[ale] What do y'all think about Microsoft's new war?

[Brian Pitts]

On the subject of patents I strongly recommend Chapter 2, Some Basic Economics of Information Production and Innovation, from Yochai Benkler's 
book The Wealth of Networks.

In print by Yale University Press and online at http://www.congo-education.net/wealth-of-networks/ch-02.htm . Creative Commons Attribution 
Noncommercial ShareAlike :-)

Overview:

Information and culture are fundamentally different from standard "economic goods" such as steel and cars in two ways. First, standard goods are 
rival or exclusive while information is nonrival. Consider an apple: If I eat it, you cannot also eat it. If you want to eat an apple too, more 
resources (trees, irrigation, fertilizer, labor, etc.) will have to be expended to procure you that apple. This is not the case with 
information. You and I can both read this book at the same time. My consumption of the information contained in the book in no way diminishes 
that information or prevents others from consuming it as well. The second way in which information differs from other goods is that it is both 
an input and an output of its own production process. Consider a wood table: the inputs of the production process are wood, fastening devices 
(nails, glue), and labor. A carpenter uses these things to make the output: a table. Now consider an academic paper: The inputs are ideas and 
labor and these ideas are often grounded in previous academic papers. Academic papers are thus "used" in producing new academic papers.

It is these two properties of information, nonrivalry and input/output circularity, that explain why the law gives people some property-like 
rights over information but limits those rights in comparison to those given over other types of goods. The standard rationale for giving people 
property-like rights over information is that people will fail to produce information if they have no incentives to do so. Copyright, which 
grants the right holder a monopoly over her creation, allows her to turn information into a rival good, creating scarcity and, thus, a market 
for her work. That is, while the actual cost of producing a second copy of a book is marginal (it is merely the cost of photocopying the pages), 
copyright prevents people (through threat of sanction) from doing this without the author's permission, and thus allowing the author to control 
the distribution of her work.

The standard rationale for limiting the monopoly rights created by copyright and patents is that because information is both an input and an 
output of information, we should not allow the "building blocks" to be captured indefinitely or entirely. Thus we have time limitations on 
copyright, thus returning old information to its nonrival state, and "fair use" provisions, allow new producers to use otherwise protected 
information in certain ways and contexts (e.g., criticism, parody, news reporting).

Many economists describe the system of intellectual property as a balance of static and dynamic efficiencies: Intellectual property creates 
static inefficiency by artificially raising the price of information goods, but this inefficiency is balanced out, however, by gains in dynamic 
efficiency in form of creating an incentive for new information production.

This chapter explores whether the realities of information production fit well with standard economic theory. It argues that the efficiency of 
regulation information, knowledge, and cultural production through strong copyright patent is not only theoretically ambiguous but also 
empirically inaccurate. This chapter posits that innovation and information production is driven mostly by a mixture of (a) nonmarket sources 
(both public and private) and (b) market actors whose business models do not depend on the protections of intellectual property.

The chapter concludes that while granting exclusive rights-based over information provides some incentives for the future production of 
information, a comprehensive intellectual property regime that mimics property too closely (such as the system in both the United States and the 
European Union) cannot work perfectly even under ideal conditions. The upshot is that noncommercial production can often be more efficient and 
more important commercial production and that noncommercial production is thus moving to a more central role in our information production system.