Copyright, patents and innovation

In 2010 I will likely do some presentations regarding Intellectual Property (IP), innovation and entrepreneurship via Syntens, as part of a program thinking, speaking and writing about innovation and entrepreneurship. In the past days, a memo leaked out from the ACTA. Read the readable reflection by Corey Doctorow here. Read another clear response on PCworld

If we look at the universal declaration of human rights, what the ACTA proposes is or could be violating the following articles:

Article 11: Shutting you off because of alleged illegal downloads – innocent of a crime until proven guilty

Everyone charged with a penal offence has the right to be presumed innocent until proved guilty according to law in a public trial at which he has had all the guarantees necessary for his defence.

Article 12: Privacy

No one shall be subjected to arbitrary interference with his privacy, family, home or correspondence, nor to attacks upon his honour and reputation. Everyone has the right to the protection of the law against such interference or attacks.

Article 21: denial of a service – being shut off from the internet

Everyone has the right of equal access to public service in his country.

So time to write some.

Copyright, Patents and innovation

Copyright and patents are often sold to be “stimulating innovation”. Via both patents and copyright, the publisher (not always the creator or inventor) protects their investments in both R&D, marketing and distribution by the right to sue anyone who issues copies of their work, or use the results of their research without paying for it. The other side of rights and laws regarding things created is where “everyone has the right freely to participate in the cultural life of the community, to enjoy the arts and to share in scientific advancement and its benefits”.

There are counter voices regarding IP and protection via patents as well. Here is an example from Australia, proposing to unlock IP. Another example is this article about the findings of a student simulating an online game of the patent system, PatentSim. A quote form the press release: “Their results suggest that a patent system underperforms a “commons,” in which no patent protection is available, on several important measures.”

I  believe the following:

  1. It is important to protect your investment when you create something new of value and you should get rewarded when it becomes a success
  2. The copyright- and patent system are valuable to protect your investment, but do NOT stimulate innovation
  3. Innovation is an iterative process based on the evolution of ideas by individual people. When you withhold key elements from innovators by any means of exclusivity, you deliberately obstruct and slow down that evolution.
  4. Patents and closed source development can become the death of the thing they to protect

So let’s take a look at the different aspects first.

1: Protecting investments

To research, develop, make a product market ready and do marketing, costs money. A lot of money. A company or a private inventor / creator is less willing to invest that money if their investment is not protected. Hence: patents. A patent is one of the ways to protect an innovative or new way to utilize something or a combination of things that might have been there already. As it is stated in Wikipedia: “any new and useful process, machine, article of manufacture, or composition of matter, or any new and useful improvement thereof”.

With a patent, you can license other parties to use your invention in return for their money. Depending on the license model, this can be i.e. a lump-sum or a price per manufactured or sold product.

2: Type of investments by companies – in the old model

Let’s take a pharmaceutical company, or a technology-company. To research and create new products, you need to create the machines first to create and research those new products. These machines are custom built and can combine a lot of very specific specializations. Elements of chemistry, electronics or physics only a small group of people know about. Prices can run up into the millions fast.

Then there is the marketing and lobbying. An invention is worthless unless you can sell it to someone else. Whether it be consumers or other companies. In some cases companies spend thousands of euro’s to pamper their potential buyers with exclusive diners, exclusive guests, exclusieve speakers and exclusive artists. People, foods and things you would normally would have to make a big effort for to find, meet, use or eat.

3: Type of investments by private people

The investments private inventors make are on a smaller scale, but comparable: sometimes inventors dedicate almost everything to what they create. Taking a second mortgage on thier house, getting deeper into debts, buying equipment or goods costing a fortune without a real guarantee that their end result will be sold or marketed ever.

4: Stimulating innovation? Blocking development by patents

Until now, everything seems picture perfect. Someone invests a lot of money, arranges copyright and / or patents and in the end, hopefully gets rewarded for their efforts.

There is another side to this game as well. Companies wage what I call “invisible wars”. These wars are about maintaining their market position by blocking other companies from entering a specific market via a specific solution. It works like this:

  1. You think up: “any new and useful process, machine, article of manufacture, or composition of matter, or any new and useful improvement thereof”
  2. You patent it.
  3. You can then block any other manufacturer from using your patents and thus prevent them from speeding up their development and pass you by at some time.

Mind you that when you register a patent, you do not necessarily have to execute the invention that you protect.

There are patents regarding medical / chemical compounds which currently halt specific developments in medicine regarding . And where human genetic data itself regarding the development of certain diseases is patented and thus claimed exclusively by one or more parties as the “discoverers”. ipmall.info/hosted_resources/crs/RL33717_081104.pdf

Patents represent money, power, potential market-ownership and leverage as well.

5: Copyright

When you produce something — a song, a story, an article, a movie, whatever — in many European countries you are automatically the copyright owner without having to register it with an official office. This copyright grants you – as the creator – the right to claim your rights related to that copyright when your work is being used, copied, broadcasted or sold. Whether this is a part of the revenue, the claim of ownership when your work is plagiarized or the power to have your work withdrawn from the public space when unrightfully used by another party.

6: Who are the creators and who are the owners? Working for a company

In most – if not all – industrial countries, when you work for a company, everything you produce within that company during working hours is owned by your employer. You owe no copyright to your produced work. In some cases, when you are employed AND you develop something new at home for that company, your company might claim that body of work as well as being theirs – even though they technically did not pay you for developing it.

There is a good reason for this from an economical point of view: when you are the copyright owner AND you create something of value for your company AND you leave that company, you can cause a great deal of trouble for that company. To deal with the shares of each of the people that worked on the development of a specific part of a product is a lot of administrative work. How big is your share? How important is your solution? What measurements do you take? Is your work really original at all in the first place? Legal and practical issues solved by removing your claim on copyright as an employee.

7: Creators and owners: the creative industry

Say you are a writer, a graphic designer, a computer programmer, a musician. When you are working as a independent agent, you are legally the owner of the copyright. It does not matter if you got payed for creating that work or not. (The major exception on this is where your work was just the execution of explicitly stated instructions: your hands doing the work, but the brain of someone else doing the thinking.) The only way to give up / hand over your copyright is when you sign a contract where you hand over that copyright to another person. When a client wants the copyright over that specific body of work, they usually buy that right from the creator.

Something interesting happens when you start working under management. Like a record company or a book publisher. To protect their investments in you — and the financial risks they take to develop you into a money maker — in most cases you hand over your copyright by contract. Where you still are an independent agent, all the work you create for that agent / publisher will be theirs. In return you get a percentage over each sold item, including the revenue from deals with other publishers, selling your work in other countries.

Maybe one of the best known cases in the record industry regarding this is the case of Prince / the Symbol. Read a selection of that and other cases here.

When your copyright is owned by a publisher, there is usually a contract stating for how long. For instance: in years or the amount of albums produced. What record labels more and more developed into are money machines with shareholders and stocks, selling the work of their artists and gaining financial momentum by the money they can take from selling or swapping stocks for the current exchange price, as the industry proved to be worthwile and artists like The Beatles proved in the sixties by selling millions of records.

Interestingly enough, people from the same industry that want you to pay for every song you buy introduced Elvis Presley and other Caucasian singers to cannibalize the new market of songs written by African-Americans, killing the possible audiences those artists could have build. So the hands that try to guide us are not free from blood themselves. It is like the priest fucking all the choir boys telling you to behave like a good person in the eyes of the all mighty god.

What the music industry did for many artists was this: once you had a breakthrough record, the best investment for a label was and is for you to repeat the factors that made you a success. More of the same. Bands like RadioHead who wanted and needed more freedom than that, broke for that reason and went other ways.

When you look at the work made for sole commercial purposes, most is mediocre rubbish without any character or content. Easy listening bullshit triggering your emotions and leaving hardly any impression on your live after the craze.

8: The protection of copyright

When we talk about the creative industry, we talk about a limited set of publishers who dominate most of the market. They are either created by buying up small labels and placing them all under one umbrella, or by older and newer publishers gaining more and more foothold over the long run of decades.

When you contract or create an artist, you start selling that artist. You spend money into marketing and sales. Also, you cover the costs of lesser successful artists with the revenues from your top sellers. It is a model currently used in book-publishing, the film- and the music industry.

So when you use their copy-righted work and pirate it (copy or play it to an audience without paying for the rights) to create new value for your own benefits you are not paying for duplicating and distributing something that someone else has payed a price for to create it.

These copies introduces “potential loss”. Instead of owning a pirated copy or hearing the music for free, you could have payed for that work and thus created more Return On Investment for the publisher.

9: Why the copyright lobby is so keen on getting more power

Let’s do some simple math. Let’s suppose that for each each publkished work, at least 10 copies are made and spread. And let’s say that each copy has a profit margin of 1 euro. This means that you as a company are missing a potential revenue that is at least twice, four or six times as big as it is now – depending on how many of those owners of rogue copies actually uses that copy.

When the gained revenue is several million euro’s and just a fraction of what could have been gained, we are talking about a lot of revenue not made. If I were the accountant of your company, I would be very pissed off. In a sense, these pirates are stealing your money. When your company is not the only publisher with that problem, we can start a united lobby as we are all hurt by these damned copyright pirates.

10: Why the copyright lobby would love to be in your houseand on every machine you own

Imagine that you can control every copy made of the work that you – as the copyright owner – have published. Each copy played by any individual in whatever situation can be tracked. In other words: when you press play on your iPod, I – or a representative – will get notified.

This notification can linked to the following items:

  1. Tracking and tracing of the popularity of an artist: do we need to invest more in this one? Will we drop him or her? Do we need to do more marketing? Can we see the results of that marketing of that artist back in the use of the song?
  2. How many copies of a copyrighted body of work are in use? Are they all payed for? How much money is still to be collected?
  3. How can we extend our current revenue model? “Pay per song?” “Pay per page?”
  4. A better and more just payment to the individual artist

11: Where the copyright lobby currently fails and conciously overlook

The copyright lobby has always been guessing what is going on. They have no clue regarding the exact amount of copies being spread, neither who is most popular, who should get most of the money based on taxes on materials you can use to make copies.

This makes it really hard to create a fair system of payment. The only hard figures they have are coming from sales numbers, playlists from radio and television and registrations from use of copyrighted materials in movies, documentaries and other creative works using the creations of other artists. Based on these lists, they guestimate how much each artist should get from this big bag of money they collect.

The most suspect in this whole model are the taxes they claim on machines and materials you can make copies with.  How do you monitor which book or article has been copied with the copy-machine? And how do you monitor what content of which artist has been put on a CD-ROM, DVD, hard drive or memory stick? It is impossible unless you can generate lists from those content carriers and report those lists back to the Copyright guardians who were raised originally to assure the people who created that content fair payment based on the use and distribution of their work.

The distribution and promotion of many artists is done by people. Because they LOVE that work. People who like the artist are at some point in time moved to buy the official copy as they like to have a real copy or want to support the artist. When the promotion of produced bullshit like “the next Britney Spears” comes to a halt, you see the effects of the peer to peer promotion. Unknown artists suddenly rise in the charts “out of nowhere” as happened with “Van Halen” in the 1980 in Holland.

12: A possible and not so unlikely scenario

It is not so hard to create software that tracks everything yo do and copy and send that to a central database. Each machine as a specific ID baked into the hardware. So let’s assume there is no privacy law, or that law can be stretched. What could you do using the current systems? This is one possible scenario:

  1. Have a law implemented that states that each intelligent machine owned by a person has to be registered on a personal level
  2. Link each person to a machine via i.e. their Social Fiscal Number.
  3. Only allow software for the playback of content that is approved by the copyright lobby.
  4. Have a punishment system (i.e. based on warnings and fines) when you use software which is not approved.
  5. Trace all actions happening on that machine regarding:
    1. Making a copy of a file from any source to a storage medium
    2. Playing a song, a video, interactive content or reading material
  6. Report these actions to a tax-office or the Copyright Lobbyist
  7. Automatically bill micro-payments for all viewed content, based on a fixed fee or a fee per artist.
  8. Pay each artist according to the tracking and tracing data collected in the central system.

From the perspective of “paying each artist what they deserve” this system would be quite effective. All tracking and tracing is automatically. You only pay for the content you really use and need. Songs and other content could be downloaded for “free” or for a reduced price. Everyone is happy.

Amazon is already implementing point #5 of this in the Kindle. Read this from Amazon.com

Information Received. The Device Software will provide Amazon with data about your Device and its interaction with the Service (such as available memory, up-time, log files and signal strength) and information related to the content on your Device and your use of it (such as automatic bookmarking of the last page read and content deletions from the Device). Annotations, bookmarks, notes, highlights, or similar markings you make in your Device and other information you provide may be stored on servers in the United States. Information we receive is subject to the Amazon.com Privacy Notice.

13: The importance of privacy laws

The trade in you make is this: you lose your privacy as an individual. Big brother is literally watching you and all of your actions on all of your smart machines. Secondarely to pay the creators of that content and primary to satisfy the publishers of that content as their revenue model is solid and all content used is really paid for.

Where the above scenario will take a lot of time to implement, parts are already tried or in the making.

Privacy laws are there for many reasons, but mainly so that organizations with great power can not abuse that power by interfering in your personal and private live. Privacy laws have never been originally invented by bodies of power, whether they are companies or governments. Privacy laws in many cases hinder those bodies as they allow criminals and pirates to prepare and do their thing and get away with things as some information and evidence can not be used in court.

The right for privacy is the right gained by the people. It is our right. It is a very important right. It protects us from the abuse of power by bodies stronger than we.

14: The importance of bootlegging and free content for the creative industry

Imagine first a world where all content is free and available. When you want to learn about a specific topic, you simply search for it and read the texts, watch the videos, listen to the music or the voice recordings. In one day you can travel through the musical history of Turkey, learn all there is about the Taj Mahal, see how Leonardo Da Vinci painted each next stroke of paint to create the Mona Lisa.

If your motivation and hunger for knowledge is big enough you can become and expert on any topic – taken that you also put things in practice and have the means to do that.

If you look at film-makers, musicians and other artists, ALL of their work is based on artists that created things before them. And the more inspirational sources are available, the richer these inspirations will be.

The same goes for science. When I can share my research-results with my peers anywhere on the world, these other people can help me find new solutions based on their research and discoveries. When I get the feedback it accelerate my work as wel as my work will accelerate the work of others.

The moment I start to close these sources, I close the oppertunities to find solutions already present in the world. I slow down development. I kill processes of creation that could have taken place otherwise.

15: The other side of copyright and patents

Right now, there are libraries and storage places cramped with books, paintings, recordings of TV shows, movies and other material that is simply rotting away. It is rotting away because it can not be monatized, presented or distributed for one reason or another. The art we are seeing and the books we have access to is less than 5% of what is in public domain with musea, banks, libraries, storage spaces of publishers and other owners of that art, or the art that is published online by the makers themselves.

A lot of solutions already worked out in patents and usable now to solve one or another problem is doing a similar thing.

As discussed before, the publishers and owners of the copyrights of artists are not willing to take risks once an artist has been proven successful performing one or more specific tricks: jumping through burning hoops and swallowing daggers. So they will train those artists to be one trick ponies and – in some cases – force them to keep on performing that one trick until their contract ends.

This kills creativity in another way. Talented artists in this system are limited in their development, get bored, frustrated and sometimes even depressed as they hate that kind of life repeating the same trick over and over like a broken record.

It is not unlikely that we have a number of unused solutions to generate energy out of other sources than the ones we use now: which are simply closed away in patents. Medicine to slow down the effects of AIDS and help against polio and malaria can be produced for low costs and spread in the countries where people are suffering and dying for nothing as the cure is simply a matter of chemical compounds you can produce in a factory for a few cents per pill.

16: Why copyright and patents do NOT stimulate creativity

  1. For most copyright- and patent owners the main reason is to protect their business and prevent others from using that material
  2. By tagging it with a price and by controlling the distribution and use copyrighted and patented material becomes exclusive for those who can pay for it
  3. All creative material produced comes from slapping other stuff together, invented by other people in the past.
  4. By denying access to that content, or making that content more exclusive by limited distribution means, means that you deny creative people access to inspirational material that could be the seed to an entire new creative road and entire new business.

17: The alternative scenarios – a start

To look at the creative business, you want both to stimulate it, have it flourish, generate new ideas and new solutions the moment we need them. To assure that the people creating things will be able to eat and have a living, you need a business model to exploit the results of their work.

You can not stop piracy unless you monitor the exact actions of each and every individual. But with that you create a world that is close to an absolute prison where all your actions and movements are observed and scrutinized.

You can not block the means of distribution used for piracy to protect your copyrights and patents because with that you will kill other industries or increase their overhead: creating gains on your side but a lot of losses in other businesses.

Copyright and Patents are not the holy grail. They are not the one and only God or Solution.

18: Creating value

In the end, each and every new invention and song creates value. You see it in advertisement: how crappy commercials with amateurs pretending to play roles turned into works of art where highly talented people are allowed to show their talent.

Discouple the artist from the commercial platform and his work will soon become masturbatory pieces of work with less and less relevance for the people around him or her.

19: The alternative scenarios – old school versus older school and flip to new school

When you look pharmaceuticals, manufacturers of goods and technologies, they all started from the same basis: solving a problem. Whether the problem as a disease, the need for a better and more effective means of transportation, growing crops for a larger group of people or a tool to do your work more properly.

For those problem solvers that became succesfull, they had to find ways to manufacture and mass produce their solutions. With that came investments and with that success came copycats who sometimes were completely stupid regarding innovation, but very smart regarding how to sell the products and close deals that excluded the other parties either by contract or pricing.

In this quite aggressive eco-system secrecy and protection are key. If I have something you have not, I might win this race.

This, however, has nothing to do with innovation and all with war and milking a concept until it is dry.

20: Creative people

We have looked at the business side until now.

When you look at the movements of creative people, this is a common cycle:

  1. Join a group or company that allows you to do the things you like
  2. Build a portfolio of successes
  3. Evolve and grow and build more ambitious solutions
  4. Expand your portfolio of successes
  5. Bail out and maybe even do something completely different when:
    1. You get bored by what you are doing
    2. The environment gets boring (usually because some bookkeeper type takes over and starts to put things as a priority which are irrelevant for your creative process)
    3. The environment becomes hostile for creativity and creatives
  6. Stay a bit longer:
    1. When your contract forces you and you have no way out but fight
    2. You earn so much money that you get lazy in finding new challenges
    3. The company or anvironment keeps stimulating you
  7. Crash and burn (depression, burn out)
    1. When the environment is hostile and you see no way out
    2. When you have no way out and are so frustrated and bored out of your mind that it will kill you
    3. When you feel obliged to your environment or company and work without end until your body gives up on you: one way or another

21: Money making and the new model

For most creative and innovative money making is important but secondary. Money making is important because it generates new possibilities, more options, buys better equipment and so on. The most important for creative people, however, is to do someting new. A new challenge. To do something that overshadows their previous work. It is very much like an addiction.

Creativity is not only “inventing stuff” or “making art”. It is also “doing business smarter” and “leading teams in a way no-one else has done”. You do not have to be a programmer, painter or musician to be a creative.

A company dies and starts to recycle their own shit when it is taken over by bureaucracy. It starts to die when the bookkeeper and the manager-who-read-the-book-about-management becomes the driving factors (yes profit is important) in a company. They have no clue. Simply no clue.

So what happens?

  1. People start doing things irrelevant to what they are hired for: solving problems
  2. People start to isolate themselves form others, thinking that their work is important and other people mostly a nuisance
  3. Creativity dies and the “why are we here and what are we supposed to do” moves away from the core. Secondary shit becomes primary, like: “we have to apply proces XY and Z because company D is using that as well / because I read the book and the writer claims it is the solution for everything / because I learned this at school”
  4. Companies become inefficient. People waste half of their day moving shit around that has to be moved around because people think it is important that that shit should be moved around. (Many processes and “problems” in companes can be cut short in 1 day or one week when all involved get together, sit in one room, with one gole: to solve the problem and leave when the problem actually is solved)
  5. Inefficient companies cost a lot of money, are an easy prey for the fast predators and will have to create bigger and bigger defenses not to be harmed or killed.

What is happening mostly in software development now is that the closed systems of development and classic company models are becoming less and less effective as tools to survive in an environment where there is hyper-competition. Let me explain the playfield:

  1. Out of the blue another party, group or individual suddenly pops up with a better version of your thing, leading to your death in that market
  2. The distribution models are becoming more and more easy to reach that goal

This means that any product you are developing might and will be surpassed.

To understand the model of “Web 2.0” and why this has changed the world for commercial development of software online you have to understand and use this:

  1. If you are able to create a product or solution with a following: other people will start developing stuff with your tool
  2. The more people use tose solutins, the higher your value as a company becomes
  3. You can NEVER compete with all developers in the world, so better have them join you

Closed source development – which was the classic model – is under a lot of pressure. Where your team of 10 dedicated developers are developing your solution in a closed environment, 1000 developers world wide might be working on something that will blow your product away.

Right now, we see only playful solutions, but what has happened with Google Maps and is happening with solutions like Twitter, Adobe Flash and Layer surpasses what a company could achieve. The solutions are playful, mediocre and not competing YET because a lot of developers are still staring at their own navels building mediocre crap while masturbating over dreaming of becoming a rock star with a solo-project that will: “make them rich beyond belief” after “being bought by Google”.

It is only the beginning

The now emerging model (predicted and nothing new) is that of collaborative work on solutions that will create valuable and monatizable spin off products. Where Content Management Systems, ERP systems, CRM systems and the lost have nothing much new to offer and are more and more easy to duplicate and build from the ground up using code generators and next generation development frameworks, the value lies in the use of those solutions.

Creating value by creating the groundworks (and do not have much illusions: your closed source solution which was costly to develop 10 years ago will be bypassed one day by a free and open source framework from one or another smart kid with too much time on his hands, surpassing you in no time once the demon is released) and then build new stuff on top of it.

22: A bleak and grim possible future for the Western world if Copyright and Patent systems do not loosen up

You can only control Copyright and Patents in the countries that respect those patents and copyrights. Second: patents (and trademarks) are only valid in a country when they are locally registered. This is not what makes it bleak and grim for us.

This is what is: if the  industry of creation, innovation and inventions is hindered by limitations, laws and lawsuits:

  1. It will slow down innovation
  2. It will drive away the talented to areas where they CAN do what they like to do.

Here is part two:

  1. Countries who have nothing to lose and where those patents and copyrights have no value have no limiters (except for human stupidity in another sense) to use, mix and evolve on inventions and innovations which are made unavailable in the Western countries.

The main reason that countries like China, Japan and India did not kick us out of the game is that their culture until now is based on te stimulation of docile behavior. Creativity requires people who say:”Fuck you. I think you are wrong. There IS a other solution for this and I will create it.” To give you an example: the biggest problem on outsourcing work to India is that most companies literally do what you tell them. A manager will not call you to tell you: “Excuse me. We have read your design for the second time and think that you made a mistake here… and here…”

The moment they will educate children to be problem solvers instead of “Yes” people, they will become a real threat to our way of working right now.

23: The fragaility of patents and copyright

Copyright and patents work in a country because:

  1. The law in that country acknowledges the patent system and the copyright system
  2. The economic pressure to that country is big enough to force the gouvernment of that country to respect the patent and copyright system

When there is now law acknowledging these systems and there is no leverage, that country becomes a free-haven for any copy + meshup of protected ideas = creation of something new that solves our problem.

24: Closure

The protection of Intellectual property has – in my view – mainly an economical reason. But even those will be challenged – especially regarding the industry – by environments where the rules of the game are completely different from those of the corporate world: where the creation of solutions is more important than making a profitable industry and where the people working on those solutions are a dynamic and changing team of contributors.

Closed source development, whether it is lesson material on universities, products for the pharmaceutical industry or innovations in other places will be under more and more pressure.

As you can not stop piracy – unless you breach the protecion of peoples personal privacy – this also requires a different approach: trusting that a new playground will emerge with new means of distribution, sales and marketing which will be self-regulatory, lowering costs and maybe even increasing profits. Even when the price per song or movie is a fraction of what it is now.

Countries with nothing to loose will be the biggest challengers. They will have the means, the drive, the need and the creativity to create solutions based on principles we would find unprofitable in the Western world. All information will be available anywhere. Whether we will try to stop that development or not.

And IF we will try to stop that, by making information harder to access, more exclusive to smaller groups, we will only slow down our own development, making our world and our industries an even easier prey. Like sitting ducks too stupid and slow to understand what has happened, until it is too late.

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