Author Archive
Siding with the Geeks on Network Neutrality
One of the perennial tropes of the network neutrality debate has been the tendency of the pro-regulation side to paint it as a David-and-Goliath struggle between big, evil corporations and the little guy. Way back in 2006, James Gattuso pointed out how silly this is: in fact, the push for network neutrality is backed by some of the largest companies in Silicon Valley. Julian points out a particularly lazy example of this kind of ad hominem that happens to target Cato: It seems that we’re one of the “15 greatest enemies of net neutrality.” And that along with CEI, Cato “seems to draw its funding from a smattering of every major corporation ever to fund lobbyists.”
As Julian points out, if “VoIP News” had done its homework, it might have discovered that Cato makes its annual report freely available online. Then they they would have noticed that corporate support accounts for about 1 percent of Cato’s budget, and that none of Cato’s corporate funders are major opponents of network neutrality regulation.
Shoddy reporting aside, the “VoIP News” article does actually highlight an important point: the people who built the Internet are deeply split on the issue of regulating the Internet, with eminent computer scientists including Bob Kahn (co-inventor of the Internet’s TCP/IP protocols with Vint Cerf) and Dave Farber (another networking pioneer) on the anti-regulation side. And based on conversations I’ve had here at Princeton, Kahn and Farber are far from the only computer scientists who are skeptical that the FCC is up to the job of regulating the Internet.
In a vacuous appearance on Rachel Maddow last week, blogger Xeni Jardin cited Vint Cerf’s support of regulation and urged viewers to “side with the geeks who actually built the Internet.” She did not, of course, mention that Kahn and Farber, who fit that description as well as Cerf does, are on the other side. “The geeks” are as split on this issue as everyone else.
Update: Tim Carney has an excellent article making a similar point: Internet companies like Google and Amazon, who have lobbied hard for network neutrality, gave overwhelmingly to Obama over McCain in the 2008 election. This doesn’t prove Obama and Chairman Genachowski are insincere in their support for network neutrality. But it does mean we should take both side’s arguments with a grain of salt.
Washington Legal Foundation Opposes GBS Deal
Via James Grimmelmann, the Washington Legal Foundation, a group known for its defense of property rights, filed an objection to the Google book deal earlier this month focusing on concerns related to those I raised in my posts earlier this week.
WLF points out that the Supreme Court has mandated that plaintiffs seeking to certify a class must make a diligent effort to notify all affected class members. According to the high court’s Shutts decision, this effort must include—at a minimum—sending a letter to every identifiable member of the class. In this case, this would mean sending a letter to every address in the US Copyright Office’s database of authors. WLF questions whether this was done; the foundation reports that it never received notification related to any of the books for which it holds the copyrights.
Now, it might be objected that this process would be prohibitively expensive. But if the class is so large that it’s impractical to notify all of its members, then the class is certainly too large to expect a judge to verify that the interests of all class members is being served by the settlement. If the class is too large to notify, then it’s too large to certify.
Google Book Search, Class Actions and the Separation of Powers
In response to yesterday’s post making the case against the Google Book Search Deal, I had spirited conversation with Google policy analyst Derek Slater, who helped me understand Google’s perspective on the case and some of the issues I discussed.
He raised a reasonable objection to my claim that “the settlement would give Google carte blanche to use these orphan works without making a serious effort to contact their owners.” He points out that the settlement stipulates that the Book Rights Registry will make an effort to locate orphan works holders and hold funds in escrow for five years to be paid to any orphan work holders who surface. Describing this as “carte blanche” was probably too strong. I think my basic point—that Google won’t be required to conduct the kind of “diligent search” for rightsholders before using a work—is still valid, but I could have made this point more carefully.
He also quibbled with my contention that the settlement would confer permanent competitive advantages on Google. I think I’m on firmer ground here; although the settlement does extend to Google’s competitors some of the advantages Google itself enjoys, the fact remains that Google would receive broad immunity from copyright lawsuits that would not be extended to Google’s competitors.
Filed under: Law and Civil Liberties; Telecom, Internet & Information Policy
The Libertarian Case against the Google Book Search Deal
Five years ago, Google began scanning millions of books for inclusion in what eventually became Google Book Search. Google carefully designed the service to stay within the boundaries of copyright’s fair use provisions, at least as Google interpreted them. Still, some authors and publishers objected, and in 2005 they filed a lawsuit accusing Google of copyright infringement. The lawsuit dragged on for more than three years. Finally, in 2008, the parties announced a settlement of the lawsuit. Its text runs for 140 pages, not counting a secret termination clause available only to Google and its adversaries. The deadline for comments on the settlement was earlier this month, and on October 7 a federal judge must decide whether to approve or reject the settlement.
I was (and still am) firmly on Google’s side on the copyright claims at issue in the lawsuit. But the proposed settlement is another matter. The parties like to describe the agreement as a private agreement settling a legal dispute. But I agree with Librarian of Congress Marybeth Peters, who surprised almost everyone on Thursday when, testifying before Congress, she came out swinging against the agreement:
We realized that the settlement was not really a settlement at all, in as much as settlements resolve acts that have happened in the past and were at issue in the underlying infringement suits. Instead, the so-called settlement would create mechanisms by which Google could continue to scan with impunity, well into the future, and to our great surprise, create yet additional commercial products without the prior consent of rights holders. For example, the settlement allows Google to reproduce, display and distribute the books of copyright owners without prior consent, provided Google and the plaintiffs deem the works to be “out-of-print” through a definition negotiated by them for purposes of the settlement documents. Although Google is a commercial entity, acting for a primary purpose of commercial gain, the settlement absolves Google of the need to search for the rights holders or obtain their prior consent and provides a complete release from liability. In contrast to the scanning and snippets originally at issue, none of these new acts could be reasonably alleged to be fair use.
In the view of the Copyright Office, the settlement proposed by the parties would encroach on responsibility for copyright policy that traditionally has been the domain of Congress. The settlement is not merely a compromise of existing claims, or an agreement to compensate past copying and snippet display. Rather, it could affect the exclusive rights of millions of copyright owners, in the United States and abroad, with respect to their abilities to control new products and new markets, for years and years to come. We are greatly concerned by the parties’ end run around legislative process and prerogatives, and we submit that this Committee should be equally concerned.
Filed under: Law and Civil Liberties; Telecom, Internet & Information Policy
We Need a New Church Committee
The Church Committee was a post-Watergate congressional committee that investigated allegations of lawbreaking by the executive branch, including the CIA and FBI. The committee’s report was incredibly important in helping the public understand the depth and breadth of Cold War lawlessness during the previous three decades. When Cato asked me to pen the chapter on electronic surveillance in this year’s edition of the Cato Handbook on Policy, I included a recommendation that Congress should launch a modern-day successor to the Church Committee.
In the last few months, I’ve been pleased to see that people smarter than me have been having the same idea. The latest is the Nation’s Chris Hayes, who has a great cover story calling on Congress to launch a wide-ranging investigation of executive branch lawbreaking.
We have lots of evidence that members of the Bush administration broke laws related to torture, wiretapping, and the Patriot Act. But because these reports are based on press reports and heavily-redacted Freedom of Information Act requests, we don’t know the full nature and extent of these crimes. Given that Barack Obama has fallen short of the transparency pledges he made during the campaign, Congress is likely the only institution in the United States with the resources and the political clout to produce a complete accounting of the civil liberties abuses of the last three decades.
I think the most important point Chris makes is this one:
Since the committee began in the wake of Nixon’s resignation and revelations about his deceptions, abuses and sociopathic pursuit of grudges, Church and many Democrats had every reason to believe they would be chiefly unmasking the full depths of Nixon’s perfidy. Quickly, however, it became clear that Nixon was a difference in degree rather than a difference in kind. Kennedy and Johnson had, with J. Edgar Hoover, put in place many of the illegal policies and programs. Secret documents obtained by the committee even revealed that the sainted FDR had ordered IRS audits of his political enemies. Republicans on the committee, then, had as much incentive to dig up the truth as did their Democratic counterparts.
Congress Abolishes Health Care Scarcity?
Reading the New York Times’s coverage of a Senate committee’s recent vote on health care legislation, I was struck by the following statement from Sen. Dodd:
If you don’t have health insurance, this bill is for you,” said Senator Christopher J. Dodd, Democrat of Connecticut, who presided over more than three weeks of grueling committee sessions. “It stops insurance companies from denying coverage based on pre-existing conditions. It guarantees that you’ll be able to find an insurance plan that works for you, including a public health insurance option if you want it.”
The bill would also help people who have insurance, Mr. Dodd said, because “it eliminates annual and lifetime caps on coverage and ensures that your out-of-pocket costs will never exceed your ability to pay.”
A basic understanding of economics should tell you this can’t be right. The federal government and the insurance industry have limited resources; the demand for health care is potentially unlimited. Therefore, no conceivable legislation can ensure that the demand for health care will never exceed the resources available to pay for it. All legislation can do is to shift who controls the allocation of scarce health care dollars—in this case away from patients and insurance companies and toward the federal government. Reasonable people can disagree about whether that’s an improvement, but it’s disingenuous to pretend that any legislation could “eliminate” caps on coverage or “ensure” that health care wants will never outstrip our ability to pay for them.
Seasteading and Other Technologies for Liberty
I’ve been following Patri Friedman’s work on seasteading for a number of years, so I was excited to see him contribute the lead essay in this month’s Cato Unbound. I think he makes some good points about the difficulty of achieving a free society through ordinary electoral politics. As he points out, libertarians are a minority of the electorate and the political game is stacked against politicians who aren’t willing to use their power to reward special interests. So smart libertarians should be looking at options outside of campaigns and elections to make the world a freer place.
But I think it’s a huge and unwarranted leap to go from this observation about the limits of electoral politics to claim that “the advocacy approach which many libertarian individuals, groups, and think tanks follow (including me sometimes, sadly) is an utter waste of time” and that “academic research has enlarged our understanding but they have gotten us no closer to an actual libertarian state.” It’s not difficult to find examples of academic research that changed the world. One of the most important trends toward liberty in the United States during the last century, the deregulation of transportation and communication markets in the 1970s, came about because a small group of academics persuaded Washington policymakers that deregulation would benefit consumers (and, in the process, their own political prospects). It surely mattered that Margaret Thatcher was a devotee of Friedrich Hayek. And if Friedman will forgive me for personalizing the debate a little bit, he must be familiar with the role his own grandfather had in ending the draft, achieving (relatively) stable money, and inspiring the modern school choice movement.
Now, Friedman says he’s interested in living in an “actual free society.” He probably regards the above examples as merely “small incremental gains in freedom.” But if that’s his critique, he bears the burden of showing that his preferred approach, seasteading, will itself achieve an “actual free society” rather then mere “incremental gains.” I’m not so sure.
Friedman makes much of the distinction between “technology” on the one hand and “advocacy” on the other. He thinks technological approaches are better because they provide superior leverage: a group as small as a few hundred people may be able to permanently lower the barrier to entry to statehood and fundamentally transform the nation-state game.
It’s an appealing vision, but I don’t think the distinction between technology and advocacy is so stark. As my colleague Will Wilkinson has pointed out, ideology is a kind of infrastructure. The tools of persuasion — magazine columns and television specials, for example — are means of improving this infrastructure by spreading new and better ideas. Modern communications technologies offer a kind of leverage not so dissimilar to the leverage Friedman hopes to achieve through seasteading. A small group of talented people can permanently change public attitudes, thereby shifting the Overton Window and changing the constraints politicians face.
Filed under: Government and Politics; Political Philosophy
Work, Social Production, and Inequality
Matt Yglesias links to an interesting discussion about the growth of activities that raise our standard of living without being captured in economic statistics. Wikipedia is a great example of this: it’s tremendously valuable to hundreds of millions of Internet users, but because it’s given away for free that value is not reflected in our economic statistics.
I think this general insight is right, but I don’t agree with John Quiggin’s conclusions about the social implications. In particular, Quiggin writes:
It seems unlikely that large inequalities in income are beneficial to anyone except the recipients of high incomes.
If improvements in welfare are increasingly independent of the market, it would make sense to shift resources out of market production, for example by reducing working hours.
The first point ignores the fact that rich people are a crucial part of many public-spirited enterprises. Jimmy Wales was able to finance the initial development of Wikipedia (then called Nupedia) because he had previously earned profits building commercial websites. The Ubuntu project, creators of an extremely popular Linux-based operating system, is supported to the tune of millions of dollars a year by successful entrepreneur Mark Shuttleworth. Brewster Kahle used the profits from his successful Internet businesses to build the Internet Archive, a crucial repository of public domain works. John Gilmore, who made his fortune as one of Sun’s first employees, has used his wealth to promote a variety of free software projects, including GNU radio and Gnash. I could provide plenty of other examples.
The important thing to recognize is that these projects could only exist because of the combination of their founders’ expertise and their money. Without cash, these folks would have been unable to provide the support necessary to get these projects off the ground. But even more important, these projects also wouldn’t have succeeded without their deep understanding of their fields. Only someone with years of experience in the software industry would have the judgment and the relationships necessary to make a project like Ubuntu successful.
Holder Takes a Small Step toward State Secrets Reform
Brian Beutler, guest-blogging for Matt Yglesias at Think Progress this week, takes a look at the steps the new attorney general, Eric Holder, is taking on the state secrets front. The Supreme Court case that established the modern state secrets privilege involved a lawsuit against the Air Force by three widows whose husbands had died in an aviation accident. The government convinced the Supreme Court that revealing information about the crash to the plaintiffs would endanger national security. But Beutler points out that there was just one problem:
The government lied. Contrary to its claims, the bomber wasn’t on a secret mission, and there were no top secret technologies aboard. Nothing in the incident report, which was declassified several years ago, legitimized the government’s decision to withhold it. What the report did contain, however, was evidence that the plane had been rather poorly maintained–a fact that might have been embarrassing for the Air Force, and vindicating for the dead mens’ wives, but that hardly amounted to a legitimate claim of state secret.
Unfortunately, the Supreme Court’s ruling is still controlling precedent, and the Bush administration used the state secrets privilege for maximum legal advantage, routinely asserting it in cases related to national security. Attorney General Holder has promised to review these assertions and withdraw those that are not “legally appropriate” circumstances.
This is good as far as it goes, but I agree with Beutler that it doesn’t go far enough. It’s nice to have responsible leaders in the executive branch who don’t abuse their powers, but it’s far more important to put laws in place that will prevent irresponsible leaders from abusing those powers in the future. In the case of the state secrets privilege, that means legislation narrowing the privilege to cases where there’s a genuine danger to national security and giving judges the power to review the relevant secrets in private to verify that it’s being invoked legitimately. Maybe that won’t matter while Eric Holder is in office. But even if Holder doesn’t abuse the state secrets privilege, it’s a safe bet that some future attorney general will. Reforming the privilege now, while memories of Bush administration abuses are fresh, is urgently needed.
The poster child for state secrets reform should be the ongoing Al Haramain case. An Islamic charity accused of funneling money to terrorist organizations was inadvertently handed a document that contained evidence that the government had spied on the charity without proper legal authority. When Al Haramain sued the government for this apparent violation of the law, the government made the astonishing argument that the document’s very existence was a state secret, that Al Haramain must return its copies of the document, and that therefore Al Haramain had no standing to sue the government because it had no evidence that it was the target of illegal surveillance. While we don’t know exactly what was in the document, it appears that rather than containing genuine state secrets, it simply contains politically-embarrassing evidence that the government has been conducting an illegal domestic surveillance program. The law should be changed to make it clear that the government can’t use the state secrets doctrine to get politically embarrassing evidence thrown out of court. And the law should explicitly give judges the power to review secret evidence in for themselves (in private and with appropriate security precautions) and judge for themselves whether the evidence merits state secret protection.
NSA Spying on Journalists: We Need a New Church Committee
Last week Keith Olbermann conducted a pair of interviews that gives a troubling look at the NSA’s domestic wiretapping operations. First, Olbermann talked with Russell Tice, a former NSA analyst who tells Olbermann that the NSA had access to all of the American’s peoples’ electronic communications, including those of journalists. Second, Olbermann talked to a New York Times reporter who is currently being pressured by federal prosecutors to divulge his sources for his 2006 book State of War, which focused on the CIA’s recent intelligence-gathering activities. The federal government hauled various former government officials before a grand jury and confronted them with phone records showing conversations between the government officials and Risen. Olbermann suggests that Risen’s phone records might have been obtained by the NSA using the dragnet surveillance program Tice has described.
It’s important to acknowledge that we don’t know if Risen was a target of the NSA program. Federal prosecutors do have legal powers to obtain the phone records of suspects without the knowledge of those suspects. It’s quite possible that the feds got Risen’s records using a valid subpoena under judicial supervision. However, the fact that we don’t know the full story is itself a serious problem. If Tice has described the program accurately and Risen’s phone records were obtained as part of such a surveillance program, that would be a pretty major scandal. Remember that even last year’s extremely permissive FISA Amendments Act didn’t legalize warrantless eavesdropping on purely domestic communications.
The problem is that we don’t know. And unfortunately, this is an area where our system of checks and balances have broken down. Congress has shown little appetite for performing one of its most important functions: investigating the activities of the executive branch to verify that the law is being followed.
Congress wasn’t always so timid. Thirty-five years ago, after another lawless president left office, we had not just one but three investigations of the prior administration: one in the House, one in the Senate, and one in the executive branch. The most successful of the three was the Senate committee that came to be known as the Church Committee. It produced a massive report documenting a ton of illegal activities by the executive branch over the preceding half-century. Gene Healy and I discussed a few of their findings here, and Julian Sanchez has a more thorough summary of the findings here.
In the forthcoming edition of the Cato Handbook on Policy, I argue that Congress should launch a broad investigation of executive branch surveillance abuses modeled on the Church Committee. Only by uncovering the full extent of domestic surveillance activities in the past can we craft sensible safeguards to make sure that abuses cannot happen again. I think there are three crucial factors in making a new Church Committee a success. First, it needs to be bipartisan. That is, it can’t focus merely on the misdeeds of the Bush administration. I recommend starting where the Church Committee left off and including the activities of the NSA, CIA, and FBI under presidents Carter, Reagan, Bush 41, Clinton, and Bush 43. If done right, this would be more than a fig leaf. Bill Clinton was hardly a doctrinaire civil libertarian, and so investigation might uncover real abuses that occurred under Clinton’s watch.
Second, it’s important that as much of the results as possible be made public. The lasting impact of the Church Committee was largely due to the sheer quantity of illegal activities it uncovered. If the Church Committee had only released information about the most egregious violations of the law, advocates of executive power might have been able to spin them as the work of a few bad apples. But because the Church Committee documented a pattern of law breaking involving dozens of people over the course of decades, under Democratic and Republican presidents alike, it became clear that there were systematic problems requiring systematic reforms. The passage of the original FISA Act was one of the most important results of the Church Committee report.
Of course, partisans for the recently-departed Bush administration will paint any effort by Congress to expose these secret programs as a partisan witchhunt that will aid the enemy. And obviously, Congress should be careful not to reveal details that could derail ongoing terrorist investigations or put undercover agents at risk, and the like. But there’s plenty of work Congress could do that is plainly neither a partisan witchhunt nor a danger to national security. The information the Electronic Frontier Foundation has uncovered regarding cooperation between telecom companies and the government would be a good place to start. Maybe Congress will find nothing improper happened there, but it’s important for the public to know what did happen so we can decide for ourselves.
Filed under: Law and Civil Liberties; Telecom, Internet & Information Policy
Patents and Property: The Evidence
I’ve been really impressed with the job that Regulation, Cato’s quarterly journal of regulatory policy, has been doing covering patent policy of late. A year ago, I highlighted a fantastic exchange between legendary libertarian legal scholar (and Cato adjunct scholar) Richard Epstein and Berkeley law professor Peter Menell over the legal and philosophical status of the patent system. Epstein, drawing a close parallel between traditional property rights and patent rights, argued that courts should give patent holders the same kind of strong enforcement powers—including the power to obtain injunctions against infringers—that are available to the holders of traditional property rights. Menell, for his part, emphasized the differences between patents and traditional property rights, and argued that in light of the patent system’s various deficiencies, it’s a good idea to give trial judges wide discretion about whether to award injunctions or monetary damages in infringement cases.
In the latest issue of Regulation, two of my favorite patent scholars, James Bessen and Michael J. Meurer, contribute something that’s all too rare in patent debates: empirical evidence. They argue that at root, Epstein and Menell’s dispute isn’t so much a philosophical disagreement as an empirical one: do patents, in fact, operate in the same beneficial fashion as traditional property rights? That is, do they enhance legal certainty and increase incentives for innovation, or do they confuse and discourage potential innovators? This is a question that can’t be settled in the abstract; it must be answered by looking at the performance of real patent systems and seeing what effects they have in real industries.
Bessen and Meurer’s answer to the question “do patents promote innovation?” is “it depends.” In particular, there appears to be wide variation in the efficacy of the patent system across nations, industries, and time periods. Historically, the patent system appears to have worked somewhat better in the United States than the UK, although its performance in the 19th century was mixed in both cases. Today, the patent system appears to work well for the pharmaceutical and chemical industries and poorly for most other industries. In most non-chemical industries, the costs of litigation are so astronomical as to completely swamp the patent system’s benefits. That is, the threat of litigation due to inadvertent infringement discourages research and development more than the patent system’s rewards to inventors encourages it. If Bessen and Meurer’s data are right, then the public would be better off if those industries did not have access to the patent system at all.
Bessen and Meurer stop there in their Regulation piece, but in their book, they argue that the fundamental problem is that outside of the chemical industries, the patent system does a poor job of defining the boundaries of patent rights. That is, in industries like software, it’s difficult to determine which patents cover any given product or technology. It’s analogous to a physical property regime in which there were numerous, overlapping claims for any given piece of land, and no clear procedure for sorting out the true owner. Such a “property” system would not have any of the beneficial features that libertarians correctly attribute to well-designed property regimes.
Friedman prize winner Hernando de Soto made a name for himself by advocating reforms to third-world property systems to make them work more like Western property systems. I think we should regard patent reformers like Bessen, Meurer, and Menell as doing something similar: seeking to reform the patent system to bring something like the predictability found in traditional property systems. De Soto understood that until that can be achieved, it’s crucial that the old “property” system not be strictly enforced, because the laws on the books are so far out of sync with the facts on the ground. It’s not fair to a Guatamalan squatter to raze the home he’s lived in for a decade because some bureaucrat decides the land rightfully belongs to someone else. By the same token, it would be unfair to an innovator like Vonage to force it to shut down the Internet telephony network it has constructed because it accidentally violated one of Verizon’s overly-broad patents. Before insisting that people respect patents, we need to make sure that the patent system is respectable.
Patent Trolls Are a Symptom of Deeper Problems
The Center for American Progress’s Matt Yglesias emailed to tell me about the latest issue of Science Progress, CAP’s science journal, which includes an in-depth series of articles on patent reform. The article that particularly caught my eye was this piece on patent trolls. In it, Daniel P. McCurdy discusses the controversy over firms whose sole reason for existence is to acquire patents and then use the threat of litigation to extract licensing revenues. The classic patent troll has no products and no employees other than the lawyers required to negotiate licensing deals and file patent lawsuits.
Patent trolls are a real concern. Most famously, in 2006 Research in Motion was forced to pay $612.5 million to a patent-trolling firm called NTP. No one in the case claimed that RIM had directly infringed NTP’s patents. Rather, RIM had independently developed its technology and only found out years after the fact that it might be covered by NTP’s patents. Even more outrageous, the Patent Office had issued “non-final rejections” of the patents at issue in the case, but didn’t move quickly enough to spare RIM from forking over a 9-figure settlement to NTP.
With that said, it’s important to keep in mind that patent trolls are a symptom of deeper problems with the patent system, not the cause of the patent system’s problems. If we had a well-designed patent system in which only high-quality patents were issued, it would be much harder for patent trolls to engage in the kinds of abusive behaviors McCurdy laments. The reason patent trolling is so profitable is that over the last quarter century the courts have expanded patenting into new areas like software and business methods, and dramatically lowered the bar for receiving a patent. As a result, patents that would have been rejected 30 years ago (like this ridiculous patent on removing white space from database entries, which IBM received earlier this month) are now routinely approved by the Patent Office. As a result, patent trolls are able to buy up low-quality patents by the truckload. Even though the vast majority of the patents won’t survive legal challenges, defendants can’t take the chance that one of them might survive and force the firm into a 8- or 9-figure settlement.
Patent trolls make good poster children for the patent system’s dysfunctions, but focusing too much on them ignores the fact that abusing the patent system is a game played by large companies as well. For example, Verizon managed to extort tens of millions of dollars from Vonage to settle a lawsuit over an absurdly broad Internet telephony patent. Verizon, of course, isn’t a “patent troll,” but a competitor interested in hobbling an up-and-coming competitor. Any patent reform needs to address the Verizons of the world too, not just the NTPs.
The problems with the patent system have primarily been caused by the United States Court of Appeals for the Federal Circuit, which has jurisdiction over patent appeals and has aggressively expanded patenting over the quarter-century since its creation by Congress in the early 1980s. In the long run, the only solution to what ails the patent system is to undo the mistakes the Federal Circuit made. The Supreme Court has begun to make progress in that direction with recent decisions such as eBay (which weakened patent trolls by making injunctions harder to get) and KSR (which raised the bar on obviousness). The Federal Circuit’s Bilski decision, which placed new restrictions on “abstract” patents, is another step in the right direction. But there’s much more to be done. Most importantly, the courts need to overturn the Federal Circuit’s decisions from the 1990s that ruled (ignoring contrary Supreme Court precedent) that software was eligible for patent protection. It’s not a coincidence that the most prominent examples of abusive patent lawsuits are almost all in the IT sector.
There are also steps Congress could take, but the changes most frequently discussed—switching to a “first to file” system, for example—aren’t likely to have much of an impact on the problems of low-quality patents. A better option would be to follow Jim Bessen and Michael Meurer’s advice and dramatically increase fees for obtaining and renewing patents, which would give patent holders incentives not to waste everyone’s time with low-quality patents.
Finally, given that the Federal Circuit has been responsible for many of the problems with the patent system, Congress should strongly consider phasing out the Federal Circuit and returning jurisdiction over patent issues to the 11 geographically-based circuit courts. As I argued in an issue of TechKnowledge last year, competition among circuit courts is an important part of our decentralized common-law system of justice, and it has served us well in virtually every other area of the law. The experiment with a unified patent appeals court has not gone well, and Congress should consider reversing its mistake.
Filed under: Law and Civil Liberties; Telecom, Internet & Information Policy
The Journal vs. the Fourth Amendment
There’s an astonishing editorial in the Wall Street Journal today about the FISA amendments that were passed in July. As you might recall, that legislation granted retroactive, blanket immunity for companies that illegally participated in the government’s wiretapping programs and substantially weakened judicial oversight of government surveillance of domestic-to-foreign communications. Under the new law, the government is no longer required to obtain an individualized warrant if it wishes to spy on your communications with people overseas. Rather, it can submit a “certification” that describes the general parameters of a broad eavesdropping program. Judges are required to approve the requests without ever seeing specific information about who would be targeted. The legislation also lengthened the grace period during which the government can conduct surveillance without any judicial oversight at all. Whereas emergency warrants were previously required within three days of the start of eavesdropping, the new legislation allows the government to spy for as long as four months while the judicial branch deliberates about its legality.
With all that in mind, I’m surprised to learn that the Journal seems to believe that the new, watered-down version of FISA is still too restrictive:
The Attorney General is only allowed to pursue threats up to certain legalistic edges, which contracted under this year’s political compromise that greatly expanded the role of the courts in intelligence gathering. Commissioner Kelly is practically begging people to think about what this means in the real world.
FISA was passed before the advent of disposable cell phones, encrypted emails and high-speed fiber optic networks. Now we live in a world where terrorist communications that originate in, say, Peshawar happen to move through U.S. switching networks. The executive branch already possesses the Constitutional authority to monitor such communications, but Democrats and the political left claimed it was “illegal” under FISA.
Then the anti-antiterror bar filed multibillion-dollar lawsuits against the telecom companies whose good-faith assistance after 9/11 made such surveillance possible. The goal was to shut down the program, and the telcos made it clear they couldn’t cooperate without Congress’s blessing. Forced to choose between a Democratic deal that gave the companies legal immunity or giving up a key U.S. antiterror tool, President Bush chose the former. The price — the one Commissioner Kelly is paying — was narrowing the government’s antiterror wiretapping powers.
What Democrats have done, in essence, is to insert an unelected judiciary into the wartime chain of command. As Mr. Kelly notes, this is producing a “lack of accountability” and “the lack of transparency into the inner workings of the FISA process.” If some faceless FISA judge denies a surveillance request from Mr. Kelly and New Yorkers die as a result, that judge will answer to no one. Under current FISA rules, we won’t even know who that judge is.
If the Journal believes it’s problematic for a “faceless FISA judge” who “answers to no one” to deny surveillance requests, then its quarrel isn’t with liberals, Democrats, or trial lawyers, it’s with the Constitution itself. The whole point of the Fourth Amendment is that “unelected judges” oversee the activities of law enforcement.
Moreover, the FISA bill the Journal derides makes it crystal clear that the government can intercept purely foreign-to-foreign communications without any judicial oversight whatsoever. And if our hypothetical Peshawar terrorist is communicating with an American, the government can take advantage of the new “certification” process that involves only cursory judicial review and doesn’t require any showing that the target is involved in terrorism. Only in cases where both ends of the communication are in the United States does the government require an individual warrant.
The Journal appears to take the extreme viewpoint that there should be no judicial oversight of the government’s domestic antiterrorism activities at all. But we know what happens when the government engages in surveillance without judicial oversight. History tells us that when judicial oversight is absent, abuses are inevitable. And if we create a terrorism exception to the warrant requirement, it would steadily grow to swallow the rule. Fighting terrorism is important, but we can do it without sacrificing judicial oversight.
Filed under: Law and Civil Liberties; Telecom, Internet & Information Policy
Libertarians Can’t Win
I was pleased to read Ezra Klein’s reaction to this month’s installment of Cato Unbound, in which he defended libertarians’ honor. Well, sort of:
This also gets at the weird nexus between libertarianism and corporate interests. Anti-state is not the same as pro-corporation, and insofar as a lot of liberals understand libertarians to be simple corporate stooges, they’re not quite right. In certain places — notably tech and patent issues, which is one of those spots where government policy and corporate interests converge — there’s nearly unanimous opposition to the position that’s most closely associated with corporate profits. And so Cato doesn’t get a lot of contributions from the recording industry.
But there are plenty of spaces where corporations or other wealthy economic actors see profit in avoiding or repealing certain regulations and laws — energy is notable here, as is the estate tax — and so libertarians find themselves rather well-funded. And then there are spaces where corporations want to profit from a service the government currently controls — like Social Security — and libertarians are quite happy to create an ideological argument for corporate self-interest. Crucially, it’s not that libertarians are always and everywhere in favor of corporate profits, but that they often are, and corporations find that useful, and so you have frequent marriages of convenience that also end up ensuring that the priorities of professional libertarians priorities are those that most effectively support corporate profits, as those are the projects that get funded.
It sounds to me like what Ezra is saying here, in an extremely back-handed fashion, is that libertarians aren’t corporate stooges at all. When the interests of corporations happen to align with what we regard as good public policy, then corporate interests tend to be our allies. Otherwise, they tend not to be. Which, as far as I can tell, is exactly how it should be.
It’s interesting that this discussion is coming up at a time when the biggest issue on the economic policy agenda is how many more hundreds of billions of dollars the American taxpayer will be forced to give to large corporate interests in Detroit, Manhattan, and elsewhere. Strangely enough, you’ll find people on the left-hand side of the political spectrum cautiously endorsing government handouts to some of the nation’s largest and most dysfunctional corporations, while scholars here at the Cato Institute have been sharply critical of welfare for large corporations.
Now, I don’t doubt for a minute that liberals’ support for government handouts to giant corporations is based on their sober assessment of the policy merits, rather than a dedication to “corporate profits” as such. But it is a little bit frustrating that when libertarians take a firm stance against the interests of large corporations, we don’t get praised for our independence so much as getting attacked for our ideological rigidity. These charges can’t both be right: we can’t both be solicitous corporate shills and inflexible ideologues. If people are going to question our motives, I wish they’d at least get their story straight on exactly which kind of intellectual dishonesty they think we’re engaging in.
Is Cato Asleep at the Switch on Copyrights and Patents?
In today’s installment of Cato Unbound, Dean Baker calls libertarians to task for their failure to take a more skeptical stance toward the government-granted monopolies we call copyright and patent protections:
Their enforcement efforts have required terrorizing people for making unauthorized copies of copyrighted material. In a recent case, a single mother was fined several hundred thousand dollars for allowing her computer to be used to download 24 songs over the web. The entertainment industry has gotten the government to prohibit the production of electronic devices because they had inadequate protection against duplicating copyrighted material. They had a Russian computer scientist arrested when he visited the United States because he gave an academic lecture that explained how an encryption lock could be broken. They even went after the Girl Scouts for singing copyrighted songs without permission.
The extraordinary abuses that we see every day as a result of patent protection for prescription drugs and copyright protection should be sending libertarians through the roof, and perhaps it does. But, where are the libertarians’ research programs on alternatives to patents for financing drug research or alternatives to copyrights for financing creative and artistic work?
My area of expertise is information technology policy, so I haven’t written much about pharmaceutical patents, but as a Cato scholar I’ve certainly spilled plenty of ink criticizing the excesses of copyright and patent law as it applies to information technology. Here is the study I did in 2006 criticizing the Digital Millennium Copyright Act, which was responsible for putting that Russian computer scientist in jail. Here is an op-ed I wrote for the New York Times last year pointing out that software patents have become an impediment to innovation in the software industry. Here is an article I wrote this summer for Reason magazine pointing out the problems the DMCA is creating for music consumers. And I’ve done dozens of posts at the Technology Liberation Front criticizing the recent expansion of copyright and patent restrictions. For example, in 2006 I did about 20 posts examining various software patents and pointing out how they were impeding progress in the software industry.
Moreover, we’ve written extensively about methods for producing creative works without copyright protection. These include free software, selling advertising, catering to core fans, selling security, and selling services. Cato published an excellent study in 2006 about the rise of “amateur-to-amateur” culture, which largely thrives outside the constraints of copyright. The growth of these alternative approaches to content creation suggests that in the future, copyright is likely to be less, rather than more, important than it was in the 20th Century.
Filed under: Cato Publications; Telecom, Internet & Information Policy
Diseconomies of Scale vs. Network Effects
I was very interested to read Roderick Long’s opening essay for this month’s Cato Unbound. Long draws a distinction between genuine free markets and policies such as corporate welfare and protectionism that favor the interests of incumbent businesses at the expense of the general public. Almost all libertarians draw this distinction, of course, but Long suggests that many libertarians too readily classify as “free market” policies that are more properly regarded as corporate welfare.
What caught my eye about Long’s article was his claim that in a genuinely free market, businesses would be significantly smaller than they are today. He points out that large, hierarchical businesses are subject to many of the same inefficiencies that plague government bureaucracies. The executives of the largest corporations cannot possibly have enough knowledge to make good decisions about the thousands of different projects various parts of their companies are undertaking, and so it’s inevitable that large companies will suffer from inefficiencies greater than those that afflict smaller firms.
I think this is an important point, and indeed is a theme that runs through my own work. For example, one of the key arguments of my Policy Analysis on network neutrality, which Cato released on Wednesday, is that the Internet’s success depends on the fact that it isn’t owned or managed by any single entity. Back in the 1990s, when the Internet was competing with proprietary online services like AOL and Compuserve, the Internet’s lack of centralized control turned out to be its most important strength. The hierarchical decision-making processes of the AOL and Compuserve companies simply couldn’t keep up with the spontaneous order of millions of Internet users acting without central direction.
Filed under: General; Government and Politics; Telecom, Internet & Information Policy
Ten Years of the DMCA, and Little to Cheer about
This week is the tenth anniversary of the Digital Millennium Copyright Act, which Bill Clinton signed into law on October 28, 1998. I was on last Friday’s Cato Daily Podcast discussing the DMCA’s detrimental effects on high tech innovation, and I’ve got a post at the Freedom to Tinker blog discussing one likely casualty of the DMCA, digital juke box software:
What we’re seeing in the video market is what the digital audio marketplace would have looked like if the recording industry had won its lawsuit against the first MP3 players. The recording industry lost that lawsuit, and entrepreneurs went on to build products that were much better than the “official” ones being pushed by the labels. Unfortunately, entrepreneurs in the digital video market don’t have that same option.
If the DMCA were not on the books, it seems likely that many of us would have set-top boxes with 500 GB hard drives capable of ripping dozens of DVDs to an open, standard format for subsequent streaming to any display in the user’s house. The existence of those boxes would spur the creation of a wider market for other digital video products designed to interoperate with the emerging open video standard.
Unfortunately, that’s not how things have gone. Hollywood has managed to do what the recording industry was unable to do: to ban users from converting their legally-purchased content to open formats. As a result, the market for open digital video devices is a pale shadow of what it would be in a competitive market. We’re stuck with clunky, proprietary, and non-interoperable products like Apple TV that require users to re-purchase their existing movie collections in order to watch them on the new device. I think everyone would agree that it was a good thing that the courts didn’t let the recording industry shut down the MP3 player market a decade ago. So why do we tolerate a law that effectively shuts down the analogous market for DVD jukeboxes?
Deregulation and Inequality
Matt Yglesias has been doing some great blogging lately about the negative effects of certain kinds of government regulation on ordinary consumers:
The fact that Joe is not a licensed plumber would be a great opportunity for an enterprising politician to try to make an issue out of the growth of occupational licensing requirements in the United States and the barriers to economic growth and opportunity they create.
And occupational licensing is hardly the only such example. Lots of America’s land use and business licensing regulations are, likewise, measures that do much more to entrench existing privilege than to promote any kind of public interest…
The original wave of deregulation was promoted by conservatives, but also liberals like Ted Kennedy, Steven Breyer, and Ralph Nader. I think we see now that that wave went too far in some respects, but in other areas it hasn’t gone nearly far enough. This is a good cause for progressives to pick up, but also one that would be completely open for a conservatism that was interested in helping the little guy rather than mocking efforts to help him as the second coming of Josef Stalin.
Matt is getting some criticism from his mostly left-of-center readers for this, but he’s right. Even if you think some recent deregulation went too far (personally I think a lot of what was labeled “deregulation” in recent years wasn’t), the deregulation of the airline, trucking, and telecommunications industries in the 1970s was unambiguously good for consumers and economic growth. Liberals like Ted Kennedy and Stephen Breyer understood this and were key architects of the deregulation effort. A similar wave of deregulation at the local level could do a ton of good, and it would be a lot more likely to succeed if we had the same kind of ideological buy-in from the left-hand side of the spectrum.
I think there’s a related point here for libertarians: we’re often too quick to reject populist rhetoric and concerns about inequality. Certainly there are good reasons to be skeptical of proposals to redistribute income via the tax code. But there are also lots of ways in which government policies widen the gap between rich and poor. So when people express concerns about inequality, the most effective response is not to dismiss those concerns out of hand, but to turn the conversation to the many ways that bad government policies have increased inequality. Liberalization of occupational licensure, business licensing, and land use regulations, restrictions on eminent domain, school choice, and a reduction of corporate welfare are all policies that deregulate and reduce inequality. Libertarians and liberals ought to be natural allies on these populist, deregulatory issues, and such a coalition is more likely to emerge if libertarians take liberals’ concerns about inequality more seriously.
Not All Banks Are Doing Badly
The Washington Post had a story on Friday pointing out that not all banks are on the verge of collapse:
Many smaller banks said they were actually benefiting from the problems on Wall Street. Deposits are flowing in as customers flee riskier investments, and well-qualified borrowers are lining up for loans.
“We collect money from local savers, and we lend it in the local community,” said William Dunkelberg, chairman of Liberty Bell Bank in Cherry Hill, N.J. “We’re doing fine. There are 9,000 financial institutions out there, and most of them are small and most of them are doing fine.”
Dunkelberg, a professor of economics at Temple University and chief economist for the National Federation of Independent Business, added that a recent survey of that group’s members found that only 2 percent said getting a bank loan was the great challenge facing their businesses.
It’s important to remember that “the financial industry” is sprawling and diverse. Some banks are on the verge of collapse. Others appear to be doing just fine. It would be unfair to these more prudent banks (not to mention taxpayers) to bail out their irresponsible competitors. And it’s a mistake to assume that, simply because a few reckless Manhattan firms have fallen, the entire financial industry is on the verge of collapse. It may be that these are simply firms that made too many bad investments, in which case their bankruptcy is precisely what is supposed to happen in a free market. Any Congressional action should be focused on preserving the health of the financial system as a whole, not at preventing the bankruptcy of individual firms that made bad investments.
Filed under: Finance, Banking & Monetary Policy; General
Adventures in Censorship
Matt Yglesias details the ways that McCain-Feingold is restricting his free speech rights. It seems that because Matt now works for a company that lacks a “media exemption,” he’s prohibited from commenting on the “character, qualifications, and fitness for office” of candidates for office. Since Matt has an extremely low opinion of one of the major presidential candidates, I imagine this is pretty hard for him.
And yet Matt doesn’t reach what seems to me the obvious conclusion: that McCain-Feingold is a restriction on free speech that can’t be reconciled with the First Amendment. Matt doesn’t defend McCain-Feingold either, and he’s said in the past that he doesn’t think McCain-Feingold will accomplish much. But it’s awfully hard to come up with an interpretation of “Congress shall make no law… abridging the freedom of speech” that doesn’t protect Matt’s right to question the “qualifications and fitness for office” of candidates for office, or the Center for American Progress’s right to pay him to do so.
Update: Matt writes to point out that both he and his erstwhile colleagues at the American Prospect have long opposed McCain-Feingold as a restriction on free speech. Good for them. They’re more enthusiastic about public financing than I am, but they recognize the basic point that the First Amendment doesn’t allow Congress to restrict people from criticizing political candidates in the months before an election. It’s a pity that the “liberal” members of the McConnell court had trouble grasping the same point. Maybe they should spend less time reading the censorious New York Times editorial page and more time reading the Prospect.
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