Tag: patent

The Revolution in the Mirror is Closer than it Appears

The father of modern chemistry Antoine-Laurent Lavoisier was beheaded in 1793 in what is now the Place de la Concorde. A victim of France’s post-revolutionary Reign of Terror, he was specifically marked for execution by one vengeful, lesser scientist named Jean-Paul Marat, whose incorrect theory about combustion had been publicly scorned by Lavoisier at the royal academy.

It’s rare when revolutions do not produce new tyrants, and of course the fact that our own war of independence avoided this fate is a legitimate source of national pride for Americans.  This doesn’t mean we’ve managed to avoid tyranny altogether, only that our despots tend to be CEOs instead of warlords.

In an article for Evonomics, Lawrence Lessig writes, “ … the biggest danger to free markets comes not so much from antimarket advocates (the Communists and worse!) as from strong and successful market players eager to protect themselves from the next round of strong and successful market players.”

Lessig is of course referring to historical precedent in which “old innovation” employs—or even revises—legal mechanisms as a means of protection against “new innovation”.  The familiar narrative is one in which the legacy industry clings to power for as long as it can while new industry inexorably builds the market of tomorrow.  Referring to the protectionists as capitalism’s biggest enemies, Lessig sets the stage as follows:

“…there are only two things we can be certain of when talking of free markets:  first that new innovation will change old; and second that old innovation will try to protect itself against the new.”

In the article, he identifies this protectionism as the kind of crony capitalism in Washington that ought to make allies of “progressives on the Left and free-market advocates on the Right”. And indeed, this type of alliance did manifest in 2012 with the shouting down of the SOPA and PIPA bills, when we saw paradoxical solidarity among members as divergent as the ultra-conservative Heritage Foundation and the anarchic hacktivist group Anonymous. And those bills were certainly labeled “protectionist”, although there were no reasonable grounds for portraying either their intent or their mechanisms in that light.  Still, one cannot deny that one droning note of rhetoric, which continues to muddy the waters, is a broad narrative of Old v New, with New having the advantage of at least appearing to be on the “right side” of history. After all,  history will tell you that New always wins.  That’s why it’s called New.

But the crucial detail Lessig leaves out of his otherwise reasonable premise is that New already won quite some time ago. The yearning revolution he’s talking about is in the rear-view mirror.  The self-proclaimed innovators—the market leaders who are presently writing the future and leading the public debate—already have the lion’s share of wealth at their backs.  Google, Apple, Facebook, UBER, Amazon, et al are not seedling enterprises trying to grow through the concrete and rusted barbed wire of outdated policy; they are the crown jewels of Wall Street and private equity with the capital to do just about anything they want and the PR budgets to tell the market that it’s what we want, too.  Far from banging their heads against a wall of protectionism, New industry is actively and effectively rewriting policy and public opinion; and Lessig is correct that both progressives on the Left and free-market advocates on the Right are cheering them on.  Though I don’t think he’s quite right that they should be.

Neither progressives nor free-market advocates (and I personally consider myself a bit of both) should be bamboozled by the rhetoric of innovation yet to come.  This is not to say that new inventions and new paradigms are not on the horizon—no doubt they are—only to propose that the corporations most likely to be at the forefront of the biggest changes, for better or worse, are already among the most financially and politically powerful entities in the world.  And Lessig is right that the powerful will use protectionist measures to entrench their interests, but the funny thing about our market today—in which a company like UBER goes from start-up to a $60bn market cap in five years—is that Silicon Valley’s leaders and VCs have disrupted protectionism itself and renamed it progress.

Redefining IP as Protectionsim

Not surprisingly, in this broader narrative about protectionism, Lessig invokes criticisms of both patent and copyright law.  With regard to the former, he refers to an increase in patent litigation from 2007 to 2011, with particular focus on the “patent troll”, who might litigate away an otherwise useful innovation.  Although patent trolls are a problem—the worst are sort of the ambulance-chasers of IP law—these actors do not generally represent a protectionist agenda for legacy business.  Ironically enough, though, the Google and Facebook-backed “reform” bill HR-9 is a protectionist proposal inasmuch as its language so broadly defines “patent trolls” that the law could actually harm small, entrepreneurial inventors while entrenching already-big patent owners—like Google and Facebook.

With regard to copyright, Lessig accuses the recording industry of seeking Internet radio rates “designed” to stifle diversity and competition online.  But in describing he innovation being hindered in this case, he first broadly conflates amateurs and enthusiasts with big, corporate players and then blames the RIAA for assuming the online radio market will consolidate.  It’s a bit hard to summarize his point here since he begs some important questions.  You can read the section for yourself, but his larger argument that the recoding industry “wants” a smaller market seems to overlook clear evidence that the networked economy tends to produce monopolies by its own means, and not because of so-called protectionist maneuvers by traditional industries.

Moreover, given that Lessig’s broader thesis is a criticism of money in politics, it seems especially disingenuous to ignore the fact that the VC money behind most of these technology plays is very much betting on market consolidation rather than expansion. In this extensive profile of Marc Andreessen, Tad Friend, writing for The New Yorker, describes the sensibilities of Silicon Valley’s major venture capitalists, who make big bets with the understanding that just one needs to become the “unicorn” while the others can fail entirely.

It is a rationale driven by an instinct for knowing that the 1000x return is somewhere in the mix of proposals that may sound like haphazard lunacy to many of us, but which sound like the future to this niche club of mostly male investors. But the point not to be missed is that this culture produces extraordinarily powerful, competition-resistant companies that go from zero to Forbes cover at historically unprecedented speed. And the political influence they wield scales in tandem, as we see when Google shifts in a matter of a few years from virtually no lobbying to ranking among the top ten in the country.  So, Lessig’s portrayal of private industry leveraging public policy is fair; it’s simply looking in the wrong direction.

Perhaps most importantly, the ideology of the venture capital behind the businesses we tend to aggregate under the generic term innovation is one that has almost no kinship with Lessig’s stated political reform agenda (i.e. getting money out of politics).  Guys like Marc Andreessen and Peter Thiel don’t talk about “fixing” American politics; they talk about rejecting it altogether—taking themselves quite seriously with proposals to establish alternative, technocratic states.

Utopian fantasies like Seasteading may be appealing to any number of libertarians and anarchists out there, but it’s a world view that should not in any way be confused with, for instance, a Bernie Sanders-like proposal to effect reform from within the system. In fact, the two interests are wholly antagonistic since Sanders-style political reform is predicated on forcing American-made wealth to reinvest in America itself—not on billionaires building autonomous societies akin to Ayn Rand’s magic valley in Atlas Shrugged.

Meanwhile, the extent to which Silicon Valley’s brand of libertarian ideology speaks with money in Washington, it is often disguised as anti-protectionist, legislative reform proposals just like HR-9.  Political clout is not exclusively a matter of pay-to-play; it’s also a manifestation of market capitalization that buys even unproven companies a seat at the table simply because they’re too disruptive to ignore. Meanwhile, it’s clear that there is a lot of stable, economic value in “old” industry. And so, this narrative that, for instance, the rights of individuals—be they authors or inventors—are just nuisance barriers to be innovated around, can foster our own economic reign of terror in which lesser innovators are financially incentivized to decapitate greater genius.

Patent Hypocrisy Raises Privacy Concerns

A few posts ago, I reported that the major lobbying muscle in the Internet industry backs a patent “reform” bill (HR 9) called the Innovation Act. I argued in that post that while this reform claims to eliminate nuisance “patent trolls” from clogging up the system with dubious claims, what it really does is eliminate competition from the market.  Because, while the Silicon Valley PR hydra continues to sell the message that intellectual property is an outdated concept in the digital age — one that is chilling the general public’s civil liberties no less — they don’t actually mean that IP is outdated for them, just for everyone else.

Not surprisingly, a web search is no way to get a quick answer as to how many patents these companies hold. Most especially, typing “How many patents does Google have?” into a Google search yields a rather opaque set of first results from the “organizer of all data.” I had to use Bing to get to this article from 2013 in MIT Technology Review, which indicates that since 2007, Google has accelerated its patent activity to the tune of over 1,500 awards per year.  This is still far behind IBM, but not bad for a company that keeps telling the public the USPTO is “overwhelmed” by applications and flimsy claims. This 2012 article from ZD Net estimates that Facebook owned 812 patents at the time of publication, nearly all of these purchased from IBM in a single week as an apparent move to build up its defensive position against litigation from Yahoo! and Mitel.  And this 2014 article in IP Watchdog offers some praise to Facebook for its “more developed” patent strategy in contrast to Twitter vis-a-vis market valuation.

I mention this final example to make the point that there is nothing inherently wrong with these companies availing themselves of IP protections; what’s wrong is the hypocrisy of backing policy change that would create an uneven playing field for big vs small.  To put that in brass tacks, if one of these big boys infringed some IP you created, it isn’t enough that you’d be at a financial disadvantage in a lawsuit, but they’d also rewrite the law to possibly label you a “troll” in order to invalidate your claim in the first place.

But so what? These are the real innovators, right?  They’re innovating a brighter future for everyone and doing it all for free in the name of freedom and open freeness and free openness and disruptive free open innovation and freedom. Right?  Yeah.  So, here’s one of Facebook’s latest patents, Patent No. 9,100,400, which this excerpt from a post by the law firm of Gottlieb Rackman & Reisman explains clearly:

“In the patent, Facebook explains that it has invented a system by which, among other things, it can take the data, specifically your list of friends or your “social network,” and examine the credit ratings of those in your social network. The data is then used to provide information about YOU to lenders, presumably under the theory that “birds of a feather flock together.” If your friends collectively have a good credit rating, the lender might give you loan. If your friends collectively have a poor rating, the lender can close its file on your application. The point here that that lenders who might see some benefit in having data about your social network to judge the likelihood of your ability to pay the loan, or even your willingness to pay it back, will likely be paying Facebook (or any company that Facebook licenses) for the data.”

At the top of the list of magical thinkers I distrust are religious zealots followed closely by actuaries, the latter being too often engaged in devising some alchemical rationale to correlate, for instance, your choice of wardrobe with the insurance premium you should pay.  And we should not be surprised at all — in fact we have already seen other evidence — that social media profiles can become part of your unintended resume, your medical history, your credit-worthiness, your insurability; in short, your worthiness to live among the haves instead of the have nots according to someone’s data-driven decision process.

Now it is possible, that Facebook and lenders will not be able to implement this patented system as described without running afoul of the Equal Credit Opportunity Act, but if adopted, how is this credit based on the company you keep not a potential digital-age means of helping the rich stay rich and the poor stay poor?  When an entity like an insurer, creditor, or potential employer wants to disenfranchise a type of person — black, gay, Mexican, women who have premarital sex! — they devise criteria to avoid direct conflict with anti-discrimination laws.  “We didn’t deny you that loan because you’re black, we denied it because your friends (who didn’t manage to escape the impoverished neighborhood you did) all have bad credit scores.”

So, it’s not hard to imagine a future with a variety of creative, actuarial schematics by which any individual or group may be disenfranchised simply because we have voluntarily made what we used to call “private life” a matter of public record. And because this is the new normal, perhaps we ought to be drawing new legal boundaries regarding personal information and discrimination, but that doesn’t seem to be the kind of reform any of the digital-age leaders want to talk about.