrum assets will allow AT&T to roll out a second national 4G LTE (longterm evolution) network to compete with Verizon’s, and expand service to rural customers. (Currently, only 38 percent of rural customers have three or more choices for mobile broadband.)

More to the point, the government has no legal basis for turning down the deal based on its antitrust review. Under the law, the FCC must approve AT&T’s bid to buy T-Mobile USA unless the agency can prove the transaction is not ‘‘in the public interest.’’ While the FCC’s public interest standard is famously undefined, the agency typically balances the benefits of the deal against potential harm to consumers. If the benefits outweigh the harms, the Commission must approve. Continue reading →

On the podcast this week, Tim Harford, economist and senior columnist for the Financial Times, discusses his new book, Adapt: Why Success Starts With Failure. He argues that people and organizations have a poor record of getting things right the first time; therefore, the evolutionary process of trial and error is a difficult yet necessary process needed to solve problems in our complex world. Harford emphasizes the importance of embracing failure in a society focused on perfection. According to Harford, one can implement this process by trying different things in small doses and developing the ability to distinguish success and failures while experimenting. A design with failure in mind, according to Harford, is a design capable of adaptation.

Related Links

  • Adapt: Why Success Starts With Failure
  • “Tim Harford on failure”, Washington Post
  • “No, statistics are not silly, but their users . . .”, By Harford
  • To keep the conversation around this episode in one place, we’d like to ask you to comment at the webpage for this episode on Surprisingly Free. Also, why not subscribe to the podcast on iTunes?

    Two data points in the news over the past 24 hours to consider:

    • A new report on “Smartphone Adoption & Usage” by the Pew Internet Project finds that “one third of American adults – 35% – own smartphones” and that of that group “some 87% of smartphone owners access the Internet or email on their handheld” and “25% of smartphone owners say that they mostly go online using their phone, rather than with a computer.”
    • According to the Wall Street Journal, the “Average iPhone Owner Will Download 83 Apps This Year.” That’s up from an average of 51 apps downloaded in 2010. (At first I was astonished when I read that, but then realized that I’ve probably downloaded an equal number of apps myself, albeit on an Android-based device.)

    As I explain in my latest Forbes column, facts like these help us understand “How iPhones And Androids Ushered In A Smartphone Pricing Revolution.” That is, major wireless carriers are in the process of migrating from flat-rate, “all-you-can-eat” wireless data plans to usage-based plans. The reason is simple economics: data demand is exploding faster than data supply can keep up.

    “It’s been four years since the introduction of the iPhone and rival devices that run Google’s Android software,” notes Cecilia Kang of The Washington Post. “In that time, the devices have turned much of America into an always-on, Internet-on-the-go society.” Indeed, but it’s not just the iPhone and Android smartphones. It’s all those tablets that have just come online over the past year, too. We are witnessing a tectonic shift in how humans consume media and information, and we are witnessing this revolution unfold over a very short time frame. Continue reading →

    Over on his Google+ page, cyber-guru Andrew McLaughlin posted a bit of a rant about libertarians and Net neutrality arguing, among other things, that “the pro-freedom position is to enforce net neutrality.” Needless to say, I disagree and posted a long comment explaining why and trying to help him and others on the Left understand the way libertarians generally look at this issue. For what it’s worth, I thought I would just repost my response to him here:

    Andrew… I’m happy, as always, to engage in friendly debate with you about this, although I suspect from the tone of some of the others here that nothing I will say will convince them that opposition to Net neutrality regulation can be based on anything other than pure corporate whoring!

    I’m always mystified by the highly selective nature of this rhetorical device when employed by some on the Left against libertarians. After all, as Tim Lee already alluded to in his comments above, we never seem to hear our Lefty friends trot out those arguments when they agree with us. For example, Berin Szoka and I filed an amicus brief in the Supreme Court last year in the BROWN v. EMA video game case along with Lee Tien and Cindy Cohn of EFF. Why is it that I did not hear one peep from any Lefties about my obvious corporate whoring in that matter! I mean, clearly, there’s no possible way that a libertarian could support First Amendment rights. I must have just been in it for video game industry money, right?

    OK, I’m being snarky here. And I know this is not your position because I’ve known you a long time and know that you do not adopt such tactics even when we do, on occasion, disagree heatedly over a major policy issue.  But, even if I am wasting my breath, let me just say this to others: We libertarians in the academic and think tank world aren’t exactly living “Lifestyles of the Rich and Famous.” If we all just in it for the money than I can tell you that we are doing a tremendously shitty job at it! (In fact, most libertarian think tanks or organizations only have something like 5 to 10% corporate funding. The organization I work for has even less.) Seriously folks, we libertarians believe in our ideas and fight for them with the same passion that you fight for yours because of a heart-felt belief in the inherent rightness of our core principles. Continue reading →

    In today’s Washington Post, Senators Lieberman, Collins and Carper [had an op-ed](http://www.washingtonpost.com/opinions/a-gold-standard-in-cyber-defense/2011/07/01/gIQAjsZk2H_story.html) calling for comprehensive cybersecurity legislation. If we don’t pass such legislation soon, they say, “The alternative could be a digital Pearl Harbor — and another day of infamy.”

    [Last time I checked](http://techliberation.com/2011/05/02/langevin-panetta-is-cyberdoom-certified/), Pearl Harbor left over two thousand persons dead and pushed the United States into a world war. There is no evidence that a cyber-attack of comparable effect is possible. Yet as [I write in TIME.com’s Techland](http://techland.time.com/2011/07/08/is-cyberwar-real-or-just-hype/), war rhetoric allows government to pursue avenues that might otherwise be closed:

    >The problem with the war metaphor is that treating a cyber attack as an act of war, rather than a crime, invites a different governmental response. In the offline world, vandalism, theft, and even international espionage are treated as crimes. When you detect them, you call law enforcement, who investigate and prosecute and, most importantly, do so while respecting your civil liberties. In war, these niceties can go out the window.

    >War changes the options available to government, says noted security expert Bruce Schneier. Things you would never agree to in peacetime you agree to in wartime. Referring to the warrantless wiretapping of Americans that AT&T allowed the NSA to conduct after 9/11, Schneier has said, “In peacetime if the government goes to AT&T and says, ‘Hey, we want to eavesdrop on everybody,’ AT&T says, ‘Stop, where’s your warrant?’ In wartime, AT&T says, ‘Use that closet over there, lock the door, and just put a do not disturb sign on it.’”

    Check out the [whole article](http://techland.time.com/2011/07/08/is-cyberwar-real-or-just-hype/) for more outrage.

    Of all the shockingly naive and shamelessly self-serving editorials I’ve read by businesspeople in recent years, today’s Wall Street Journal oped by Netflix general counsel David Hyman really takes the cake. It’s an implicit plea to policymakers for broadband price controls. Hyman doesn’t like the idea of broadband operators potentially pricing bandwidth according to usage /demand and he wants action taken to stop it. Of course, why wouldn’t he say that? It’s in Netflix’s best interest to ensure that somebody else besides them picks up the tab for increased broadband consumption!

    But Hyman tries to pull a fast one on the reader and suggest that scarcity is an economic illusion and that any effort by broadband operators to migrate to usage-based pricing schemes is simply a nefarious, anti-consumer plot that must be foiled. “Consumers and regulators need to take heed of what is happening and avoid winding up like the proverbial frog in a pot of boiling water,” Hyman warns. “It’s time to jump before it’s too late.”

    Rubbish! The only thing policymakers need to do is avoid myopic, misguided advice like Hyman’s, which isn’t based on one iota of economic theory or evidence.

    Continue reading →

    Vivek Wadhwa, who is affiliated with Harvard Law School and is director of research at Duke University’s Center for Entrepreneurship, has a terrific column in today’s Washington Post warning of the dangers of government trying to micromanage high-tech innovation and the Digital Economy from above.

    For reasons I have never been able to understand, the Washington Post uses different headlines for its online opeds versus its print edition. That’s a shame, because while I like the online title of Wadhwa’s essay, “Uncle Sam’s Choke-Hold on Innovation,” the title in the print edition is better: “Google, Twitter and the Best Regulator.” By “best regulator” Wadhwa means the marketplace, and this is a point we have hammered on here at the TLF relentlessly: Contrary to what some critics suggest, the best regulator of “market power” is the market itself because of the way it punishes firms that get lethargic, anti-innovative, or just plain cocky. Wadhwa notes:

    The technology sector moves so quickly that when a company becomes obsessed with defending and abusing its dominant market position, countervailing forces cause it to get left behind. Consider: The FTC spent years investigating IBM and Microsoft’s anti-competitive practices, yet it wasn’t government that saved the day; their monopolies became irrelevant because both companies could not keep pace with rapid changes in technology — changes the rest of the industry embraced. The personal-computer revolution did IBM in; Microsoft’s Waterloo was the Internet. This — not punishment from Uncle Sam — is the real threat to Google and Twitter if they behave as IBM and Microsoft did in their heydays.

    Continue reading →

    NPR science correspondent Shankar Vedantam had a great spot on NPR’s Morning Edition today about the disputes among social scientists over the impact of violent video games on kids. [“It’s A Duel: How Do Violent Video Games Affect Kids?”] You won’t be surprised to hear I wholeheartedly agree with Texas A&M psychologist Chris Ferguson, who noted in the spot:

    Ferguson says it’s easy to think senseless video game violence can lead to senseless violence in the real world. But he says that’s mixing up two separate things.  “Many of the games do have morally objectionable material and I think that is where a lot of the debate on this issue went off the rails,” he said. “We kind of mistook our moral concerns about some of these video games, which are very valid — I find many of the games to be morally objectionable — and then assumed that what is morally objectionable is harmful.”

    I’ve written about Ferguson’s work and these issues more generally many times over through the years here at the TLF. Here are some of the most relevant essays:

    In these essays, I’ve tried to make a couple of key points about the social science literature on “media effects” theory: Continue reading →