The New York Times on Hypocrisy of US IP Policies

jwinterboy writes " The New York Times has an article (free blah di blah) criticizing the intellectual property framework that the U.S. places on developing countries, given that it was a large pirate of intellectual property during it's own industrialization. "

Comments

Re:Developing nations

[Anonymous Coward]

Just to add a little bit to the "happened elsewhere theme":
AFAIK in the 2nd half of 19th century Germany was widely seen as the rip-off nation building machinery, chemical and pharmaceutical industries on violating patents, only switching to international patent system after they had something to lose.

For general amusement: among my fellow german countrymen it is widely unknown, that the mark "made in germany" (which they hold in a kind of national pride) was originally forced on german goods by the British to mark them as cheap crap (anybody to remember first japanese cars?).

Typefaces and IP

[munro]

Typefaces/fonts are an interesting area. American companies apparently used typefaces (which tradionally all came from European type design houses) without paying any royalties or licences, but are now starting to try to get protection.

http://nwalsh.com/comp.fonts/FAQ/cf_14.htm

"The reluctance of Americans to press for typeface copyright may have been influenced by a feeling that typeface plagiarism was good for U.S. high-tech businesses who were inventing new technologies for printing, and plagiarizing types of foreign origin (Europe and England). If the situation becomes reversed, and foreign competition (from Japan, Taiwan, and Korea) threatens to overcome American technological superiority in the laser printer industry, then American firms may do an about-face and seek the protection of typeface copyright to help protect the domestic printer industry. Such a trend may already be seen in the licensing of typeface trademarks by Adobe, Hewlett-Packard, IBM, Imagen, and Xerox in the U.S. laser printer industry."

Adam Smith and *Intellectual monopoly*

[NZheretic]

From The Relevance of Adam Smith by Robert L. Hetzel.
With added commentary by yours truly...

MONOPOLY AND GOVERNMENT SUBSIDIES: The principal theme set forth in The Wealth of Nations is that a country most effectively promotes its own wealth by providing a framework of laws that leaves individuals free to pursue the interest they have in their own economic betterment. This self-interest motivates individuals? propensity to truck, barter, and exchange one thing for another and thereby leads them to meet the needs of others through voluntary cooperation in the market place:

...man has almost constant occasion for the help of his brethren, and it is in vain for him to expect it from their benevolence only. He will be more likely to prevail if he can interest their self-love in his favour, and shew them that it is for their own advantage to do for him what he requires of them. Whoever offers to another a bargain of any kind, proposes to do this. Give me that which I want, and you shall have this which you want, is the meaning of every such offer; and it is in this manner that we obtain from one another the far greater part of those good offices which we stand in need of. It is not from the benevolence of the butcher, the brewer, or the baker, that we expect our dinner, but from their regard to their own interest. We address ourselves, not to their humanity but to their self-love, and never talk to them of our own necessities but of their advantages. (p. 14)

Everyone realises and acknowledges that Microsoft is a business, there to make a profit to share with it's marjor stakeholders, from it's shareholders to it's employees. However ...

Smith also argues that the harmony between private goals and larger socially desirable goals promoted by voluntary cooperation between individuals in the market place is interfered with by monopoly and government subsidies. In contrast to competition, monopoly and government subsidies cause individuals to devote either too few or too many resources to particular markets:

....the private interests and passions of individuals naturally dispose them to turn their stock towards the employments which in ordinary cases are most advantageous to the society. But if from this natural preference they should turn too much of it towards those employments, the fall of profit in them and the rise of it in all others immediately dispose them to alter this faulty distribution. Without any intervention of law, therefore, the private interests and passions of men naturally lead to divide and distribute the stock of every society, among all the different employments carried on in it, as nearly as possible in the proportion which is most agreeable to the interest of the whole society.

All the different regulations of the mercantile system, necessarily derange more or less this natural and most advantageous distribution of stock. (pp. 594-5)
Every derangement of the natural distribution of stock is necessarily hurtful to the society in which it takes place; whether it be by repelling from a particular trade the stock which would otherwise go to it, or by attracting towards a particular trade that which would not otherwise come to it. (p. 597)

.... sometimes, because of the overiding profit motive, the end consumer can be put at a disadvantage, and the natural model can become unbalanced. This often happens in tha case of several types of monopoly...

Smith describes the actions of monopolists as follows:

The monopolists, by keeping the market constantly under-stocked, by never fully supplying the effectual demand, sell their commodities much above the natural price, and raise their emoluments, whether they consist in wages or profit, greatly above their natural rate. (p. 61)

The natural price is the lowest which the sellers can commonly afford to take, and at the same time continue their business. (p. 61) Today we would use the word competitive for natural. The effectual demand is the demand of those who are willing to pay the natural price of the commodity. (p. 56) Monopoly, as well as a governmentally subsidized activity, contrasts with a competitive market where a commodity is...sold precisely for what it is worth, or for what it really costs the person who brings it to market. (p. 55)
The Wealth of Nations contains three general kinds of criticism of monopolies. The first is that the higher prices in a monopolized market reduce the welfare of consumers:

If...capital is divided between two different grocers, their competition will tend to make both of them sell cheaper, than if it were in the hands of one only; and if it were divided among twenty, their competition would be just so much the greater, and the chance of their combining together, in order to raise the price, just so much the less. Their competition might perhaps ruin some of themselves; but to take care of this is the business of the parties concerned, and it may safely be trusted to their discretion. It can never hurt either the consumer, or the producer; on the contrary, it must tend to make the retailers both sell cheaper and buy dearer, than if the whole trade was monopolized by one or two persons. (pp. 342-3)
In every country it always is and must be the interest of the great body of the people to buy whatever they want of those who sell it cheapest. The proposition is so very manifest, that it seems ridiculous to take any pains to prove it; nor could it ever have been called in question, had not the interest sophistry of merchants and manufacturers confounded the common sense of mankind. Their interest is, in this respect, directly opposite to that of the great body of the people. As it is the interest of the freemen of a corporation to hinder the rest of the inhabitants from employing any workmen but themselves, so it is the interest of the merchants and manufacturers of every country to secure to themselves the monopoly of the home market. (p. 461)

.... like deals made between vendors to set prices, which RAND "reasonable" licensing systems effectively does.

The second criticism of monopoly is that it engenders inefficient management:

Monopoly...is a great enemy to good management, which can never be universally established but in consequence of that free and universal competition which forces everybody to have recourse to it for the sake of self-defence. (p. 147)

For example, Microsoft's Internet Explorer containscurrently 20 unpatched vulnerabilities, a disproportionately high number in comparison to all the other browers on the market today. Also, because of a general disregard for security in the past, many of those same vulnerabilities are exploitable though other Microsoft applications.

The third criticism of monopoly is that it is inequitable because it increases arbitrarily the inequality in individuals? incomes:

...The policy of Europe occasions a very important inequality in the whole of the advantages and disadvantages of the different employments of labour and stock, by restraining the competition in some employments to a smaller number than might otherwise be disposed to enter into them. (pp. 118-19)

And there is many a CIO discovering that the new Microsoft enterprise licensing agreement is far more expensive than before.

Monopoly has always been a contentious issue in debates on public policy in the United States. It is interesting to examine the way in which the ideas of Smith appear in current debates over monopoly. In general, proponents of government intervention in the market place argue that monopoly is endemic in capitalism and that its elimination requires significant intervention by the government in the market place. An opposing group argues that free markets effectively restrain monopoly power and that it is in fact government intervention in the market place that is chiefly responsible for monopoly. The first group assumes that large size, fewness of firms, and operation over an extensive geographic area automatically imply monopoly power and thus supports its position by citing the existence of industries dominated by a few large firms and the existence of multinational corporations. The opposing group supports its position by trying to show that where monopoly power exists it is made possible by particular governmental actions, e.g., in the United States by marketing orders that fix the price of milk above what it would be otherwise, or FCC regulations restricting the growth of cable TV, thereby preventing competition with the established networks.

The view of the world suggested in The Wealth of Nations is that monopoly power cannot persist without the assistance of government. The specific examples of monopoly that Adam Smith attacked required the police power of the state for their maintenance. These monopolies were of three kinds. One kind of monopoly depended upon the mercantilistic system of laws which England used to monopolize trade with its colonies: Monopoly of one kind or another, indeed, seems to be the sole engine of the mercantile system. (p. 595) Another kind arose from the monopoly power granted guilds (referred to by Smith as corporations), which allowed them exclusive rights to produce a given commodity:

The exclusive privilege of an incorporated trade necessarily restrains the competition, in the town where it is established, to those who are free of the trade. To have served an apprenticeship in the town, under a master properly qualified, is commonly the necessary requisite for obtaining this freedom. The bye-laws of the corporation regulate sometimes the number of apprentices which any master is allowed to have, and almost always the number of years which each apprentice is obliged to serve. The intention of both regulations is to restrain the competition to a much smaller number than might otherwise be disposed to enter into the trade. The limitation of the number of apprentices restrains it directly. A long term of apprenticeship restrains it more indirectly, but as effectually, by increasing the expence of education. (p. 119)
The government of towns corporate was altogether in the hands of traders and artificers; and it was the manifest interest of every particular class of them, to prevent the market from being overstocked, as they commonly express it, with their own particular species of industry; which is in reality to keep it always understocked. (p. 124)

A final kind of monopoly depended upon tariffs and quotas that prevented foreign producers from competing with domestic producers:

The superiority which the industry of the towns has every-where in Europe over that of the country, is not altogether owing to corporations and corporation laws. It is supported by many other regulations. The high duties upon foreign manufactures and upon all goods imported by alien merchants, all tend to the same purpose. Corporation laws enable the inhabitants of towns to raise their prices, without fearing to be under-sold by the free competition of their own countrymen. Those other regulations secure them equally against that of foreigners. (p. 127)

Competitive markets restrain monopoly because the above-average profits associated with the exercise of monopoly power attract new producers who increase output and thereby lower prices:

When by an increase in the effectual demand, the market price of some particular commodity happens to rise a good deal above the natural price, those who employ their stocks in supplying that market are generally careful to conceal this change. If it was commonly known, their great profit would tempt so many new rivals to employ their stocks in the same way, that, the effectual demand being fully supplied, the market price would soon be reduced to the natural price.... Secrets of this kind, however, it must be acknowledged, can seldom be long kept; and the extraordinary profit can last very little longer than they are kept. (p. 60)

The next section is very IMPORTANT.

Monopolists can preserve their favorable position only if the government prevents potential competitors from entering the monopolized activity:

The exclusive privileges of corporations, statutes of apprenticeship, and all those laws which restrain, in particular employments, the competition to a smaller number than might otherwise go into them, have the same tendency...They...may frequently, for ages together, and in whole classes of employments, keep up the market price of particular commodities above the natural price, and maintain both the wages of the labour and the profits of the stock employed about them somewhat above their natural rate.

Such enhancements of the market price may last as long as the regulations of police which give occasion to them. (pp. 61-2)

In fact, the term "intellectual property" is a misnomer, a more correct term would be intellectual monopoly. Patents, Copyrights and even Trademarks are a government granted monopoly, they do not occur naturally. That does not mean that they are a bad thing per-say, but their use should be dictated by the benefit to socitety in general, with approprate limits so their use cannot be abused.
These statutes give the power that the ol' Mercantile laws gave to those monopolies. There is no true effective choice in the market. Compainies like Microsoft are sustaining it's dominate position in the markerplace by using a state-constructed and granted monopoly, which gives Microsoft the monopoly over it's protocols, effectively just as restrictive as the East India Trading Company trading zone monopoly of the Orient.

Free markets make the formation of monopoly difficult because monopoly requires the adherence of all actual and potential sellers in a market. Self-interest makes achievement of such adherence difficult because each seller has an incentive to undercut the monopoly price in order to increase his share of the market. Monopoly power is increased or made possible if enforced by the government. In the following passage Smith refers to the guilds, or corporations, of his day:

An incorporation...makes the act of the majority binding upon the whole. In a free trade an effectual combination cannot be established but by the unanimous consent of every single trader, and it cannot last longer than every single trader continues of the same mind. The majority of a corporation can enact a bye-law with proper penalties, which will limit the competition more effectually and more durably than any voluntary combination whatever. (p. 129)

Smith?s ideas appear in current public debate over monopoly. Advocates of deregulating the transportation and communications industries by eliminating or reducing the power of Federal regulatory agencies argue that these agencies promote monopoly by limiting the entry of new firms and by fixing prices for all producers. Government regulations enforced upon all firms in an industry have the effect of allowing producers to eliminate competition and to raise prices. At the same time, lack of competition reduces incentives for efficient production.

My Solution

[Lonath]

Compulsory licensing of IP at a rate like this:

Take the lowest bulk licensing rate in the G8 (if they don't license, then the lowest rate per pill or copy of the software or whatever minus the expected costs of producing each copy).

Multiply this by the ratio of country Foo's MIN(mean, median) income over the G8's MAX(mean, median) income.

Then the industrialized nations have a reason to increase their income equality and they have a reason to make poorer nations less poor. And, poorer nations have the chance to make things without being overburdoned by the IP laws of the rich nations.

And for those of you keeping score at home, YES this is effectively giving away IP to poorer nations, but so what? The richer nations should be paying for their own IP within their own economies and they should look at any money gotten from poorer nations only as gravy.

The first industrial spy?

[ProfessorPuke]

For a specific example of how America's development was spurred by IP violations, run a websearch on "Francis Cabot Lowell spy".

Tis said that in ~1810 he memorized the schematics to the automated weaving machine to get around the British prohibition on the export of technical schematics.

Whole cities (some bearing his name) in Massachusetts sprung up around this invention, and it lead to a spread of large scale agriculture in the south and west. Previously textile raw materials had to be exported to England for manufacture into garments, then imported back to the US for sale- and enormous impediment for efficiency and growth.

The development of American factories also changed the face of urban demographics- large quantities of the lower classes were pulled into dense cities that were previously enclaves of the wealthy (and their abundant domestic help). Since the best (most nimble & most managable) factory workers were girls, unmarried single women finally got the opportunity to support themselves financially while mantaining their virtue.

The violation of patents lead to progress like this, which had a much greater impact than breaking copyright and reading Dickins on the cheap.

Re:Developing nations (the Mauser)

[JThaddeus]

So the Germans stole from the Brits but the Yanks stole from the Germans. I recall that the Germans invented the Mauser bolt-action rifle mechanism, considered the finest in the world at the that time. After the First World War, the US Springfield arsenal was sued for failing to pay royalties on their wartime production of the 1903 Springfield rifle, the standard US Army rifle for WWI. Of course, this was heard in a US court that was not sympathetic to a German claim.

Farm subsidies

[zenyu]

I used to be one of those people who thought those anti-globalization protesters were just treehugging tenderhearts looking for something to do. Mostly because I'm for free trade on principle. But then I realized how our farm subsidies caused starvation in poorer countries by destroying local food production industries. But our attack on those countries industrial sector with IP laws is part of the same picture.

The IMF orders those same third world countries we dump our subsidized food into on good years to stop helping local farmers buy chickens with something as simple as insurance that if the chick they buy doesn't become a 1 year old chicken it will be replaced. Then the free trade negotiators show up and tell them they can get rid of that 33% tariff on the president's widgets if he will just get rid of that tariff that protects his countries maize production and well prevents his family's competitors from coming out with better widgets by making those patent laws stronger, err in line with American standards.

What does it mean when we complain about a 55 year copyright in Taiwan, which hasn't even been around that long, much less democratic in that time? They are in line with international standards, and have trouble policing such an overlong copyright already, much less the kind of permanent monopoly the US wants them to establish on words.

PS As I understand it the farm subsidies are even worse in the EU, esp France, and this is causing problems with Eastern European countries who wouldn't get the subsidies if they joined the EU. This is from the economist which isn't an unbiased source; is it true?

Re:Farm subsidies

[sql*kitten]

I used to be one of those people who thought those anti-globalization protesters were just treehugging tenderhearts looking for something to do. Mostly because I'm for free trade on principle. But then I realized how our farm subsidies caused starvation in poorer countries by destroying local food production industries.

Ironically, by campaigning against agricultural subsidies and for "fair prices" for the developing world, the anti-globalization movement is agitating in favor of more globalization! That would homogenize prices across the market.

Actually, the whole movement is like that. They are anti-profit, but pro-tax. Anti-monopoly, but pro-government. Anti-capitalist, but pro-freedom.

Really, the corporate CEO and the tree-hugger want the same things, neither of which are in the interests of the government, which does its best to set them against each other.

As I understand it the farm subsidies are even worse in the EU, esp France, and this is causing problems with Eastern European countries who wouldn't get the subsidies if they joined the EU. This is from the economist which isn't an unbiased source; is it true?

Yup, google for "Common Agricultural Policy". You can get the raw figures from the EU website itself, then do the analysis yourself (compare, say, the CAP to the value of the agricultural sector in one of the aspiring members). I won't post a link, I want you to look for yourself so you know that I'm not biased the other way.

J.R.R. Tolkien...

[Storm Damage]

...was rather bothered by American bootleggers, too. But unlike Charles Dickens, he didn't go on a big U.S. tour to lobby for stronger international copyright protection. He and his publisher issued a higher-quality print of his novels, sold them for a reasonable price (a bit higher than the bootlegs, but not much), and made an appeal to his fanbase to boycott the unauthorized version.

The result was, he made a lot of money, and the unauthorized version didn't sell very well.

Neat, huh?

Re:Developing nations

[FyRE666]

Another way of putting that is that the US gives food and medicine to starving nations.

Are you actually objecting to that policy?

I was hoping someone would try this argument. Yes I do object when the pharmaceutical companies use war, famine and death as an excuse to push up their stock prices. The drugs and other garbage these companies "dump" are of absolutely no use to the people in the countries they're sending it to.

A guy called Mark Thomas here in the UK presents a programme where he tries to uncover government corruption, corporate corruption etc each week (he also has a pretty wicked sense of humour, whire really makes the show). One of these shows dealt with this issue. Here are a few quotes that you might find interesting...

During the civil war in Bosnia so much unwanted drugs were dumped that the government were forced to pay $34 million to build an incinerator just to dispose of them. One charity we spoke to, Pharmaciens Sans Frontieres, said that they had to spend £100,000 in the town of Mostar alone disposing of these drugs in lime filled buckets.
[...]
Since then, the situation has not improved. We spoke to a woman who was involved in sorting out drugs in Albania in 1999. She told us of a hospital in Tirana which had received tonnes of drugs, shown below.

[picture of tonnes of drugs]

However in sorting them out she found some nitrous oxide canisters which had an expiry date of 1989 or 1990 - ten years before they reached Albania. She also discovered sadly that of all the tonnes of drugs donated, only a small proportion could actually be termed useful, shown below.

[picture of about 150 small bottles]

There were also other companies sending sex aids, diet pills and other completely useless crap to starving nations simply to make money while leaving the huge cleanup job to those with nothing. Nice, huh?