The Stop Online Piracy Act (SOPA), a controversial bill before the House of Representatives aimed at combating “rogue websites,” isn’t just about criminal, foreign-based sites that break U.S. intellectual property laws with impunity. Few dispute that these criminal websites that profit from large-scale counterfeiting and copyright infringement are a public policy problem. SOPA’s provisions, however, extend beyond these criminal sites, and would potentially subject otherwise law-abiding Internet intermediaries to serious legal risks.

Before moving forward with rogue websites legislation, it’s crucial that lawmakers take a deep breath and appreciate the challenges at stake in legislating online intermediary liability, lest we endanger the Nozickian “utopia of utopias” that is today’s Internet. The unintended consequences of overbroad, carelessly drafted legislation in this space could be severe, particularly given the Internet’s incredible importance to the global economy, as my colleagues have explained on these pages (123456)

To understand why SOPA could be a game-changer for online service providers, it’s important to understand the simmering disagreement surrounding the Digital Millennium Copyright Act (DMCA) of 1998, which grants certain online service providers a safe harbor from liability for their users’ copyright infringing actions. In exchange for these protections, service providers must comply with the DMCA’s notice-and-takedown system, adopt a policy to terminate users who repeatedly infringe, and meet several other conditions. Service providers are only eligible for this safe harbor if they act to expeditiously remove infringing materials upon learning of them. Also ineligible for the safe harbor are online service providers who turn a blind eye to “red flags” of obvious infringement.

The DMCA does not, however, require providers to monitor their platforms for infringing content or design their services to facilitate monitoring. Courts have held that a DMCA-compliant service provider does not lose its safe harbor protection if it fails to act upon generalized knowledge that its service is used for many infringing activities, in addition to lawful ones, so long as the service provider does not induce or encourage users’ infringing activities.

Defenders of the DMCA safe harbor argue that it’s helped enable America’s Internet-based economy to flourish, allowing an array of web businesses built around lawful user-generated content — including YouTube, Facebook, and Twitter — to thrive without fear of copyright liability or burdensome monitoring mandates.

Conversely, some commentators, including UCLA’s Doug Lichtman, argue that the DMCA inefficiently tips the scales in favor of service providers, to the detriment of content creators — and, ultimately, consumer welfare. Pointing to a series of court rulings interpreting the safe harbor’s provisions, critics argue that the DMCA gives online intermediaries little incentive to do anything beyond the bare minimum to stop copyright infringement. Critics further allege that the safe harbor has been construed so broadly that it shields service providers that are deliberately indifferent to their users’ infringing activities, however rampant they may be.

What does SOPA have to do with all of this? Buried in the bill’s 78 pages are several provisions that run a very real risk of effectively sidestepping many of the protections conferred on online service providers by the DMCA safe harbor.

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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.]

I’ve written two articles on the Protect IP Act of 2011, introduced last week by Sen. Leahy (D-Vt.).

For CNET, I look at some of the key differences, better and worse, between Protect IP and its predecessor last year, known as COICA.

On Forbes this morning, I have a long meditation on what Protect IP says about the current state of the Internet content wars.  Copyright, patent, and trademark are under siege from digital technology, and for now at least are clearly losing the arms race.

The new bill isn’t exactly the nuclear option in the fight between the media industries and everyone else, but it does signal increased desperation. Continue reading →

The English language is public domain (the language itself, not everything said with it). So it’s worthless, right? No dollars change hands when people use it. Perhaps it could be made worth something if someone were to own it. The owner could charge a license fee to people who use English, making substantial revenue on this suddenly valuable language.

Congress can take works in the public domain and make intellectual property of them according to the Tenth Circuit Court of Appeals in a case that approved Congress “restoring” public domain works to copyrighted status. (The case is Golan v. Holder, and the Supreme Court has granted certiorari.)

But would we really be better off if the English language were given a dollar value through the mechanism of ownership and licensing? No. What is now a costless positive-externality machine would turn into a profit-center for one lucky owner. The society would not be better off, just that owner. If we had to pay for a language, we would regard that as a cost.

In a similar vein, Mike Masnick at TechDirt indulges the somewhat tongue-in-cheek observation that Microsoft costs the world economy $500 billion by accumulating to itself that would have gone to other things. It’s a sort of Broken Window fallacy for intellectual property: the idea that creating ownership of intellectual goods creates value. What is not seen when intellectual property is withheld from the public domain is the unpaid uses that might have been made of it.

Now, Microsoft has reaped wonderful benefits from its intellectual creations because it has bestowed wonderful benefits on societies across the globe. But might it have provided all these benefits for slightly less reward, leaving more money with consumers for their preferred uses?

This is all a way of challenging the mental habit of assuming that dollars are equal to value. In the area of intellectual property (whether or not protected by federal statutes), things that have no effect on the economy (because they’re in the public domain) may have huge value. Things privately owned because of intellectual property law may have less value than they should, even though their owners collect lots of money.

“On the whole, the results certainly seem to suggest that patent trolls with software patents do very much view the system as a lottery ticket, and they’re willing to use really weak patents to try to win that prize. That is not at all what the patent system is designed to do, but it’s how the incentives have been structured — and that seems like a pretty big problem that isn’t solved just by showing how many of these lawsuits fail. The amount of time and resources wasted on those lawsuits, as well as the number of companies who pay up without completing a lawsuit, suggest that there is still a major problem to be dealt with.”

So writes the always-thoughtful Mike Masnick at Techdirt.  He is referring here to a newly-published article by John R. Allison, Joshua Walker and Mark Lemley, released as a Stanford Law and Economics Olin Working Paper.  Mike has written frequently about patent trolls—companies that buy up patents from inventors and then make money by litigating or threatening to litigate against potential infringers—and never with much sympathy. Continue reading →

On the podcast this week, Timothy B. Lee, PhD candidate in computer science at Princeton University and fellow at Princeton’s Center for Information Technology Policy, discusses a variety of issues.  Lee parses new net neutrality nuances, addressing recent debate over prioritization of internet services.  He also discusses wireless spectrum policy, comparing and contrasting a strict property rights model to a commons one.  Lee concludes by weighing in on potential software patent reform, referencing Paul Allen’s wide-ranging patent-infringement lawsuits and the Oracle-Google tiff over Java patents.

Related Readings

Do check out the interview, and consider subscribing to the show on iTunes. Past guests have included Clay Shirky on cognitive surplus, Nick Carr on what the internet is doing to our brains, Gina Trapani and Anil Dash on crowdsourcing, James Grimmelman on online harassment and the Google Books case, Michael Geist on ACTA, Tom Hazlett on spectrum reform, and Tyler Cowen on just about everything.

So what are you waiting for? Subscribe!

I don’t have a great deal to add to coverage of last week’s big patent story, which concerned the filing of a complaint by Microsoft co-founder Paul Allen against major technology companies including Apple, Google, Facebook and Yahoo. Diane Searcey of The Wall Street Journal, Tom Krazit at CNET, and Mike Masnick on Techdirt pretty much lay out as much as is known so far.

But given the notoriety of the case and the scope of its claims (the Journal, or at least its headline writer, has declared an all-out “patent war”), it seems like a good opportunity to dispel some common myths about the patent system and its discontents.

And then I want to offer one completely unfounded theory about what is really going on that no one yet has suggested. Which is: Paul Allen is out to become the greatest champion that patent reform will ever know.

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Reading the 2002 edited volume, From 0 to 1: An Authoritative History of Modern Computing, I came across an interesting history of the first software patent—a business history, as opposed to a legal history. I hadn’t seen this anywhere before, so I’ll recount it here.

Luanne Johnson, president (now co-chair) of the Software History Center, tells the story of Martin A. Goetz at Applied Data Research (ADR), a Princeton, New Jersey company founded in 1959 to sell computer programming services.

In 1964, computer manufacturer RCA approached ADR about writing a flowcharting program that RCA would provide to users of its RCA 501 computer at no cost. ADR designed and wrote the program, AUTOFLOW, and offered it to RCA for $25,000. But RCA didn’t want it at that price. Marty Goetz then went to work on a different approach to recouping the $10,000 his company had laid out to write AUTOFLOW.

There were only hundreds of companies using the RCA 501, to whom he might have sold directly. So, seeing a larger market among users of the IBM 1401, Goetz and his colleagues re-wrote AUTOFLOW for that computer. They ultimately produced superior flowcharting software to what IBM offered its customers. AUTOFLOW was capable of flowcharting the logical sequence of existing software, easing the design of software to compliment what was already in use on IBM machines. Writes Johnson: Continue reading →

I dashed off a quick analysis of the Bilski decision for CNET yesterday (see “Supreme Court Hedges on Business Method Patents”), a follow-up to a piece I wrote for The Big Money when the case was argued last fall.  (See “Not with my Digital Economy, You Don’t.”)

The decision was a surprise for me.  I had fully expected the Court to reject outright the experiment in granting patents to paper-and-pencil business methods launched by the Federal Circuit in 1998 with the State Street decision.  Especially since the Federal Circuit itself, in its rejection of Bilski’s application, had all but dismissed State Street as the disaster most businesses—even businesses who have benefited from business method patents–know it to be.

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I’m quoted briefly in a story today in E-Commerce Times (see “Apple’s Patent Attack:  This Too May be Overhyped” by Erika Morphy) about the patent lawsuit filed this week by Apple against rival mobile device maker HTC.

Apple, of course, produces the iPhone, while HTC makes Google’s Nexus One and other devices that run on Google’s Android operating system.

So right from the start this case looks less like a simple patent dispute and more like a warning shot over Google’s bow.  The two companies are increasingly becoming rivals.  In August of last year, Google CEO Eric Schmidt resigned from Apple’s board.  Apple CEO Steve Jobs wrote at the time, “Unfortunately, as Google enters more of Apple’s core businesses, with Android and now Chrome OS, Eric’s effectiveness as an Apple Board member will be significantly diminished….” Continue reading →