IP Matters

Today in the Wall Street Journal, there is good op/ed about the threat of Ebola and other infectious diseases that urges us to invest more money in medical innovation.

There's also another op/ed complaining that cutting edge, innovative medical cures are too expensive, and that we need something apparently just short of price controls to do something about it.

So which is it? Do we want pharmaceutical and biotech companies taking risks and innovating new cures, such as Sovaldi, the new cure for hepatitis? Or not?

Ms. Ignagni's piece is particularly egregious. It's part of a campaign that she's behind to get the federal government to forceably lower the price of Sovaldi, a blockbuster new miracle cure for hepatitis C. Note the word "cure."

First, she writes as if concern over high drug prices is a recent phenomenon, which of course it isn't. I've been hearing statists complaining about high drug prices for the 20 years I've been doing public policy. In fact, the first paper I ever edited and published at IPI was on this very topic. The redistributionists have never understood why they can't have all their diseases cured and their pain alleviated without it costing anyone anything. They're always focused on the second order concern--how goods are distributed--without fully appreciating the first order concern--how goods come to be in the first place.

Distributing existing goods is easy--innovating a new product or service that never existed before, now that's impressive. But apparently not to Ms. Ignagni.

Those who dismiss concerns about copyright piracy always deflect the conversation to the big Hollywood studios, as if piracy only affects extremely wealthy people driving around in Bentleys. It's not surprising that defenders of piracy tend to be class warriors in other areas of politics as well.

But the greatest impact of piracy is on those downstream small businesses and employees who work in the industry. Losses due to piracy, at the margin, affect the number of people hired, how much they are paid, and how many projects are undertaken in the first place.

But then there's the indie filmmaker, for whom the entire project is being done on a shoestring. When everything is being done with marginal resources, marginal impacts have a major impact. The same protections that would protect the major Hollywood studios against rampant piracy would be even more beneficial to the little guys.

There's a very interesting article up on FilmSchoolRejects.com about filmmaker Zak Forsman and the experience he's having with piracy of his new indie film, Down and Dangerous.

A particularly shocking report comes today from the UK, in which counterfeit wine and liquor are flooding the market, containing dangerous chemicals such as methanol, chloroform, bleach, nail polish remover and anti-freeze. According to the report, up to 2 dozen bottles of vodka were being produced every minute at one counterfeiting site. 

And it’s not just occurring in the UK.  

In the United States, federal agencies have stepped up to identify, intercept, and prosecute criminal activity attempting to import or manufacture fakes in the U.S. to protect innovators and consumers from the dangerous impact of counterfeits. 

This week, Sen. Ron Wyden (D-Ore.) told the Washington Post the Supreme Court decision on Aereo will discourage innovation.

But in a recent podcast, IPI president Tom Giovanetti debunks what he calls negative spin regarding the ruling, and says it’s a win for all players in the market because it’s a win for the rule of law. (Click here to listen to the IPI podcast.)

Reports indicate President Obama is poised to tap Phil Johnson as the next Director of the United States Patent and Trademark Office.

Currently Senior Vice-President for Intellectual Property Policy & Strategy at Johnson & Johnson, Phil Johnson joined IPI in 2011 at our annual World Intellectual Property Day Forum and spoke on a panel called “Hot Topics in IP.” Click here to watch video of that panel.

Be judicious when you buy. That "steal of a deal" may cost you a lot more than you think.

For some time IPI has been at the forefront of arguing in favor of intellectual property protection, since we believe that property rights are the basis of any market-based system, and markets are the best way to allocate goods and services. And particularly in an innovation-based economy, ensuring that innovators and creators are able to reap the rewards of their successful products is the best way to continue to fund a virtuous cycle of innovation.

Most commonly IP is protected through the force of law, since it is a proper role of government to facilitate the protection of private property. But, practically as well as legally, everyone who wants their world to be a world rich in creativity and innovation has an interest in seeing that creators and innovators are rewarded, in order to encourage continued creativity and innovation as envisioned by the American Founders in the Constitution’s Copyright Clause.

Massive on-line piracy, of course, derails the virtuous circle by depriving creators of any hope of reward. But the development of new business models through which content can be legally obtained on-line means that today those who might have taken the easy piracy route can be educated and redirected toward an abundance of legal options.

This is what brought Internet providers to the table with content companies some time ago to devise a voluntary system to try to reduce online piracy. Whereas before ISPs had been sometimes accused of having interests opposed to those of the content companies, in the maturing Internet ecosystem it has become clear that all legitimate players in the Internet have an interest in making sure that the Internet is a place rich in creative content, and a place where those who contribute to this richness at least have the option of attempting to monetize their content through various business models.

Great piece in today's Wall Street Journal on ad-supported piracy.

Many people still think of piracy as a victimless crime; or rather, of a crime that affects a victim that they don't care about: Big Content, or whatever disparaging name they prefer to use. They like to convey the idea that piracy is simply people "sharing" content that they "care about."

But piracy is big business, and people are profiting from piracy. Valuable content is valuable, and people are going to make money off of valuable content. The only question is whether the profit-makers are those who invested in the creation of the content, or whether it's just parasites who are making the money.

Piracy websites are the criminals, but companies and networks that advertise on those piracy websites are the enablers. And it's appropriate to put pressure on companies and ad networks to ensure that their ads don't run on websites trafficking in illegal content.

In February, nonprofit Internet safety group Digital Citizens Alliance commissioned MediaLink to research how much money these sites are making. MediaLink examined 596 sites where viewers can find pirated movies and TV shows, and estimated those sites generate a total of $227 million in advertising revenue annually. Even "small" piracy sites could make more than $100,000 a year from ad space sold to major brands, the report said, because they don't pay for their content. The profit margins of the sites examined could range from 80% to 94%, based on the costs typically associated with maintaining such sites, which include hosting fees and human resources.

Take zzstream.li, for example, which helps users unearth and stream unlicensed video owned by companies including Home Box Office Inc., Warner Bros. Entertainment Inc. and Lions Gate Entertainment Corp. In March, it featured advertising for brands including Kraft, Toyota, Target, Honda, Lego and Claritin. The site reached 1.34 millioni people in March, according to online measurement firm com Score.

I had the privilege of speaking a couple of weeks ago at a Cato Institute briefing on whether it is wise or appropriate to include intellectual property protection in trade agreements, specifically in the Trans-Pacific Partnership (TPP), the major trade agreement that is currently in a pretty vital stage of negotiation. The name of the event was "Intellectual Property in the Trans-Pacific Partnership: National Interest or Corporate Handout?" It was kind of Bill Watson at Cato to invite me to participate, and you can see the video of the event on Cato's website here. You can also see my Powerpoint slide deck here.

My role at the event was to speak from the perspective that intellectual property protections should be part of such trade agreements. I was in the definite minority, as both the other two panelists and the moderator are all skeptical of IP protection in general, and certainly don't think we should be using trade agreements as leverage to ask our trading partners to raise their IP protection standards. But I was happy to play that role.

A few hours ago Francis Gurry won re-election (technically, re-nomination) as Director General of the World Intellectual Property Organization (WIPO) in Geneva. This is a good thing.

My sources tell me Gurry received 46 votes on the first ballot, 4 votes over an outright majority. At this, the Estonian (7 votes) and Panamanian (10 votes) nominees withdrew.

What would normally then have happened is a second ballot, but after seeing Gurry’s large initial vote, some of the African Group went to the nominee from Nigeria, who had received 20 votes, and told him they were going to switch to Gurry, undoubtedly because they wanted to go with the winner. At this, the Nigerian nominee withdrew, so Gurry was nominated by consensus.

When President Obama performed his infamous “You didn’t build that” soliloquy during the 2012 campaign, it obviously hit a nerve. Not because there was anything particularly outrageous with the point he was trying to make, but rather because the phrase was seen to be a revealing slip, and seemed to confirm what many had long suspected about Obama—that he had a dismissive attitude toward the traditional American value of the rugged individual who, though hard work and determination, built a successful business. Your success is not due primarily to your hard work and sacrifices, you see—it’s mostly due to everyone else. Really, we all out here sitting on our behinds are responsible for your success, and we don’t recall seeing any dividend checks lately from you. So it’s time to pay up.

Parents don’t raise children, you see—schools and institutions do. Entrepreneurs don’t build businesses—taxpayers and government bureaucrats do. It takes a village, remember?

It’s just a slight step from there to conclude that, since you don’t really get the credit for your success—since we all really had more to do with it than you did—it really ought be us, not you, who gets to say how your capital gets used. After all, you didn’t build that. Next thing you know, we’re wresting control of the means of production from the capitalists, because after all, they didn’t build that—the collective we did.

This is crap. The creator and builder has always been an American hero to all but that small, disgruntled minority that believe you must take from the creator to redistribute to others. In capitalism, as in any moral system, the builder and inventor and creator is a hero, and is deserving of his or her success. Because their success is simply the fruit of their labor, and everyone is entitled to the fruit of their labor as their possession. It doesn’t get much more basic than that.

But the mob still lurks out there, demanding that they are a better judge of how the fruit of your labor should be deployed than you are. I’ve long argued that the primary locus of this essentially nihilistic and even Marxist thinking is today being focused on intellectual property, and I’m sad to say that the latest iteration showed up in, of all places, the editorial page of The Wall Street Journal. Specifically, in “Sorry, Writers, but I’m Siding With Google’s Robots,” a February 7^th op/ed by James Panero, a thirty-something art snob who, ironically, doesn’t seem to have a very high view of art—or at least of art that is protected by copyright.

Today, the U.S. filed an official complaint with the World Trade Organization (WTO) against India for its domestic content requirements for solar panels.

Domestic content requirements are prohibited in most cases under WTO agreements.

Of course, the details of this dispute relevant to the solar panel industry are important. But this dispute takes place in a much wider trade dispute context in which India has been purposely ignoring and violating the rights of intellectual property rights holders as part of their domestic industrial policy. Particularly in the area of prescription drug patents.

As Sally Pipes writes in Forbes:

Over the last two years, the Indian government has attacked pharmaceutical patents with increasing aggression. In March 2012, it issued its first “compulsory license” for a kidney-cancer drug made by Bayer AG. A compulsory license allows firms to make generic copies of drugs supposedly still protected by patents in exchange for a licensing fee set by the government. The patent holder has no say in the matter.

Later that year, the Indian government revoked Pfizer’s patent on Sutent, which treats gastrointestinal tumors and advanced kidney cancer. No other country has taken such an action.

And in early 2013, India’s Supreme Court denied patent protection for Glivec, which is used to treat leukemia, despite the fact that it continues to be protected by patents in almost every other country.

To date, India has issued compulsory licenses or revoked patents for eight advanced pharmaceuticals.