LINDA GREENHOUSE reports that the Supreme Court reversed the United States Court of Appeals for the Federal Circuit, the specialized court that hears all patent appeals, (NY Times link here). It ruled 8-to-1 that the holder of a patent license can sue to challenge the patent's validity without first refusing to pay royalties and putting itself in breach of the license agreement and subjecting itself to a patent infringement suit and triple damages if it loses. See the story for the specifics.

Greenhouse suggests this will make it easier for smaller start-up companies that rely on obtaining licenses for patented technology from bigger patent-owning companies to challenge the legitimacy of those patents. Who else has enough self-interest to sue?

The decision could be important but we will have to wait and see how it works in practice. Competition is usually good. Pray that is what we got.

Larry Lessig tells us that the election of Democrats, which was supposed to mean redefining copyright law, is not likely to mean much change. The House committee in charge is in the hands of a Democrat, Howard L. Berman, who "is a favorite boogeyman of advocates for copyright reform, many of whom say he is in the pocket of his Hollywood constituents" according to the NYTimes (link here). Lessig says a good bit more on his blog (link here). Look for his post dated Dec 24. Among other things, he wants to "to fit the legitimate objectives of copyright to assure that artists have the incentives they need to create great new work into the contours of digital technology."

I suspect most of us on this blog would like to see copyrights disappear but it isn't going to happen anytime soon. For now, we need to keep pointing out the deficiencies and push for incremental changes. Write your members of Congress, pointing out the bad results.

One of the criteria we use to judge intellectual property law is its effect on innovation. A recent study doesn't directly address this issue but it is suggestive because it says that only about ten percent of companies are highly effective in this area and that there are other ways than patents and copyrights to encourage innovation (link to NY Times article here).

The complete study is here, together with a short bulleted summary. The key finding is "Patents generally don't drive profits. Boosting R&D spending can increase the number of patents that a company controls, but there is no statistical relationship between the number or even the quality of patents and overall financial performance."

Microsoft Office 2007 is due out on January 30 and is favorably reviewed by Walter Mossberg for the Wall Street Journal, even while taking note of the shortcomings (link here). He likes the change in the radically new interface, is ambivalent about the new file formats which cannot be read in older Word versions without free conversion software, and then notes that the learning curve is steep, even for someone as computer expert as he. The much-cheaper but still expensive household version of the new Word lacks Outlook which must either be purchased separately or as part of the more expensive Standard version. His bottom line is, it helps business users but not the home user. Read the whole review for more details.

From where I sit, it is hard to see how this is worthwhile for most of us. In other words, it is standard Microsoft strategy to extract more money from us by creating obsolescence in the market place without really significant product improvements. Go for the free office suite, Open Office, downloadable at OpenOffice.org, which uses most file formats and is powerful at formating. It has made steady improvements to keep the program compatible with MS Office and no doubt will continue.

In a story you would prefer not to hear, talk radio station KSFO, a subsidiary of Disney and ABC radio, has forced a blogger to take down his site and cease sending audio clips from the programs to station advertisers on the grounds that it violated copyright (link to details on Daily Kos). His offense? He had sent advertisers clips of the talk-show speech which urged murder and torture of political opponents or trashed their products and suggested that they might want to consider pulling their ads on that station. He had some success in getting them to do so but decided to fold.

It is unlikely that Disney's suit would have succeeded in court but the defendant didn't have the resources to defend himself there. This is still another case in which copyright is used to offend the fundamental right of freedom of speech. Read the whole sad post.

A hacker appears to have broken a new encryption system for high definition DVD's (yahoo link here) to allow copying protected movies. I use the word appears, because the hacker has yet to publish the full hack but says he will on January 2. He has, however, published a video suggesting he has done it (youtube link here) and participated in a fascinating discussion thread (forum link here) in which he talks about what he has done, more or less step by step.

The New York Times reports the story but sees the issue mainly as affecting which of the two leading encryption systems will be used by the movie industry (NY Times link here). It conjectures that the system not yet broken now has an advantage and points out that it can be reprogrammed on future production even if broken. The Times also notes that the decrypted system might have a competitive advantage among DVD buyers who want to copy (it seems unlikely that studios would make this choice).

With a lot of luck, this will mark the beginning of the end of the whole encryption system, as there are people who are capable of breaking this form of monopoly in which a buyer's rights to his purchase, the DVD, are severely restricted-–he can't copy it and he can't play it on the device of his choice, much less sell additional copies where competition would drive down the price to no more than the cost of production.

Time magazine enters the drug patent debate with an article on a Government Accountability Office study which reports that the bulk of the growing amount of research money is going into “me-to” drugs rather than real innovation (link here). The study notes that the amount spent more than doubled over a ten-year span but the number of ground breaking drugs submitted for FDA approval grew a modest 7 percent, even as the basic science was turning up a large number of promising new leads.

Suggestions for reform were small beer, including more collaboration among government, industry and academia; more scholarships to train "translational" researchers to bridge the gap between basic science and medicine; more incentives for innovative drug research; and patents for breakthrough drugs extended from the current 20 years to 25-30 years, and those for "me too" drugs shortened to 10 years.

Too bad that Time failed to address just abolishing the drug patent system or Stiglitz' idea to have government fund drug development costs.

Writing in the British Medical Journal, Nobel economist Joe Stiglitz editorializes against pharmaceutical patents, at least on some drugs where their market is limited (link here). He cites the large number of people who cannot afford existing patented drugs or who constitute an unattractive market for the development of new drugs. He proposes that governments create big prizes to cover development costs while making the successful discoveries available at the cost of manufacture.

While he would limit the drugs for which prizes would be created, he makes several of the standard criticisms of patents, a healthy stimulus to public questioning of the system. Moreover, for now he proposes a realistic way to deal with a part of the problem when it is unlikely that we will get a major reform of the patent system for a long time to come.

Mike at Techdirt (link here) has a good piece on David Levine and Michele Boldrin's book Against Intellectual Monopoly (available on line here), focusing on the chapter on pharmaceuticals. I've been looking for a way to again highlight the book for this blogs readers. Chapter 9, to quote Mike, “completely destroys the idea that without pharma patents, there can be no pharmaceutical industry, by pointing to other countries that had no patent protection over pharmaceuticals until recently -- but still had absolutely thriving pharma industries. In other words, patents aren't needed for a pharmaceutical industry. However, if the patent system does recognize pharmaceuticals, are those patents really beneficial? Again, Levine's book hacks away at that notion, pointing out that, as with any government-granted monopoly, rather than creating real incentives for innovation, the patent system has created a situation where rent seeking occurs.”

Mike goes on to reference the publication of a GAO report downloadable as a PDF from his site, that concludes “there is a worrying trend in fewer new and innovative drugs being created, and also sees evidence that pharmaceutical companies are playing games to expand monopoly protections. It does note that many are concerned that patents are the cause of this, though it's clear that there are many factors playing into it.”

The comments on this post are worth reading as well–-lots of controversy.

One gets a sense of how complex copyright is by following the cases that come up in courts or in pretrial negotiations or in the news. Here is one, (a letter by Alex Curtis at Public Knowledge) responding to an editorial in the Wall Street Journal. I post the whole short piece because it makes the current law clear and emphasizes that the responsibility for identifying and claiming infringement is on the copyright holder.

Notice and Take Down' Lets Web Services Exist

our Dec. 1 editorial, "Google Search: 'Copyright'" missed crucial elements of the Digital Millennium Copyright Act (DMCA) and the concept of fair use when it comes to the posting of copyrighted material online.

The content industry fought very hard and largely won what it wanted in the DMCA. The trade-off for infringing content hosted by an unknowing service provider was essentially this: no liability for the service provider that expeditiously removes the infringing content after the copyright holder has been notified. This "notice and take down" provision allows most automated Web services like YouTube to exist. The take-down provisions effectively place the responsibility on copyright owners to actively identify infringement and notify the host services, all themselves. That's a fair trade considering they also have the weight of civil and criminal copyright law in their corner. It would be unworkable for YouTube or any other organization to have someone sit behind the curtain and approve every submission of copyright-able works.