[iwar] [fc:Suddenly,.'Idea.Wars'.Take.On.a.New.Global.Urgency]

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Date: 2001-11-11 19:11:59
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November 11, 2001

Suddenly, 'Idea Wars' Take On a New Global Urgency

By AMY HARMON

s officials from around the world gather to discuss global trade in Doha,
Qatar, this weekend, many are challenging one of the towering achievements
of American industry during its economic boom years: an unprecedented
expansion of intellectual property rights.

Brazil, India and other developing countries argue that America's devotion
to the sanctity of patents puts drugs for AIDS and other diseases beyond the
reach of the poor and costs millions of lives. And, they charge, Washington
showed its hypocrisy last month when it considered revoking Bayer's patent
on the anthrax-fighting drug Cipro because it was Americans who seemed at
risk. Suddenly, the American stance, that without patent protection there
would be no drugs, seemed hollow.

But whether or not the two sides reach an accommodation ‹ the Bush
administration wants the World Trade Organization meeting to serve as a
display of global unity in the face of terrorism ‹ the dispute illuminates a
broader battle over the ownership of innovation in an information economy.

The questions on the table at Doha ‹ Should one corporation have control
over a lifesaving innovation? Would anyone develop new products and
technologies if he were not guaranteed a temporary monopoly on their use?
Can strong protection actually inhibit innovation? ‹ are at the core of a
debate roiling nearly every industry, encompassing areas from Internet
services to scientific research to movie characters.

Call it the idea wars. At a time when information has emerged as the world's
most valuable currency, owners are asserting, and winning, more control than
ever over how ideas are used, sold and consumed.

Proponents hail the advent of an era of "intellectual capitalism," the
latest stage in the evolution of the post-industrial economy. "In the
knowledge economy, ideas become the product," said Kevin G. Rivette, author
of "Rembrandts in the Attic" (Harvard Business School Press, 2000), which
has become a textbook for would-be intellectual property owners.

But critics warn that, far from promoting innovation, America is in the
midst of an information-age enclosure movement comparable to the fencing off
of public grazing lands at the dawn of the Industrial Revolution. Building
on the ideas of others, a fundamental part of creativity, they say, is much
harder when a license must be negotiated to use any existing sliver of
innovation. And, they complain, intellectual property rights are regularly
trumping social values like free speech or public health.

Throughout the 1990's, the drug, entertainment and technology industries
lobbied hard to erect the strongest protections for intellectual property
rights in American history. For drugs, the effective duration of patents has
in some cases almost doubled, to 16 years. Copyrights on creative works can
now stretch as long as 95 years, the result of lobbying by companies like
Walt Disney, which wanted to keep the 73-year-old Mickey Mouse from slipping
into the public domain alongside the works of Shakespeare and Victor Hugo.

A new copyright law made it a crime to distribute software or other tools
that could allow people to make illegal copies of digital media like DVD's
or electronic books. Although the tools may also have legitimate uses,
companies say they need the extra protection because of the Internet-era
ease of wide-scale copying.

Court cases established the right of companies like Bayer to extend their
monopolies on patented drugs by keeping cheaper generic versions off the
market. Drug, computer and software makers amassed extensive "thickets" of
patents to discourage innovation by competitors. Even Bristol-Myers Squibb
(news/quote), a company that supports the Bush administration's efforts to
extend drug patent protection in the developing world, has said its
researchers cannot pursue at least 50 promising approaches to fighting
cancer because of patents accumulated by others.

Meanwhile, more than 26,000 scientists, including several Nobel laureates,
have vowed to boycott major scientific publishers after they rejected a
petition demanding that journal articles be turned over to a free, online
archive within six months of publication. The scientists say the efforts of
magazines like Science and Nature to control distribution of articles based
on taxpayer-supported research is delaying scientific progress.

Even trademark holders are increasingly asserting ownership claims over
their marks, based on laws originally intended to prevent consumer
confusion. Several young Harry Potter fans took their Web sites down earlier
this year after Warner Brothers threatened legal action, claiming that sites
like www.harrypotterfan.co.uk were "likely to cause dilution" of its
intellectual property rights to the film about the fictional boy wizard.

Proponents say that tighter protections on intellectual property have
spurred creativity and innovation. Patents and copyrights certainly have
boomed. The Patent and Trademark Office received a record 315,015
applications for patents last year, up from 176,264 a decade earlier. It
issued 254,329, almost double the 1990 figure. The United States Copyright
Office said that registrations totaled almost 600,000 in its last fiscal
year, a 16 percent increase over the year before.

As the number of patents and copyrights has grown, so has the disagreements
over them. Patent litigation alone cost American companies more than $4
billion last year. Many companies pay royalty fees to patent holders rather
than risk an infringement case ‹ even if they do not infringe. New
businesses divert scarce resources from generating innovations to paying
lawyers to make sure someone else does not already own their ideas.

Increasingly, patents cover things that were rarely subject to anyone's
ownership before, often lumped in a category called business methods. The
floodgates opened in 1998, when a court decision upheld a patent on a bank's
computerized method of managing a mutual fund, but the patent office has
since been widely criticized for issuing patents on practices that are
neither new nor novel.

Patents have been issued on a method for producing a personal golf lesson
video, computer software for privatizing socialist economies, even a process
for filing patent applications. The Marine Corps has applied for a patent on
the design of its new uniform, featuring a digitally generated camouflage
pattern. "Microsoft (news/quote) Patents Ones, Zeros," read a recent
headline on The Onion, a humorous Web site, satirizing the frenzy.

Indeed, whole new industries are springing up, from insurers offering hedges
against litigation to patent bounty hunters and specialists in spotting
patent infringement. Self- styled "I.P." consultants tout their ability to
identify the stray innovations stored in a company's file cabinets, on its
hard drives and in the heads of its employees.

But some analysts say it is lawyers and business executives skilled at
writing patent applications ‹ not innovators ‹ who are being rewarded the
most.

Civil liberties advocates are contending in several court cases that the
assertion of property rights by copyright owners restricts the development
of technologies. They also argue that copyright holders are using the
Digital Millennium Copyright Act to restrict the free expression of computer
programmers like Dmitry Sklyarov, a Russian who was arrested in the United
States this summer, accused of illegally distributing software that can
enable consumers to copy electronic books.

They say that the 1998 statute, by banning software tools used to circumvent
the locks on digital material, prevents consumers from using copyrighted
works in ways that have long been considered acceptable ‹ excerpts for
criticism or teaching, say, or making a personal backup copy.

"The emergence of new technologies has called into question whether we might
have gone too far in strengthening the rights of property holders against
consumers," said Richard C. Levin, the president of Yale University, who is
heading an investigation by the National Academy of Sciences into the
nation's intellectual property policy. "The key question is, are we getting
the balance right?"

It is a question that has long been relegated to lawyers and lobbyists. But
the direction of intellectual property policy has gained urgency in recent
weeks as the Bush administration has begun to view international development
in terms of national security. Further complicating the debate, a growing
contingent of economists suggests that more protection for intellectual
property does not necessarily lead to more innovation.

"There's been a tendency on the part of policy makers in the United States
to equate stronger intellectual property rights with more innovation in a
very simplistic way," said Josh Lerner, an economist at Harvard Business
School. "A more nuanced approach is much more appropriate." In a study of
150 years of patent policies in 60 countries, Mr. Lerner found that there
was no evidence that increased patent protection in developing countries led
to increased innovation among domestic companies.

Some economists, legal scholars and entrepreneurs argue that patent
protection should also be applied more sparingly in industries like computer
technology where innovation is already taking place at a rapid rate. They
point to the growth in a method of software development known as open
source, in which programmers do not patent or copyright their work, as proof
that innovation can occur without intellectual property protection.

"Patents are regulating a broader range of innovative activity than ever
before," said Lawrence Lessig, a Stanford University law professor and
author of a book, "The Future of Ideas" (Random House, 2001), that
emphasized the importance of a healthy public domain to fuel innovation. "I
believe we should be extremely skeptical about extending government-backed
monopoly in the context of the Internet before we find out if it's doing any
good."

At a hearing of the House Judiciary Committee earlier this year, Andrew
Steinberg, vice president of the Internet travel site Travelocity.com
(news/quote), said a flood of patents on business practices was discouraging
innovation in his industry and wasting resources on legal fees that ought to
be spent on developing products.

Travelocity had to pay to use Priceline's system for selling
name-your-own-price airline tickets over the Internet, for instance, even
though, Mr. Steinberg says, the basic reverse-auction concept is not new. By
contrast, since the concept of holding traditional auctions online was not
patented, he said, eBay (news/quote), Yahoo (news/quote), Amazon
(news/quote) and others have been free to innovate and compete in that
business.

"We believe the proliferation of these patents is a serious threat to the
growth of electronic commerce," Mr. Steinberg said. "No prudent business
would allow its competitors to patent key business processes without
attempting to obtain some patents of their own. And so we, and virtually
every other large Internet company, must accept the law as it is and
aggressively attempt to obtain patents wherever we can."

But Jay Walker, the founder of Priceline, said he could not have started the
company without being able to assure investors that airlines would not be
free to copy his idea.

"Strong property rights fairly applied build assets for society," Mr. Walker
said. "Lack of property creates uncertainty, destroys investment and
ultimately is worse for society. The only people who really dislike
intellectual property are the people who don't have any."

That may well be true. Mr. Steinberg's testimony contained strong echoes of
a public hearing in 1994, when patents on computer software were just
beginning to be issued in large numbers. Then, most of the executives who
testified at patent office hearings argued for limiting such patents, saying
that novelty in the software business was fleeting at best. Now, most of
their companies have large patent portfolios, and many bring in annual
revenue.

"Companies found that software patents were very easy to get in very broad
terms," said Matthew Powers, a managing partner at Weil, Gotshal &amp; Manges, a
law firm whose 20 or so software industry clients have all been involved in
patent litigation in the last year. "The inherent power of a patent ‹ the
power to force someone to stop selling a product ‹ is so much greater than
any other form of protection. They started embracing patents with every arm
they could find."

Rather than share patents, leading companies in the semiconductor industry
today swap and shuffle licenses in what is widely viewed as a way to keep
others out. Although large concerns like AT&amp;T (news/quote), I.B.M.
(news/quote) and Texas Instruments (news/quote) have long held large
portfolios of patents for trading purposes, other semiconductor
manufacturers have radically expanded their portfolios since the 1980's,
largely for defensive purposes. For example, LSI Logic (news/quote), a chip
maker in Milpitas, Calif., increased the size of its portfolio from 7
American patents in 1986 to more than 1,000 by last year, an increase that
far outpaced its spending on research and development, according to a recent
study in the RAND Journal of Economics.

"The main reason they've been patenting like crazy is either because they
lost a lawsuit or they want to prevent one," said Rosemarie Ziedonis, an
assistant professor at the Wharton School of the University of Pennsylvania
who helped write the study. "That's not the same thing as saying, `I spend
more money developing innovative technologies because of patents.' "

Even some industry executives say the frenzy of cross-licensing may be
anticompetitive. "Pretty soon, if it continues, you'll find that everyone's
going to have rights to everyone else's technology, so there's not going to
be any competition," said Julie Mar-Spinola, chief litigation and
intellectual property counsel for the Atmel Corporation (news/quote), a
semiconductor maker in San Jose, Calif.

That may not sound much like Abraham Lincoln's famous description of the
patent system "adding the fuel of interest to the fire of genius." Critics
argue that the patent office, established in 1790, is tailored to the needs
of industries whose products require years of work and large capital
investment ‹ manufacturing in the 19th and 20th centuries, for instance, or
the pharmaceutical industry today.

Indeed, drug makers justify their large profit margins on patented
medications by pointing to the billions they invest each year in research
and development, often in pursuit of drug targets that do not pan out. But
even pharmaceutical giants, facing the specter of thousands of gene patents
owned by universities and biotechnology companies, are now raising questions
about the effectiveness of the system.

"If people have put effort into patentable material, they should expect a
return," said Dr. William Koster, a former senior executive at Bristol-
Myers Squibb. But what sort of return, and under what conditions? "What is
intellectual property worth?" asked Dr. Koster, who recently left
Bristol-Myers to become chief executive of a biotechnology company. "It's a
debate, and its outcome is very significant."

Thomas Jefferson, who served as the nation's first patent examiner, wrote
that the exclusive right to ideas is "given not of natural right, but for
the benefit of society." The deliberate bargain is enshrined in Article 1 of
the Constitution, which authorizes Congress to issue patents and copyrights
"for limited times" in order to "promote the progress of science and the
useful arts." Patents originally covered only inventions that could be
demonstrated with working mechanical models. Copyrights could be held for
only 28 years, and the law governing them evolved to allow for some public
uses of copyrighted material without the owner's permission.

Now, many legal scholars argue that major patent and copyright owners are
trying to stretch their qualified grants into a more absolute form of
control. The relatively new use of the term "intellectual property," they
say, has skewed the original legal and cultural meaning of patents and
copyrights.

Thinking of ideas as property creates "a very powerful metaphor that tips
the scales in the direction of the person asserting their property rights
have been violated," said Pam Samuelson, co-director of the Center for Law
and Technology at the University of California at Berkeley. "When you're
talking about real property you're not talking about people's ability to
express themselves in a democratic society."

Some members of Congress want to shift the balance. Representative Rick
Boucher, Democrat of Virginia, and Representative Howard Berman, Democrat of
California, have introduced legislation that would establish higher
standards for issuing patents on the rapidly growing category of business
methods.

Mr. Boucher, the most outspoken critic of expanded intellectual property
rights on Capitol Hill, also said he planned to propose softening the terms
of the Digital Millennium Copyright Act. "There has been an overreach at the
expense of information users that needs to be corrected," he said.

But even as there are signs of a backlash against intellectual property
expansion, from the coalition of developing nations making their case in
Qatar to the scientists who are starting their own online repository for the
free distribution of peer- reviewed articles, companies are striving harder
than ever to lock up their valuable intellectual assets.

Consulting companies like InteCap Inc., which helps corporations develop
intellectual property strategies, are in high demand. And entertainment
companies are hiring technology firms to track people who are illegally
trading copyrighted music and movies over the Internet.

Other companies are seeking to make money on the complaints that patents, by
their volume and breadth, are stifling competition. Bountyquest, based in
Boston, lets a customer offer a reward on its Web site in exchange for proof
that an invention was publicly available before a patent was issued. Such
information can be used to invalidate a patent in court. Several bounty
hunters have collected as much as $10,000 since Bountyquest was started last
year; the company has collected its commissions in turn.

IP.com, in Rochester, offers "defensive disclosure." For $109, inventors can
publish on the company's Web site material they choose not to patent ‹
making it ineligible for patenting by anyone else.

"As we enter this patent race, and there's really no other name for it," the
IP.com chief executive, Tom Colson, said, "you need a way to protect your
freedom to practice innovation without patenting yourself out of business." 

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