The lawyers creating unnecessary intellectual property rents – again

Here is today’s column for the Financial Review.

Patently there’s a problem

As Mark Twain said, It ain’t what you don’t know that gets you into trouble. Its what you know for sure that just aint so.

Our biggest mistakes often come when we’re most untroubled by our logic even when it’s wrong! For decades we’ve been applying this syllogism: Intellectual property (IP) stimulates innovation and creativity. Therefore stronger IP generates more.

We might know it for sure, but surprisingly often, it just ain’t so.

Given its costs to consumers, stronger intellectual property protection is only worthwhile where it encourages IP production that would not otherwise have occurred.

Yet we’ve often strengthened protection for IP that’s already in existence. For instance, weve lengthened the period of protection retrospectively. Like when we agreed with all the other intellectual property importers in the world – that’s pretty much everyone except the US – to retrospectively extend patent terms from sixteen to twenty years.

  • Like when we agreed with all the other intellectual property importers in the world – that’s pretty much everyone except the US – to retrospectively extend patent terms from sixteen to twenty years.
  • Like when we negotiated the Australia U.S. Free Trade Agreement to retrospectively extend copyright protection for an additional 20 years. The pre-WWI song Happy Birthday finally escaped Australian copyright in 1997 but back it went. Happy birthday indeed.

This lurch towards IP mercantilism hasn’t just been driven by the US’s trade negotiating muscle. From the early eighties, judges around the world somehow caught the zeitgeist. Intellectual property came to be seen as such a Good Thing that well-reasoned judicial taboos on patenting software and business methods and various doctrines which stood in the way of patenting the obvious were whittled away.

The result? Today we have people successfully patenting garden swings and toast! Litigation on software patents is four times more likely than chemical patents; business methods patents twelve times more likely; finance patents 49 times.

But what’s ultimately much more serious are road blocks preventing further innovation. And massive uncertainty as software developers must now use lawyers as minesweepers as they negotiate the patent thicket before them at hundreds of dollars an hour.

Last week the lawyers struck again! The Copyright Agency Limited (CAL) collects royalties for copyright owners. Over the last decade, they’ve driven up their royalties from around $7 million to $50 million per year.

A lot of this comes from the penurious education sector and, given that quite a bit of the content on which CAL earns royalties is generated by those on the public purse, a simple public subsidy to content creation would get more money through to creators. And see more creation.

CAL is still broadening its horizons. It’s seeking royalties from the NSW Government whenever it republishes the surveyors plans of your housing block.

These documents have already been created, often ages ago, by surveyors paid by the original developer of the block. They’ve been deposited on the public record and so are available for free distribution.

The case went to the Full Court of the Federal Court which held unanimously in favour of NSWs free right to use and disseminate the plans. But last Wednesday, in a case that’s gone all but unreported, the High Court held unanimously that what the Federal Court seemed to know for sure just ain’t so.

I’ll leave the legal reasoning to the lawyers, but one lawyer Professor Brian Fitzgerald of the Queensland University of Technology may be underwhelmed having proffered a range of legal arguments that their Honours dealt with sketchily if at all.

Economically it’s the usual travesty.

The decision increases costs for users including you next time you need a copy of your title documents. Yet the increased IP will encourage not one additional unit of surveying (Is a unit of surveying a serve?). And how far has the free flow of other content been jeopardised by their Honours’ reasoning?

While an extra $20 odd here or there for surveyors plans is small beer, these imposts frustrate those who might otherwise add value to the content in unforeseeable ways. Five years ago, who would have predicted street view on Google maps which launched in Australia last week along with the CAL decision?

That’s why around the world in places like the UK and New Zealand, Governments have established comprehensive policies to optimise public access to publicly owned information. Australia has hastened more slowly and spasmodically.

Our Parliament could pick up the pace by legislating so that that in the future, it just ain’t gonna be so.

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derrida derider
derrida derider
15 years ago

Ya know, you don’t have to be a full-blown French postmodernist to understand how a narrative can frame actions. The unfortunate narrative with “Intellectual Property” arises from the term “property”. “Owners” (another framing term), lawyers and lawmakers all tend to see IP as sonmething that is an innate right because it is somehow the personal possession of the owner, in the same way a piece of land is. Hence the warnings on DVDs about “You wouldn’t steal a car …” etc.

Whereas, of course, it is historically and in economic theory just a pragmatic method of bringing forth invention, and should be judged solely by its efficacy in so doing (Article I, Section 8 the US constitution gets that right). “Rights” have little to do with it, but lawmakers don’t seem to understand that (perhaps because it’s not in the interest of the lobby groups that they do so).

Legal Eagle
15 years ago

Tangible property is all about managing scarcity and enforcing exclusive possession (particularly re valuable resources such as land). Intellectual property is not scarce (in fact, an idea can be disseminated broadly in multiple copies everywhere) so legislation enforces scarcity by a monopoly regime. The idea of excluding others is intrinsic to property, and has been imported into intellectual property, but really we stifle productivity if we exclude others from using ideas too much. A free interchange of ideas is necessary for progress.

Gummo Trotsky
Gummo Trotsky
15 years ago

Timely article.


[…] Part 2 (but the Constitution!). Inchoate responds here.Nick Gruen has an AFR op-ed, which is re-produced on Club Troppo here – referring to Fitzgerald’s and Anderson’s (pre-High Court decision) article […]

Bingo Bango Boingo
Bingo Bango Boingo
15 years ago

I object to being lumped in with High Court justices. They’ve been getting things wrong for over a century, whereas I always get things right. Please don’t talk about Teh Lawyers, talk about Teh Judges.



[…] up here’s Nick Gruen at Club Troppo: Our biggest mistakes often come when we’re most untroubled by our logic even when […]

15 years ago

Who actually ends up with the royalties on these plans?

Kim Weatherall
15 years ago

To answer Tel’s question: the surveyors/surveying firms who drew them in the first place. BUT that assumes that the license is worth something: I wonder if the Copyright Tribunal would consider a zero fee license? Or will the government think about re-working the system and working out what they should really have to pay for? Creating an exception based on the public benefit that comes from greater availability of this material? Much still to ponder on this one.

Kevin Cox
Kevin Cox
15 years ago

The funny thing is that for many ideas excluding others by trying to fine them for using your idea is commercially the worst thing you can do. For an idea to sell you actually have to convince others that the idea will work. So the first thing you have to do is to ask others to copy it in their heads and believe in it and then act on it – which is exactly what patents are trying to stop. You now say to them. “Everytime you use this idea you have to pay me something for it – that is pay a fine” If the idea is any good people will do it anyway but will vary it in some way so their lawyers can argue the case for a long time and you will not get any money. More likely people will say – it is not worth the risk and I will not “buy” the idea. So if you have an idea the best way to sell it is to let anyone else use it and if you have a patent on an idea then you agree that others will not be charged if they use it.

I think this principle can be extended to other regulations. If you want to “sell” a regulation then you have to get others to embrace it and follow it. But the best way to do that may be not to punish people with fines if they disobey. But how do you stop people from breaking the regulation? Well you do it so that anyone who breaks the rule is punished by exclusion from the game. How does this work? Anyone who wants to indulge in some social or economic activity agrees that they will obey the rules. If they break the rules then they are not punished they are simply excluded from playing in the future – or perhaps for some period of time. This is the way we do it with imprisonment and with football. Why not do it for economic activities and in particular for white collar crime. For example you agree not to collude with others on prices. If you do and you are found out then you are stopped from selling or employment in areas on which you colluded with others and it is made public. We do it in a limited way with licenses, with credit checks, so why not extend to most government regulations.

We could even institute a yellow card, red card, approach to white collar crimes!