This Month in IP Insanity (April 2015)

Now that the academic year is slowing down, I can start to account for all of the developments in IP law and technology again. Here are a handful of events and discussion points for the past month:

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  1. Tidal has turned out to be a bust. Predictably, Jay-Z has pulled all of his music off of Spotify and Youtube, meaning Tidal is the only place where you can access it. As I commented during the odd fanfare of its release – while we’ve certainly increased access costs, I haven’t really seen any big boon to musical innovation, and it’s not clear that any other artists (big or marginal) will flock to Tidal. It’s probably just a rent-extraction system for the musical elite.
  2. More streaming music news — Spotify is lobbyisting up (which somehow doesn’t sound as catchy as “lawyering up”, perhaps that’s for the better). I’ve reported upon Spotify before, in the context of Taylor Swift’s criticism of streaming music. Spotify seems to be preparing to go to war with Apple, the latter of which is preparing to release it’s own streaming service, the newly acquired and revamped “Beats.” At the same time, the DOJ is considering another pass at music licensing regulations, and the blue moon when Congress decides to revamp copyright laws may also be around the corner (due, no doubt, to the fact that 2018 will see the first batch of copyrights to finally expire since 1923).
  3. Another reason Spotify is lobbyisting up, and yet another music streaming news bit, is that Grooveshark has finally streamed its last. From The Atlantic’s subtitle, “Everyone knew you were probably illegal all along,” one wonders how they were able to persist for so long without properly acquiring licenses to all streamed music. Apparently it was “good lawyers,” but even that will only get you so far for so long…
  4. John Oliver set his hilarious investigative journalist sights on patents, specifically patent trolls. [I should add that I watched this live the night before my dissertation defense, taking it as a good omen.] It was a very entertaining piece, highlighting the true cost of non-practicing entities (NPEs) who extract rents from would-be users or innovators who use something the NPE holds a patent on (but the NPE does not actually produce anything). Alex Tabarrok, commenting on a further link to Timothy Lee, rightfully discuss how trolls are not the fundamental problem with the patent system, just one of the system’s most visible and absurd excesses.
  5. Not a news story, but on a related note, I recently read a dated article by Stephan Kinsella arguing that patent trolls are akin to mafioso, who don’t want to actually block competition (like actual patent holders do), but rather keep it flowing so they can just wet their beak. This framework makes actual patent holders, who would exercise their monopoly power and block future innovation for want of rents, actually seem worse than the trolls, counterintuitively. It sounds very similar to Mancur Olson’s stationary bandit being economically superior to the roving bandit model of government. I’m inclined to agree, but the point again is that the system is broken, not those who are exploiting it best.
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  7. Onto cable TV, the market for which was blown open this past month by Verizon FIOS’s announcement that it will finally will break up the famous cable bundle into smaller packages. This is far from a la carte channel purchasing, long held as the ideal from the consumer’s point of view, but not the economist’s, as Verizon will offer several slimmer packages with about 20 channels including the famous broadcasters and ESPN, etc. It will be interesting to see how this affects the cable industry: established players don’t like it.
  8. Our benevolent overlords at Google now want to get into the phone carrier business. Google’s proposed Project Fi will cost $20 a month for talk and text, beyond free Wifi, and another $10 per gigabyte of data used each month. Most interestingly, unused data can be credited to the next month’s quota. While a welcome innovation, Google will have to build up its network and reputation as a carrier beyond simply a software (and limited hardware) company, to compete with the infrastructure of Verizon, AT&T, and Sprint.
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Seeing the world as a social scientist vs. as a nationalist

When mass protests against corruption and economic privation began erupting in Venezuela last year, followed by brutal police crackdowns and the disappearing and killing of protesters by government forces and government-backed militias, I naively thought the American Left might take an interest in the protesting side. After all, they were mainly young people upset at the system that was failing them, and the protests seemed to have evolved organically throughout large parts of the country. It didn’t seem to matter how the American Left had approved of Hugo Chávez, cautiously in pockets and enthusiastically in other pockets, for 15 years. After all, Chávez was dead, and it wouldn’t have lost them too much face to declare that his successor, Nicolás Maduro, had betrayed the revolution. Killing peaceful protesters is usually enough to establish bad guy status. Though Maduro was a Chávez disciple and largely continued his policies, it didn’t seem to be asking much to say that some kind of tide had turned.
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But no, where there was a reaction at all it was to point out that one of the major opposition figures, Leopoldo López, was alleged to have links with the CIA. (It is difficult to confidently pinpoint exactly what these links involved, but I am not disputing the major theme.) Thus the argument implicitly ran that what appeared to be an organic social movement was secretly being orchestrated or at least manipulated by the CIA and thus was not eligible for sympathy or support. López turned himself in to avoid being labeled as the mastermind and tarnishing the rest of the movement, and he remains incarcerated at present.
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Though my frustration with the Left continues, I should have been prepared for the disappointment. After all, this phenomenon has happened time and time again. Orwell began his essay “Notes on Nationalism” with
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Somewhere or other Byron makes use of the French word longeur, and remarks in passing that though in England we happen not to have the word, we have the thing in considerable profusion. In the same way, there is a habit of mind which is now so widespread that it affects our thinking on nearly every subject, but which has not yet been given a name. As the nearest existing equivalent I have chosen the word ‘nationalism’, but it will be seen in a moment that I am not using it in quite the ordinary sense, if only because the emotion I am speaking about does not always attach itself to what is called a nation — that is, a single race or a geographical area. It can attach itself to a church or a class, or it may work in a merely negative sense, against something or other and without the need for any positive object of loyalty.

By ‘nationalism’ I mean first of all the habit of assuming that human beings can be classified like insects and that whole blocks of millions or tens of millions of people can be confidently labelled ‘good’ or ‘bad’. But secondly — and this is much more important — I mean the habit of identifying oneself with a single nation or other unit, placing it beyond good and evil and recognising no other duty than that of advancing its interests. …

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In this case, of course, the “nationalism” I refer to is loyalty and emotional attachment to the global “progressive” movement, many of whose goals I share. Because Chávez was considered (by many) to be part of this movement and Maduro is his handpicked successor, the attachment extends to the Venezuelan government of 2014–2015, i.e. the regime that is still causing economic disaster and beating, disappearing, and killing protesters.
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But why is it that so few people seem to be capable of nuance or complexity in politics? It is entirely possible for one to believe, for example, that Chávez did a lot of bad things while with the other hand doing a lot of good things. One can also believe that the CIA is generally up to no good and hence its support of López taints him while also believing that López might locally be considered a legitimate political leader who is preferable to Maduro. This mindset makes sense to me, and it’s not unfamiliar to most people in the US, where the majority of this blog’s readers reside. Take Thomas Jefferson. Most of us can agree that (a) Jefferson had a lot of good, important, insightful ideas about how governments should be run, and at the same time that (b) his advocacy of and personal involvement in the system of chattel slavery are completely despicable, especially given that he seemed in his more lucid moments to have known better. Why is applying this framework to current events and people so uncommon?Clearance Oakley sunglasses

Uber Uber Alles, Or Why We Can’t Rely Solely on Uber to Improve Transportation

The best of all monopoly profits is a quiet life. – Sir John Hicks

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A lot of people who are fans of free markets and technological innovation praise Uber as the poster child of market competition and ending crony monopolies like taxis. The ridesharing service promotes greater resource utilization and echoing the work of Hernando de Soto, brings a lot of dead capital to life, enabling low-income groups to become entrepreneurs in a world where regulation keeps them out. Even the Republican Party is trying to exploit the disruptive dynamism of Uber to claim themselves as “the party of Uber” (even if Uber has been saying things contrary to the GOP’s ideals). Contrast this to a lot of progressives who have made Uber their rallying call against unregulated markets. And yet, even economists widely agree (an unfortunate rarity), that on net, Uber is an improvement in people’s lives, for the obvious reasons.
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I have used Uber about a dozen or so times, and have never had anything short of a wonderful experience. The drivers were always courteous, and many times we have had conversations about Uber, the taxi-monopoly, and the state of technological improvement. It might be where I currently live, but these drivers were ethnically diverse, often second-generation immigrants from North Africa and the Middle East, and some commented about how Uber was substantially improving their even friends and family’s lives back in their home countries. I have even thought, on multiple occasions, of driving for Uber.
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Yet, even as the taxi monopoly is obviously trying to bring Uber down, in a some ways, Uber itself is bringing itself down. Or, at least, it is smearing the ideal that we really want it to be. It’s CEO has been saying a lot of shady things, prompting the media to say Uber has an “a-hole problem.” Uber has been dealing with a lot of criticism over the way it has been engaging with its rivals such as Lyft and Sidecar. It seems Uber allegedly uses a lot of shady tactics to make it more expensive for Lyft. Maybe these claims are overblown or even misrepresented, in hopes to benefit Uber’s rivals.
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None of this is to mention the cries of “price gouging” when Uber multiplies its rates during peak hours, and media attention given to horror stories of short trips with high bills. A friend of mine took an Uber on Halloween night about 10 miles for $250. While as a consumer in that situation I too might be irate, the greater principle of peak-load pricing is perfectly fine by me, it’s even socially beneficial. High prices signal information about relative scarcity, and induce new drivers to start offering their services. While you might save money by taking a cab in those situations, the “cost” you incur will instead be the hours waiting for that cab (if you can get one at all). And then there is the kicker, you can always chose not to take the Uber.
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But the most troubling developments about Uber is that it is starting to play the Taxi monopoly’s own game against its rival ride-sharing companies:

In September, though, the company hired former Barack Obama adviser David Plouffe specifically to work with local governments. “Uber should be regulated,” says Plouffe, who hails the legislation he hammered out in Washington, D.C. as “groundbreaking legislation [that] provides a model going forward.”
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That model is one that gives clear advantages to Uber, which has more market share and political clout than its rivals such as Lyft and Sidecar. What the legislation does is establish “burdensome new ridesharing regulations” dictating minimum ages of drivers and other requirements that will make it more difficult for competitors to catch up to Uber or enter new markets in the first place. (Time

In the end, we must remember that Uber is a business, and the goal of every business is to become a monopoly. The reason Uber has been such a force for good is that it opened up the stagnant monopoly of the taxi cabs to one of convenience and innovation precisely because it stood as a rival competitor. The taxis were able to crush competitors because of the favorable regulation that they were able to co-opt from regulators.

Uber broke this very stable equilibrium because it was able to exploit technological progress in software to come up with a clever way to offer a more convenient service to consumers, and an equally clever way around the pro-taxi regulations: it’s not a taxi service, it’s just a software app that connects people who want to share rides that happens to be in exchange for money, and you cannot hail one from the street.
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But now that Uber has taken prominence over its own competitors, we should not at all be surprised that it would seek to use regulation to favor itself and make its rivals less competitive. Given favorable (but highly unlikely) circumstances, they would become the new taxi monopoly and we would be stuck back at square one. The only way to ensure consumer satisfaction and innovation is by the threat of rivalrous competition. 
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Thus, as economists and advocates of free markets, we must remember to be vigilant of the abuses of individual businesses — we are pro-market, not pro-business. Only through open competition can we enable the wealth-creation that allows us to live the good life. Even the most innovative company will use free-market rhetoric just long enough to allow them to capture enough market share to start turning to the political process to switch from earning profits by creating value for consumers to collecting rents and deterring entrants.
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This is in no way a call to smear or boycott or prohibit Uber or ridesharing. We just have to realize that without reforming the capturable regulation itself, we risk our heroes becoming the villains once they are strong enough.

The Victorious and the Resentful, Socialist calculation past and present

Twenty-five years ago today the Berlin Wall fell, that monument to the brutality that the domesticated ape is capable of when its operating software is infected by bad ideas. Twenty-five years is a dangerous amount of time because it is enough time for an entire generation to have grown up largely unaware of the significance of the event, and by extension of the horrors of socialism when put in practice. Around 42% of the current world population was born after the fall of the Berlin Wall. Yet considering that before a certain age (around 15?) politics and economics are largely alien interests, the percentage of us that are left largely to our own devices to learn about this history is much greater than 42%. This is dangerous if there is some reason to believe that those who do not know their history are condemned to repeat it.
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Another reason that twenty-five years is dangerous, is that it is just enough time for those who cried of sadness (and many in my home Latin America did) instead of joy when the wall fell to have distorted history enough to make socialism appealing once again. After all history, is not written by the victors, it is written by the resentful (regrettably these are often the same ones that write the textbooks). The advance of twenty first century socialism by Podemos in Spain, and its consolidation in Latin America, are proof positive that the failure of socialism in Eastern Europe has long been forgotten by those not directly affected by it, and that it has been revived and revised by the necromancers of bad ideas. In trying to understand how this is possible at least part of the problem is thinking that societies learn from their past. Societies do not learn from their past, individuals do. It is only when the learning of individuals is institutionalized that societies are capable of learning. But this analysis stops short as well because institutions are only self perpetuating on average terms and in the long run, the consolation of the economist is the misery of everyone else that lives in crests and troughs of history, and not on the trendline.
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The revived version of socialism slightly alters the means and goals of its former self. Unlike its Marxist-Leninism, it does not aim at producing more than capitalism, but rather at producing “buen vivir” or good living (as defined by the government’s sub-secretary of good living of course). The means have been revised as well, rather than the complete abolishment of private property, productive firms are to be directed by the state, with only certain sectors ripe for outright nationalization. Very reminiscent of Lenin’s New Economic Policy. Thus the only problem with socialism that this revised version concedes is the one that all practical implementations have conceded, the one pointed out by Mises, something really telling about the fundamental economic problem with socialism. The concession in the means employed by all the implementations of socialism is really a testament to Mises’ paradox of planning. The change in the goals of twenty first century socialism is telling as well. If you can’t accomplish what you originally set out to accomplish with the means you propose, alter your goal to that which your means can accomplish. If the means you propose are unable to deliver material prosperity but instead deliver poverty, redefine poverty as “good living”, and set up an official agency to preach about it.ray ban sunglasses Discount