Time for patent war disarmament?

In this morning’s Wall Street Journal, columnist Holman Jenkins reports how Verizon proposed that President Obama block the ITC enforcement of an import ban over any infringement finding in the cellphone patent wars. The occasion was Apple’s anticipated victory over Samsung, but Jenkins suggests this should also apply to Samsung’s recent victory over Apple in a separate case.

Although the tables are turned,

Verizon's call for Obama intervention still has merit. The ITC ruling against Apple is rightly surprising and rightly troubling, reflecting mostly the deformities of the agency's own peculiar place in the patent wars.

The ITC is attracted to injunctions because injunctions are what the ITC is allowed to issue. Samsung would be very unlikely to win a ban on infringing products in the civil courts (where the parties are also fighting). For one thing, the Supreme Court has raised a considerable bar against such injunctions. For another, the patents in question are so-called standard-essential patents, which Samsung presumably is not entitled to exclude others from using, but only entitled to "fair and reasonable" compensation.

Apple’s loss and the call to change how the ITC impacts patent cases comes the same week that the White House announced executive orders and proposed legislation (based on academic advisors) to make the patent system less arbitrary and more predictable.

The pending ban only impacts the older model iPhones and iPads for the AT&T network. Jenkins notes that the problem is more urgent for Apple than many realize, because its cheaper obsolete model (the iPhone 4) is gaining market share on its latest but more expensive model (the iPhone 5).

Multilateral disarmament of all patent injunctions may be the best thing for the industry. However, from a legal and ethical standpoint, Jenkins minimizes how standards-essential patents are fundamentally different. Because of the way that 3G standardization works, Samsung has made promises for “Fair, Reasonable and Non-Discriminatory” licensing terms which means that it both promises to license the ’348 patent to Apple and to do so at a fair price.

In the US, Judge Richard Posner concluded that such patents should not be entitled to injunctive relief. The European Commission criticized Samsung for anti-competitive and abusive behavior for its efforts (eventually abandoned) to seek such injunctions.

Even more ironic, Florian Mueller reports that in February Samsung asked the ITC not to ban Samsung products from the US for violating Ericsson standards-essential patents. As Samsung argued before the ITC:

Like other SSOs, ETSI, IEEE, and 3GPP have developed IPR Policies designed to ensure that investment in standard-setting and standard-compliant equipment is not wasted as a result of essential IPR being unavailable or only available under unreasonable and/or discriminatory licensing terms.

Intractable online IP policy controversies

Hat tip: Matt Asay (@mjasay)

Like anyone who follows the tech industry, I’ve been seeing apocalyptic stories, emails and seminar announcements about how SOPA (the Stop Online Piracy Act) will destroy the Internet, Internet companies and technological innovation as we know it.

With my new job, I haven’t been paying as much attention as I’d like to, but from what I’ve read, it’s another law in the general direction of the (much loathed) Clinton-era Digital Millennium Copyright Act. Certainly the motivation and opposition sound nearly identical to DMCA.

What also sounds similar is the oddfellow coalition: I mean, how often do Republicans try to make Hollywood studio execs richer? And how often do Democrats have to choose between the supporting the entertainers (and entertainment execs) who help them raise millions against the grass roots consumers and the EFF/civil liberties types?

I spent a fair amount of time studying DMCA. After briefly working as a consultant to one of the earliest Internet music streaming sites (Live365), I wrote two teaching cases about the challenges facing the entertainment industry in the Napster generation, and the trade-offs of Federal imposition of terms for content producer-consumer negotiations (particularly the Online Royalty Tribunal).

My favorite part of that era was when I asked my MBA students to do a five forces analysis of the record industry ca. 1995, when there were 6 major labels instead of the soon-to-be 3. After walking through the buyer power, supplier power, substitutes, rivals and entry barriers, I led them to the inescapable conclusion: this is as close to a cartel as you’re ever going to see. (Hint to students: professors love examples of industries with very high or very low forces.)

There are no white hats here. The DMCA was a sledgehammer to kill a mosquito, but that didn’t make the mosquito any less deadly. My sense is the SOPA is roughly the same.

So I was thrilled to read a blog entry (tweeted by Matt Asay) by John Lilly:

What’s bothering me about the SOPA “discussion”

There are 3 things that have really been bothering me about how the SOPA/PIPA discussion has been going so far.

1. it’s not a discussion at all — it’s people calling each other names.
2. it’s highly likely to have a result that is unhelpful at best, and insanely destructive at worst
3. we’re building a completely worthless/bad roadmap for how to deal with technology policy going forward, and it’s going to get worse

Let me be very clear: SOPA is a terrible law that should not be enacted under any circumstances. It’s broken technically and misguided from a policy point of view. It not only won’t accomplish what advocates want it to accomplish, but it also will create backbreaking burdens and barriers to entry for some of our most promising technology companies and cultural movements of the coming decade.

But also: content creators & owners have a legitimate beef with how their content can be appropriated and distributed so easily by rogue actors.

I don’t share John’s interpretation of the law. Part of this is because I’ve not read the law, nor heard more than a smidgen of the articles regarding it. But part of it is also because entertainment companies are getting killer, the other side (consumers, Silicon Valley, cyberlibertarians) are at best indifferent to their situation and it’s only with the threat of bad legislation will they make even the most modest concessions.

John was particularly funny as he caricatured the name-calling on both sides:

[Here] I use the term “conversation” here very loosely, since it has characteristics more like a bunch of schoolyard name calling. The conversation that’s happening is going more like this:

- content: “you people are stealing our stuff. you’re thieves”

- techies: “we’re not stealing it. we’re just building great apps for users.”

- content: “you’re ignoring the problem and helping the thieves. you’re effectively pirates, so we’re going to shut everyone down.”

- techies: “you’re acting like jackbooted fascists, embracing censorship and your’e going to end everything that’s good about culture today.”

- content: “we’re trying to protect our content — you guys are pretending like there’s no problem, then getting rich off platforms that pillage our content.”

- techies: “you don’t understand how the Internet works — how do you even live life in the 21st century? dinosaurs.”

So that’s awesome. Then you throw Congress into the mix and hilarity ensues. Because if you’re looking for folks who really do not act like they want to understand the Internet, Capitol Hill is a pretty good place to start.

John advises that “we need to be thinking about copyright law — in an age where copies are the natural order of things, as opposed to previously, when it was harder to make copies.“

What I find particularly depressing here is that fixing entertainment copyright law is trivial compared to fixing patent law. Here we have a pretty simple mix of stakeholders: content producers, content consumers, interested bystanders and pirates.

When you’re trying to fix patent law, you a particularly rich mix of people in an industry. For example, for the patent term on a therapeutic compound you’d have big pharma, startup biotech, insurance companies, the Feds (Medicare/Medicaid/VA), consumes, and senior citizen lobbies. But when the same patent system also impacts IT — with components, systems, software, open source, patent trolls — and dozens of other industries, then the prospect of finding a patent reform compromise that a majority will endorse becomes virtually impossible.

When anti-troll is anti-innovation

The Paul Allen/Interval Research patent lawsuit has occasioned much handwringing in the tech industry. Some of it recoils at the timing, nature and expansive claims of Interval. However, other is just reflexive antipathy to the idea of patents, particularly from the free software crowd.

Now one of the thought leaders (hate that term) of the open source crowd has weighed in with an expansive attack on all things patent. My friend Matt Asay of Canonical writes in The Register:

Businesses aren't built on ideas. They're built on execution. Google didn't win because it was the first to the search market. It won because it did search better than anyone else, and devised an ingenious way to monetize it.

This, more than anything else, is what makes the US patent system, overrun by patent trolls, so broken: it rewards ideas, not execution against them.

Anyone can think up a brilliant idea. The difficulty is in doing something with it.

Matt is clearly wrong here: I don’t know whether it’s his own bias (or vulnerability) as COO of an open source company, or just a overwrought reaction to the latest example of someone filling a silly suit (which may or may not make any progress in the courts).

While I understand the sentiment, ideas matter too. Things like the laser and the transistor and recombinant DNA got invented by real people who certainly deserved monetary rewards for their contribution to mankind — whether or not they create a company to bring those ideas to market.

My own test is “did this person cause this invention to benefit mankind sooner.” A patent troll goes to a market that’s already developed and says “pay me some money.” A legitimate nonpracticing entity says “I’ve invented something, I’ll help you commercialize it and we’ll share in the profits.”

As law school prof Frank Pasquale notes on the Madisonian, discounting the role of the specific inventor because “it would have happened anyway” is a slippery slope: Microsoft, Google, Facebook and Canonical would have happened too, but they got up one morning and decided to pursue the opportunity with the right strategy before someone else did.

If we don’t incentivize invention, we'll get less of it. This is particularly true today when “innovation benefactors” (to use Henry Chesbrough’s term) are becoming scarce due to budget cuts in basic research and higher education.

The patent system certainly needs incremental reform to fix its excesses, as Adam Jaffe and Josh Lerner showed in their book Innovation and its Discontents. These reforms involve preventing junk patents from being issued, and making it easier to challenge the bad ones who slip through

People in the patent office certainly know about these problems, and are taking steps to address them. One of the most knowledgeable on patent excesses is Stuart Graham, a PhD economist with a JD who was appointed chief economist of the USPTO in March. A study Graham co-authored earlier this year concluded in part:

• Technological innovation is linked to three-quarters of the nation’s post-WWII growth rate. …
• Highly innovative firms rely heavily on timely patents to attract venture capital—76 percent of startup managers report that venture capital investors consider patents when making funding decisions.
• Delay in the granting of rights has substantial costs.…
• The enhanced post-grant review—the process by which a patent’s validity may be challenged through an administrative appeal in front of the USPTO—offers a cost effective and speedier alternative to litigation. The cost of such proceedings is expected to be 50-100 times less expensive than litigation and could deliver $8 to $15 in consumer benefit for every $1 invested.

Patent reform — whether through USPTO administrative action, legislation or court rulings — will improve the odds that a given patent is applied appropriately. However, no system created or run by human being is ever perfect, or ever will be.

Moreover, an effective innovation policy means more than just a patent policy: not all innovations are patentable, and patents are not always the best way to incentivize innovation.

Suzanne Scotchmer has talked about the historic role of prizes as a way to encourage innovations in her seminal book Innovation and Incentives. The idea of using prizes is catching on, with things like the X Prize and academic research on crowdsourcing. In some cases, the prize-winner even keeps the commercialization rights as an incentive to see it to market.

So while I certainly agree with Asay (and Chesbrough and many others) that we must reward those who bring goods and services to market, technological innovation is more than just execution: it’s also about technology. We need more than the MBAs and the salespeople and the bean counters and even the engineers who productize the technology; we also need the inventors who made it all possible.

French open war against Google, Amazon

The CEO of French publisher Hachette Livre has declared war on both Amazon and Google’s efforts to commoditize (and perhaps disintermediate) book publishing, according to a front page story in Monday’s FT (quoted by Teleread, Barron’s, GigaOM etc. etc.). (Even the commentary en Français quotes the FT original).

Arnaud Nourry has two objections to the price-cutting American cultural imperialists. First, Amazon is selling best-selling books in the Kindle edition at $10 — less than the wholesale price. Since this Kindle pump-priming strategy is obviously not sustainable, Nourry is willing to say in public what American publishers (who perhaps fear Amazon) will not:

So, one day, they are going to come to the publishers and say: ‘by the way, we are cutting the price we pay.’ If that happens, after paying the authors, there will be nothing left for the publishers.

I remember back to 1998 when teaching the Amazon case — and writing my own BN.com case — we debated whether book publishers would disintermediate retailers or whether retailers would disintermediate publishers. I think this would be a good Five Forces question for MBA students: why is Amazon threatening to disintermediate publishers while the converse threat never got off the ground?

French publishers (including Hachette) are also hoping that a French court will toss out Google’s 10-month old settlement for giving away out-of-copyright books. The goal would be to force Google to negotiate more favorable terms with French (and perhaps other) publishers.

So in both cases, the French publishers don’t like commoditization of information distribution. Since such commoditization is inevitable, I guess they’re hoping to secure for themselves a tollkeeper role rather than being disintermediated by the big bad Americans.

My European history isn’t very good, but I don’t recall the French winning any wars against the Americans — only alongside the Americans (including their final victory over the English.) Still, fighting on home turf, under Napoleonic law, with Gaullist-inflamed passions against American cultural imperialism, I would bet $20 (not $500) that they’ll get the outcome they seek and extract additional payments from Google. The only wildcard is whether the Obama administration will intervene on behalf of the organization whose employees represented its 5th largest group of 2008 campaign contributors.

Health reform vs. biotech innovation

A major reason for the high cost of US healthcare is that Americans pay full prices for brand new drugs that are either not available in other countries or (due to monopsony buying power) sold at a vastly reduced price. We have an American pharmaceutical (and now biotech) industry because of this policy, and we get solutions before anyone else, but effectively American consumers subsidize the rest of the world.

Without healthcare reform, one of the biggest healthcare policy questions before Congress would be establishing the policy for generic biotech drugs. Unlike small molecule (chemically produced) drugs, it is much harder to establish the biological equivalence of large molecule biologics (which tend to be protein-based created using recombinant DNA) without conducting new clinical trials.

Of course, generic biotech drug makers do not want to be required to conduct expensive and time-consuming clinical trials. They would rather sell knock-off drugs after patents expire, just as small molecule generic makers did after Hatch-Waxman came into effect.

The government has two hats here. As the safety regulator, it must reduce the chances of unsafe drugs being sold. As the nation’s largest drug purchaser (and antitrust regulator) it wants lots of competition for drugs to push down prices, as Hatch-Watchman has done for small-molecule drugs.

Alas, there is also the little inconvenient problem that if the biotech companies never get monopoly rents, then they won’t get VC investment and won’t develop drugs and probably won’t even come into existence. Large risky investments in innovation (new compound investments are among the riskiest) don’t get made without financial incentives and a supply of capital. (There are academic criticisms of using patents to incentivize innovation, but patents are a much cleaner incentive for pharma innovation than for say software or electronics).

Blogger Gene Quinn of IP Watchdog notes an interesting policy discussion last week on CNBC with two former government officials and the head of BIO (Biotech Industry Organization), the industry trade association. He summarizes the issues succinctly:

[T]he segment is well worth watching and will no doubt dispel the myths and lack of understanding by open-minded individuals who question why the biotechnology industry wanted 12 to 14 years of exclusivity for biologics, when the FTC said zero years of exclusivity would be sufficient, President Obama wanted no more than 7 years of exclusivity and Congress opted for 12 years of protection. Co-anchor Joe Kernan started off the questioning by saying: “How did you get 12 years? Why exclude biotechnology from the cost pressures that everyone else is going to have to live under?”

Surrounded by Republicans, apparently the CNBC host interjected himself to speak for the administration’s position:

Specifically, Kernan said: “it just seems like you are a poster child for the exorbitant costs of treatment and maybe some of the costs we shouldn’t be undertaking and we have to judge where to spend the money.” And people wonder why throughout the health care debate the public has been fighting so hard, despite the erroneous and scandalous labels hurled at ordinary citizens who simply want answers and know the government is lying about so much.

Here, Kernan defines the problem as should we be undertaking the cost of exorbitant treatments? Despite what President Obama and his team say, and despite what Democrats in Congress say, the truth is that the overwhelming majority of health care costs come at the end of life, and the only way to lower costs is to ration care at the end of life, as was suggested by Kernan.

Or, as Harvard economist Marvin Feldstein put it Wednesday: “The Obama strategy is to reduce health costs by rationing the services that we and future generations of patients will receive.”

Patent term is the key policy lever for increasing or decreasing the incentives for new drug discovery: it can make or break companies in this industry (while at the same time, excessive term delays competition that makes readily available).

I hope that the patent issue can be debated outside the context of healthcare reform, because it’s too important an issue to get buried among 1,011 unread pages of the healthcare reform bill.

What's up with that?

There’s an American Express and Microsoft pitchman who apparently used to have a comedy show that, he bragged, was a “show about nothing.” Somehow he managed to create 9 seasons of DVDs out of nothing and a decade later is still milking that celebrity for $85 million/year.

I never watched the show, except occasional snippets in reruns or when trapped on an airplane. However, I recall that one of the favorite phrases of the protagonist (I’ll call him “Jer”) was “what’s up with that?” Apparently that made it into our shared cultural understanding, even if not to the same degree as “yada yada.” More on Jer in a minute.

I’m guessing that some readers have heard that another celebrity (The Gloved One) died earlier this month and had a blowout funeral. Probably fewer people recall that in 1985 he paid $47.5 million to buy the copyrights to all the Beatles songs, which is either the sort of one-of-a-kind collectible only rich people an afford or a high-profile way to convert cash into an income stream. (Evidence of the latter is that one estimate says the investment is now worth billions.) John Lennon doesn’t care anymore, but apparently Paul McCartney still performs these songs now and again.

What’s odd is apparently is that Jackson didn’t really buy all rights — because Congress retroactively created a loophole. For anyone interested in IP law, I recommend the posting by Hollywood blogger Chris Arledge. One excerpt:

People not familiar with copyright law might be surprised to hear that McCartney-one-half of music’s most-successful songwriting duo-must pay royalties to perform his own hit songs. The fact certainly seemed to grate on McCartney, who frequently made mention of it in interviews. But even more surprising, at least to those not acquainted with the intricacies of copyright law, is that Sir Paul will one day be able to re-acquire the rights to his music without even having to pay to buy them back.

This is true because of the Copyright Act’s reversion provisions, which allow the original author of a copyrighted work to reclaim the work many years after assigning it away. It is this same right to reclaim lost copyrights that will soon make millionaires of the heirs of Joe Shuster and Jerry Siegel, Superman’s creators, when they conclude their pending lawsuit against Warner Brothers.

(For younger blog readers, Superman is a fictional character who co-starred with Jer in those American Express ads.)

Intellectual property law exists for two reasons: to create incentives for creators, and (like all legal rights) provide a stable institutional framework for creators and users, buyers and sellers, competitors and complementors. Some of the trade-offs make sense: long IP term=more incentives, short IP term=more derivative works. If you want one outcome, then you put your thumb on that side of the scale.

However, indeterminacy of term makes for an uncertain property right. One example is the 1998 Mickey Mouse Copryight Extension Act — there is no economic rationale for lengthening the term ex post facto since it provides no incentive for something that was long since created. Meanwhile, the indeterminate term of sale provided by copyright reversion means that the buyer of the property right doesn’t know what it is buying, leaving the actual rights granted subject to the whims of the seller (or perhaps the courts).

When I mentioned this article to a legal blogger, her observation was that “Termination rights are an aspect of copyright law many people find strange.” I guess “strange” is the polite way a law school professor says “makes no sense whatsoever.”

I prefer to quote Jer the stand-up pitchman: “What’s up with that?”

A real war of IP violators

In addition to killing people, forcing thousands of civilians to permanently leave their homes, and causing $1+ billion in damage, Russia’s invasion of Georgia in August may have also violated a special EU “design right” (consistent with the WIPO policy for industrial designs) held by the Finnish government.

The New York Times reports on the similarity between Russian and Finnish military camouflage uniforms, and the suggestion (never quite proved) that Russians stole a Finnish design. I didn’t know that camouflage can be protected, but apparently it can:

Over the last decade, as the world’s militaries switched over to camouflage based on digital images, it has become standard for countries to protect their patterns — though manufacturers in China have been known to pirate them and sell them commercially. The M/05 took years to create, Captain Karhuvaara said. Finland barred reservists from using it and filed for design protection within the European Union, he said.

But of course, Finland has no desire to pick any fight (ever) with Russia, so in the end, it let the matter drop. I suppose the Poles or the Czechs might pursue the matter, but otherwise (fearing invasion or commercial retaliation) none of Russia’s other neighbors will stand up to the Bear in their midst.

Hat tip: Madisonian

The Mouse who once set IP policy

Belated birthday wishes to Mickey Mouse. Eighty years ago Tuesday, he made his professional debut in Steamboat Willie, the first Disney cartoon, the first cartoon with sound, and the beginning of the Disney empire.

Daniel Finkelstein of the London Times describes the back story of that first cartoon and also defends Uncle Walt against his posthumous critics. He recommends the 2007 biography of Disney by Neal Gabler (now in paperback) which brings together a largely unknown facts about Uncle Walt and his empire.

My interest is Mickey’s role in setting the term of US copyright law. A decade ago, the copyright on Steamboat Willie was about to expire, so Disney Co. lobbied its friends in DC to extend all copyrights by 20 years. The ex post facto extension of copyright term makes no economic sense whatsoever, but (despite the heroic efforts of Larry Lessig) it was upheld by a 7-2 SCOTUS ruling. Hence the disparaging term “Mickey Mouse Copyright Law” or “Mickey Mouse Copyright Extension Act.”

Did I mention that there was no economic justification for this? (Yes, I know that Stan Liebowitz would beg to differ). People who created something 70 years ago (or even are dead) get no incentive for innovation or creativity for such an ex post facto change in terms. Instead, it is just another exhibit in the core Libertarian argument that a government that has the power to hand out favors to the well-connected is a government of men, not laws — or a government that can be bought.

However, today I find myself encouraged. I think this is the last copyright extension we’ll ever have: the law will be permanently set at 90 years rather than 70 (or 50) years, but it won’t be extended indefinitely. Someday Fitzgerald and Faulkner and Winnie the Pooh will be in the public domain.

Why? In 1998, the biggest threat to Steamboat Willie was unauthorized DVDs: think of all the DVDs of It’s a Wonderful Life, whose copyright was allowed to lapse.

Today, it’s the Internet. And, as any fool knows, this is a battle that won’t be won by copyright or copyright enforcement, but by clever business models that can compete with free.

Steamboat Willie is already being given away free by GooTube. Disney either doesn’t know or doesn’t care — or it realizes that pulling this copy will only have it replaced by another somewhere else.

So Eric Eldred may not live to see it, but someday works will again start falling into the public domain, and (hopefully) we’ll never see this mistake repeated again.

Two ideas for patent reform

Patently-O talks about two ideas on patent reform — one serious, one not.

The silly one is that Halliburton seems to be trying to patent how to be a patent troll. Halliburton didn’t want to talk about the application. Given stricter rules on business model patents, this seems to be a nonstarter.

The serious one is that telecom entrepreneur (and former UCSD professor) Ron Katznelson is doing a road show for his patent reform ideas. I interviewed Katznelson for my planned SD telecom book, because he worked at Linkabit, worked on DBS standardization with General Instruments, and then started a company MCSI (later Broadband Innovations).

Ron’s recent talk at the UC Davis Law School was written up Monday at Patently-O, complete with slides. His two main concerns are addressing the huge number of pending patents, and also the declining quality.

Week in review

This week I’ve been swamped coaching my two simulation teams in the final rounds of their International Collegiate Business Strategy Competition. A long slog that began on Jan. 7 (during winter vacation) ended Saturday with both teams victorious.

However, I wanted to comment quickly on a few items:

• The WSJ had a great article (available free) on how Vizio used offshore manufacturing to come from nowhere to be one of the top TV makers — in a virtual three-way tie (with Sony and Samsung) for the most LCD sales in North America. Consumer electronics has been a brutal commodity business with entrenched competitors and (except for flat panels) excess capacity, so Vizio’s success (using open innovation) should be an inspiration for upstarts everywhere.
• Red Hat has beat a retreat from the desktop Linux business. Which Windows advantage matter most — the one from network effects or switching costs? (The exact question I tried to answer with my dissertation). I don’t know, but If Red Hat can’t make it, it’s hard to see how Linux is going to be a major factor in consumer or business PCs — at least in countries with high existing PC penetration rates.
• Adobe’s new Photoshop Express website got a very nice writeup in the WSJ — which basically said it’s about as good as the 1.0 of an online photo program can be. This shows that not only is Adobe trying to remake itself into a SAAS company, but its skills are transferrable. Also that by requiring Flash, its can continue to use its position in one software segment to boost another.
• Some (but not all) of the 4G wireless equipment makers agreed to a patent cooperating agreement to speed adoption of the GSM/W-CDMA derived LTE technology. It’s not clear if the parties have agreed to a formal pool or a set of rules — either for valuing patents or (as announced in August) for deciding which patents are essential. Given the past failure of telecom patent cooperation, this seems more like a promise to agree rather than an ironclad agreement.
• The patent “reform” bill S.1145 seems to be dying, with those big IT companies that want to weaken patents (e.g. Apple, Cisco) unable to overcome the opposition of those that like them just as they are. I wonder if anyone in D.C. understands “win-win” — such as recent efforts to make patent examination more rigorous and accurate.

Virtual trademarks

On the Madisonian, Greg Lastowka writes about having trademarks in virtual worlds, summarizing his recent analysis in a law journal.

This is one of those problems I didn’t know existed. But since people take very seriously earning virtual cash (and virtual fame) in virtual worlds, obviously attempts at trademark infringement will eventually happen.

Coca-Cola (or Disney or Apple) certainly care about their trademarks in a virtual world — such as in overseas countries where they have no presence but someday hope to. So if they aren’t yet worried about virtual trademarks, they soon will be.

Microsoft's survey of opinion leaders

I was minding my business last week, trying to finish grading when the phone rang. The call came from the 204 area code (Manitoba, I later learned Winnipeg), and the caller identified herself as being with Ipsos Public Affairs. For participating in a survey I was offered a $50 donation to one of a variety of charities, both blue chip (Alzheimer’s, Cancer Society, American Heart Association) or socially conscious (Habitat, Doctors without Borders) but not the charity Peter Drucker told Forbes was “by far the most effective organization in the U.S.”

The donation should have been the tip-off, because the interview ran 48 minutes. Most of the survey asked my opinion of seven high-tech companies: Adobe, Apple, Cisco, Google, IBM, Microsoft, Oracle, although some questions also “Linux” (or “Open Source”). However, the bulk of the interview — nearly half — was on comparing Google vs. Microsoft vs. IBM.

Having covered political surveys as a newspaper reporter, it only took 10 minutes to identify this as a Microsoft-sponsored survey. One hint was the three way comparison: Google and IBM are major rivals to Microsoft but not to each other. Other hints were the questions that matched Microsoft’s PR campaigns or potential Google criticisms.

I started taking notes about 5 minutes in. The major comparison questions between Google, Microsoft and IBM (in that order) are these questions:

• [paraphrase] Has a technological vision
• [paraphrase] Works well with hardware and software from other companies
• [paraphrase] Is good for the US economy
• Helps the us technology industry succeed
• Gives customers control over the privacy of their information
• Helps people and businesses realized their potential.
• Is a responsible leader
• Is committed to making charitable and social contributions in the US
• Is a company I trust
• Is a technologically innovative company
• Offers products of the highest quality
• Prices its products fairly in the US
• Cares about its customers
• Makes secure products
• Is committed to being a leader in online safety
• Is committed to making secure products
• Its business practices meet the highest standards
• Promotes opportunities for technology skills for underserved populations in the US (senior citizen, disabled)
• Is an agile company
• Is a dynamic company
• Respects the individual property rights of individuals (for example, artists) and companies (e.g. publishers) for use for their content on the Internet
• A company that has access to too much personal information
• A company whose business practices are overly aggressive

In the second part, I was asked:

• What company from the list I most associated with innovation [Apple, of course]
• Any recent news I recall of IBM, Google and Microsoft
• What firms would want with business partnership, and how good the 7 main companies are as partners.
• What a company [like Microsoft] should do to reach out to the SV community
• What technology-related public policy issue is most important [I said interoperability], which brought questions about what about interoperability was important, and asked to rate the 7 main companies on this.
• I was asked to compare open source (“like Linux”) and proprietary code (“like SAP”) as to which one was better: ease of use, increasing global competitiveness of US companies, work well with products of other companies, security, quality, growing the local IT economy, innovation. [“Local” was ambiguous, but to me that implied the user’s country, e.g. India, China, etc.]
• A series of questions about the role of IP as an incentive, the optimal strength of IP for various industries, and whether specific companies’ (RedHat, Sony, Siemens, Microsoft, Google, IBM) approach to IPR “fosters innovation and technology development in the US.”
• Questions about Microsoft’s ads, and corporate citizenship
• Questions about what news sources I follow — newspapers, websites, and bloggers
• Questions confirming my political party and job title (which they had as “business school faculty”

Updated Nov. 14 (Thanks Tom) The list of bloggers must be some sort of badge of honor. The list that I was asked about was (in order) Eric Savitz, Thomas Hawk, Robert Scoble, David Sifry, Tom Foremski, Scott Beale, Kevin Rose, Michael Arrington, John Battelle, Om Malik, Fake Steve Jobs, Valley Wag, and Marc Andreessen. I’d only heard of the last four, although I didn’t know Andressen had a blog and only Malik’s blog has been useful to me in the past.

I’m not sure how I ended up in their sample, nor how they got my phone number. They called me on my GrandCentral number (which is on my most recent business card and my website). This is what Ipsos promises its clients:

It's about understanding and managing issues, and advancing reputations.

We've been doing just that for clients in the private, public, and not-for-profit sectors. Every day. …

We provide boutique-style customer service and work closely with our clients while often also undertaking research on a global scale. Clients receive forward-thinking solutions to data collection, innovative use of research technologies, and the strategic insight to evaluate and respond to ever-changing client demands. …

The essence of what we do is help our clients listen to what their audiences are saying, understand what they are thinking and anticipate what they have in mind. We know how best to determine and measure their views and opinions. But we go beyond delivering data. We analyze it, put it in context, and then let our clients know how they can best translate this understanding into efficient and effective policies, programs, communications strategies, and marketing initiatives.

I’m not sure what Microsoft is going to learn from its survey, other than perhaps quantitative measures of Google’s vulnerabilities like privacy and resentment of its march to Total World Domination.

Incentives for innovation

This week my friend Kevin Short (former guest lecturer on drug discovery in my technology strategy class) introduced me to several healthcare blogs. The most interesting was “In the Pipeline” (referring to drugs under development) by Derek Lowe, a Ph.D. chemist who has worked for various pharma companies. Its average posts are as substantial (if not more so) than my longer posts, and it has the sort of dry humor that I enjoy.

There was a lot to enjoy. As an academic social scientist, I liked “Run! Anthropologists!” about the (decade-old) practice of hiring anthropologists to study corporate culture. As a former journalist, I relished how he skewers bad gonzo journalism in a visit by a wanna-be Hunter Thompson to the Genentech plant in Vacaville (about 80 miles north of Silicon Valley). Gonzo journalism is about 30 years out of date: at least imitating Hemingway (rather than Thompson) has some lasting value.

But the article most relevant to this audience bears on a core theme of this blog, the incentives for innovation. As someone whose business card says “innovation and entrepreneurship,” I think there is no more fundamental issue than who and why does someone develop important new innovations?

In the posting, Dr. Lowe talks about European Union efforts to stimulate more drug innovation. He quotes from a speech by Günter Verheugen, a commission official looking at pharmaceutical industry policy, acknowledging (very obliquely) the conflicting goals of containing prices and providing incentives for innovation.

After he praises EC for considering providing more financial incentive for European drug discovery, Lowe wonders whether that’s the major effect, instead pointing to cultural differences:

Perhaps I think this way because I used to work for a European company, and now work in Cambridge (home of a zillion startups). But I've long thought that there's a different attitude to research and development in this country, a greater willingness to try odd ideas and to put money behind them. I'm not saying that you don't find innovation in Europe, because you certainly can. But I think that innovators have, on the average, an easier time getting funded and being taken seriously over here. It’s not a huge difference, but it's a steady one, and it's been compounding over time.

In classical political and economic theory, the two issues are inherently related — encouraging risk-taking either reflects (or is reflected in) economic policies. The problem with such neat theorizing are the counterfactuals.

In the past decade, California has become one of the most redistributionist states in the country, and yet remains probably the most risk-taking. Cambridge (Mass.) is located in an even more redistributionist state, one that more than 20 years ago was dubbed “Taxachusetts” and yet still has the best concentration of biomedical research universities in the country. So will entrepreneurs continue despite regulation and taxation? Is there a lag effect? Or are the universities so important that California will always beat out Nevada, Arizona (or Utah) in entrepreneurial formation?

So as with any policy question, advocates on each side can only guess what would happen with a policy change. Would more generous payment for European drugs encourage innovation, or would it require a sea change in work attitudes and risk taking to make something happen? And will it ever matter if the Wild East (of Chinese coastal regions) boasts both low wages and high rates of industry growth and entrepreneurial opportunity, or if India becomes the preferred Anglo-American outsourcing venue for more than just I.T.?

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