Freedom Line Blog

CFIF and other conservative and libertarian groups strongly oppose a new proposal from Obama’s overactive Federal Communications Commission (FCC) to regulate cable television set-top boxes, and that opposition is widely shared among a bipartisan Congressional coalition and even the political left.

Now, even the U.S. Copyright Office has joined the voices criticizing the FCC’s misguided proposal:

The U.S. Copyright Office criticized a federal agency’s plan to open up the market for pay-TV set-top boxes in a letter to lawmakers on Wednesday.  The letter adds political pressure on Federal Communications Commission Chairman Tom Wheeler, who has been pushing since the beginning of the year for new FCC rules to open up the market for the costly set-top boxes…  ‘As currently proposed, the [FCC] rule could interfere with copyright owners’ rights to license their works as provided by copyright law.’  That is because those who create programming, and hold the copyright on it, have negotiated specific deals with cable companies, and those deals could be upended if other companies also obtain access to the programming through their own set-top boxes.  The letter adds that the Copyright Office is ‘hopeful that the FCC will refine its approach as necessary to avoid conflicts with copyright law and authors’ interests under that law.'”

It’s pretty damning and humiliating that even a counterpart executive branch agency raps the highly-politicized FCC across the knuckles in such an open manner.

Nevertheless, it’s a welcome rebuke against the FCC’s proposal, which constitutes a 1990s-vintage, one-size-fits all mandate to make cable TV set-top boxes artificially compatible with third-party devices.  It additionally constitutes transparent crony capitalism, threatens consumer privacy, undermines the creative community and damages property rights by facilitating piracy of creative content.  And technologically speaking, the set-top box proposal freezes in place an outdated set-top box business model that private innovation and technological advance are already leaving in the dust, with cable companies and other entertainment industry entrepreneurs already abandoning traditional cable boxes in favor of apps and other devices owned and guided by individual consumers.

Hopefully, the Copyright Office’s welcome input helps drive a well-deserved nail into the proposal’s metaphorical coffin.

We take no position in the ongoing Taylor Swift versus Kanye West divide.  But as perhaps surprisingly featured in a Wall Street Journal opinion this week, we do applaud her strong stance in defense of intellectual property (IP) and against the scourge of counterfeiting:

Pop star Taylor Swift has been feuding in recent days with rapper Kanye West and his wife, Kim Kardashian.  The details of the drama are lurid and complicated, but young aficionados of Snapchat and Instagram have been following it all intently.  If only the same were true for other Taylor Swift feuds that have received less attention.  Namely, those the 26-year-old songstress has fought in defense of a principle often scorned by fellow celebrities and the social-media generation generally:  the value of intellectual property.

In battles against tech titans, Chinese e-commerce swindlers and others, Ms. Swift has repeatedly insisted on being paid for her music and brand – and in the process has taught some valuable lessons in basic economics.  This may be the ‘information wants to be free’ era, when online content is glibly swiped by millions who would never dream of shoplifting, but Ms. Swift has a deep appreciation for the profit motive and the fruits it bestows on society.”

As we’ve often noted, it’s no coincidence that the United States has become the most artistically innovative and influential nation in human history while maintaining the world’s strongest IP protections.  Rather, it’s a direct causal relationship, as Ms. Swift recognizes:

Ms. Swift explained why she fights.  ‘Music is art, and art is important and rare.  Important, rare things are valuable.  Valuable things should be paid for.’  She added, ‘My hope for the future, not just in the music industry, but in every girl I meet, is that they all realize their worth and ask for it.'”

Whatever one thinks of Ms. Swift as a musician or pop culture icon, her high-profile leadership in defending IP is to be celebrated.

Reasonable people understand that nations more protective of property rights and the rule of law enjoy higher levels of innovation and prosperity.  The fields of pharmaceutical advancement and biomedical innovation more specifically are no exception.

In a cogent new piece, U.S. Chamber of Commerce Executive Director of Intellectual Property Policy Patrick Kilbride demonstrates how strong intellectual property (IP) protections fuel biomedical innovation that benefits the world:

[E]conomies with the strongest IP protections are 60 percent more likely to provide environments conducive to biotech innovation.  And economies with specific protections for the life sciences field see an average of 13 times more biomedical investment than those lacking IP protections…  [A]s intellectual property systems have strengthened over time, public and private investment in health care has increased, as well as individual earnings to support heath costs.”  (emphasis in original)

Why does that matter?  Because international and even domestic forces seek to  undermine IP protections, threatening the goose that continues to lay golden eggs:

We live in a world where concerted efforts are being made daily to erode intellectual property rights, based on the false premise that IP somehow threatens access to medical care.  While the facts simply don’t support this theory, it hasn’t stopped activists around the world from spreading misinformation and chipping away at the very IP protections that produced life-saving medicines in the first place.  Just a few short years ago, India stripped a leukemia drug of its patent, claiming that it inhibited access by its citizens.  The result?  Due to government interference, fewer Indian citizens had affordable access to this medication than before the patent was annulled.  In Canada, an overzealous judiciary revoked 25 previously granted pharmaceutical patents and sparked a case involving NAFTA protections that could do lasting harm to future investments in life-saving medicines.  And Colombia’s prime minister of health has repaid medical researchers scrambling to find a cure for the Zika epidemic by pursuing an arbitrary and dangerous attack on others in the industry, effectively stripping a pharmaceutical company of its patent for another drug.  It is also against this backdrop that the United Nations Secretary General has pressed for establishment of a High-Level Panel on Access to Medicines (HLP) to quickly produce a report, based on the same false premise:  that ‘failure to reduce the costs of patented medicines is resulting in millions of people being denied access to lifesaving treatments.'”

As Abraham Lincoln observed, “The patent system added the fuel of interest to the fire of genius.”  It’s incumbent upon us to safeguard IP protections that continue to fire the genius of medical innovation.  Too many lives are at stake across the world to allow the grim alternative.

Please join CFIF in celebrating World IP Day!

Over more than two centuries, the U.S. has become the most innovative, prosperous and powerful nation in human history, without even remote competition.  What nation in all of recorded history rivals our array of patented advancements, from the light bulb to powered flight to computer technology to lifesaving pharmaceutical and medical advancements?  What nation has so dominated the world in terms of copyrighted content, from blockbuster films to popular music to literature to television entertainment?  What nation has ever maintained such disproportionately high levels of valuable trademarks recognized instantaneously throughout the world, from soft drink logos to technological products that have revolutionized our lives?

The simple answer is that no society rivals the U.S. in any one of those categories, let alone all of them simultaneously.

And that is the direct result of America’s tradition of strong IP protections, as the U.S. Chamber of Commerce’s annual International IP Index makes clear.  Our Founding Fathers specifically protected IP rights in the text of the Constitution, and the U.S. has consistently led the world in protecting IP rights.  The relationship between America’s IP protections and our unrivaled innovation and prosperity therefore isn’t coincidental, it’s causal.

So today let us celebrate IP, which accounts for over 40 million American jobs, rewards innovation, incentivizes inventiveness and helps ensure safe and genuine products for consumers.

In an open letter to Canadian Prime Minister Justin Trudeau, CFIF joined a coalition of free-market organizations imploring him to promote an environment supportive of intellectual property (IP):

We the undersigned companies and organizations write to urge you to promote a public policy environment in Canada that supports innovation and intellectual property (IP).  Canada has a history of one of the most well-developed environments for promoting advancement of the arts and business through the defense of intellectual property rights, but we are concerned about current developments. Canada has begun to lag behind other developed nations in protecting and enforcing intellectual property rights, even though scholarly research shows that more than ever, the protection of such rights are key drivers for a country’s economic growth.

The letter proceeds to detail the value of IP to both the Canadian and American economies in terms of employment, investment, exports, research & development, consumer products and higher income jobs.

In addition, the letter alerts the Prime Minister to emerging threats to IP rights in Canada, including the proposed “promise doctrine.”  That misguided and potentially dangerous proposal would essentially require inventors to see into the future and itemize the various utilities of an innovation when filing patent applications.  Not only  are such predictions impossible to accurately foresee, but they add uncertainty that threatens to stifle innovative efforts and investment for fear of no future reward due to bureaucratic whim.  That is particularly true in the lifesaving pharmaceutical industry, where the effects are already being felt, as the letter details.  The promise doctrine also contravenes NAFTA, WTO rules and international IP norms.

Because Canada remains America’s most important trading partner, we therefore ask Prime Minister Trudeau to remain vigilant in protecting Canadian IP rights and resist ongoing efforts to undermine them.

In addition to CFIF , other organizations joining the letter include the American Legislative Exchange Council (ALEC), Americans for Tax Reform (ATR), the Small  Business & Entrepreneurship Council, American Commitment, Citizens Against Government Waste (CAGW), Frontiers of Freedom, Taxpayers Protection Alliance (TPA), the Institute for Policy Innovation (IPI), the National Center for Policy Analysis, Digital Liberty and the Property Rights Alliance.

The full letter, which was organized by the Property Rights Alliance, can be read here (.pdf)

With cybercrime on the rise, CFIF’s Renee Giachino discusses why cybertheft of America’s intellectual property should be a kitchen table issue for all of us as it damages the broader economy and costs jobs.

In a recent Daily Caller piece entitled “Patents Are Private Property, Too,” Eagle Forum adviser James Edwards throughout most of his column marshals a strong defense of America’s intellectual property (IP) rights system.

Unfortunately, in his final two paragraphs he needlessly and erroneously detours into alleging that patent litigation reform efforts before Congress somehow undermine IP protections.  The truth is precisely the opposite.  Patent litigation reform and IP rights are complementary, not contradictory.

CFIF takes a backseat to no organization in defending IP rights, and Edwards rightly highlights how America’s strong IP system provides the foundation upon which we became and remain the most innovative and prosperous nation in human history.  He correctly notes that our Founding Fathers considered IP a natural right no different than physical property, and how they accordingly specifically protected them in the text of the Constitution.  As Abraham Lincoln later observed, “The patent system added the fuel of interest to the fire of genius.”

And as we have noted repeatedly, it is not by coincidence that America maintains the world’s strongest IP protections while also standing unrivaled as the most inventive, powerful, prosperous and influential nation in history.  That relationship is causal.

Unfortunately, in his final two paragraphs Edwards veers regrettably astray.  Specifically, he claims that patent litigation reform legislation currently under Congressional consideration would somehow undermine patent rights and “make it much more difficult and riskier to defend one’s patent against infringers.”

Respectfully, that is flatly false.

Patent litigation reform legislation, which passed the House two years ago with an overwhelming 325-to-91 majority, addresses how patent disputes are litigated, not patent rights themselves.

Under current law,  as most people know, overly litigious actors can file frivolous lawsuits or baselessly defend against valid claims because it’s highly unlikely under our current system that they’ll be forced to pay the other side’s attorney fees and litigation costs when they ultimately lose.  That’s because American law generally requires each side to pay its own costs and fees, even if the other side’s claim was weak.  As a litigating attorney who defended against innumerable frivolous claims in my legal career, I can confirm firsthand that winning an award of costs and fees from even the most egregious litigants is exceedingly and unfortunately rare.  Accordingly, bad actors often use our court system to extract improper settlements or frighten legitimate patent holders from defending their rights due to the prospective time and costs of litigation.

That’s where patent litigation reform comes in.

The Innovation Act, the bill that CFIF most strongly supports, targets abuse of our court system by:  (1) Holding losing parties accountable for prevailing parties’ attorney fees and costs unless they can demonstrate that their “position and conduct … were reasonably justified in law and fact, or that special circumstances (such as severe economic hardship to a named inventor) make an award unjust”;  (2) Reforming pleading standards to require greater clarity and justification for their case, rather than relying on vague and unintelligible boilerplate allegations;  (3)  Increasing transparency regarding the true owners of disputed patents;  and (4) Streamlining the burdensome discovery process, which too often imposes oppressive burdens and delays resolution of cases.

Those are manifestly common-sense litigation reforms that all Americans, particularly conservatives and libertarians who broadly favor reform of America’s flawed system of litigation, should support.

CFIF simply would not support any bill that undermined America’s patent or other IP protections.  The simple fact is that patent litigation reform would protect legitimate patent holders, and the only people with anything to fear are those who cannot demonstrate that their claims are based upon good faith and valid law – which is not difficult for legitimate litigants to show.  We therefore encourage all of our supporters and activists across the country to contact their elected representatives in Congress to voice their support for badly-needed patent litigation reform legislation.

As we enter 2016 and the presidential race accelerates, it can be tempting and even entertaining for conservatives and libertarians to find themselves divided on an array of issues, from foreign policy to immigration reform to how to improve our tax code.  Respectful debate and disagreement on such matters is both healthy and necessary.

On another issue, however, there should be little disagreement:  the desperate need for litigation reform in America.  That includes patent litigation reform, particularly in light of the fact that , as Wall Street Journal legal reporter Ashby Jones reports, 2015 just witnessed a 25% increase in patent suits in a single year:

Patent litigation brought by so-called ‘non-practicing entities’ continued to flourish in 2015, according to a new study, despite repeated attempts to curtail it.  According to the report, released Monday by RPX Corp., NPEs filed over 3,600 patent cases in 2015.  NPEs, also referred to derisively as ‘patent trolls,’ buy up patents and seek to make money from them through licensing and litigation.  NPEs filed 3,604 cases last year, a sharp increase over 2014, in which NPEs filed 2,891.

Fortunately, a large and bipartisan majority in Congress has recognized the need for patent litigation reform, which CFIF has strongly and consistently supported:

To address those widespread problems in our current patent litigation system, while also protecting legitimate patent claimants, Congressman Robert Goodlatte (R – Virginia) has reintroduced the Innovation Act.   Identical legislation passed the House approximately one year ago by a lopsided 325 to 91 vote, and nothing has changed since that date to justify a reversal.

The bill narrowly targets patent litigation abuses, primarily by introducing several key reforms to the patent litigation process.  Those reforms include:  (1) Greater ability to shift costs and fees to improper litigants than the current system provides;  (2) Heightened pleading standards that require greater clarity and justification for the lawsuit itself;  (3) Greater transparency regarding true owners of disputed patents;  and (4) Much-needed streamlining of the discovery process during litigation, which often imposes oppressive burdens in time and resources upon respondents.

Unfortunately, some opponents of reform have resorted to claiming that patent litigation reform would somehow undermine patent rights or intellectual property rights more broadly.  That is simply not the case, as we have explained exhaustively.  We at CFIF stand among the strongest proponents of IP protections, and we would not support any cause that undermined them.  The reality is that the bills we support target patent litigation abuse, not substantive patent rights themselves.  The Innovation Act, for instance, simply requires that losing parties in a patent lawsuit demonstrate “that the position and conduct of the nonprevailing party or parties were reasonably justified in law and fact or that special circumstances (such as severe economic hardship to a named inventor) make an award unjust.”

That is not a difficult hurdle to clear.

Accordingly, opponents of patent litigation reform must answer why requiring parties who resort to costly and protracted litigation to show that their claim is “reasonably justified in law and fact” is somehow unfair or excessively burdensome.   They cannot, and there is simply no reason for further delay in achieving patent litigation reform legislation in 2016.

Maligning pharmaceutical enterprises is a curious perennial dance, one that becomes even more active during presidential campaign seasons.  That always struck me as odd, since it seems a sign of societal advance that we can complain about the price of something that saves lives and improves living conditions rather than lamenting its nonexistence.

Regardless, the U.S. Chamber of Commerce’s Global Intellectual Property Center (GIPC) offers an instructive corrective entitled “4 Charts Explain the Economics of Drug Development.”  It is worth the brief examination and passing on to others, because it helps rebut many of the politicized myths that threaten the goose that lays the golden eggs:

“It’s not just the science that goes in to developing medicines that’s complicated.  The economics that drive the industry, allowing resources to be available so people can have access to beneficial new medicines is complicated, too.”

Each chart is worth 1,000 words, but the four broad takeaways are:  (1)  It takes ten years and $2.6 billion to bring a single drug to market;  (2)  In 2014, pharmaceutical companies spent $51.2 billion on research & development;  (3)  Only a few drugs, however, become commercial successes;  and (4)  The end result is that pharmaceuticals’ enormous investments result in people living longer and better lives.

Something to keep in mind as sometimes silly presidential campaigns get even sillier, at least in terms of maligning the innovative pharmaceutical industry.

This month, GroupM, the world’s leading media investment management company, announced that it will now require its media partners advertising on websites to receive anti-piracy certification from the Trustworthy Accountability Group (TAG).  This new initiative will go far to keep its clients’ advertisements off of rogue websites, as GroupM summarized in its announcement:

‘We’re in the business of giving the world’s most valuable brands marketing advantages with smart media strategies.  This inherently means we’re vigilant for clients’ brand safety.  Our work with TAG in the development and full adoption of anti-piracy guidelines is a major leap forward,’ said John Montgomery, Chairman, GroupM Connect, North America and Co-Chair of the TAG Anti-Piracy Working Group.  ‘With IAB, 4As, and ANA, we’ve worked for years to make the digital ecosystem more trustworthy.  Fighting pirates of copyrighted content required every ounce of our tenacity and ingenuity, but with the advent of TAG’s Brand Integrity Program Against Piracy, we have powerful new tools and safeguards.'”

Such advertising on piracy sites accounted for an estimated $209 million in ill-gotten revenue in 2014 alone, so this constitutes a significant, voluntary private sector milestone.  Summarizing the nature of the problem, Mr. Montgomery observed:

There’s no brand in the world that wants their advertising to appear on a pirate site or wants to be seen as supporting piracy, even inadvertently…  A brand’s entire reputation is at stake – something that they’ve been nurturing for decades or, in some cases, centuries.  The people who create pirate sites are the same ones who perpetrate clickbait fraud – they’re the ones who spread malware and create armies of bots that generate most of the automated clicks in the business…  Which is why being worried about ad fraud without also being aware of the role piracy plays in its perpetration is like fretting over a flood in your apartment while neglecting to turn off the tap.”

Hopefully, other ad industry players will follow GroupM’s lead in utilizing TAG, but CFIF and anyone who supports the rule of law and property rights – including intellectual property (IP) rights – owe them an enormous “thank you.”  Accordingly, please click here to join us in thanking them.

Elementary concepts of fairness demand that musical artists and performers remain free to negotiate performance rights with broadcasters that seek to play their songs.  Indeed, current law allows artists to mutually bargain with satellite, Internet and cable stations.

The only exception:  traditional AM-FM radio stations, which are unfairly protected by federal law from having to negotiate with artists for performance rights.  This is precisely the sort of crony capitalism against which the American electorate is increasingly irate.

Unfortunately, rather than advocating market reform, some in Congress wish to cement the current protectionist status quo.  Under the so-called “Local Radio Freedom Act,” whose very name contradicts its real-world effect, terrestrial radio’s unjustifiable exemption from having to negotiate performance rights would be made more permanent.  The bill would foreclose bargained-for negotiation between artists and stations for compensation, perpetuating stations’ ability to earn billions by playing songs without paying for them.  And in an example of of supreme chutzpah, the same traditional radio stations benefiting from that loophole turn around and ask Congress to require cable and satellite providers to pay them for retransmission of television programs of stations they happen to own.

The bill’s proponents advance the offensive claim that artists seeking payment should just shut up and appreciate that their works get played over the air, thereby providing them publicity and advertising.  But that’s not something that stations should dictate.  The creators and performers of those songs should be free to determine which market model they prefer – performance for payment or free of charge.  That’s how a free market works.

Accordingly, we at CFIF have joined an array of fellow free-market organizations in a letter to Congress stating our objections to this protectionist and crony capitalist proposed legislation:

We urge you to refrain from co-sponsoring the Local Radio Freedom Act, which sanctions the status quo, and has a chilling effect on the development of a forward-thinking policy that respects the rights of all music producers in all media.  The Constitution protects private property rights and specifically delegates to Congress the authority to protect creative works.  Unfortunately, LRFA closes the discussion about how to best protect property rights by resolving that terrestrial radio should never pay performance royalties on music broadcast on their stations used for raising advertising revenue.  This is not equitable treatment for any musical artist or music distribution service.”

Americans are justifiably fed up with the sort of protectionism and cronyism that this proposed legislation represents.  We accordingly urge Congress to reject it, and that our hundreds of thousands of supporters and activists across the country to contact their representatives in Congress and express their opposition as well.

Under current law, recording artists remain free to negotiate performance payment rights with Internet, cable and satellite stations.  Due to an unfair exception, however, artists cannot negotiate in the same manner with traditional AM-FM radio.  Unfortunately, proposed federal legislation backed by broadcasting interests would cement that anomaly.  Deceptively entitled the “Local Radio Freedom Act” (“LRFA”), the bill would stifle a potentially freer marketplace and foreclose future negotiation for payment to musicians for songs.

If successful, that would perpetuate terrestrial radio broadcasters’ ability to exploit a legal loophole allowing them to earn billions of dollars by playing songs whose artists would remain uncompensated.  Exacerbating matters, those same terrestrial broadcasters simultaneously ask Congress to require cable and satellite providers to pay them for retransmission of television programming from stations that they own.  That similarly violates straightforward concepts of fairness and intellectual consistency.

This past January, CFIF joined an array of other free-market organizations in a letter to Congress opposing the LRFA and setting forth the policy basis for our objection:

The Constitution protects private property rights and specifically delegates to Congress authority to protect creative works.  Unfortunately, LRFA closes the discussion about how best to protect property rights by resolving that terrestrial radio should never pay performance royalties on music broadcast on their stations used for raising advertising revenue.  That is not equitable treatment for any musical artist or music distribution service.”

Fortunately, there’s a superior alternative also before Congress.

Representative Marsha Blackburn (R – Tennessee), perhaps the most reliable advocate of property rights in Congress, has joined Representatives from both parties in introducing the Fair Play, Fair Pay Act of 2015.  This bill would correct the existing unfairness described above by finally requiring terrestrial broadcasters to negotiate with artists who seek compensation for broadcast of their creative works.

Advocates of LRFA claim that artists have no reason to complain when terrestrial radio plays their works without compensation, since that provides them publicity and free advertising.  But that’s something for artists and broadcasters to freely negotiate, rather than have broadcasters make that decision for them and deprive them of choice in the matter.  Some artists may indeed opt to allow their works to be broadcast for free.  But as Taylor Swift just illustrated in standing up for her rights, other artists have a right to disagree and negotiate payment for those playing their songs.

CFIF believes that property rights, including intellectual property (IP) rights for artists and musicians, must be fiercely defended.  America’s foundation of strong IP protections is one reason we’re the most innovative and artistically productive nation in human history.  Accordingly, we encourage our supporters and activists to contact their representatives, demanding that they reject the dangerous LRFA and support Rep. Blackburn’s PRMA.

We at CFIF strongly advocate both free trade and intellectual property (IP) protection.  Although typically distinct policy questions, they are currently intertwined as Congress finally and fortunately moves toward passing free trade legislation.

The pending legislation rightly demands that trading partners recognize American IP rights, but that has naturally drawn fire from some of the usual suspects (e.g., Google, the Internet Association, et al.) who tend to oppose stronger IP rights because those protections tend to run contrary to their own particular business interests.  Specifically, those interests seek to include copyright limitations in free trade bills, including mandatory “Fair Use” exceptions.

That would be a bad idea.

Among other problems, those voices misstate domestic law in suggesting that “generally, an Internet company in the U.S. is not held liable for the conduct or content of third parties who use its platform.”  While existing law provides a level of immunity for Internet companies, such immunity is limited and does not excuse violations in numerous circumstances, including:  (1) when the interactive computer service materially contributes to the illegal content; (2) when the interactive computer service itself engages in fraud/misrepresentation; (3) when the interactive computer service engages in, or aids and abets, criminal activity; or (4) if the illegal activity violates IP laws.  Accordingly, omitting discussion of an Internet company’s liability for copyright infringement is particularly and intentionally misleading.  American law regarding the liability of intermediaries is infinitely more complicated, and intermediaries may face liability under a variety of circumstances, including where they induce the infringement of third persons (the Grokster standard), and in other circumstances in which they meet the standards of contributory infringement or vicarious liability.  Additionally, “safe harbors” under applicable law remain conditioned on a number of affirmative acts on the part of intermediaries, such as promptly taking action once they learn of infringing content (rather than merely upon receiving formal notice), maintaining policies with regard to repeat violators and adoption of standard technical measures designed to prevent infringement.

Thus, domestic law does not extend some blanket, general exemption from liability for Internet companies with regard to the conduct of third parties, and the scope of liability in the U.S. continues to evolve, both from a judicial standpoint and a legislative one.  Furthermore, Congress is presently considering the appropriate contours of the safe harbors established in the 20-year-old DMCA, with many members expressing concerns about the levels of piracy that prevail, and the fact that “notice and takedown” has been largely ineffective in reducing piracy levels, with a particularly devastating impact on individual creators and actors who can ill afford to pursue takedowns only to have the same content immediately re-uploaded.  Accordingly, it remains unclear exactly what liability regime the US should be seeking to export.  But it’s absolutely clear that American interest in foreign markets remains primarily in promoting greater discipline and accountability to reduce piracy levels that deprive the US billions of dollars in earnings.

Furthermore, U.S. trade agreements already include provisions relating to exceptions and limitations.  They also already recite the relevant provisions of international law that define the scope of permissible exceptions and limitations.  Those binding provisions are contained in a variety of agreements, including the Berne Convention, TRIPS, the WIPO Treaties (WCT and WPPT), and each of our free trade agreements.  Other nations have employed different means to achieve what they believe is a proper balance between protection and limitations, but remain they bound by the provisions of international law.  A particularly wide variance exists in how common law and civil law nations approach exceptions and limitations.  More specifically, courts in civil law countries are not permitted to interpret general provisions, and legal standards that require the weighing of different factors are a poor fit.  As a result, legal provisions such as Fair Use are ill-suited to the jurisprudence of most countries across the globe.

Moreover, as the world’s leading producer and exporter of copyright protected materials, the U.S. maintains a tremendous economic interest in ensuring the effective protection of copyright works.  While all parties strongly endorse balanced copyright protection that both protects works and provides reasonable flexibility, the biggest problem in foreign markets is lack of discipline, and not overboard protection.

It is critical that Congress passes free trade legislation currently on its agenda, and those who seek to exploit it as a device to weaken American IP protections must be rejected.

This week, the U.S. Chamber of Commerce Global Intellectual Property Center released its third annual GIPC International IP Index, and it provides some welcome good news.

Namely, the U.S. retains its top global ranking in a survey that expanded this year to include 30 nations, “comprising nearly 80% of the global gross domestic product (GDP).”  The Index provides critical “empirical literature showing a robust relationship between strengthening levels of IP protection and an increase in economic benefits such as foreign direct investment, job creation, technology transfer, and economic development.”

We at CFIF often note the way in which strong IP protection is the causal factor explaining why the U.S. stands as the most innovative and prosperous nation in human history – by far.  With the release of this year’s Index, the Chamber and GIPC provide the latest empirical support for that critical causal connection.

Each Monday, The Wall Street Journal’s “Information Age” column by L. Gordon Crovitz is a must-read.  His analyses are invariably intelligent and his policy positions are usually wise.

On intellectual property (IP), however, Crovitz occasionally hits discordant notes.  Unfortunately, this week provided another example.

In “Even Silicon Valley Tilts Republican,” he highlights the surprising news that this year, technology companies reversed tradition and gave 52% of their political contributions to Republicans.  He also touches upon the topic of patent law reform, which CFIF has broadly supported.  But then he veers off logical course by maligning patent rights, specifically with regard to software patents:

Patents make little sense for software, which almost always builds on an earlier work.  There are some 250,000 potential patent violations in smartphones alone.  Companies known as ‘patent trolls’ stockpile patents to extract huge settlements from technology companies, not to build products.  Plaintiff lawyers joke that their focus has gone from ‘PI to IP.’  Now that personal-injury litigation has been reformed in many states, they’re turning to intellectual property lawsuits such as patent infringement.”

It’s difficult to fathom how Crovitz continues to make such a claim.

The United States maintains by many measures the world’s strongest patent and IP protections.  It also leads the world in technological innovation, including software and smartphones.  That’s not coincidence.  It’s cause-and-effect.  In an excellent recent piece for IPWatchdog.com, patent attorney Gene Quinn offers a superior analysis on IP rights and innovation in such areas:

Why will anyone invest the extraordinary sums of money to create the innovations we want without an expectation of exclusivity that will allow for a recoupment of the investment plus a reasonable return on investment?  ‘The Truly Staggering Cost of Inventing New Drugs unveils a Forbes study finding:  ‘The average drug developed by a major pharmaceutical company costs at least $4 billion, and it can be as much as $11 billion.’  And it is pure fiction to believe that software development doesn’t follow the same economic realities.  When IBM produces one of their large-scale projects, there will have been many hundreds of people working on the software solution for at least several years.  The same is true for a new Apple operating system, or the next version of Microsoft Windows.  It is pure fantasy to believe that software programs are written over a long weekend by a single person who is merely a second-year engineering student.  Software that is compatible, secure and actually works is rare these days, and takes real development effort, which costs real sums of money.  The quickest way to get less innovation is to destroy the patent system.”

Quinn is correct, and the real-world facts speak for themselves.  Strong patent protections spur the innovation for which America and its tech sector are known.  Moreover, there isn’t anything inherently wrong if a patent holder with no ability or intention of manufacturing or marketing an invention sues for violation.  A patent right is simply a property right enforceable by law, just as a songwriter can rightfully sue for infringement even if he or she didn’t have the ability to sing the song, assemble a band, reserve a recording studio or find an agent.

That obviously doesn’t mean that we should in any way condone the filing of frivolous lawsuits based upon false claims of patent infringement.  But it does mean that much of the “patent troll” problem can be resolved via litigation reform, such as requiring greater specificity in court pleadings and shifting of attorneys’ fees and costs to more of a “loser pays” system.

What we don’t want to do is demonize patent rights, which have been the foundation for American innovation through the decades and centuries.

Following up on our patent reform post last week, today’s Wall Street Journal includes an interesting viewpoint via letters to the editor.  Specifically, Paul Adams of Albuquerque, New Mexico notes that while some economists short-sightedly applaud the way in which weakening patent protections and encouraging copying can lower costs in the near-term, they ignore the longer-term incentive to invest and invent that strong patent protections provide:

It may satisfy economists that allowing copying by large corporations will drive down prices for consumers since there is no other way to compete.  But that does enhance technology.  In fact, one benefit of the patent system is the pressure on competitors to invent a different and likely better solution, thereby advancing the technology.  I have on many occasions assisted competitors in ‘designing around’ a patent creating a new product or service.  There are few patents of such broad scope that there is not an alternative.”

Opponents of strong patent protections often fancy themselves clear-sighted, dispassionate, economics-based observers, but their positions are more accurately penny-wise but pound-foolish, as Mr. Adams correctly notes.

Tomorrow (April 26) we celebrate the annual World Intellectual Property Day, recognizing IP’s critical role in protecting and promoting scientific, artistic and commercial innovation.

In that vein, the U.S. Chamber of Commerce’s Global IP Center held its 2014 IP Champions event in Washington, D.C. this week to celebrate organizations and people who have particularly embodied and advanced IP over the past year.  It brought a packed audience, the panels were informative and entertaining, and the award recipients spanned an impressive range of scientists, songwriters, entrepreneurs, engineers, foreign dignitaries and political leaders like Congressman Doug Collins (R – Georgia).

Most importantly, the recipients highlighted the critical value of patents, copyrights and trademarks in protecting their creations, encouraging further innovation and – critically – helping protect consumers against unsafe and defective counterfeit goods.  It is no coincidence that the United States stands as the most scientifically and artistically prolific nation in human history, given our tradition of strong IP protections in comparison to other nations and legal systems.  That’s a truism that bears emphasis and preservation in our increasingly interconnected global economy, lest we recede in our leadership role and witness a diminution in the pace of innovation.

Do America’s copyright protections stifle artistic innovation?

Obviously, that question answers itself.  After all, no nation in human history even approaches the United States in terms of sheer scale of musical, film and other creative innovation.  And that’s due precisely to our strong copyright laws that reward creativity and incentivize more.  Moreover, Americans’ ability to access a greater amount of artistic content, more easily, more cheaply and via more outlets increases daily.

Bizarrely, however, the contrary assertion remains regrettably fashionable even among some self-proclaimed “libertarian” and “conservative” circles.  Fortunately, voices of reason rebut the pernicious anti-intellectual property (IP) movement’s myths, and bring clarity to the debate.  One such voice of reason is Ben Sheffner, the MPAA’s Vice President of Legal Affairs.  In this abbreviated and this full-length debate video recently released, Mr. Sheffner clarifies the realities and refutes the curious claim that copyright laws inhibit innovation.  Quite the contrary, he makes clear, strong copyright laws not only preserve the fruits of creators’ labor, they incentivize the risk-taking and investment critical to spark additional creativity now and into the future.

Mr. Sheffner does an excellent job, and absolutely schools Derek Khanna multiple times on both the broader and finer points of intellectual property generally, and copyright more specifically.

In our Liberty Update this week, we highlight the new 2014 Index of Economic Freedom, which itself highlights the critical importance of property rights and free trade in generating prosperity.  The facts, and that correlation, are simply beyond dispute.

On that note, current Trans Pacific Partnership (TPP) free-trade agreement negotiations provide a critical opportunity to upgrade intellectual property (IP) protections that have gradually become outdated since the landmark North American Free Trade Agreement (NAFTA) was signed two decades ago.  That was the expert conclusion of Mark T. Elliot, Executive Vice President of the U.S. Chamber of Commerce’s Global Intellectual Property Center, in testimony this week before the House of Representatives at a hearing entitled “NAFTA at Twenty:  Accomplishments, Challenges, and the Way Forward.”

At the time of signing, NAFTA intended to create the best levels of IP protection and enforcement…  It was a testament to how important IP was viewed by Mexico, Canada, and the United States.  However, as this was signed twenty years ago, this level of IP protection is now a very low bar in 2014.  In 2012, the Chamber released an International IP Index, a comprehensive review of the intellectual property environment in 11 key markets based on existing international standards and best practices.  The United States, the United Kingdom, and Australia all perform well in the Index…  Mexico and Canada, however, rank closer to the likes of Russia, Malaysia, and China.

In Mexico, however, we continue to see progress… and the business community has been working productively with the Mexican government.  In contrast, Canada’s relative low score is a result of wide-ranging IP problems including:  enforcement, weak on membership and poor ratification of international treaties, and significant problems with patent and copyright laws.  Canada is the largest trading partner for the United States… [making] it all the more bewildering to the business community at how substandard Canada’s IP system is.”

When NAFTA was signed, it was an idea ahead of its time.  And as former Clinton Administration Chief of Staff Thomas “Mack” McLarty noted a recent Wall Street Journal commentary, the results have been spectacular:

U.S. trade with Mexico and Canada has tripled to more than $1 trillion a year, supporting millions of American jobs.  The U.S. exported more last year to Mexico than to Brazil, Russia, India and China combined; and more to Canada, with 35 million people, than to the European Union, with 500 million…  NAFTA also opened the door for free trade agreements across Latin America, a catalyst for economic and political reforms.  Mexico was transformed from one of the most closed economies in the world to one of the most open, and it subsequently threw off decades of one-party rule.   Today, U.S. products make up 40% of the contents of goods imported here from Mexico (compared with 4% in goods imported from China).  An integrated market boosts exports and imports, and helps keep good jobs at home.”

Today, we face a perfect opportunity to improve upon NAFTA’s good thing.   As Mr. Elliot testified:

2014 will present many opportunities for the United States, Canada, and Mexico to further improve their IP environments…  In particular, all three countries are participants in the Trans Pacific Partnership (TPP) Agreement negotiations.  The TPP is being negotiated between 12 different countries, and it is essential that it include robust standards for IP protection, using the Korea-U.S. free trade agreement as a model and providing 12 years of regulatory data protection for biologic products.  We encourage the U.S., Canadian, Mexican, and all TPP negotiators to uphold their positions and protect IP from the efforts to weaken existing laws and norms.  The TPP provides the U.S., Canada, and Mexico the opportunity to stand shoulder-to-shoulder in support of strong IP protections, innovation, and access to the creations and inventions of the 21st century.  A TPP agreement that includes a high-standard IP chapter is good for jobs and good for international trade.  The TPP will also allow Canada to raise its IP standards, promote innovation, and bolster its growing economy.  2014 should be the year when the North American neighbors work together to improve each other’s IP environments and the IP environments of countries around the world.”

Free trade and strong IP rights are critical components of economic freedom, which the latest Index of Economic Freedom shows is causally related to a nation’s prosperity.  America, Canada, Mexico and the other negotiating nations face an important opportunity in 2014 to improve upon both, which will boost our prosperity at a time when we desperately need it.

(1)  In a Daily Caller commentary entitled “Conservatives and Libertarians Should Support America’s Copyright Protections, Not Malign Them” I highlight the causal connection between U.S. intellectual property (IP) protections and our unmatched artistic and technological dominance:

America’s system of copyright and intellectual property (IP) protections, which incentivize creators and reward their efforts, has resulted in the most innovative, influential, artistic, and prosperous nation in human history.  No country or alternative system even rivals our record of creative preeminence in music, movies, television shows, news, and literature.”

On that basis, I also address some myths regarding proposed Congressional legislation entitled the Free Market Royalty Act (FMRA):

That bill would finally end terrestrial radio’s special government privilege against paying performance rights that artists are allowed to negotiate with all other forms of use.  Simply put, the proposed legislation doesn’t “regulate the market” as Khanna claims.  More accurately, the FMRA seeks to create a more level playing field for all forms of broadcast.  Currently, artists aren’t compensated when their works are played on terrestrial radio, except through a cumbersome licensing process.  This bill would change that and allow them to negotiate.”

(2)  Over at AEI’s TechPolicyDaily.com, Jeffrey Eisenach and James Glassman wrote that “It’s Time to Move Ahead at the FCC”:

The DISCLOSE Act was proposed in 2010 by Sen. Charles Schumer (D-NY) and Rep. Chris Van Hollen (D-Md) in the wake of the Citizens United decision by the U.S. Supreme Court.  The act, in our view, was genuinely pernicious and in all likelihood unconstitutional.  For example, it would prohibit political contributions by recipients of TARP (Troubled Asset Relief Program) money and by any firm that received government contracts of more than $10 million.”

The authors agree with Senator Ted Cruz (R – Texas) that it is “understandable and appropriate” to raise questions, but that now the FCC can hopefully move on and act in ways that spawn innovation, incentivize investment and reduce costs for consumers.

On that note, as reported in USA Today, “The U.S. Senate on Tuesday confirmed venture capitalist Thomas Wheeler to head the FCC and, as a commissioner, Mike O’Rielly, who had been an advisor to Senate Minority Whip John Cornyn, R-Tex.”   With these confirmations, the FCC now has a full roster.

(3)  At HighTechForum.org, Richard Bennett writes in a piece entitled “IP Transition:  The One Percent Problem” that “the way forward is to incentivize the formation of private firms operating with diminishing levels of public subsidy”:

The hardest thing to do in Washington is to unwind a body of regulation with a long history, and the telephone has been around forever in technology terms.  In 1876, Alexander Graham Bell picked up a telephone and said:  “Mr. Watson–come here–I want to see you.”  In 1913, The Justice Department made an out-of-court settlement with AT&T that allowed it to operate as a government-sanctioned monopoly as long as it provided universal service within a defined territory and allowed other telephone systems to interconnect with its network to serve others.  By 1984, technology changes made this arrangement untenable and the Justice Department’s anti-monopoly suit against AT&T broke the company up into a number of parts.  After 12 years in which the nation’s telecom business was run out of a judge’s chambers, Congress finally passed the Telecommunications Act of 1996, imposing new obligations meant to promote competition for local and long-distance telephone service.  By 2010, the Telecom Act was irrelevant as telephone users had began to end their Plain Old Telephone Service (POTS) subscriptions in favor of mobile telephony and broadband.  Today POTS is not economically viable.”

(4)  On The Hill’s technology blog, Kate Tummarello and Brendan Sasso update us on events affecting the FCC and FTC:

The government shutdown has forced the Federal Communications Commission to delay the planned auction of the “H block” of wireless spectrum.  The commission had set the auction for Jan. 14, but on Monday, the agency announced that date will be bumped back to Jan. 22.  House FTC hearing postponed: The House Commerce, Manufacturing and Trade subcommittee has postponed Thursday’s planned hearing on the future of the Federal Trade Commission.  The House canceled Thursday’s session so members can attend the funeral of Rep. Bill Young (R-Fla.).”

(5)  At Politico, Brooks Boliek writes an update piece entitled “FCC Forced to Play Catch-Up After Shutdown”:

The FCC is delaying high-profile actions, including a key spectrum auction, as it plays catch-up after the government shutdown.  Acting Chairwoman Mignon Clyburn had originally scheduled an auction for the so-called H-Block for Jan. 14.  The auction, which will be the first major airwaves sale since 2008, is now slated to start on Jan. 22, the FCC announced today.  That could push it into next year’s fiscal battles.  The bill that just passed Congress funds the government through Jan. 15 and raises the debt ceiling through Feb. 7.  The shutdown delays add new pressure to the FCC, which is in the midst of major policy initiatives and stuck at three commissioners with two nominees stalled in Congress.  The H-Block is the first of a string of planned auctions designed to get more airwaves into the marketplace to feed data-hungry smartphones and power high-speed communications systems.  The commission lost critical planning time with most of its nearly 2,000 staffers furloughed for 16 days.  ‘These schedule changes are necessary to give potential bidders and commission staff additional time for planning and preparation,’ the FCC said in a public notice issued Monday.”

(6)  At Mountain View Voice, Angela Hey details online education innovations in “Coursera Educates Five Million Students and Revenues Start Growing”:

Mountain View’s Coursera offers free online courses from the world’s leading universities.  Today, at the Global Mobile Internet Conference in San Francisco’s Moscone Center, Stanford professor Andrew Ng described why he co-founded Coursera, which launched in 2012.  The conference, which is also held in Beijing, features mobile apps, wearable devices and connected cars.  Ng is director of Stanford’s artificial intelligence laboratory.  At Stanford he can teach 400 students.  With Coursera he taught 100,000 students in his machine learning class.  The other co-founder is Daphne Koller, a Stanford professor of computer science.  Five million students have registered Coursera accounts to take MOOCs (massive open online courses).”

(7)  Over at Forbes, Steve Forbes himself laments how telecom sector regulations simply aren’t keeping appropriate pace with technological change in “Government Should Mandate that Car Makers Invest Billions in Horse-Drawn Carriages!”:

Should Ford Motor have to reintroduce the Model T instead of investing in new cars that meet the needs of today’s consumers?  Should Apple be made to bring back the Apple II instead of investing in new products?   Should dental device makers be forced to invest in drills powered not by electricity but by foot pedals?  Crazy?  Not in telecommunications.  Special interests want to require traditional landline telephone companies like Verizon and AT&T to increase investment in antiquated technologies like copper-based telephone services that most consumers are choosing not to use.  These phone companies are restricted by archaic regulations that were put in place back when the Bell system was a monopoly.  Consumers then had one option, the landline phone.”

(8)  Finally, over at Broadcasting & Cable, John Eggerton writes on points of left-right agreement and disagreement in “Public Knowledge, AT&T Weigh in with Hill on IP Trials”:

Public Knowledge and AT&T agree on five touchstones for the IP transition but disagree on AT&T’s suggested trials, according to testimony for an Oct. 23 House Communications Subcommittee hearing on the transition.  Harold Feld, senior VP of Public Knowledge, delineated those values in his testimony as follows:  service to all Americans, interconnection and competition, consumer protection, reliability, and public safety.  Feld adds that AT&T’s suggested IP transition trials should be rejected.  However, AT&T countered Feld’s statement, saying the FCC should expedite those ‘real world tests.’  Feld will tell the legislators that test trials are needed, but they must be guided by those values and they should not be the trials AT&T has offered up.  In his prepared testimony AT&T senior VP James Cicconi complimented Feld on ‘identifying the key consumer protections needed for a successful IP transition.  We may end up differing on details,” he said, “but their framework is sound.  Clearly the fundamental principles of universal connectivity, interconnection, consumer protection, reliability and public safety are hallmarks of our Nation’s commitment to communications and cannot be lost in this process.’  Cicconi says its trials offer ‘clear benefits’ with no costs and says AT&T is not looking for the IP world to be a regulation-free zone.  ‘We understand that there will be a set of core consumer protections that exist,’ he said.  ‘While I might disagree with the FCC on particular matters, I would concede readily the FCC can play a strong role in protecting consumers, and it has demonstrated that in recent years.  Public safety should fall within the FCC’s consumer protection mandate as well.'”

And those are your CFIF TechNotes for this week!