There has been some great discussion on Piracy Happens’ sister Facebook page Pirate Nation about the ways in which larger companies are involved in copyright infringement. More importantly, whether this is a boon to them, and even more importantly, whether it actually hurts content creators.

Every day the patent grab means robbing Peter to pay Paul. This company sues this one, who counter-sues, followed by appeals, followed by a lot of wealthy, happy patent lawyers. But I’m not terribly concerned about that in the scope of this post because I don’t believe that patent infringement has much in common with, say, generating ad or transaction revenue from copyright infringement. It is far more diaphanous than that, and – arguably – has much more to do with rights-holders than content creators.

For example, I’ll choose auction monolith eBay. There should be little doubt that – according to the letter of copyright law – eBay facilitates copyright violation every hour of every day. That is: they house auctions for items that violate copyright, whether it’s a bootleg film or tv series, unauthorized re-sale of royalty-free b-roll, or selling computer hardware with pre-loaded apps that are not legitimate versions. I’ll be borrowing from my book Pirate Nation a little here.

So foremost: does eBay profit from this? Despite slews of angry customers claiming that eBay is little more than a treasure trove of pirated warez – that they resist fighting infringement because they welcome any commission, there is – as usual – much more to it than that. After a case in which filmmaker Robert Hendrickson attempted to sue eBay for copyright violation for supposedly selling bootleg DVDs, it was decided in the courts that eBay fell under protection based on a facet of the Digital Millennium Copyright Act (DMCA). It basically goes like this: eBay isn’t responsible for what others try to sell so long as they remove the content and take action to prevent it recurring whenever the rights-holder (or someone else) files a complaint. But they went beyond this.

eBay created Verification Rights Owner (VeRO), a program to report infringement and for rights-holders to create ‘about me’ pages regarding permissions. eBay also employs hundreds of people who traverse thousands of auctions solely to stop sellers from hawking infringing material. eBay also relies on buyer and seller finger-pointing. A customer receives a bootleg copy of a film instead of the original, reports the seller, and eBay stops their auctions or even cancels their seller accounts.

So it’s incorrect to claim that eBay does nothing to stop infringement OR to claim that they make lots of money from violating content. While I have no balance statement handy, I somehow doubt that their return on commissions for pirated warez is greater than the salary of a few hundred employees. Bit of a stretch there.

And let me say: I DON”T CARE about eBay’s anti-piracy actions. I am not awed by them; I don’t claim they are headed in the right direction; they have their own sets of drawbacks. I merely mention them because they are a fitting example of a large corporate infringer-by-proxy.

Secondly, does it hurt the artists? This would be even harder to prove. First, you’d have to discount all sales using the first-sale doctrine: that is, all used material. If you sell a used copy of The Simpsons: Season 20 on eBay or Amazon or Craigslist or a yard sale, nothing goes back to the content creators. And this indeed comes far closer to constituting a “lost sale” because – unlike with pirates – it’s evident that the buyer is willing to pay something for the media, though not full price. And yet, media has long flourished despite the first-sale doctrine: in music, movies, publishing – you name it.

But are there bootleg media sales where the product is passing off as new, costs nearly as much, and thus might represent a loss to the rights-holder (and often the content creator)? I’m sure. But again, this is a very difficult number to tally. If the buyer were willing to pay full price for a retail copy, he would have walked his butt to Best Buy and laid it down.

Most importantly: is the loss large enough to dissuade content creation? Obviously not. I’m sure there are investors out there gun-shy about putting money into media creation because of perceived threats from everyone from Google to The Pirate Bay, but that does not diminish the zillion or so dollars still poured into media creation all the time. Is it less for some media? Sure, but we also have crap-tons more media to choose from now.

Check out part two for a look at what ad-revenue on sites infringing copyright means for content creators and rights-holders. 

Patent troll company Worlds, Inc has filed a patent infringement lawsuit against World of Warcraft creators Activision Blizzard, Inc. The claim? That Blizzard violated a patent for a “System and Method for Enabling Users to Interact in a Virtual Space.”

This should sound familiar, since it’s the premise for pretty much every MMO game ever. As one commenter pointed out, the patent was actually filed three days AFTER the release of the first Everquest game back in 1999, which means that Worlds, Inc had absolutely NOTHING to do with innovating the digital environment currently used in WoW or any other MMO game.

This should come as no surprise. Companies are always suing each other – no different for smaller, do-nothing companies such as Worlds, Inc suing larger companies who are actually making things happen. Who have made it big. The difference here – and what drew my attention and ire – is that Worlds, Inc is operating on the platform that they contributed in some way to the huge success of MMO titles – a billion-dollar industry.

Worlds, Inc CEO Thom Kidrin said: “Technologies created by Worlds have helped the businesses of virtual worlds gaming and the sale of virtual goods to grow into a multi-billion dollar industry. While we are pleased to see that the gaming industry and its rapidly growing customer base have enthusiastically embraced our patented technologies, we deserve fair compensation for their use.”

There are several problems with this statement. First, that Worlds, Inc has helped anyone do anything. That Everquest was already in stores, and that WoW game designers had never even heard of Worlds, Inc completely invalidates this claim. They didn’t DO anything but walk their butts to the patent office to file a piece of paper that has about as much to do with innovation as lawyers have to do with justice (ie – nothing at all).

Second, that game companies have “enthusiastically embraced” their technologies. If the hundreds of thousands of software patents imply anything, it’s that no one has the capacity to predict or reference what “outcomes” have been patented. It’s not as if MMO game makers were spit-balling in an office and checking the US patent office Web site for ideas.

The idea of “Enabling Users to Interact in a Virtual Space” is completely ordinary, expected, and obvious. Patents are supposed to be for “non-obvious” products or processes, so I’m not sure how this one even got through, but I’m not surprised, either.

Lastly, that Worlds, Inc now deserves a slice of the billion-dollar MMO pie. Just because they were first to the patent office doesn’t mean they did or are entitled to anything. This “virtual space” they patented, has been around – as noted – at least for 13 years. Why wait to file suit now? It’s obvious: they were waiting for some MMO manufacturer to grow large enough to make their predatory practices worthwhile.

And realistically, they don’t want to WIN, they want to settle. Proof of this rests in their choice of counsel. Max L Tribble, no doubt a real stand-up guy, has a long history of extorting settlements for patent infringement. Representing patent trolls and taxing companies that are actually creating something.

This is all old news, but until our courts (and our citizenry) recognize this important and obvious flaw in the patent system, such suits will continue to proliferate, to no one’s benefit but a few leeches, sucking money from content creation while contributing nothing.

A recent interview with Apple co-founder Steve “the Woz” Wozniak is making some headlines because Woz is communicating some criticism of the current patent system. As much of an innovator as he’s been, I would have to argue that none of his comments on the problem of patents come anywhere close to innovative, let alone as acerbic as they rightly should be.

Suggesting that software patents stymie innovation and tax content creation is like suggesting that bombing might lead to casualties or fast food to obesity. Why the safe stance? Who knows. But at least he’s saying something, and not merely relying on the same ‘ole song and dance: that patents are a great way to encourage innovation.

They’re a great way to float patent lawyers, just in case the world needed a few more lawyers (about as much as it needs more pollution or more disease, I’d say). But with all the patent-grabbing going on – between Facebook and AOL and AOL and Microsoft – it should be obvious that patents serve the IP rich and tax the IP poor.

Indeed, there have been several small trolls who’ve found a niche in patents: suing large companies for violating patents that stood in the path between idea and execution. But do – as Woz suggests – small companies really find any incentive in the patent system? Perhaps.

Likely, though, the motivation is in patenting a process in order to cash in on someone else’s use of that process, through forbidding them and then suing, not through licensing. The motivation is likely seldom close to the original purpose of the patent: to create some manner of monopoly over an innovative design.

It’s no coincidence that this battle has moved away from, say, patents on refrigerators or bicycles and into software. This is a recent phenomenon: that patents can cover the result or outcome of a piece of software, and not merely a physical aspect of mechanics. The problem here is obvious: while you may build a refrigerator many, many ways, what matters are the mechanics of the device, not the result (ie – cooling or freezing its contents).

You can build an application many ways as well – use any of multiple languages and write virtually limitless ways of having the program perform a task. But the outcome is limited and even predictable: a piece of software that, say, allows an action in one click instead of two. That points an arrow toward a destination. But these are the very outcomes that have been restricted by patents. Nothing about the code itself, but a clamping down of the outcome of that code.

The eventual end to all this, I imagine, is that larger companies holding fistfuls of patents will incentivize upstarts only so far as it serves them, gobbling them up and bringing their ideas and innovation into the fold, and not necessarily to see such ideas to fruition, but just as often to squash them before they can represent competition to the existing cash cow. While patent lawyers and patent law grow fatter and fatter until there are few reasons to create at all, save to serve patent holders and hope for acquisition dollars.

How does this serve innovation? It doesn’t, why do you ask?

The scumbags at ArrivalStar have made a business out of waiting for people to use their clients’ patents and then suing for infringement. As I’ve stated many times, resolving IP issues in court is an enormously costly process, and when legal precedent is about to sway in favor of the defense, accusers can simply cut their losses and drop the suit, ensuring that they can file the exact same type of suit again.

ArrivalStar’s client Martin Jones has been extorting five-figure settlements from small business and large corporations alike, since both hold the same pragmatic attitude: easier to shut the troll up with a few bucks than to fight this thing in court and risk losing millions.

Now it seems Jones is going after cities using his patented technology that says when a bus is going to arrive. Patents are supposed to be non-obvious, so Christ knows how this humdinger made it through the patent office, but we are talking about an office that receives hundreds of thousands of applications per year, because trolling is the hot new job for losers who can’t make money actually doing something.

Cities in particular aren’t looking for a long, legal battle, and just cough up the few tens of thousands of dollars to Jones and his ignoble lawyers. Anthony Dowell, an ArrivalStar slime-ball attorney (redundant, I suppose; I did say “attorney”), spews the usual drivel colluding the unauthorized use of IP with larceny, saying: ”The government can’t just take property from someone, and if they do, they have to pay for it.”

Forget that to “take property” implies that someone is both less that property and is ostensibly aware of the “theft” – neither of which apply in this case. No, it takes research and investigation (seemingly the only real work ArrivalStar does) to find these cases of “infringement”.

And why? Because ignorance of patent infringement is not only excusable, it occurs organically. The steam engine was divined by several people all over the world at virtually the same time, but Watts was the guy who happened to patent it first (to everyone’s detriment, it should be noted – even his own).

Thus, the problem is quite obviously with the patent system itself. For one, patents are given to those without any intention of producing anything. Secondly, for patents on computer code, the patent is on the outcome, not what it took to get there (the code itself).

Think for a moment what that would mean in another media, such as in literature. I could transcribe to any tangible medium of expression a slew of outcomes: hero marries princess; hero kills villain by throwing him off building; hero kills evil zombie horde by becoming a zombie, etc. Then I just sit back and wait for someone to write a novel that uses the same or even similar outcome. I then sue (or – more likely – settle out of court) and we’ve effectively taxed literature as we have computer code and most other patentable technology.

If you’ll excuse the digression, let’s delve into a little troll history. In Middle-Earth, while the orcs were a corrupt off-shoot of attempted elf breeding, the trolls were the chaff when trying to propagate ents – largely peaceful, mind-their-business anthropomorphic trees. Perhaps Tolkien could not have predicted the suitable appellation applied to the vampires who wait for other people to build things and then sue them for patent infringement, but you have to admit that the name fits like a glove. We don’t need them or want them. They are implicitly negative and benefit no one but themselves.

So why are we still convinced that the patent system is working? Why do courts even entertain the idea of such suits? Perhaps the answer is that if we admit that the patent system is broken, we’d have to take a closer look at other intellectual property issues.

And no one is keen on that.

In a bit of a blast from the past, Patent Arcade just posted some history about the Bleem! emulator and their David v Goliath case against Sony back in 2001.

It seems that Bleem! allowed users to user Playstation games on either the Sega Dreamcast or the PC. It had the same physical and digital copy protective measures as the Playstation. That is, it required the disks, and wouldn’t play backups or run without the proper disk in the drive. Certainly there were workarounds that could be exploited, but the same was true for the Playstation itself.

In case it’s news to you, console companies take a loss on each console sold. They hope to recoup that with game sales – where the real money is. This is why Dreamcast bit the dust: once everyone figured out how to bypass the simple copy-protection, no one bought the games, even though the consoles sold fine.

So, with that in mind, it might seen completely rational for Sony to do nothing at all to stop Bleem!. I mean, here’s a company ensuring that even those without the Playstation would still have cause to buy Playstation games. This would be like a burger joint selling nothing but their high profit margin items, like that 30 cent piece of cheese that costs them a penny.

Instead, Sony did what any copyright rich company would do: they litigated to the point of lunacy, losing in every possible way they could lose. However, the court costs were too much for little Bleem! and the company went bankrupt. I can hear notoriously Luddite Sony CEO Howard Stringer yelling: “That will teach you do try and sell our games!”

There is so much wrong with the current patent system, that this post will do little to even scratch the surface. However, a recent story by The Wall Street Journal posted on Slashdot illustrates that patent trolling may be reaching ludicrous speed. It seems Microsoft is selling patents to Linux in order to protect them from patent trolls.

While I’ll not get into the gory details here, this act alone shows how horrid and restrictive the patent system has become. It should be obvious by now that when Microsoft plays ball with a competitor, either the sky is indeed falling or patents are clearly out of control (I’ll let you guess which).

For those just joining us, a patent troll is one who buys up patents in order to sue companies that violate those patents later – knowingly or unknowingly. The only criteria seem to be that the company being sued has the money to settle. Picture if the RIAA sued only rich, white, trust-fund babies for file-sharing – you get the idea.

The fundamental harm here should be obvious: the troll contributes nothing, and only stops (or stalls) those who are contributing. This goes against everything our constitution stands for when reading that such laws are to “ensure the progress of science and the useful arts”. Many would argue that what can be patented has simply grown too wide for its purposes. To receive a patent, something must be: 1. New 2. Useful 3. Not obvious. Sure, there are whole textbooks detailing this, but the point being that when trolls can patent such broad concepts only to trap other businesses later, there’s something wrong.

Perhaps the answer is that the patent owner has so many months to actually attempt creating something with his patent or else sell it or have it fall back into public domain. What good is a patent when the person filing it is not the same person creating the patented design or object? This would still allow failed companies to reap some rewards for having pioneered what some other company perfected, but would discourage companies whose only operating model is leeching off an imperfect intellectual property system.

Though the answer is likely not so obvious as I’ve suggested, I can certainly tell you what isn’t working: our current system. If someone has other ideas, leave a comment.