This Month in IP Insanity (January 2015)

In keeping with my new monthly feature, here is this past month’s IP news:

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  1. We know Tom Petty won’t back down. He just won a lawsuit against Sam Smith for infringing Petty’s copyrights on the song “Stay With Me,” requiring Smith to give Petty royalties. This is the third time Petty has sued someone for copyright infringement over similar sounding songs. Perhaps it is because Petty’s music is so fundamental as a building block for Rock n’ Roll that everything starts sounding the same. Either way, looks like Tom Petty is okay with free fallin’, not so much free ridin’.
  2. Not quite a story on the intellectual property wars, but I find it relevant. A Harvard Ph.D student had a manuscript of complete gibberish (literally written with Random Text Generator) accepted in seventeen medical journals. Granted, they are lower-tier journals who spam out email solicitations, and he would have to pay $500 to “process” them, so this isn’t Nature or the New England Journal of Medicine. His paper is entitled “Cuckoo for cocoa puffs? The surgical and neoplastic role of cacao extract in breakfast cereals” and you can read the whole “paper” at the link. Reminds me of the heroic Sokal affair.
  3. Another offbeat story but I find it interesting, television producers no longer focus on the first season as a metric for deciding to produce future seasons. With more people cutting cords, binge watching on their own schedule, and simply waiting for word of mouth to rate shows they’ve “gotta see,” the real money is now in the second season.
  4. If you needed a new casebook study of what was once an innovative industry giant turning to rent-seeking and the political process once they lose their competitive edge, look no further than BlackBerry (formerly RIM). The company wants Congress to pass a law mandating that all app developers must develop a BlackBerry version to go with the more popular iOS and Android versions. Their argument? We should broaden the definition of “net neutrality” to “application neutrality,” meaning developers should be forced to produce for all platforms, no matter how irrelevant and obsolete, in the name of openness. Maybe BlackBerry forgot about the Open Source movement.
  5. As if they were trying to make it harder for me to begrudgingly root for them tomorrow, the Seattle Seahawks are trying to trademark the words “boom,” “go hawks,” and the number “12.”
  6. Taylor Swift, who is transforming me into a hater for her views on music, is trying to trademark “this sick beat” and other catchphrases from her 1989 album, like “Party Like It’s 1989.”  Do people say even that?
  7. Yet another trademark story, this time it’s the MPAA who forced a local Minneapolis brewer to stop selling “Rated R” beer. Apparently, as long as the beer contained the trademarked word ‘rated’ it would still be liable, according to the MPAA. Frankly I don’t really see how consumers are likely to be confused, deceived, or mistaken about the source of the goods or services. Does the MPAA even sell beer?
  8. Torrentfreak posted a link to a new art project out of Australia, Pirate Cinema, which livestreams a collage of videos that people are streaming simultaneously on Bittorent. If you want to try to watch 3 or 4 movies at the same time, try this.
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  10. A revealing natural experiment in Norway. From 2009-2014, Norwegians under 30 dramatically stopped illegally downloading music, from 80% of those surveyed saying they did download, to just 4%. Yet, in that same period, despite the collapse of music piracy (mostly due to legal streaming services), Norwegian music revenues increased just 1.5% in nominal terms (likely negative when including inflation). Maybe piracy isn’t the real problem in the media industries?
  11. Lastly, like a Phoenix rising from the ashes, the Pirate Bay is back. It’s apparent return will disrupt the innovation and competition that’s been going on between spinoffs and rivals like Kickass Torrents and isoHunt, the latter of which recently offered $100,000 to the old Pirate Bay’s most active contributors to boost its publicity. Also, apparently not all of the former TPB staff are happy about TPB’s return.
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Patronage as a Mechanism for Socialism?

It has become quite clear to me in my research that most expressive works (art, literature, music, film, science, etc) always have been, and probably always will be, funded by patronage. The key question, which has been answered differently according to the historical evolution of culture, technology, and the extent of the market, is who should be that patron? Wealthy elites, as in the Duke of Tuscany sponsoring Galileo or Pope Julius II sponsoring Michelangelo? The government, as in the National Endowment for the Arts or the National Science Fund politically allocating grants? Publishers, as in the Big Six movie studios or the Big Five record labels who buy copyrights from artists to distribute their work? The crowd, as in Kickstarter and Indiegogo who collectively chip in small donations?
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I only recently realized that there is an obvious parallel here between the temporal structure of patronage and the temporal structure of wages in production. In patronage, the patron pays the artist’s fixed costs up front, the artist takes time to produce, and then the work is finally sold and distributed (depending on the type of patronage above, either by the artist or patron). In exchange for covering the artist’s expenses, the patron contracts for some portion of the gains, either in royalties, merchandising rights, prestige, rewards (on crowdfunding sites), etc, until the fixed costs have at least been recouped by the patron. During the time of actual production (days, months, years), the artist sustains him or herself on the advance furnished by their patron.
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This might seem somewhat trivial to economists, as obviously the patron-client relationship is a form of entrepreneur-laborer relationship and is just a firm by another name. But I find it interesting that a lot of the crude arguments for socialism emerge from misunderstanding this critical market relationship (of employer-employee). When I say socialism, I do not mean a superior, comparable economic system to replace capitalism (such as what emerged from the socialist calculation debate), but that emotionally-charged pseudo-economic lamentation of the ills of capitalism we are all viscerally familiar with. Our hearts may sympathize, yet those trained in economics know to trace out incentives and consequences and recoil from the fallacies of such undisciplined thinking.

Socialists, particularly of the Marxian variety, argue in this fashion that (1) workers are the ones who make all of the goods, and (2) do not even receive enough wages to buy back the product, hence (3) capitalists are exploiting them by appropriating “surplus value” generated beyond what laborers are paid.
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These claims, of course, misunderstand the time structure of production: {Econ 101 lecture} Laborers, just like other owners of the factors of production (landowners, and capitalists), demand to be paid wages before the product is ultimately sold in the market. Imagine a world where nobody is paid until products were finally finished and sold on the market, years later — nobody would work because nobody could pay the bills. Thus, laborers are paid wages regularly, landowners are paid rent regularly, and capitalists (anyone who lends money) are paid interest regularly for their time services. There is little risk that these factors will not receive their payment (assuming the business at least breaks even). All of these are treated as costs to the entrepreneur (which is functionally, if not personally, different from the capitalist) who manages the enterprise and bears all of the risk. After all of these costs are paid, if (and that’s a big if, as the overwhelming majority of businesses have costs exceeding revenues) there is any revenue left over, they are earned as profits for the entrepreneur. That is, the entrepreneur (aside from their own laboring wages) only earns a return if the product is successful and society values the product more than its inputs. As for buying back the product, laborers marginal productivity contributes only a fraction of the total market value, combined with the shares going to the marginal productivity of landowners, capitalists, and entrepreneurial stewardship. Further, the incomes of workers allow them to purchase other products, as one is required to produce something (at minimum, rent out one’s labor services) in order to exchange with others to acquire the goods they desire. {\Econ 101 lecture}.

It is also a common trope that artists do not like capitalism because it is exploitative. Blake gave us the bleak view of “those dark satanic mills,” Dickens caricatures greedy capitalists like Scrooge in stark contrast to the wretched underclass of industrial England, and Sinclair churned our stomachs at the “Jungle” of working at a meat processing plant.

In more modern times, we have everything from the modern hippy/hipster subculture to Rage Against the Machine to Picasso. If we were feeling charitable, we could extend the definition of “artist” to Chomsky, Derrida, and all those philosophers of the varying branches of postmodernism that deconstruct modern capitalist society from all angles. Perhaps everyone has different experiences, but to think of the average “artist,” the mind’s eye tends to conjure up some combination of a bohemian “misunderstood” young 20-something, weighing invectives against the corporate media, industrial exploitation, or environmental degradation by unregulated free markets running amok.
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Might the patronage relationship be a mechanism by which artists and other bohemians, who are popularly known to identify with the political left, discover or craft their ideologies and identities against capitalism/the system/the man? Artists are, from their perspective, actually the ones doing all the work and producing the final product (be it a painting, a novel, a song, their part in a film, etc), and yet serve their bosses (patrons, studio executives) who dictate the direction of their work, sitting high and mighty on a paycheck probably much larger than their own (for apparently doing nothing of value in view of the artists). Would not this relationship color how they view value, production, and markets?
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I am not saying that all artists are political leftists, or even if they were that it is wrong, or that all artists misunderstand how economies operate. I don’t know, or think, that artists historically hated their patrons, that Da Vinci hated the de Medici. It’s perhaps more plausible today where artists become managed by faceless megastudios with political leverage, who start to look more and more like “the man.” But this seems to me to be a plausible mechanism for how art and artists tend in the aggregate, to take leftist views on culture and economics.
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Is it plausible? Or am I being just as apophenic and myopic as I am claiming some artists are?

Ancient methods for modern times: Team suspensions in cycling

Looking back on history we find many examples of group punishment whereby an entire community could be held responsible for an infraction by one of its members. Though this seems patently unjust to modern tastes, there was a logic behind it: if the keepers of the peace are limited in their capacity to detect and/or punish crimes, group punishment incentivizes the other members of a potential offender’s community to deter breaches of the peace before they happen. After all, they are close to the potential offender and have much more influence on his behavior than a distant peacekeeping entity. I am not suggesting, of course, that this is always a good policy. Punishing a community for one member’s rebellion against a tyrant is unjust all around. But inter-community murders and another genuine crimes had to be prevented somehow, and with limited law enforcement resources group punishment was often the most efficient method. Thanks to the growth of technology and civilization it is no longer common practice, and I am glad for it, but I don’t condemn the tool for all the ways in which it was used.
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There are instances in which it may still make sense, and one of these was announced today by the Union Cycliste International, the global governing body of competitive cycling. Even people who are not fans of the sport are aware that cycling had, and possibly continues to have, a serious doping problem. (Note: this is not unique to cycling, but it was certainly a more serious problem in cycling than in most sports as far as we know, with former riders from the 1990s claiming that 60-70% of the peloton was doping in major races.)
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I should say first that even though at first I refused to believe Lance Armstrong was doping, eventually the scales fell from my eyes and I have a much more realistic view of the subject now. I recognize that it is still an issue, although I think the UCI has made great strides in reversing the decay of its product. As evidence we no longer have large, musclebound riders with time trial physiques like—to use a completely random example, alleging nothing, I assure you—Miguel Indurain absolutely crushing riders whose body types are better suited to climbs on major climbs. The record on Mont Ventoux, a legendary climb in the Tour de France, was set in the suspicious year of 2004 and has not even been approached since.

Now with the obligatory defensive stuff out of the way I can get to the meat of the post. The UCI announced many changes to its doping procedures, but the one that caught my eye the most was this:

Team Suspension

The UCI has adopted new measures relating to teams and their responsibilities:

Team Suspension
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If two riders within a team have an ADRV [= anti-doping rule violation – RFM3], the team shall be suspended from participation in any international event for a period determined by the UCI Disciplinary Commission. The suspension will be between 15 days and 45 days.

If there is a third ADRV, the team shall be suspended for between 15 days and 12 months.

Fine for UCI WorldTeams and Pro Continental Teams

In addition to the suspension above, UCI WorldTeams and Pro Continental Teams shall pay a fine if two of their riders have ADRVs within a twelve-month period. The fine will be 5% of the annual Team budget.

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For much of the golden age of doping the process was a team effort. Occasionally individual riders would dope on the sly, but to use the most famous example Lance Armstrong’s US Postal team was said to have an organized team doping effort involving not only the riders themselves but the management and support staff as well, and the overall pattern of violations and confessions confirms that they were not alone.

The standard procedure when a rider flew too close to the sun and got burned in doping controls was for the rest of the team to deny they had any knowledge of it and to say it was the rider’s own poor individual decision. As we have learned, this was usually a bold-faced lie. But the value of group punishment holds even if it had normally been the truth. The fact is that doping can be very hard to detect. The reason it became so widespread was that the doping technology was several years ahead of the testing technology. Even today smarter dopers can minimize their risk with well-known methods.
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The UCI has been slowly ramping up the punishments for doping but so far they have all applied only to the riders themselves, although certainly teams do not like the negative publicity they get when the media and fans rightly assume that the incident is probably not isolated. It has had some success (as evidenced by the above link to Mont Ventoux times) but it is not quite enough. There were several cases in the 2014 season that did further damage to the image of the sport.
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Given that it was rare after the early or mid-1990s for doping to be an isolated event on a team, and that teams were all to often incentivized not only to shield their riders but to actively promote doping, as they suffered no severe penalties as an organization for doing so and often won great accolades and bigger sponsorships, this should have been implemented many years ago. Teams are in a much better position to deter doping than the limited amount of doping controls the various agencies that govern the sport nationally and internationally are able to perform. To use this capacity for a result that the consumers of the product prefer is a wise move. It is much more efficient for teams that are already constantly in contact with riders to monitor them at almost no extra cost than for the UCI to do so with far less success and at much greater cost. Sure, it was fun to see record after record broken twenty and fifteen and ten years ago, but the consumers (i.e. fans) of cycling have generally come to a consensus about the product they demand, and it does not include doping.