Via my father Robert Levine, a New York Times article bemoaning the negative effect of investors on innovation. Funny thing is, it's mostly about how patents discourage research - but never a thought to patent reform.

Financial Problems in Japan!

Following the problems in the financial sector in the US, uncertainty has now hit Japan. In the last 7 days Origami Bank has folded, Sumo Bank has gone belly up and Bonsai Bank announced plans to cut some of its branches. Yesterday, it was announced that Karaoke Bank is up for sale and will likely go for a song, while today shares in Kamikaze Bank were suspended after they nose-dived.

While Samurai Bank is soldiering on following sharp cutbacks, Ninja Bank is reported to have taken a hit, but they remain in the black. Furthermore, 500 staff at Karate Bank got the chop and analysts report that there is something fishy going on at Sushi Bank where it is feared that staff may get a raw deal.

One study found that users of pirated software sufficiently influenced by word-of-mouth communication eighty percent of the software's prospects to buy the legal product and another described several scenarios in which piracy can help increase the sales of legal products. The pirated product functions as a free sample that the innovator does not have to fund.

The rest of Jerry Kirkpatrick's article, "The Market Function of Piracy," is here at the Ludwig von Mises Institute.

If you want to amuse yourself, go check out patent 6,025,810

Over on Freedom to Tinker there is a nice essay about an important discovery in the online game SecondLife. To briefly summarize: people can create and sell objects for "Linden Dollars" which can be traded in the real world for US Dollars. Someone has now built a copybot which can make exact duplicates of any object. It seems the "perfect storm" for the pro-IP crowd: surely the economy will collapse over night. (It does matter quite a bit whether the copybot can operate without or without the permission of the current owner of the object - it isn't clear to me from the essay which way it works.) If you want to know what will happen next, go read the 1958 Ralph Williams science fiction short story "Business As Usual During Alterations."

Techdirt has an interesting discussion of patent law, suggesting that the test for whether an innovation is non-obvious needs to be clarified. So far, as a practical matter the only test is whether there is prior art and that is often hard to show, even when the invention seems all too obvious (link here).

In other words, the constitutional test for granting a patent--that the invention be new and non-obvious--is faulty in practice.

A lone blogger Peter [last name unknown to me] has taken on the Amazon one-click patent. It is expensive to file patent appeals - he raised the money by asking people to vote against the patent with their dollars. He successfully raised the filing fee and has filed the appeal. He identified significant prior art that should - in a just world - invalidate the patent. His beta test of a market based procedure for getting rid of ridiculous patents continues. Let us wish him luck and give him our support.

An interesting post by Tim Wu at Lessig.

A relatively little-known fact outside of copyright practice is that movie studios regularly purchase the film and television rights to newspaper stories. Yes, newspaper stories, which by their nature, report on facts or ideas, two things the copyright law does not protect. So what are studios buying?

There is a widespread myth that the government monopoly provided by copyright is necessary to sell something: Wu speculates that the studio is worried about being sued. Why don't they pay me for the movie rights then? I have as much chance of suing successfully as the newspaper does. Michele and I have done our best to point out that as a matter of theory ideas are always scarce and command a positive price. Yet the fact that it is true in practice continues to mystify people.

Without patents, innovations will be imitated, and hence not developed. So goes the logic underlying most economic models of innovation. The case of the development of containerized shipping (a major transportation innovation) offers valuable lessons regarding this logic. If an innovation was to be easily imitated, the innovation of putting cargo in a box would seem to be a good candidate. Someone would load the first box on a ship, and then everyone would start doing it. Yet as Marc Levinson discusses in the 25 April, 2006 edition of the Financial Times, "Unforeseen consequence: how a box transformed the world," it took the industry a long time to understand how important the box would be, and how to use it. In fact, "the most remarkable aspect of its [the box] history is that no one foresaw how the box would change everything it touched, from ships and ports to patterns of global trade."