Friday, January 18, 2013

Knockoff Economy, Session IV

David Opderbeck (Seton Hall University School of Law; Notre Dame Law School)

Photos: Flickr, iStockphoto: a CC regime establishes both an open- and closed-source community.  Can pay $5 for a very professional-looking image.  You need copyright to support the dual model.

Pushing back on specific examples.  Fashion: what really matters in fashion is the TM/brand.  Consulting on Coach fabric—company bought 20 rolls of vinyl fabric with the Coach brand on it; selling swathes to people on Etsy who presumably were making iPhone cases. Coach sued, listing 100 TMs, including 2 on fabric, but Coach doesn’t sell fabric at retail; instead they supply it to contractors.  Asking for millions in statutory damages for the logo.

Cuisine: parts of a dish are known while parts are innovative—but is this a completely unique community because it’s so different from other creatives?

Comedy: can we really say that norm enforcement that includes occasional beatdowns is a superior form of regulation?  Connection/history with organized crime.  What supports a willingness to use violence?

Football: League is a cartel; league is very strict about TMs and other IP; highly specified what the team can do, what only the league can do, what the players can do. There, underlying copying norm is the notion that the cartel would fall apart if someone could monopolize a play that would always win. Probably true for the NCAA.  What about high school?  The league may have norms of a certain kind of competition.  Not competitors slugging it out in an open market, but a closed cartel.

Fonts: thinks that fonts are overproduced; 5000 fonts you get with your purchase are marketing, not used.

Finance: are trade secrets as important as the authors say?  Tacit knowledge is important, as it is in biotech.  People jealously protect tacit knowledge developed in the lab.  Knowing what a client prefers isn’t really a trade secret, but not something you want to share either.

Lea Shaver (Indiana University Robert H. McKinney School of Law)

Consider willingness to share smaller share of larger pie.  One theory: provide maximum rewards to the person most responsible for the pie.  Anyone else who takes a piece is stealing.  But that wrongly assumes a pie of fixed size.

Case study of early light bulb industry—Edison’s patent litigation strategy.  Early industry: people knock off designs because they don’t understand the patents and are too poorly financed to sue anyway.  Innovation is everywhere.  Edison, who’s financed and has an emperor’s view of his Lockean role, chases everyone else out.  Innovation slows; maybe a Pyrrhic victory.

Don’t fall into the fallacy of the fixed pie. IP enforcement can be less rational viewed over a longer timeframe; hard to convince firms with a shortterm mentality to see benefits of competition.

Implicit in the book is a question of distributive justice and innovation. Knockoff seems to make innovation affordable to the masses—trickle-down theory.

South Africa: English books are readily available, as are books in Afrikaans (for white minority w/sufficient disposable income to induce robust regime), but you don’t see many works in Zulu or !Xhosa, not because people can’t read in those language—a Zulu newspaper publishing industry has arisen.  May come down to the fact that the community isn’t wealthy enough to afford the copyright model of innovation.  Transaction costs/can’t deliver innovation cheaply.  We should modify copyright to allow translations, which could allow the industry to thrive and then Zulu authors could also earn a living by accepting a smaller share of a larger pie.

Fred von Lohmann (Google)

Kept thinking of the dysfunction of policymaking.  Why can’t legislators deal with the richness and variety of these fields?  Rep. Kastenmeier & Michael Renner, who served on his staff for many years: Kastenmeier used to view requests for extensions/expansions of exclusive rights in relation to a principle from David Lange (influenced by a law professor!): a civil procedure for copyright reform proposals.  Four burdens of proof for new copyright legislation to expand exclusive rights—proponent ought to show that the interest can fit harmoniously within the existing legal framework; proponent must be able to commit the new expression to a reasonably clear and satisfactory definition—the sort of thing you could explain to the average member of Congress (many provisions of current law flunck this); honest analysis of costs and benefits of proposed legislation—the argument that a particular interest group will make more money and thus be more creative doesn’t satisfy this standard or the requirements of the Copyright Clause; and finally, any advocate of a new interest should show how giving protection will enrich or enhance the aggregate public domain—the public gain should outweigh the private benefit. It’s this last part that’s the most important.

If you ask not “would comedians/fashion industry be better off?” but “would the public benefit exceed the benefit to the comedians/fashion industry?” the answers would be very clear.  But he’s never heard anyone explain how the public would benefit more than the recording artists from enhancements to recording artists’ rights.

Peter DiCola’s results from survey of 5000 working musicians.  Revenue sources were 80%, on average, not related to copyright or at best indirectly related to copyright. Echoed The KE’s themes. Robust incentives that are remote from what we think of as the copyright incentive/monopoly model.

Dave Fagundes (Southwestern Law School; University of Miami School of Law)

Last-mover advantage.  Derby, like football, is an open-source strategic innovation world.  May be dying for lots of reasons, including bad business model; it’s kind of a novelty and most people don’t come back.  New strategic innovation: slow derby, both highly effective and horrible to watch.  You can typically gain points more effectively with this strategy; but whether it’s worse is contested—participants say it’s more interesting for players and rewards different kinds of play and strategies.  Ass’n is trying to intervene to change the rules against this, but hasn’t been able to do so. 

The KE is useful for taking things that are in plain sight and pointing out that they have implications that are not in plain sight.  Puzzle, though: there are a lot of angry people in this book.  Louis CK is made at Dane Cook, etc.  Third parties are also mad at copiers. Why are they mad if they’re not losing money or prestige?  Third parties have no monetary investment in brand even if we believe dilution theories.  They should be happy about the positive effects of copying on a brand!

They’re mad because they feel like they got ripped off, which triggers an instinctive sense of moral outrage.  Highlights a difference between the way The KE thinks about unauthorized use and how it’s actually experienced.  In this room, we think of unauthorized copying as an economic phenomenon that can be optimized. Owners, authors, some third parties at least sometimes see it as a deeply harmful activity that inflicts expressive harm.  Many people say it wasn’t about economic harm or brand dilution: someone stole my name!  Speaking a different moral language.

Moral psychology language, primary popular expositor Jonathan Haidt.  Basic claim: moral reasoning is something like innate—organized in advance of experience.  Just as we use heuristics to perceive the world, we have the equivalent of moral heuristics.  Basic descriptive claim: these moral heuristics are not just the harm principle, but feature different dyads: justice/fairness, sanctity/perversion, loyalty/betrayal.  They vary a lot among cultures and people. Some people are fine with copying.

What is to be done?  Counterpoint to claim made in The KE, which is about social benefits of unauthorized copying.  Can represent an additional social cost beyond the ones we usually think about.  Demoralization costs of observing work being copied, for the copied person or for third parties.  Maybe dynamic costs for people who experience sense of moral loss; maybe they’ll be less trusting in creative process.

Why aren’t people more receptive to this? Gets to what law can do about copying and what industry can do.  Resistance to copying among substantial percentage of population is going to exert gravitational pull—hard for law to encourage more copying.  Sees this as a teacher.  American copyright law has tons of natural rights language.  If people are not consciously adopting the content of law, they will have a hard time changing reactions no matter what law says.

Moral psychology helps us understand why self-governance pops up. Norms coalesce around behavior.  Not just a norm story in the sense of coming from other people; feels like it’s coming from the self.

Sprigman: we criminalized adultery for a long time; the moral intuitions are deep but that doesn’t mean that we want the law to intervene.  Also endogenous—if you change the rules, people understand that the rules allow copying, and people like what they’re used to.

Von Lohmann: some idea that the tweaker is lining its pockets at the expense of the originator—but if there’s competition, the tweaker doesn’t keep social surplus—in the competitive market of VCR makers, the price falls to marginal cost; the benefit goes to consumer surplus.  Maybe that’s wasting some valuable asset, but the idea that the follow-on innovator is rentseeking doesn’t work if the market in that segment is competitive.

Opderbeck: Games sometimes prevent even the innovator from using the innovation—that’s one thing a cartel can do if it slows down the game.

Von Lohmann: Mixed martial arts also had “bad” innovation—resulted in combatants immediately going to ground in very static wrestling holds: made matches unfun to watch and very short. 

McKenna: across sports—NFL rule changes are intended to score more.

Buccafusco: not “bad” just subject to different incentives.

McKenna: likely to cost the group a bunch of money (in the long term—arguably this happened to the brand of college debate in which Fagundes & I engaged).

Buccafusco: moral intuitions are sufficient to allow people to find harm when they’re told they need to in order to impose a sanction.  (Not automatically, but definitely there are big swings in the research I saw.)  But they can be debiased.

Raustiala: we focused on the central question of what causes innovation, and not so much about who gets the gains, but that’s a huge issue.  Often happens that larger pies lead to greater distribution of benefits, he believes.  Shepherd Fairey: really pissed off that his fashion line is often knocked off.  Illustrates that people have moral intuitions, but they find ways to make those fit their economic interests.

McKenna: it’s not just economic interests; it’s that you don’t have a fully explicated sense of which copying is wrong.  CVS always locates next to Walgreen’s and vice versa, and no one sees that as wrong just because the other ID’d a market.

Heller: in European laws that could be unfair competition.

Von Lohmann: doubts anyone in the book would have an objection to a purely personal copier—a restaurant will happily share a recipe with an ordinary citizen.

Sprigman: one comedian said, “If you can use one of my jokes to improve your lame life, go ahead.” Fashion designers say that their rights shouldn’t apply to home sewing.

Ellickson: maybe it’s a Lockean norm, I made it so I should own it—but that’s not what you really see in the world.  To allow property in football plays would be destructive of the league, so efficiency demands no rights; but is there any moral outrage that is just trumped by other considerations?

Sprigman: the moral outrage tends to be directed at the innovation.

Me: I think Fagundes makes a great point; the question is how that psychology gets operationalized in any given society—because it’s clearly very different across times and places, as well as with ingroups and outgroups.  E.g., Joe Karaganis’s copying study shows that many people don’t take very much account of the interests of distant record companies.  Likewise you see different cultural results in the dictator game, on a base that is stable (people like fairness).

Fagundes: doesn’t think moral outrage is itself a reason to grant rights, but something to be factored into calculate.  Is Hume right?  Do we begin with intuitions and then reason our way to them?  No one knows whether copyright really promotes progress of science/useful arts; maybe we should stop pretending we know the answer.  The Qs are empirical in that people differ even individually as well as within culture.  If something is seen as a transgression, then it triggers your sense of wrongness; if you don’t have that heuristic and just think in terms of economic harm, you’ll never see that as a problem.  Compare consensus about what’s transgression in football (copying plays is ok) versus no consensus in fashion (big disagreements about what copying is ok).

Von Lohmann: moral intuitions have a distributional element. Vast difference in revenue distributions depending on how successful musicians are—if you’re making over $200,000/year off of music, sources of your revenue more likely to be copyright-related.  Young musicians starting out may have a very different moral compass compared to older/successful ones, influenced in both cases by economic situations.

Shaver: not Lockean; she thinks people often think ideas should be protected, and they don’t give moral credit to the people who take the idea and make it operational/executable; they think of the patent system as kind of a lottery.

Fagundes: people angry on behalf of third parties make the pure Lockean story harder to tell.  (Though wanting to enforce norms can come from a Lockean place, I’d think.)

McKenna: the NFL might well step in to stop teams from protecting plays, but that doesn’t explain why the copying norm exists in the first place. At the very bottom level, the reason why there’s no norm against copying in football is that it would be unmasculine. You win by dominating, not by whining about the play used.  Also, coaches make a reputation by being able to come up with a new thing and staying ahead on a week to week basis.

However, some ways of copying would be deeply offensive. Teams share game tape, now enforced through conferences but by norm first.  You’d be shamed for not complying.  But if someone spied on practices, or on a playbook, that would be deeply offensive.  You have to figure it out on your own, and only once we put it out on the field.  Has to do with first mover advantages.  Can’t take away our chance to have a successful play.

Also, people get mad when there’s too much innovation.  Cultural norm about who gets to define what the game is—you’re playing some other game if you change it too much.  (Along with policy debate, see: golf and the ADA; letter values in Scrabble.)

Raustiala: interests of designer/chef in being innovator/being copied can be very different from that of a firm by which s/he’s employed.  Better reputation as innovator allows you to move up—a principal/agent problem that needs to be considered. One thing that ties our examples together is that they’re often individuals.

McKenna: firms who are most interested in sharing are also the most innovative—feel they can stay ahead and improve their reputations.

Von Lohmann: engineers in Silicon Valley can also get a lot of reputational capital from sharing code.

Ellickson: doesn’t share the intuition that firms are constrained more by norms than individuals—individual deviance is more highly distributed.  (Depends on which kinds of norms, it seems to me—Fox News was mentioned.  Herein we are talking about norms about freedom to copy and the extra benefits available to individuals when there’s free copying and improved reputation that don’t accrue to their firms, not norms about how accounting will be done or whether your clients are muppets.)

Sprigman: Institutional conservatism can keep a client/institution out of trouble.  Not so much about law but about norms of enforcement agencies.  In the financial crisis, stuff got done that wouldn’t have gotten done in earlier regimes, with really aggressive advice from lawyers. Firms read the law and asked what they could do, not what the norms were.

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