Tuesday, 28 October 2003

Law driving innovation

The government should occassionally drive innovation. This is especially true when the potential benefits of a new science or technology are great but the probability of developing products based on them within a reasonable time is small. This is an obtuse reference to the old argument that the government should, in some cases, support "pure" research. In most cases, however, government intervention in the market for research and development (R&D) is unwarranted and even destructive. The case for government intervention absolutely breaks down when market forces have already produced the first viable product. Where multiple products compete, there is no plausible argument yet-made for government intervention.

Sometimes, however, government actions shape innovation as the unintended consequence of legitimate actions taken in another sphere. This is happening right now in the area of copyright law. Since the first Congress enacted the first American copyright act in 1789, copyright law has grown in two directions: more complex and more protective of copyright owners' interests. Both trends have deeply affected copyright markets in the last two centuries. Since the 1976 copyright act — the most recent major overhaul to copyright law in this country — the complexity of the law has had a disproportionate impact on the technologies developed to serve the copyright industry. My theoretical opinion and this practical reality collide in the project of two Massachusetts Institute of Technology (MIT) students.

The New York Times reported yesterday that MIT students Keith Winstein and Josh Mandel have developed a system for distributing music via campus information networks that appears to comply with copyright law and partially render moot the grand public debate over file sharing. (Article: With Cable TV at M.I.T., Who Needs Napster?) The project transmits music over MIT's cable television infrastructure in analog form — thereby taking advantage of the bulk licenses that copyright producers routinely grant to television and radio operators and avoiding digital transmission, which triggers the nastier niceties of the copyright act. This new technology adds precisely zero end-user functionality to existing distribution systems (namely, file sharing networks and radio). Its sole purpose was to formally circumvent a distribution mechanism that copyright producers find objectionable. John Schwartz of the NYT writes that "some legal experts say the M.I.T. system mainly demonstrates how unwieldy copyright laws have become." Mike Godwin, senior technology counsel to Public Knowledge, says the students have "sidestepped the stonewall that the music companies have tried to put up between campus users and music sharing."

Copyright law's burgeoning complexity may be the lifeblood of intellectual property lawyers, but it is bad social policy. I admit this as someone currently aspiring to become an IP and cyberlaw lawyer. Another prime example of complexity breeding bad results lies in the recent episode where the Minnesota Public Utilities Commission (MPUC) tried regulate Vonage and other VoIP providers as telephone service providers. The Federal Communications Commission (FCC) long ago penned the legal distinction between "telecommuniction services," which states may regulate, and "information services," which they may not regulate (because such regulations are preempted by federal law. Vonage and other VoIP providers offer consumers and businesses a method of conducting voice communication, which we would ordinarily recognize as "phone calls." The only difference, from the end-user's perspective, is that his phone is plugged into a black box which, in turn, is plugged into the wall, instead of the phone being plugged directly into the wall. The user still dials a number, talks, and listens just as he would with an ordinary telephone. The problem is that the law created two legal categories and treated them differently. As technology allowed, the market made this distinction spurious at best by offering products that straddled the line between the two categories.

In both cases, the complexities of the law drove technology and they way we use it. In the former, copyright law inspired wasteful development of a system that is, at best, as efficient as preexisting systems. In the latter, the law held up development of a highly efficient technology (compared to what it would replace) with wasteful litigation that sought to resolve whether it was really the old technology or something new. The commonality is the resources consumed by the attempt to apply overly complicated laws to new facts. These examples are drawn from this and last week's headlines. I could probably select one example per week over the last five years, with some effort. I think, however, that my point is made.

Posted at 11:19:08 AM | Permalink

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Topics: Cyberlaw, IP, Science, Technology, VoIP
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