White House: What's Blocking Innovation in America?  My Answer: IP Laws
IP laws are flawed today in their implementation but it is a serious mistake to say that they are what is blocking innovation in America.It is easy to pick some extremes of flawed implementation of IP laws and to ridicule their effects. Software patents have been seriously abused to block innovation, with the prototypical troll being, in effect, the equivalent of some lawyer sitting in a back room endlessly "conceiving" ideas from which extortion-style demands can be exacted. So too with things like the RIAA-led lawsuits demanding millions in damages for the downloading of 20 songs or the Disney-inspired extensions of copyright terms to ridiculous lengths having nothing to do with protection of any conceivable right of an author. Such items can readily and rightly be mocked and cast as the absurd anti-innovative creatures that they are. Nor does it help that the beneficiaries of such legal aberrations are often large and powerful companies, lawyers and lobbyists, and others who might be characterized as the antithesis of innovation in any productive society.That said, IP laws do not in any sense categorically block innovation and, indeed, remain essential to it.To understand the true importance of IP laws, we need to look at fundamentals. Property is both tangible and intangible. You can touch the former and physically transfer it to someone else. It is a thing that is possessed by someone and such possession excludes or limits possession by others because it is a finite resource that can only be shared so much. In the modern age, in contrast, intangible property is capable of almost infinite replication with few, if any, incremental costs. The temptation exists, then, to say that all such property should be commonly shared because it can be so shared and because people will use it to make advancements for the betterment of themselves and society. In other words, there presumably is no cost to making all information free, legally unprotected, and infinitely shareable. Or so the thinking goes.But this assumption is not sound.IP laws are designed to protect all forms of intangible property having commercial value. This means patents (which protect inventions), copyrights (which protect any tangible embodiment of an original work of authorship), trademarks (which protect the distinctiveness of the origin of goods or services), and trade secrets (which protect any form of valuable confidential and proprietary information).These laws are so built into the fabric of the startup world that we normally just take them for granted.For example, no startup could hope to survive without laws protecting trade secrets. Without such laws, whatever information or knowledge base you have in your startup that is unique and valuable could be lifted at will by any passing person: an employee who passes through and copies such information wholesale to give it to a competitor; the janitor who comes in at night who decides to publish it on the internet; someone who breaks into your network, copies it all, and then shares it with the world or, worse, if it is a competitor, who uses it to compete against you. If you once take the legal position that all information is free and freely shareable, then all protections for your confidential business plans, for your technical innovations, for your execution strategy, for your database of key customers, personnel, marketing data, etc. evaporate and you can no longer derive any competitive advantage from any of this as long as anyone gets his hands on it and makes it public.Founder groups would have the same problem in pre-formation situations. Say, four founders build something that they have worked on for a full year and are prepared to launch. One of them defects and says to the group, "I am going to take everything that we have worked on and take it for myself." Of course, that is outrageous. Buy why? Because laws exist that declare it illegal for someone to misappropriate what the founders have been working on. Those are IP laws. They protect the interests in intangible property. Without them, every founder would be vulnerable to such defections, without any form of legal recourse.Copyright serves a similar function. Whenever a startup relies on proprietary code, it is copyright (along with trade secret laws) that ensures that the work product of the company can't simply be lifted at will and used in any way that the person taking the code desires.Open source is no exception. It relies heavily on rules of copyright law and on licensing to make its system work. If everything were freely shareable without any form of restriction, one does not have open source - one has freeware.I could go on with this but, having already noted the potential for serious abuse when such laws are ill-formed, I think I have said enough to show that IP laws lie at the foundation of the startup world and are not in themselves the enemy. There are philosophical arguments to be made that all information should be freely shareable but any society based on that premise would be radically different from the one in which startups thrive today.Startups depend heavily on IP laws. Such laws have great value in today's startup culture and ought to be recognized for that contribution. Reform them, absolutely; abolish them, don't even think about it (unless you are ready to embrace a philosophically extreme position about all forms of intangible property ownership). I don't believe most people are prepared to embrace the extreme position and, hence, one ought to be careful about castigating that which is good while condemning that which we can agree is bad.Bottom line: IP laws do not kill innovation and, on the contrary, are vital to it. Flawed IP laws stink and need to be reformed.