Our intellectual property (IP) laws are not a Deep State bureaucratic conspiracy. Patents, copyrights, trademarks and trade secrets are all based on the Copyright Clause in Article 1, Section 8 of the Constitution. It’s the only clause in the Constitution that comes with its own justification, and intellectual property protection is one of the few legal regimes that points directly to a specific constitutional provision.

IP protections incentivize creation and innovation because they allow creators at least the possibility of profiting from their creations if they turn out to have any value. Even if the creation has no real market value, IP protects creators from having others steal and take credit for their work.

So, IP incentivizes creators, and thus facilitates the constant production of new innovative products for the general public. But IP creates barriers for freeloaders, thieves and opportunists. There’s always someone out there who thinks they can make better use of your property than you are, or who wants to make money without accounting for all the costs of doing business. Intellectual property protections are barriers to those who wish to gain something based on the property of others without compensation, whether that something is financial or political.

Over the past 20+ years there have been a lot of threats to copyright and patent. Internet piracy, digital piracy, and file-sharing technology all threatened first the music industry and then the movie industry. A campaign by international non-governmental organizations (NGOs) blamed patents for high drug costs, failing to recognize that, without patents, the drugs wouldn’t exist in the first place. Public policy should never prioritize the allocation of creative goods at the expense of their creation.

The good news is that policy makers mostly resisted the calls to weaken IP, and thus today we have access to almost unlimited libraries of recorded music and video, at affordable prices. And we have new drugs that are saving and extending lives, curing diseases, and making life more enjoyable.

But sadly, during Donald Trump’s second term, his administration’s policies have repeatedly threatened IP protections, and thus continued innovation.

Consider drug pricing. The Trump Administration’s May 2025 executive order on “most-favored-nation” pricing for prescription drugs insists that Americans pay no more for certain drugs than the lowest price offered by a set of other countries. This policy effectively adopts the price controls of other nations. Government-imposed price ceilings function as a backdoor taking of patent value, and will discourage future risk-taking in pharmaceutical innovation.

Patents are how we finance the expensive, failure-prone work of discovering and improving new therapies. Even Congress’s own research arm notes that legal issues may arise from the policy’s interaction with intellectual property rights—“particularly patents”—because patents play a central role in drug development.

Now turn to copyright & AI. In April 2025, tech billionaires Jack Dorsey and Elon Musk made headlines by calling for the radical dismantling of the intellectual property (IP) system—urging us to “delete all IP.” That’s because large language models (LLMs) are greedy for content to train on and regurgitate. Those investing in AI want to eliminate any friction for their efforts, but IP rights cause friction by design—they make it hard for creators to be trampled.

We’re bullish at IPI on AI, but AI’s potential doesn’t mean it should get a special carve-out from using the property of others without compensation.

In reaction, the U.S. Copyright Office appeared to accelerate release of its “Copyright and Artificial Intelligence Report,” which in Part 3 found that AI training typically entails copying protected works and that fair use exceptions, if any, must be assessed with close attention to purpose and—critically—market substitution. The Office also recommended letting licensing markets develop rather than having government impose sweeping “solutions” such as compulsory licensing regimes.

This was early in Trump’s second term, when AI bros had the President’s ear. Next thing you know, President Trump fired Librarian of Congress Carla Hayden on May 8, 2025, and Shira Perlmutter—the Register of Copyrights—was dismissed days later. Multiple reports note that observers and lawmakers linked the timing to the Copyright Office’s AI report, which seems likely if not at least suspicious. Even if motives are debated, politicizing the institutions that administer copyright chills the very stability that property rights require.

Then in President Trump’s July 23, 2025 speech announcing an “AI Action Plan,” the President argued that you “can’t” have a successful AI program if you must pay for “every single article or book,” and urged that AI be allowed to use a broad “pool of knowledge” without constant licensing negotiations.

Dismissing copyright because it makes business more complicated may seem to a businessman like a commonsense idea, but what about to the businesses that own that copyright? Should it be official government policy that one industry can steal from another? Is that equality under the law? Obviously whatever access AI has to copyright material has to balance the interests of the copyright owners, through licensing or some other system. The courts are already dealing with these issues and will be for years.

Finally, the spillover risk extends beyond patents and copyrights. Broad “eliminate information silos” directives that mandate “full and prompt access” to information can erode confidence that proprietary business information will be handled with strict need-to-know discipline—exactly the confidence trade secret protection depends on in practice. And workforce edicts that increase patent and trademark pendency at the USPTO weaken brands and inventors by delaying the moment when rights become reliable and enforceable.

America can lead in AI and improve affordability without degrading the rule-of-law foundation of innovation. But that requires a simple, old-fashioned commitment: respect intellectual property as a source of creativity and economic growth, not as a barrier to be overcome.

And beware when certain industries are cozying up to an administration in order to gain advantages over other industries.

We’ve written before about the decision of Warner Bros. Discovery to put all or a portion of the company on the auction block.

In that piece we primarily argued that the government should allow a transaction to take place within the consumer welfare standard. Mergers and acquisitions should be permitted so long as there is not a threat to harm consumer welfare by allowing too much concentration of market power.

We also observed that conservatives should probably prefer a Paramount Skydance purchase of the Warner Bros. assets, including the fascinating possibility of news network CNN being owned by a conservative-leaning Paramount Skydance.

Most observers thought Paramount Skydance was the suitor most likely to be successful.

But yesterday’s news threw everyone a curve. Turns out Warner Bros. Discovery accepted Netflix’s bid, even though it was reportedly for a lower price per share. According to the Wall Street Journal, Warner Bros. Discovery preferred the idea of retaining its cable networks, while Paramount Skydance’s higher offer included purchasing them as well.

A Netflix purchase of Warner Bros. Discovery should concern those who value market competition. A marriage of Netflix and Warner Bros. would have more than twice as many subscribers as the second largest competitor.

It should also concern fans of the theater experience. Michael O’Leary, the CEO of Cinema United (and longtime friend of IPI) has said that “such a transaction ‘poses an unprecedented threat to the global exhibition business.’” Noted director James Cameron has said that Netflix buying Warner Bros. would be a “disaster.” And he’s got reason to be concerned—Netflix CEO Ted Sarandos has publicly stated that theatrical films are dead and that the theater experience is an “outmoded idea.”

Here's the thing—Paramount Skydance’s offer poses no antitrust concerns. If anything, it enhances competition, and could bring some much-needed reform to the news media business. Netflix’s purchase, on the other hand, merits thorough antitrust review because it would create a dominant player dwarfing its competitors.

And a little appreciated detail of the studio business is that Warner Bros. sells its shows to several different network and streaming services, whereas Netflix tends to keep its shows in-house. So Netflix’s control of the Warner Bros. catalog and creative output might well also be stewarded in a way that inhibits competition.

Sen.Elizabeth Warren tends to always oppose mergers of any kind, so it’s no surprise that she also opposes the Netflix purchase of Warner Bros. Discovery. The thing is, “even a stopped clock is right twice a day.”  Given the assumption that President Trump also favors Paramount Skydance, this might be one of those rare occasions where President Trump and Sen. Warren might find common ground and say “pass the popcorn” while the Justice Department considers the threat to competition posed by a combination of Netflix / Warner Bros. / HBO / DC Studios.

The Trump administration has been very active in AI policy since he assumed office. Nearly a dozen Executive Orders have emanated from the White House, and on July 23^rd the President gave a speech introducing the administration’s 28-page “AI Action Plan.”

There’s a lot of good in the plan, and this post is not intended to be a detailed critique of the plan. A federal pre-emption of state AI regulation is an important feature, although the President can’t just declare it—that requires federal legislation. A provision banning state AI regulation was in the penultimate version of the “One Big Beautiful Bill Act” (OBBBA) but was stricken at the last minute at the request of Tennessee Sen. Marsha Blackburn.

Copyright protection has been a hallmark of Sen. Blackburn’s public service, and for good reasons. Not only does represent the songwriting capital of the world, Nashville, but copyright protection is a critically important area of policy. Trump is right, and Sen. Blackburn is wrong, on federal preemption of state AI regulation.

We at IPI take a backseat to no one in the defense of copyright, a topic we’ve covered for almost two decades. IPI is an accredited NGO with the World Intellectual Property Organization (WIPO) in Geneva, Switzerland, and for several years IPI sponsored the leading World IP Day (April 26) policy event in Washington DC.

So we’re big on copyright.

All of copyright is a balancing act between the rights of creators and ease of public access (notice I didn’t say “the rights of consumers,” because no one has a right to someone else’s property). But there can’t be any discussion of balance until the fundamental right of creators to own and control their creations is acknowledged, and certainly not disregarded.

That’s why President Trump’s comments on copyright and AI are so troubling. No one expects Trump to be an expert on intellectual property law, but the sentiments he expressed would be very dangerous to the U.S. economy.

President Trump said that we can’t expect copyright holders to be compensated for their work by AI companies because “China’s not doing it.” Well, there’s a lot of individual rights that China doesn’t respect, but we aren’t tossing our individual rights because of competition with China.

Trump also seemingly belittled the idea that every time someone reads a book, they have to pay something for it. But, actually, usually we do. You may have bought the book, or someone else bought the book and gave it to you. Perhaps you borrowed it from a library, in which case the library paid for the book under a licensing arrangement with the publisher.

If you’ve viewing a book or article online, chances are you are either paying for it with a subscription, or paying for it by subjecting your eyeballs to advertisements. We do, in fact, almost always pay something in order to read a book or an article.

This post is not intended to be a detailed prescription for balancing the rights of copyright owners with the AI innovators. That’s going to take a lot of work and probably a number of court cases.

But here’s is what is obvious: 

• It cannot be that, because China doesn’t respect property rights, neither should we if we want to compete.
• It cannot be that the rights of one set of creators get tossed in favor of the rights of another set of creators.
• It cannot be that we dispose of a proven system of rights because the demands of an emerging technology.

There has always been a tension between copyright and technology, going all the way back to the printing press, but especially since the emergence of the internet. We’ve had to figure out the balance between rights and search engine indexing, rights and streaming, rights and music sharing, and especially piracy. It should be no surprise that there is a tension between those training large language models (LLMs) and copyright holders.

It's a balance that we will be able to solve.

And inputs into LLM training is not the only tension between AI and copyright. Buckle up.

Below is a transcript of the portion of President Trump's July 23, 2025 speech on his administration's new AI Action Plan. This excerpt captures his comments about copyright and AI.

. . . 

"And that begins with a commonsense application of artificial and intellectual property rules.

"It’s so important. You can’t be expected to have a successful AI program where every single article, book or anything else that you’ve read or studied, you’re supposed to pay for. “Gee, I read a book. I’m supposed to pay somebody.”

"And we appreciate that, but you just can’t do it because it’s not doable.

"And if you’re going to try and do that, you’re not going to have a successful program. I think most of the people in the room know what I mean.

"When a person reads a book or an article, you’ve gained great knowledge. That does not mean you’re violating copyright laws or have to make deals with every content provider. And that’s a big thing that you’re working on right now. I know.

"But you just can’t do it. China’s not doing it. And if you’re going to be beating China—And right now, we’re leading China very substantially in AI. Very, very substantially. And nobody’s seen the amount of work that’s going to be bursting upon the scene

"But you have to be able to play by the same set of rules. So when you have something, when you read something, and it goes into this vast intelligence machine, we’ll call it, you cannot expect to every time, every single time say, “Oh let’s pay this one that much. Let’s pay this one.” Just doesn’t work that way. Of course, you can’t copy or plagiarize an article, but if you read an article and learn from it, we have to allow AI to use that pool of knowledge without going through the complexity of contract negotiations, of which there would be thousands for every time we use AI."

While the piece appeared in the May 3^rd edition, I knew it had gone live Sunday evening around 8pm because I suddenly started getting vitriolic Twitter traffic in response to it. And it’s still going on strong 24 hours later. I have had many hundreds of tweets trashing me and the piece, questioning my motives, my intelligence, my knowledge of the issue, my research skills, my honesty, my integrity, my Christianity (yes), etc.

Reactors to the piece on social media fall into one of three categories:

• Friends in the IP policy world who praised and shared the piece,
• Hordes of Twitter keyboard warriors with single-digit followers bashing the piece and insulting me personally BUT focusing on extraneous issues, and
• One guy, Louis Rossmann, who is apparently the guru of Right to Repair. He has a YouTube following of 1.5 million subscribers, and apparently his meaning in life is Right to Repair.

Within an hour of my piece going live, Mr. Rossman had recorded a YouTube video trashing the piece, trashing me, trashing the arguments, and etc.  Have a look.

Look, I’m not new at this. Part of the fun of being in the arena of ideas and making arguments is the response you get. But it’s IMPOSSIBLE to respond to a 24 hour flood of Twitter criticism, and inefficient and counterproductive to try to do so. So this blog post comprises my responses.

Writers know this, but most people probably don’t: Authors don’t get to choose the titles and descriptions of their pieces. That right is reserved to the publication, and they have the right to title it and market it in whatever way they think will get the most traffic. 

If you read the article, my op/ed focused on the importance of intellectual property and the offense against intellectual property (and thus incentive to innovation) by forcing disclosure of patented and proprietary information. The most recent iteration of this campaign is with medical devices, but it’s already worked its way through consumer devices like cellphones, automobiles, and agricultural equipment.

A TERTIARY argument I made in my piece was the health and safety angle, but the Journal chose to focus on that angle, so the Journal titled the piece “Right to Repair Is Bad for Your Health” and described it as “Do you want a PET scan from a machine with unauthorized adjustments?”

Now, were it up to me, that’s not the direction I would have gone with the title and description, but that’s their prerogative. But because the Journal chose to title it that way, 98% of those objecting to the piece have focused on the health and safety argument, have tried to cite FDA regulations, have sent me copies of FDA documents, etc.

So 98% of the objections and criticisms were directed at a MINOR argument that I made, rather than the major argument (IP). The secondary argument, by the way, was cybersecurity.

So look: If you’re going to unload on an author for something, maybe take on their main argument, rather than focusing on a minor argument?

And of course the old “Who paid you, you rotten corporate shill?” argument.

If only.

Folks, that’s not how it works at IPI and at most principled policy organizations. We are not for sale. We have a set of principles we adhere to and an issue set on which we have expertise. If people like our work, they might hopefully choose to support us. But we NEVER take a position based on funding. Never. I’ve turned down funding more times than I can count because someone was asking us to get involved on an issue we didn’t care about or take a side that we didn’t believe in.

It’s not:

1) Money is dangled in front of our eyes

2) We take on a new client and do whatever they want us to do.

It’s:

1) We’ve identified an issue we think is important

2) Our principles lead us to a particular conclusion

3) We do policy work on that issue based on our principles

4) We HOPE people choose to support our organization based on our work.

5) If we get enough support, we’re able to do MORE work on that issue.

That really is how it is. If you are going to take issue with something we’ve written, or said, deal with the arguments made, not the source of support. I have news for you: EVERYONE in policy and politics is being supported by people who like what they do.

A great deal of the criticism was simply name-calling by people with single-digit Twitter followers. Might I suggest that might be the reason why you have only single-digit Twitter followers?

Lots of folks had fun questioning and attacking my research skills, my knowledge of the issue, my IQ, etc.  What they don’t know is that we at IPI have been working on intellectual property issues for 20 years, and specifically on Right to Repair for at least a decade. I’ve sat across the table with Right to Repair lobbyists (yes, they also employ lobbyists!) and listened to their arguments more times than I can recall.

It's not that I don’t know what I’m talking about, or don’t know the issue. It’s that we disagree. Simple as that. And the likelihood, frankly, is that I know more about the issue and have spent more time researching it than YOU have.

Some folks railed about how I was a lousy journalist. Folks, I'm not a journalist. It was an opinion piece, not a reported piece. It also wasn't a blog post (THIS is). You know it's an opinion piece because of where it is placed in the Journal. Also, for those complaining that I didn't cite sources, you don't footnote op/eds.

Also, a lot of criticism was along the lines of somehow I didn’t think anyone had the right to repair anything other than the manufacturer, which is not an argument I made. I take my car to Firestone, I take my various phones and tablets to CPR Phone Repair, etc. I’M NOT AGAINST THE REPAIR INDUSTRY and I wrote nothing of the sort. My piece is focused exclusively on the idea that manufacturers have the right to guard their intellectual property, and if that makes it more difficult for third-party repair services, that’s just a price I think we have to pay. We unapologetically take a very high view of intellectual property protection here at IPI; that’s one of our principles, and so that’s where we end up on the Right to Repair issue.

Yes, I get that some of you work on your own cars! I simply used the increased complexity of today’s automobiles as an introduction to the idea that everything is getting more complex. I wasn’t insulting all you grease monkeys out there.

Finally, Mr. Rossmann. Dude, congratulations on your 1.5 million followers. Seriously. Congratulations. That’s an accomplishment you are obviously proud of. But look: If your meaning in life comes from your campaign for Right to Repair, then I don’t expect you to like my op/ed. It’s not much more complicated than that. On this issue we’re adversaries, but probably not on every issue. That’s just how it is.

When we engage in the arena of ideas, we’re hoping to persuade the persuadable and provide arguments to people who already agree with us. We don’t expect to change the minds of people who are passionately on the other side of the issue.

Okay, so that's my attempt to address the various criticism of the piece. Of course, I don't expect many of those complaining to care enough about the actual issue to interact about my responses. Nonetheless.

In April 1902 the first permanent movie house, the Electric Theatre in Los Angeles, opened its doors. People started leaving their homes to go to the movies. More than 117 years later legal video streaming has empowered people to watch video anywhere they want. Consumers clearly value mobility as evidenced by streaming subscribers now being more numerous than paid television subscribers.  

During this era of seemingly endless video choices, and options of where to watch it, one specter looms: Digital piracy continues to grow, threatening the very innovation that has brought us so many options.  

According to a recent U.S. Chamber of Commerce study, “Eighty percent of digital piracy is now due to streaming, largely encouraged by the widespread proliferation of piracy devices and apps that make pirated content easier to access.”  

Piracy has gone mobile in more ways than one. According to same report, “Overall, approximately 26.6 billion viewings of U.S.-produced movies and 126.7 billion viewings of U.S.-produced television episodes are digitally pirated each year, mostly from outside the U.S.” 

The pirates are making out like, well, pirates. While the movie and television production industry accounted for $229 billion in domestic revenues and supported 2.6 million U.S. jobs, piracy stole more than an additional 10 percent, totaling $29.2 billion, in reduced revenue each year—resulting in lost job opportunities and economic growth. 

In the nearly 113 years since the first music broadcast via radio (“O Holy Night,” played on the violin by Reginald A. Fessenden), music has also become increasingly mobile‑and the pirates increasingly inventive. Streaming music must contend with “stream ripping,” taking a song from a streaming service and turning it into a permanent download. 

According to the International Federation of the Phonographic Industry, last year the global recorded music industry clocked in at $17.4 billion, with digital revenues accounting for nearly 60 percent of the market. Streaming music continues to power the growth of the music industry, which grew by nearly 10 percent, marking the fastest growth in 20 years. Yet, the growth could be faster. Forty percent of internet users access unlicensed music content. 

The Consumer Technology Association projects that in the U.S. alone, consumers are expected to spend $26 billion on movie and music subscriptions this year, an increase of more than 27 percent, and twice that of 2017. Music streaming itself is expected to increase another 33 percent in 2019, after increasing 34 percent in 2018, with revenue ramping up as well. Piracy will follow. 

Copyright piracy is just plain theft. Those who engage in it are greedy criminals stealing the property of others for their own benefit. But the damage to employees, artists and creators, the industry and the U.S. economy are real. The harm is not just to those who invent, create and innovate, but to us all if piracy reduces the incentive for artists and creators to write, record and imagine.

“We make intellectual property too hard sometimes,” he said. “We make it ethereal, it’s out there in the realm, only the experts know how to talk about it.”

“What happens is, when we actually need to make public policy on this, when we need to explain to the American public why we are doing this, or actually have their buy-in into this, then it’s hard for us to understand.”

“But the reality is all of intellectual property, no matter where you actually start, comes back to the simple idea that we’ve been teaching since kindergarten—and that is to think for yourself,” said Collins. “To find new ways. To find solutions. To find things that make a difference in people’s lives.”

“Strong intellectual property protections are not a hindrance to creativity, they are the reason for creativity. They are why we are the country that we are.”

The Index is an attempt to rank 50 countries based on their IP systems, under the assumption that stronger IP protections are positive for encouraging innovation and investment in a country. Many studies have demonstrated that higher levels of IP protection correspond with higher levels of foreign direct investment and the resultant economic growth, and the Index also contains some of that data.

The Index also contains a section talking about general international IP trends, which in general are not good. While some developing countries are seizing the advantage of stronger IP protection (India, Brazil, Argentina), many countries are undermining IP protection (Chile, Colombia, Peru, Russia).

In the US, which has been slipping in the rankings because of some unfortunate Supreme Court decisions and the PTAB process at the Patent Office that has been cynically abused to invalidate patents, things have turned back up. The new USMCA trade agreement (as yet not adopted or implemented) increases IP protection, but the major fact that lifted the US from 12^th place to 2^nd place in the patents ranking is the change at the top of the U.S. Patent Office. New Director of the Patent Office Andrei Iancu has implemented significant, pro-patent procedures throughout the Office but especially in the PTAB process, which has restored the process to something approaching its original intent, instead of the abusive way it operated under the previous USPTO regime.

The problem with such improvements, of course, is that they are easily undone by a future administration, which means we still need legislation like the Stronger Patents Act to use the force of law to either eliminate the PTAB process, or lock-in the higher standards imposed by Director Iancu. Such legislation should reverse some of the recent Supreme Court patent decisions as well.

Joining CGTN America’s The Heat, IPI’s Dr. Merrill Matthews said the threat of additional tariffs is a “huge gamble” and not even the important issue.

“The bigger issue for President Trump is tech transfer and the IP theft in China,” said Matthews.

“It’s widely believed in the U.S. that the Chinese government is simply not putting enough pressure on tech transfer and IP theft it should be,” he said.

Noting the significant economic risks for additional tariffs, Matthews suggested China and U.S. consider a different course.

“Trump says he wants China to lower its tariffs. If I were talking to President Xi, I’d say: 'Call his bluff.' Trump has said to the G7: I want to go to zero tariffs and trade barriers… I’d suggest President Xi ask for the same deal. If you were to do that, you’d either call his bluff or you’d get us on the right path.”

Watch the full interview here.

Currently, the IP-intensive industries comprise 58 million jobs in our economy, and these are not just average jobs. The wages for these jobs, more than $67,000 a year, are 46% higher than for jobs in non-IP industries. But those high wages and satisfying careers do not just happen magically.  What is the secret sauce? Innovation.

The higher pay in these IP jobs is because productivity in IP industries is higher per person than in other industries. Companies reward that success by paying more. These industries invest more in research and development--dramatically more—than other industry sectors do. More research and development leads to more new and innovative products to sell around the world. As consumers adopt these cutting-edge products, employers can hire more people to be more productive at higher wages creating great careers.

Higher productivity not only means higher paying jobs, but enhanced global competitiveness for the U.S. economy. It’s not a stretch to conclude that the IP-intensive industries are the keys to the future of the U.S. economy.

So, when something like “TickBox” appears, we all need to pay attention.

The “TickBox” is a sort of “Kodi Box.” A Kodi box is a small black electronics box that is merely an open-source media player. However, it allows users to modify it with a variety of software, including software that enables the easy streaming of pirated content. TickBox actually comes loaded with this theft enabling software ready to go and accessible for even the most novice of technology users. And in case a potential buyer missed the point, the box has been expressly marketed as a way to stream videos from the web “for free!”

As the LA Times explains, “TickBox relies on software called Kodi, an open-source media player that developers can modify with apps for watching films and TV. Kodi technology itself, which is maintained by software engineers who work voluntarily, is legal and has legitimate uses, experts said. Some people use it as a convenient way to access content from licensed sources.

But the technology also makes it vastly easier for consumers to watch pirated movies, TV shows and sports. A TickBox device, which connects to a TV, directs people to load software add-ons that allow users to search for movies and television programs online and watch them without paying. The add-ons scrape video content from websites to stream video, including live TV and sports, from the internet without authorization.

The ethical problem here seems clear: Creating a device and then actively encouraging its use to commit theft is wrong. But in addition, this theft comes with damage to the economy, as an economy depending on IP for its economic future cannot tolerate widespread IP theft.

It’s good and proper to draw attention to the theft by China and other countries of U.S. IP. But what about IP theft happening here in the U.S., right out in the open?

This theft targets a key pillar of the U.S. economy, and puts at risk some of those solid jobs and great careers. 

If you’re interested in some of the work I’ve done on IP and trade, here’s a little:

• In 2014, during the Trans-Pacific Partnership (TPP) discussions, I spoke as a panelist at a Cato Institute event. The panel was pretty much stacked 3:1 against me, and I think I held my own pretty well. It’s one of the more fun things I’ve done in policy in the last couple of years.
• Why Intellectual Property Should be Included in Trade Agreements

Anyway, recently, the anti-copyright coalition Re:Create’s Executive Director Josh Lamel wrote an op-ed in “The Hill” claiming creative industry calls for modern, strong copyright provisions in NAFTA that reflect lessons learned about internet ills since the DMCA was enacted in 1998 “would cripple the creative economy and the internet economies.”

To support his bizarre and counterintuitive assertions, Lamel relies on dubious claims and ends-driven research. To help everyone see through Re:Create’s artifice, I set the record straight below.

Bottom Line: Copyright is critical not only for promoting American creativity and powering the diverse array of U.S. sectors that rely on it, but is also vital for driving U.S. economic growth, growing good American jobs and fueling a healthy balance of trade.

MYTH #1: Hollywood wants U.S. trade negotiators to believe that they alone represent “creators.” Yet they continue to neglect the interests of millions of creators who create using online platforms.

REALITY: Digital platforms do not speak for creators. More than 20 music industry groups and CreativeFuture—a coalition of more than 500 companies and organizations from across the creative industries, and more than 120,000 individuals—were among those who called out these absurd claims in various letters to the U.S. Trade Representative. 

Further, creators of all types, regardless of the medium they choose for distribution, rely on copyright and other IP protections to be compensated for their work. That’s why online platforms Lamel lists like Etsy, SoundCloud, Shapeways, Instagram and ebay all have IP policies, Terms of Use and Community Guidelines in place to entice creators to use their services.

But pointing to those services is intentionally misleading. All creators, whether users of those platforms or other distribution channels, are hampered in stopping websites dedicated to IP theft from distributing their creations because of abuse of safe harbors. Indeed, In March 2016 Google Search received 75,000,000 takedown notices, or over 100,000 every hour. And in 2014 Grammy Award Winning Composer Maria Schneider testified before Congress that she now spends more time trying to protect her work than creating music because of the toothless nature of the DMCA’s notice and takedown process. 

MYTH #2: The old economic model — where creators had to enter complex deals with big studios and record labels to distribute their content — has been supplemented by a new world of tools for creativity and distribution.

The notion that new online platforms free creators from the drudgery of “complex deals” is silly. While it’s true that online platforms like YouTube allow creators to monetize their content, they require creators to sign one-size-fits-all contracts to use their platforms. And the alternative to those terms is, essentially, “take this, or have it stolen online and get nothing.”

Or perhaps the “complex deals” Lamel is referring to are the hard-won collective bargaining agreements achieved by creative industry workers with mainstream producers and distributors? Those agreements allow for creative workers to make a living, support their families and educate their children—something “new world tools” offer only to a precious few.

The paternalistic assertion that limiting the contractual freedom of creators is something they should be grateful for should be dismissed out of hand.

MYTH #3: Fair use industries equate to 16 percent of the U.S. annual economy … Meanwhile, a recent study found that weakened safe harbors would result in the loss of 425,000 American jobs and $44 billion in U.S. GDP each year.

REALITY: This is the one that most drives me up the wall, because those studies, produced by anti-copyright trade groups CCIA and the Internet Association, are misleading. The CCIA report counts the recording, film, TV, book publishing, video game and other copyright dependent industries in their calculation of the “fair use” economy. Just as they call for the exception to swallow the rule in practice and law, their economic calculations are based on the exception and ignore the rule. Those calculations also fail to substantiate a tangible economic problem, ignoring the fact that the companies represented by such anti-copyright trade groups have greater market share outside the United States than they do here.

Pointedly, the most common basis of a fair use defense is that the use is non-commercial. How can there be billions of dollars of economic production based on fair use, if fair use is by definition non-commercial?

Moreover, credible, independent research by the Phoenix Center for Advanced Legal & Economic Policy Studies Chief Economist Dr. George Ford has made plain the costs to content owners of ineffective notice and takedown procedures. And further research by Ford demonstrates that abuse of safe harbors is costing the recording industry up to $1 billion in lost licensing revenue on YouTube is the U.S. alone.

MYTH #4: U.S. wholesale revenues from music increased 9.3 percent in 2016 … Online streaming and other online platforms like Netflix, YouTube and Hulu actually help drive down infringement and theft — despite Hollywood claims.

REALITY: The music industry is finally seeing growth after watching their revenue plummet for years. From 2001-2015, U.S. recorded music industry revenues went from almost $14 billion to $7 billion. During that same time period, Google went from receiving thousands of takedown notices annually to more than 1 billion in 2016 alone.

Furthermore, legal online options for content are ubiquitous. There are over 400 legal online video services and more than 400 authorized sites worldwide for music. Lamel’s assertion that piracy can be solved merely by more legal availability is a red herring. For instance, it was recently reported that the season seven premiere of “Game of Thrones”— which was available online globally at the same time it premiered on television—was viewed illegally a staggering 187.4 million times. It was viewed legally 16.1 million times.

MYTH #5:  81 percent of venture capitalists indicate that stronger safe harbor provisions are more important than strong economic conditions in deciding whether or not to invest.

REALITY: This Google-commissioned survey asked 189 angel investors and 24 venture capitalists if increased legal liability for online platforms might make them less likely to invest. No shock here: they answered yes.  

But as I previously noted in a blog about a similar survey:

“The notion that investors account for legal liability as they choose their investments isn’t insightful or new. And the idea that a VC might choose not to invest in a new business built on facilitating access to unlicensed copyrighted content shouldn’t be either …

Copyright laws aren’t written to reduce risk for billionaire VCs – they’re written to incentivize the creation of new cultural works, which benefit us all. In fact, when VC’s want to invest, they are reassured by strong patents. So it’s not at all surprising that VCs would want strong intellectual property protections for their investments but weak rights for those they intend to consume. But don’t those on the other side of the transaction naturally want and deserve similar intellectual property protection? …

In other words, if you’re a VC investor in content rather than in digital intermediaries, you have a whole different attitude toward copyright.”

Canada’s Promise Doctrine, wholly invented in Canada and finding no basis in domestic or international patent law, turns out to not have even been consistent with Canada’s own Patent Act, according to the Supreme Court, which stated that “The Promise Doctrine is incongruent with both the words and the scheme of the Patent Act.”

Instead of simply granting a patent based on a non-obvious and useful inventive step, the Promise Doctrine insisted that a drug must be able to meet the nearly impossible test of predicting exactly how the product will be useful and then living up to that standard at the time the patent is applied for. This means that a court could be highly subjective in determining that a given patent did not live up to that standard at a time long after the patent was granted, which Canadian courts have been doing, invalidating 26 patents over the last decade based on this faulty Promise Doctrine.

The US Chamber has an excellent statement on the ruling, and Philip Stevens and Mark Schultz at the Geneva Network have a great explanation how the Promise Doctrine (now defunct) threatened innovation in Canada and beyond.

Canada’s Supreme Court apparently understands the importance of not weakening patent protection. Unfortunately, the US Supreme Court seems determined to go in the opposite direction, which is why Congress is beginning to contemplate new legislation to strengthen patent protection in the US.

We will kick off our policy forum at 2:00 pm on Tuesday, April 25 in the Symposium Room at the Reserve Officer's Association (ROA) Building on Capitol Hill in Washington DC. The policy conference will be followed by a reception downstairs in the atrium at 4:30 pm. Click here to register.

The UN High-Level Panel on Access to Medicines recently recommended weakening intellectual property protections that drive and sustain biopharmaceutical innovation. Panelists hope their proposals will make it easier for foreign companies to create knock-offs of treatments researched, developed, and manufactured in America and distribute them around the world.

The Panel's misplaced focus on intellectual property resulted in a series of damaging recommendations that would suffocate medical innovation and stunt economic growth in Texas and across the nation -- all without helping patients one bit. Patents and other intellectual property protections are not barriers to access to medicines. The vast majority of treatments on the World Health Organization's Essential Medicines List are no longer protected by patents, yet millions of people around the world do not have access to them.  

Innovation is expensive and risky. Bringing a new drug to market takes an average of a decade and costs roughly $2.6 billion.1 Additionally, only one out of every 5,000 promising compounds makes it out of the lab and through clinical trials to receive FDA approval. And just twenty percent of approved drugs ever turn a profit.2

Strong IP protections allow inventors to profit from their rare successes by restricting copies for a limited amount of time. That's essential, especially given that these companies need to earn back not just the development costs of the successful drug, but of all the ones that failed too.

Weakening IP rights would make it all but impossible for a company to recoup these losses. As a result, it would destroy the incentive to invest. That means fewer new medicines and treatments. The patent critics are concerned about how we allocate medcines, but you can't allocate something that hasn't been invented.

Weaker patents means less incentive to invest, and in the pharmaceutical world, that means less investment in research.

Cuts in research spending would devastate patients -- and the Texas economy. Texas has hosted more than 8,000 clinical trials in recent years.3 The Lone Star biopharmaceutical industry supports roughly 194,000 jobs.4 Indeed, the average state biopharmaceutical employee contributes about $614,800 to Texas' economy per year -- three times higher than the average non-biopharmaceutical worker's contribution.5

Texas' biopharmaceutical sector generates $52 billion in economy activity.6

If implemented, the UN High-Level Panel's recommendations would wipe out Texas jobs and prevent the development of many new medicines. That'd guarantee that patients around the globe have even less access to lifesaving treatments.

There has always been some cross-border traffic on pharmaceuticals, as drug prices in Canada can be cheaper than in the US. But the Medicare Part D prescription drug benefit, which came into effect in 2006, has significantly reduced this traffic by making prescription drugs available to seniors at more affordable prices.

There’s a reason why such importation is illegal today under most circumstances, and that’s because of safety. The rate of counterfeit drugs in other countries is staggering, and the only way to keep the counterfeit problem from infecting the US drug supply is through the rigorous inspection and supply-chain regime maintained by the FDA. And the FDA has repeatedly told Congress that it cannot guarantee the safety of drugs entering the US from other countries such as Canada, since it does not inspect those facilities. And when the FDA has been permitted to inspect overseas facilities, the results haven’t been encouraging, such as the extensive and discouraging history of the FDA with Indian pharmaceutical manufacturer Ranbaxy.

Some on the free-market side of the political spectrum argue that importation of prescription drugs is simply a matter of “free-trade,” which at least up until the last few months has been a persuasive argument when presented to Republicans. But, as professor Richard Epstein notes in an IPI publication noted below, importation of prescription drugs is actually a perversion of free trade, in that it rewards other countries for their price controls and socialized medicine systems, rewards them for their disregard for the patents of American drug companies, and would likely create shortages of much needed drugs in poor countries as their drug supply was diverted back to the US.

It would be bizarre for a new administration and Congress that intend to protect US manufacturers (and that includes drug manufacturers) from the unfair foreign competition of price controls, socialized medicine, and violations of US intellectual property rights, to begin by importing all of those offenses into the US through drug importation.

Yes, high prices on cutting-edge pharmaceuticals and biotech products are a concern on Capitol Hill. Efforts to address drug prices should be narrowly focused on factors that unnecessarily add to drug costs, and should not undermine patient safety, intellectual property rights, and continued US global competitiveness on prescription drug innovation.

Here’s the final take: Since the enactment of Medicare Part D prescription drug benefit, seniors are no longer clamoring for reimportation, and patient groups aren’t, either. It’s only Senate Democrats who are bringing up importation now, and it’s purely for political reasons. Reimportation is not the answer.

Here are some additional resources from IPI on importation of prescription drugs:

• Five Reasons to Oppose Reimportation, by Dr. Merrill Matthews
• Parallel Importation as a Perversion of Free Trade, by Richard Epstein
• The Free-Market Mirage of Reimportation, by Doug Bandow
• The Ethical Dilemmas of Prescription Drug Importation, by Dr. Merrill Matthews
• Reimportation: Trojan Horse, not Free Trade, by Doug Bandow
• The Impact of Drug Importation: The U.S. and Massachusetts, by Dr. David Tuerck, John Barrett, Douglas Giuffre, Zaur Rzakhanov

Well, a couple of days ago, Larry made a little Freudian slip on Twitter. Or perhaps it was entirely intentional. Regardless, it's instructive.

@thrashRadical @girlziplocked all “property” is imaginary. Some just gets your hands dirty.

— Lessig (@lessig) October 7, 2016

Wheeler's proposed rule would force pay-TV providers to transmit copyrighted content to third parties without obtaining the consent of the copyright holders, allowing the third parties to appropriate that content for their own commercial benefit and undermining the ability of programmers to create television and film content in the first place. 

Almost from the moment Chairman Wheeler announced his set-top proposal, it has been teetering over an abyss in the face of near unanimous opposition, including from small and large programmers, civil rights groups, television and film unions, individual creators, more than 180 Democrats and Republicans in the House and Senate, policy think tanks like IPI, and a bipartisan triumvirate of Chairman Wheeler’s own fellow commissioners.

In the face of the copyright issues, Chairman Wheeler asked the Copyright Office to brief FCC staff. Commissioner Jessica Rosenworcel and Rep. Marsha Blackburn have also received briefings. After hearing the Copyright Office’s concerns, Rep. Blackburn sent a letter—along with Reps. G.K. Butterfield, Doug Collins, and Ted Deutch—asking the Office to send Congress its analysis in writing.

Not waiting for the Copyright Office to issue its analysis, five academics have written what they claim is the only possible answer. Both in comments to the FCC and in a letter, they seek to frame the issue as only whether, at the very end of the process Chairman Wheeler envisions, consumers’ use of set-top boxes infringe on copyright holders’ copyrights. They simply ignore that the FCC proposal itself would already have abrogated copyright holders’ exclusive rights by compelling pay-TV providers to transmit copyrighted content to third parties in ways not authorized by the copyright holder, and potentially even in ways specifically prohibited by the copyright holders’ license agreement with the pay-TV provider. Many parties have made this very point in the FCC proceeding, including 10 copyright scholars in comments and a letter.

As you might have guessed, the five academics behind this campaign have track records on copyright that makes it fairly easy to classify them as IP skeptics. We've tangled with Prof. Tushnet at least once before.

Rather than addressing only one of many issues raised by Chairman Wheeler’s proposal, and stunningly trying to tell a federal agency what it may or may not report to Congress, the five academics might do well to wait for the Copyright Office to issue its written analysis before they criticize it. It's disappointing to see scholars, who normally welcome thoughtful discourse and debate, try to preemptively silence a respected government institution to further their own agenda. 

Today’s example is Priti Radhakrishnan, who runs an organization called I-MAK, which apparently stands for “the Initiative for Medicines, Access & Knowledge.” Well, aren’t those all three very nice things? I’m sure we can all get behind Priti.

So, in her latest article at Statnews.com, “Pharma’s secret weapon to keep drug prices high,” Priti rails against pharmaceutical patents, especially what she calls “secondary patents.” just as an aside, there is no such thing as a secondary patent. There is no distinction in patent law between “primary” and “secondary” patents. This is a disparaging term that is used by the anti-patent crowd.

Now, any clown can come up with an example of a bad patent. Priti has the nerve, however, to use Solvadi as her example, which is where we are going with all of this.

What is Sovadi? Sovaldi is a CURE for Hepatitis-C.  It’s a revolutionary medicine. First you had Hep-C, and you suffered and you died early. Now, with Sovaldi, you can be cured of Hep-C.

I emphasize this because, before Sovaldi, the critics of the pharmaceutical industry were bashing the industry because it allegedly was focusing on lifestyle drugs for the rich West rather than trying to cure the diseases that plagued millions of people. Greed rather than trying to actually cure diseases. Then Sovaldi comes along and inconveniences their argument.

But you’ve got to hand it to Priti. She has nerve—almost certainly more nerve than you or I have.  Because Priti can write something like this:

“We have evaluated Gilead’s patent portfolio and found that, based on US and international patent law, Gilead does not deserve any of its 27 patents for Sovaldi. Both the base and secondary patents for the drug are based on old science and commonly known techniques.”

Really? So there’s no cure for Hep-C. Someone invests millions of dollars and years of expertise and actually manages to invent a cure for Hep-C, but they’re not entitled to a single patent for such a revolutionary invention?

Who knew? "Old science and commonly known techniques!" We could have cured Hep C a long time ago with old science and commonly known techniques! We just didn't bother! All that time the cure for Hep C was laying around, being used as a door stop. We just never got around to it.

I guess if Priti and her organization used their evaluation methodology on my front yard, they wouldn't manage to find a single blade of grass.

In Priti's case, it appears that her hatred of the pharmaceutical industry has clouded her ability to even see things in logical sequence. I hope I'm not crossing through the same intersection with Priti anytime soon.

Later, Priti manages to come up with the standard disclaimer that the anti-IP crowd always manages to throw down so they don’t seem quite so unreasonable:

“We support patents”

And

“Our patent system should reward only true inventions in science and medicine.”

Wait—curing Hep C with a pill isn’t a “true invention in science or medicine”?

These people.

But seriously, it's important to understand a couple of things here. First, you can become so twisted in your political agenda that you can make outright foolish and false statements, and you don't even know you've done it.

And second, believe it or not, people like Priti and with her views are taken seriously in the global health policy community. That's the really scary thing.

It’s this VC worship that likely led Silicon Valley-backed intellectual property skeptic advocacy group Engine to commission a 2014 survey of investors (and law firms that advise them) concluding VCs may be less likely to invest in “digital content intermediaries” (firms like YouTube) if the company were exposed to legal risk for copyright infringing content on their sites.

The notion that investors account for legal liability as they choose their investments isn’t insightful or new. And the idea that a VC might choose not to invest in a new business built on facilitating access to unlicensed copyrighted content shouldn’t be either.

This “innovation at all costs” mentality, which seems to fuel the Engine report, reminded me of a 2013 Wired article discussing Silicon Valley’s “threadbare nature of digital exceptionalism.”

The undue emphasis placed on entrepreneurship, combined with a limited view of who “counts” as an entrepreneur, functions to exclude entire categories of people from ascending to the upper echelon of the industry. And the ideal of authenticity privileges a particular type of self-presentation that encourages people to strategically apply business logics to the way they see themselves and others.

I don’t agree with everything in the article, but the Engine report reflects this self-serving worldview. For instance, copyright laws aren’t written to reduce risk for billionaire VCs – they’re written to incentivize the creation of new cultural works, which benefit us all. In fact, when VC’s want to invest, they are reassured by strong patents. So it’s not at all surprising that VCs would want strong intellectual property protections for their investments but weak rights for those they intend to consume. But don’t those on the other side of the transaction naturally want and deserve similar intellectual property protection?

Further, the report pays no attention to the effect weak IP laws and rampant theft has on investment in new content – a relationship explored by researchers at Carnegie Mellon University – who concluded that “our study provides affirmative evidence on a central tenet of copyright policy, that stronger effective copyright protection effects more creation.” In other words, if you’re a VC investor in content rather than in digital intermediaries, you have a whole different attitude toward copyright. What’s more, the authors could have benefited from some discussions with individual creators like Grammy Award winning composer Maria Schneider, who in this video of congressional testimony describes the obstacles she faces to protecting her work online – which reduces her time and incentive to create. Instead, the authors limited themselves to the interests of venture capital funds and white shoe law firms.

There’s also a notable disconnect between what seems to concern real VCs and entrepreneurs and what their advocacy groups say concerns them. For instance, legendary VC Bill Gurley recently published a 5,500 word essay sounding the alarm about investor over-exuberance in the “Unicorn” market (unicorns are startups valued over $1 billion). Per Gurley:

The reason we are all in this mess is because of the excessive amounts of capital that have poured into the VC-backed startup market. This glut of capital has led to (1) record high burn rates, likely 5-10x those of the 1999 timeframe, (2) most companies operating far, far away from profitability, (3) excessively intense competition driven by access to said capital, (4) delayed or non-existent liquidity for employees and investors, and (5) the aforementioned solicitous fundraising practices fundraising rounds that include terms dangerous to the companies health. More money will not solve any of these problems — it will only contribute to them. The healthiest thing that could possibly happen is a dramatic increase in the real cost of capital and a return to an appreciation for sound business execution.

Gurley makes no mention of copyright laws inhibiting investing. Rather, he sees bad business fundamentals, easy money, predatory investors, and shabby treatment of employees as huge risks to startups and investors. And he thinks there’s too much money in the system, as oppose to scared investors unwilling to take risks on new companies.

Additionally, entrepreneurs themselves aren’t concerned about copyright liability. A recent ICANN commissioned report by the Boston Consulting Group concluded that the largest impediment to the growth of the online economy is lack of adequate broadband infrastructure – particularly in developing markets.  And Small and Medium Size Enterprises looking to participate in the online economy are worried about data security, privacy, and the lack of “reliability of intellectual property rights online.”

When thinking about the role of IP in the digital economy Silicon Valley luminary Jaron Lanier perhaps said it best in a recent WIPO Magazine interview:

If we expect computers to pilot cars and operate factories, the employment that is left should be the creative stuff, the expression, the IP. But if we undermine that, we are creating an employment crisis of mass proportions… That's where IP comes in. The general principle that we pay people for their information and contributions is critical if we want people to live with dignity as machines get better.

In contrast to Lanier, the Engine Report’s motivations seem cartoonish.

VCs play a critical role in the growth of our innovation economy, as investors always have. But the key to a flourishing economy is that the rights of all parties are equally respected and equally protected in law, instead of one side of the transaction using the heavy hand of government to weaken the rights on the other side.

And today, Comcast announced its Xfinity Partners Program, which will allow Comcast customers to access their Xfinity content through a variety of devices and platforms using an Xfinity TV Partner app. Samsung and Roku have already joined the program, which means Comcast customers simply won’t need a set-top box if they own one of the new Samsung or Roku devices featuring the Xfinity TV app.

Seeing Comcast join the impressive number of over-the-top video providers who allow access to their content through apps demonstrates that the FCC’s AllVid rulemaking is not a response to a problem in the marketplace. The FCC has also done no economic analysis whatsoever to justify its scheme. Nevertheless, the FCC is pushing the Allvid scheme very aggressively with shortened timeframes for comments and public input.  One has to wonder what, exactly, is the FCC trying to accomplish? And why the rush?

Meanwhile, industry continues at the speed of innovation while the FCC regulates looking backward.

I've seen EFF doing this lately with the TPP bill. They've been using fear mongering to make people believe that they're seriously gonna go to prison for making a free mod for a game, or that it's gonna destroy the internet somehow. People are eating it up though.

Right on cue, the latest effort to invent controversy centers on a breathless EFF conspiracy theory – government lawyers have secretly expanded the scope of penalties for copyright infringement during a technical review of the TPP text by changing the word “paragraph” to the word “subparagraph” in a footnote. 

To be fair, it is true that this change means the footnote only applies to one part of the paragraph, and that does actually make a difference.  The paragraph at issue sets out rules for calculating and applying remedies for criminal theft of intellectual property, and the footnote allows countries to ignore those rules, except for more significant cases.  The change means only the last part can be ignored (except for more significant cases), not the whole paragraph.  Sensing an opportunity, the EFF pounces insisting there is “no rational basis” for the change.  Let’s examine that.

The very first obligation in the paragraph — where the footnote no longer applies — is that the punishment should fit the crime.  In the precise terms of the agreement, countries must provide “Penalties that include sentences of imprisonment as well as monetary fines sufficiently high to provide a deterrent to future acts of infringement, consistent with the level of penalties applied for crimes of a corresponding gravity.”  Now, if the footnote applied to this requirement, it would be saying that in lesser cases, the punishment doesn’t have to fit the crime and doesn’t have to provide a deterrent.  Would that make any sense to you? 

The second clause in the paragraph — again, where the footnote no longer applies — creates an obligation for countries, “in determining penalties, to account for the seriousness of the circumstances, which may include circumstances that involve threats to, or effects on, health and safety.”  If the footnote actually applied to this, it would mean that countries set penalties without taking into account the seriousness of the case, but only in lesser cases.  That’s not only illogical, it is the opposite of what anti-IP groups should want; otherwise there could be higher penalties in lesser cases.

So what is the right reading?  The last clause of the paragraph, the one on which the footnote is actually placed, requires countries to give their police and prosecutors the authority to investigate crimes on their own initiative.  This is already what Americans expect, but in some countries, especially in the Far East, the police can only act if there is a complaint from the victim.  So, for example, if a police officer witnesses someone selling knock-off DVDs, they can’t do anything because they don’t have a specific complaint about that crime from the copyright owner.  The U.S. seeks to change this to at least give the police the choice of whether to take action.  And the footnote would allow countries to limit that discretion to only more serious cases. 

In looking at the whole paragraph and how the footnote would apply, it seems clear that its intention is to ensure that remedies to copyright infringement are tied to the seriousness of the crime while at the same time giving sovereign nations flexibility to determine law enforcement priorities for themselves. 

Moreover, if anything, the TPP language is weaker than previous FTAs. In the Australia-U.S. Free Trade Agreement Australia and the United States agreed to provide remedies for criminal IP theft, including deterrent penalties and the ability of police to act on their own authority, with no limiting footnote at all.  How EFF can interpret the analogous TPP text to be so “shocking” is puzzling.

As to the edit, it’s hardly surprising that a few minor mistakes were made given that the TPP negotiation wrapped up with a marathon week-long session of negotiations. After all, trade negotiators are only human, and a week of sleep deprivation leads to at least a few drafting errors.  But when such a mistake is caught later, it hardly justifies using the terms, “devious,” “sneaky,” or “underhanded,” as EFF’s article does.  And while it may not be justified, it certainly is consistent with their tactics. Indeed, as EFF supporter and Redittor “cknl2” laments:

If government proposes any law regarding the internet, it is twisted and equated to SOPA (the horrors of SOPA/PIPA)… The idea is that you should be afraid of anything the government does… The only people who will defend the law are "governments/corporations" so EFF will just claim they are lying in order to oppress you. It's called politics. I like to call it conspiracy-theory politics.

Indeed.

For one thing, IAF features prominently on their website and in their materials the critical text of Article 27 of the Universal Declaration of Human rights, which states:

Everyone has the right to the protection of the moral and material interests resulting from any scientific, literary or artistic production of which he is the author.

It drives the CopyLeft and Access to Knowledge folks crazy that the key international human rights document includes intellectual property rights as a basic human right. Yes it does. They try to reconstruct the sentence sometimes to make it sound like it means the opposite of how it is written, but they’re wrong.

I’ve tried to make some hay over the years with this fact, not only writing about it, but also getting physically accosted by activists at a WIPO meeting where I dared to read out the text of Article 27 during an IPI intervention (more here). Ah, memories.

Anyway, the International Authors Forum has a great document PDF on their website where authors from around the world including developing countries explain how expanding copyright exceptions and limitations would be harmful to their attempts to produce cultural products in their own markets. It’s worth your time.

Some quotes:

• “Most authors in African countries, especially those writing in indigenous languages, barely earn a living from their work. These exceptions will be an erosion of the little that they do earn and the consequence will be a decrease in locally produced content. . . . We have publishers sitting on great manuscripts because it is not commercially viable to publish them . . . . Depriving authors of the little they earn is not the way to make educational content available to all. - Elinor Sisulu, South Africa
• ". . . prejudicial changes to the copyright laws are draining revenues from writers' already very thin and threadbare pockets . . . . 'free culture' — that is, freedom for consumers not to pay for cultural content." - Harry Thurston, Canada
• "If further copyright exceptions for libraries and educational institutions are approved, I believe this will impact considerably on authors generally and on children's authors in particular — the very people whose works first opens up the world of literature for children." - Sophie Masson, Australia

There is a ranking, of course, because people (and governments) like lists. And while the rankings easily lent themselves to highlighting on social media, the great value is the nation-specific discussion of changes in country policies that have improved their IP climate, and nation-specific discussion of gaps and areas for improvement. For instance:

• Malaysia is noted for improvements in its IP climate, and its participation in the Trans-Pacific Partnership (TPP) will result in further improvement in its IP policies.
• Israel’s 2014 patent reforms, including data protection for pharma-related clinical data and patent restoration for biopharma.
• But several European countries, including Switzerland, Sweden, Poland and Italy, are noted for lax efforts at combatting online piracy.
• The BRICs (Brazil, Russia, India, China) are noted for continuing to tie IP protection to concessions on market-access and for an overall policy of using weak IP protection as a means of trying to favor their own domestic interests.
• Even the U.S. is faulted for weak enforcement against trade secrets theft.

The Index also helpfully points out through the criteria chosen many pro-IP arguments that tend to get glossed over, such as the way strong IP protection facilitates investment and greater access to financing.

In the current environment where IP is under attack by many international and domestic interests, it has been a crucial strategic step to emphasize empirical data and methods in support of IP-based innovation, and the GIPC should be commended for taking this approach. The great thing about empirical approaches and disclosed methodologies is that it forces the policy discussion to acknowledge the empirical data and the scholarly approach. Critics of IP may disagree, but if they are unwilling to deal with the data and interact with it, their arguments are revealed to simply be opinions rather than arguments. And, frankly, much of the IP skeptic rhetoric has been little more than assertion and opinion. When pressed for proof and data, almost always their attempts have been lame.

To be clear: If a critic of IP disagrees with a methodology, let’s have that conversation. We should always be open to fact-based critique of our positions. And laws and policies are always subject to improvement. But let’s not pretend, for instance that IP doesn’t underlie almost 60 percent of U.S. exports to other nations.

The GIPC has once again made a solid contribution to a fact-based policy discussion about the importance of IP protection, as well as giving guidance to nations about how they might improve their innovation environments. Good job!

And it’s entirely consistent with America’s long tradition of civil society and free association for voluntary agreements among Internet players to be a big part in creating this healthy internet ecosystem. That’s why it’s been cheering to see several recent examples of voluntary agreements designed to reduce online piracy.

Last week Donuts—the world’s largest Internet domain name registry and the registrar of the new .MOVIE domain extension, announced that it has entered into an agreement with the Motion Picture Association of America (MPAA).

Essentially, infringement notices from MPAA to Donuts will be treated with high priority, and MPAA’s notices will have a presumption of credibility, so long as MPAA provides sufficient information to Donuts. That information includes:

• A statement that the MPAA is authorized by its members to submit the referral;
• Detailed description of the clear and pervasive copyright infringement occurring on the domain (e.g., sample URLs, screen shots);
• Non-exhaustive identification of the law(s) being violated and a description of why the copyright infringement violates the specified law(s);
• Statement that, prior to sending the referral, the MPAA alerted or attempted to alert the registrar of record and hosting provider, including a description of the response received, if any, from registrar and hosting provider and an explanation of why such responses failed to mitigate the infringement;
• Statement that the referral is submitted with a good faith belief that the information contained therein is true and accurate; and
• Confirmation that the referral was subject to careful human review and not submitted solely based on automated Internet scanning or scraping services.

This is more than enough information to guard against the concerns of copyright critics that such takedown notices are sometimes used nefariously to suppress legitimate content.

IPI commends Donuts for its willingness to work cooperatively with content owners to reduce online piracy. We’ve not simply reproduced the entire agreement in this blog entry, but the agreement is a robust model for other registrars and operators to follow, and we hope further such voluntary agreements are in the offing.

PTAB is the Patent Trial and Appeal Board, which was created in the America Invents Act (AIA) patent reform bill in 2012. The idea was to find a quicker way to find and invalidate patents that should not have been issued.

Of course, PTAB has turned into many things, including a means for hedge fund short sellers to make a quick profit by shorting a stock and then challenging patents held by that company. I'm guessing creating a new way to manipulate the stock market for profit isn't quite what the patent reformers had in mind.

But apparently it's worse than that. Here's Gene Quinn's view from his IP Watchdog blog:

The Redline case, like so many others, shows just how much of a wild west inter partes review is at the Patent Office. PTAB judges do not implement the rules and laws uniformly, and joke is being made out of due process. Why? Because these proceedings need to be completed within 12 months, so the PTAB cuts corners and simply doesn’t believe they can offer the process that patent owners, and increasingly petitioners, deserve. This is making post grant proceedings seem more like a kangaroo court or some hang ’em high court right out of a Clint Eastwood western.

Lovely.

Scissors is a free-trader who recognizes the need for such agreements in the absence of an effective WTO trade liberalization process. Based on several of his written pieces, Scissors 1) thinks the TPP as negotiated is distinctly better than no TPP, 2) is disappointed that the U.S. didn’t work harder to get a better deal, 3) thinks we should still try to fix the TPP within the framework of the existing parties to the agreement and, if that doesn’t succeed 4) we should fix the TPP at the cost of dropping countries that refuse to go along with the proposed fixes.

Earlier in November of 2015 Scissors wrote:

If this cannot work, free traders should not abandon the TPP. The next step would be to shrink the number of participants in the first round. 

Scissors recognizes that the business community is pretty solidly behind the TPP as an improvement the status quo.

Here at IPI, we’ll be writing a lot more on the TPP as the debate begins in earnest. But for now I wanted to highlight the fact that Scissors’ disappointment with the TPP do not stem from the most popularly criticized and controversial sections of the agreement, the intellectual property and agriculture sections. His chief criticisms are with the sections having to do with state-owned enterprises (SOE) and with the excessive number of exceptions that were granted to countries to simply not conform to the agreement in particular areas. It would have been far better to allow those countries longer phase-out times for those domestic considerations rather than simply granting them a carve-out from trade liberalization.

The strength of Scissors’ paper is how handily he rebuts the most commonly voiced arguments against the TPP. In particularly, as you might guess, I’m interested in his comments on the intellectual property section, which he grades at a B+.

Some in the US object to the TPP’s codification of IP protection. These objections are largely misguided. Most TPP countries are nowhere near providing excessive IP protection—indeed, half are on the latest US Trade Representative watch list. The same is true for many potential candidates to join the TPP or other US free trade agreements. Raising these countries’ standards is not a threat to consumers. Meanwhile, countries that already boast solid protection of IP have little to do.

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Few existing agreements address digital trade, an increasingly glaring omission that is addressed by the TPP. . . . It includes valuable requirements for border measures that block trade in goods utilizing stolen IP. . . . The precedents set for future TPP members and future agreements, such as revisions to the WTO rules on trade-related aspects of intellectual property rights, are largely positive.

Scissors’ common-sense reaction to the TPP’s IP-related provisions is a helpful rebuttal to the kind of uninformed, knee-jerk, anti-IP temper tantrums that have characterized discussion of the IP chapter, such as this piece by Logan Albright of Freedomworks. If you’re just an anti-IP activist, you’re not going to like IP protection, wherever it happens to show up.

Finally, be sure to check out the final section of Scissors’ paper on red herrings and globalization myths related to the TPP. He explains why the investor-state dispute settlement mechanism is not a “threat to American sovereignty,” why trade deficits don’t matter, why currency manipulation is a false issue, and why there’s no proof that NAFTA harmed the job market in the United States.

Per Masnick:

What if the answer to Hollywood’s concerns about piracy actually come from Silicon Valley?  What if the best way to reduce piracy is to let innovation flow, and to provide better services that reasonably respond to consumers and their entertainment needs?

But as Masnick surely knows content creators already make their works available on an abundance of legal online distribution services. Indeed, there are over 400 licensed video services and 98 licensed music services worldwide, and digital books, magazines, newspapers, photos and other works are ubiquitous.

Instead, Masnick offers a straw man argument, as no one is arguing that enforcement is the only solution to online theft. Indeed, in the real world, rights holders are pursuing voluntary, market based solutions amongst good faith stakeholders to combat piracy. For instance, the five largest ISPs and the content community created the Copyright Alert System to educate users about infringing activity and help guide them to legal alternatives. And the advertising industry recently announced the formation of the Trustworthy Accountability Group, which will help advertisers ensure their valuable brands don’t appear on websites dedicated to theft, thereby helping to take the profit out of piracy while at the same time protecting their good names. Further, recognizing that rights holders should ask of themselves what they ask of others, the MPAA launched wheretowatch.com, a search tool that helps connect consumers with particular movies or shows of interest to them among so many options.

Masnick’s assertion is further undermined by the fact that even pirates admit enforcement regimes can be effective. In an ironic twist, just yesterday TorrentFreak published an article offering grudging admiration for the efficacy of site-blocking.

So when Masnick suggests that the answer to theft is “innovation” forgive me if I roll my eyes. Nobody wants consumers to enjoy their work more than the creators themselves do– they just want it done through the market and not simply stolen.

Further, Copia’s assertions are at best misleading. For instance, while the authors’ focus is on the video and music markets, the piracy stats they use are primarily about software piracy–not music and movie piracy–as they come from the Business Software Alliance, which represents companies like Adobe and Microsoft, not record labels and movie studios. (As an aside, if you want a good laugh, read this 2012 blog by Masnick savaging the BSA data he relies on in this paper).

Also, Copia uses language like “relatively low” to describe piracy rates of 27% in the United Kingdom. I suppose 27% is “low” compared to the 74% figure offered for China, but is that an acceptable amount of theft? how we should be measuring ourselves? Would any industry accept 27% “shrinkage”? Creators deserve much better.

Worse, there appears to be some intellectual dishonesty at play here. Copia states:

An analysis of anonymized internet traffic data… concluded that the block of The Pirate Bay website by itself had no effect on encouraging users to adopt legal content services, as users may have switched to alternative file sharing sites or used VPN (virtual private network) services to circumvent the block.

I suspect that is a deliberately incomplete representation. While Copia chose not to include any citations in their paper, I presume they’re referring to peer-reviewed research by scholars at Carnegie Mellon University that also concluded:

Blocking 19 different major piracy sites caused users of those sites to increase their usage of paid legal streaming sites such as Netflix by 12% on average. The lightest users of the blocked sites (and thus the users least affected by the blocks, other than the control group) increased their clicks on paid streaming sites by 3.5% while the heaviest users of the blocked sites increased their paid streaming clicks by 23.6% … Our results suggest that website blocking requires persistent blocking of a number of piracy sites in order to effectively migrate pirates to legal channels.

Essentially, the CMU researchers are saying that blocking only one pirate site probably doesn’t create enough friction in the marketplace to change consumer behavior. But blocking many simultaneously leads to a significant increase in legal consumption, particularly among the worst offenders. That seems pretty reasonable to me, but Copia only offers The Pirate Bay example to suggest to readers that piracy enforcement is futile.

Masnick’s biases in the copyright space are well-known, and so it should surprise no one that his outfit produces papers that breeze past data and arguments that are inconvenient. When correlation works for his argument, he embraces it, saying that two music services in France going out of business “suggests” HADOPI was unnecessary. But when correlation works against his argument, he dismisses it, saying that the increase in music revenue in France during the same period “cannot be directly attributed to HADOPI.” And of course he cites an analysis of HADOPI regime by Rebecca Giblin, which I have elsewhere shown to be as similarly biased as is Masnick’s own work here.

I’m a big believer in innovation. Everyone is. But patronizing suggestions that creators should “innovate” away their problems is an unhelpful contribution adding nothing to discourse about solutions to piracy. And contrary to Copia’s commitment to “ideas in abundance,” their paper represents a lack of imagination.

Content owners ARE innovating. They also want their product protected against massive theft. It’s not a matter of either/or—it’s a matter of both/and.

“Doesn’t everyone understand that some smart company will quickly move to take advantage of this huge spread and come out with an affordable alternative?” I thought. Because that’s how markets work.

Well, indeed, just a few weeks later, Imprimis Pharmaceuticals has announced that it will be producing an improved variant of Turing’s Daraprim, the marked-up drug in discussion, and will be selling it for somewhere around $1 per pill. Not only exploiting the unforced error of one of its competitors, but also engendering enormous goodwill in the public square along the way.

I’m guessing Imprimis simply got their news out first, and that in fact several companies moved or are moving to come out with similar attempts to capitalize on Shkreli’s mistake.

In fact, this is how markets work. Companies aggressively competing to meet consumer wants or needs move quickly to exploit their competitors’ mistakes. Consumers win in the end with an ever-increasing array of products and product improvements representing increasing value. Companies that please their customers and avoid disastrous mistakes succeed, and those that don’t fail. Capital (human and financial) that was flowing to the failing company gets more efficiently deployed with succeeding companies. The result is a net plus to the economy.

This is also, by the way, a great example of why corporate executives are highly compensated. Companies need the very best in top management—executives who are smart and prudent and trained to not make stupid pricing and communication mistakes.  The risks of a slipup are enormous, and possibly devastating to a corporation. Turing clearly didn’t have the benefit of top-flight management, and we’ve all seen the problems that resulted. It doesn’t make sense for a top executive to be limited to making only 10 times the salary of a low-level employee when an executive’s mistake can cost the company a million times that of a mistake by an assembly line worker.

Too many times, critics fault markets because they don’t deliver exactly the result the critic wanted exactly when the critic thought it should happen. Martin Shkreli does something colossally stupid and critics say the whole pharmaceutical industry is messed up and in need of even heavier government regulation. Shkreli’s mistake was not an example of market failure or proof of industry dysfunction—it was an example of markets working and doing exactly what they are supposed to do, in real-time: Encouraging risk-taking, punishing miscalculation, and creating opportunity and value.

(I think I got the better of my fellow panelists at that event—you can watch it and judge for yourself.)

The TPP negotiators are in Atlanta this week trying hard to work through the last few, toughest issues, and Bill is back at it again, this time arguing that the United States should not only allow, but in fact demand broad exceptions to copyright in the laws of our TPP trading partners.  This again proves what I said last year – that the TPP debate is not really about trade, it’s about people who want weaker intellectual property rights.  (Bill was kind enough to reference this piece of mine in his, which is always nice.) Ok, so let’s have that debate.

Bill says that U.S. fair use should be mandated in the TPP for all participating countries to adopt.  For those not familiar with it, fair use is a broad exception to copyright in U.S. law; it is an equitable doctrine guided by a few statutory factors but ultimately limited only by the discretion of the judge or jury hearing the case.  Bill’s main point is that if we are asking other countries to adopt our copyright system, we should include all aspects of that system, including fair use.  That might sound reasonable--if we really were able to export our entire copyright system.  But that isn’t what we are doing and the real result of mandating a broad exception to copyright would be to undermine the TPP provisions and endorse continued theft of American creative products.

Reported piracy rates in TPP countries are as high as 81%.  Imagine what that must be like – you go to the store to buy a product for your family and 8 out of 10 items on the shelves are fake.  They may not work, they may even be harmful, and you can’t tell which are the real ones.  Does that sound anything like the American marketplace?  Of course not.  Does that sound like a country that needs stricter laws and enforcement, or big, boundless exceptions?

Let’s get real.  If we are going to talk about the whole copyright system in the U.S., let’s talk about rule of law, let’s talk about prosecutors who take cases without having to be bribed, let’s talk about judges who don’t reflexively rule against American right holders.  All those things are commonplace around the world and the weak enforcement of American copyrights in those places costs us jobs here at home.  And now the idea is to give those same judges an open-ended fair use exception and hope they apply it with the same restraint as U.S. courts?  Please.

Bill’s argument is also undermined by the fact that piracy isn’t a problem just for the creative sector; licensed online services consider piracy their greatest challenges in some foreign markets as well. Need proof? Just ask Spotify and Netflix. Nor is effective copyright protection and enforcement exclusively an American concern.  Earlier this year 85 organizations from 51 different countries (including 9 of the TPP countries) signed a letter calling for strong IP protections in trade agreements.

Instead of having intellectual property provisions in trade agreements, Bill suggests they be addressed at the World Intellectual Property Organization (WIPO), a UN-affiliated body.  Of course he must know that in that venue Russia, China, and other countries with massive piracy networks built on stealing American intellectual property can block any real progress on IP.  Which brings me back to one of my initial points – this debate is really about people who don’t like intellectual property.

Speaking of WIPO, one other point on this idea of mandating fair use—every time anyone at WIPO tries to pass any kind of norm-setting on intellectual property, all we hear about is the need for countries to be able to maintain local and regional flexibilities. In other words, to refine the fine details of their own IP policies within the four corners of basic IP law. Well, fair use is precisely those fine details—specific, granular defenses against infringement that are appropriate to each individual country. What that means is NOT mandating things like fair use through trade agreements, and allowing countries to implement whatever such structures they feel appropriate.

Finally, almost no one who talks about fair use actually understands what it is. For those folks, I recommend this piece.

Public Citizen quotes the protester as saying: "When you have breast cancer today, you can’t wait 8 years or 7 years or 6 years for a treatment to become available or affordable. When you have cancer, even a one-year delay in affordable medicine can be a death sentence. That is why we call this proposed provision of the TPP a ‘death sentence clause.’  If it passes, thousands of women like me will die waiting.” 

She (along with many others) is urging the TPP negotiators to push back against U.S. insistence on “data exclusivity,” or the time an innovator drug company can retain its proprietary data, in this case for biologic products, before sharing it with other companies that want to make a generic version. The U.S. provides 12 years of data exclusivity, but some want that period reduced in the agreement to five or six years, or even less. The patient cited above apparently thinks even one year is too long. 

One can sympathize with that patient’s plight without conceding to her logic, because her (and the protestors’) solution would be the real “death sentence.” 

The data generated during biologic development, refinement and testing comes at great cost and is an important incentive to innovation in itself. Different than a patent, data is a proprietary asset, and its disclosure is not required in exchange for the grant of a patent.  

The economic fallacy here is that if you deprive an innovator company of an appropriate period of data exclusivity, a generic version will come out sooner and that will lower drug costs. Actually, it would do just the opposite.  

By eliminating or reducing the period of data exclusivity, you would only force the price higher, or . . . an even worse possibility: that the drug never gets invented at all. In other words, the marginal cost of innovation and risk-taking would simply be too high. So compressing the data-exclusivity timeline effectively cancels who knows how many new treatments because they can’t provide the necessary returns in the allotted time.  

And this problem is exacerbated with diseases such as cancer, such as the protestor has, because the patient population treated by many of the new and upcoming therapies are often small.  

Of course, the logic of the protestors would apply equally to patent in general—patents are alleged to make drugs expensive, and so somehow if we could get rid of patents and data exclusivity, drugs would suddenly somehow become much more affordable. 

The protestor erroneously assumes the innovator companies will just pour in billions of dollars anyway, regardless of risk or the cost of innovation, even it they can’t recoup their costs at all. But they won’t. 

The truth is that, without incentives to innovation like patents and data exclusivity, the drugs wouldn’t be cheap—they would be nonexistent. They would never be developed. And “never” is the real death sentence.