Republic 3.0’s Capitol Hill briefing on design patents featuring David Gerk, USPTO; Rebecca Tushnet, Georgetown University School of Law; Julie Hopkins, Tydings & Rosenberg LLP; Geoffrey Manne, International Center for Law and Economics; and Anne Kim and Rob Keast, Republic 3.0.

https://www.youtube.com/watch?v=9_kmBHtE-7A

The International Center for Law & Economics (ICLE) and TechFreedom filed two joint comments with the FCC today, explaining why the FCC has no sound legal basis for micromanaging the Internet and why “net neutrality” regulation would actually prove counter-productive for consumers.

The Policy Comments are available here, and the Legal Comments are here. See our previous post, Net Neutrality Regulation Is Bad for Consumers and Probably Illegal, for a distillation of many of the key points made in the comments.

Read the full piece here.

In our blog post this morning on ABC v. Aereo, we explain why, regardless of which test applies (the majority’s “looks-like-cable-TV” test or the dissent’s volitional conduct test), Aereo infringes on television program owners’ exclusive right under the Copyright Act to publicly perform their works. We also explain why the majority’s test is far less ambiguous than its critics assert, and why it does not endanger cloud computing services like so many contend.

Because that post was so long, and because the cloud computing issue is key to understanding the implications of this case, this post pulls out the cloud computing argument from that post and presents it separately.

Read the full piece here.

Yesterday, the Supreme Court released its much-awaited decision in ABC v. Aereo. The Court reversed the Second Circuit, holding that Aereo directly infringed the copyrights of broadcast television program owners by publicly performing their works without permission. Justice Breyer, who wrote the opinion for the Court, was joined by five other Justices, including Chief Justice Roberts, Justice Kennedy, and the liberal-leaning bloc. Interestingly, Justice Scalia dissented on textualist grounds, joined by his conservative-leaning colleagues Justice Thomas and Justice Alito.

Read the full piece here.

UPDATE: I’ve been reliably informed that Vint Cerf coined the term “permissionless innovation,” and, thus, that he did so with the sorts of private impediments discussed below in mind rather than government regulation. So consider the title of this post changed to “Permissionless innovation SHOULD not mean ‘no contracts required,’” and I’ll happily accept that my version is the “bastardized” version of the term. Which just means that the original conception was wrong and thank god for disruptive innovation in policy memes!

Can we dispense with the bastardization of the “permissionless innovation” concept (best developed by Adam Thierer) to mean “no contracts required”? I’ve been seeing this more and more, but it’s been around for a while. Some examples from among the innumerable ones out there:

Vint Cerf on net neutrality in 2009:

We believe that the vast numbers of innovative Internet applications over the last decade are a direct consequence of an open and freely accessible Internet. Many now-successful companies have deployed their services on the Internet without the need to negotiate special arrangements with Internet Service Providers, and it’s crucial that future innovators have the same opportunity. We are advocates for “permissionless innovation” that does not impede entrepreneurial enterprise.

Net neutrality is replete with this sort of idea — that any impediment to edge providers (not networks, of course) doing whatever they want to do at a zero price is a threat to innovation.

Chet Kanojia (Aereo CEO) following the Aereo decision:

It is troubling that the Court states in its decision that, ‘to the extent commercial actors or other interested entities may be concerned with the relationship between the development and use of such technologies and the Copyright Act, they are of course free to seek action from Congress.’ (Majority, page 17)That begs the question: Are we moving towards a permission-based system for technology innovation?

At least he puts it in the context of the Court’s suggestion that Congress pass a law, but what he really wants is to not have to ask “permission” of content providers to use their content.

Mike Masnick on copyright in 2010:

But, of course, the problem with all of this is that it goes back to creating permission culture, rather than a culture where people freely create. You won’t be able to use these popular or useful tools to build on the works of others — which, contrary to the claims of today’s copyright defenders, is a key component in almost all creativity you see out there — without first getting permission.

Fair use is, by definition, supposed to be “permissionless.” But the concept is hardly limited to fair use, is used to justify unlimited expansion of fair use, and is extended by advocates to nearly all of copyright (see, e.g., Mike Masnick again), which otherwise requires those pernicious licenses (i.e., permission) from others.

The point is, when we talk about permissionless innovation for Tesla, Uber, Airbnb, commercial drones, online data and the like, we’re talking (or should be) about ex ante government restrictions on these things — the “permission” at issue is permission from the government, it’s the “permission” required to get around regulatory roadblocks imposed via rent-seeking and baseless paternalism. As Gordon Crovitz writes, quoting Thierer:

“The central fault line in technology policy debates today can be thought of as ‘the permission question,’” Mr. Thierer writes. “Must the creators of new technologies seek the blessing of public officials before they develop and deploy their innovations?”

But it isn’t (or shouldn’t be) about private contracts.

Just about all human (commercial) activity requires interaction with others, and that means contracts and licenses. You don’t see anyone complaining about the “permission” required to rent space from a landlord. But that some form of “permission” may be required to use someone else’s creative works or other property (including broadband networks) is no different. And, in fact, it is these sorts of contracts (and, yes, the revenue that may come with them) that facilitates people engaging with other commercial actors to produce things of value in the first place. The same can’t be said of government permission.

Don’t get me wrong – there may be some net welfare-enhancing regulatory limits that might require forms of government permission. But the real concern is the pervasive abuse of these limits, imposed without anything approaching a rigorous welfare determination. There might even be instances where private permission, imposed, say, by a true monopolist, might be problematic.

But this idea that any contractual obligation amounts to a problematic impediment to innovation is absurd, and, in fact, precisely backward. Which is why net neutrality is so misguided. Instead of identifying actual, problematic impediments to innovation, it simply assumes that networks threaten edge innovation, without any corresponding benefit and with such certainty (although no actual evidence) that ex ante common carrier regulations are required.

“Permissionless innovation” is a great phrase and, well developed (as Adam Thierer has done), a useful concept. But its bastardization to justify interference with private contracts is unsupported and pernicious.

Filed under: contracts, copyright, cost-benefit analysis, intellectual property, Knowledge Problem, licensing, markets, net neutrality, patent, privacy, regulation, technology, telecommunications, television Tagged: Aereo, airbnb, contracts, copyright, innovation, net neutrality, permissionless innovation, Tesla, uber

Geoff Manne joined Sandra Aistars and Bartlett D. Cleland to discuss the Aereo case as part of World IP Day 2014.

2014 World IP Day: What’s at Stake in the Aereo Case?

Interested observers on all sides of the contentious debate over Aereo have focused a great deal on the implications for cloud computing if the Supreme Court rules against Aereo. The Court hears oral argument next week, and the cloud computing issue is sure to make an appearance.

Read the full piece here.

Summary

“Respondent (“Aereo”) deploys a system of tiny antennas and large computer servers to capture, transcode, and retransmit live television broadcasts online without authorization or, indeed, any contractual relationship with copyright holders at all. The inelegant complexity of its retransmission system is entirely a function of Aereo’s efforts to evade copyright law; it makes no sense from a technological standpoint. Despite its efforts to engineer its way around the Copyright Act, Aereo cannot escape copyright liability. By providing unlicensed television broadcasts to its subscribers—a subset of the public—Aereo plainly violates the exclusive public performance rights held by copyright holders in its unauthorized transmissions.

Although Aereo’s technological machinations are cleverly designed to create sufficient ambiguity as to their legality, Aereo’s business model is clear: to offer the public the same online access to broadcast television programming that is readily available elsewhere, but without incurring the cost of compensating copyright holders of that programming. In so doing, Aereo effects a simple— and illegitimate—wealth transfer from copyright holders to itself, without creating any appreciable countervailing consumer benefits. In so doing, it undermines the ability of copyright holders to enter into voluntary transactions to license their content and thus subverts the constitutionally and congressionally protected right of creators and their licensees to market their creative works…”

Summary

“STELA (and its predecessors) as well as the Cable Act were written to promote competition and to protect consumers in nascent markets. But since their enactment the market has
fundamentally changed, becoming quite competitive. Rather than continuing to try to tweak the laws of a bygone era, Congress should abandon these disparately applied, technology specific regulations and embrace the default tool for dealing with market power across the economy: antitrust law. Antitrust is the best tool for policing market power in evolving (if not
perfectly competitive) markets, to ensure that distributors with market power do not use their power to harm consumers, while recognizing the benefits that come from experimentation in new technologies and business models for delivering video content to consumers…”