The Knockoff Economy

by Kal Raustiala

  * It’s possible that if a team were to apply for and receive a copyright or patent on a particular play or formation, the National Football League would react either by banning the use of IP to protect the innovation, or by mandating that any patent or copyright be licensed to rival teams. Such a move by the NFL might, however, raise antitrust issues. The Supreme Court recently ruled, in the American Needle v. NFL case, that the NFL’s teams are economic competitors, and that they and the league itself are not one entity. As a result, NFL rules that unnecessarily restrict competition—and a ban on obtaining IP rights might be perceived as such—would be subject to federal antitrust review.

  * The irony is that Edison did not really invent the light bulb. As Mark Lemley of Stanford Law School has noted, Edison simply found a bamboo fiber that worked better as a filament in the light bulb developed by Sawyer and Man, who in turn built on lighting work done by others. This kind of innovation—incremental, tweaking—is precisely our topic in this section.

  * Davis himself may have tweaked an earlier version of the run-and-shoot pioneered by a high school coach from Middletown, Ohio, named Glenn “Tiger” Ellison. Davis’s version of the run-and-shoot was more pass oriented.

  * Other MathWorks contests have asked contestants to design a formula to map the surface of Mars, find the most efficient way to fold a complex protein molecule, and tackle a difficult positional problem in the classic Mastermind game.

  * John Philip Sousa was among those who testified in Congress in support of this expansion of copyright. Sousa, however, was deeply ambivalent about the advent of mechanically reproduced music, and in 1906 he published a vitriolic essay, “The Menace of Mechanical Music,” attacking the new technologies. Sousa believed deeply in the importance of music as a democratic activity:

  There are more pianos, violins, guitars, mandolins, and banjos among the working classes of America than in all the rest of the world, and the presence of these instruments in the homes has given employment to enormous numbers of teachers who have patiently taught the children and inculcated a love for music throughout the various communities.

  Right here is the menace of machine-made music!… [I]nstruments… are no longer being purchased as formerly, and all because the automatic music devices are usurping their places. And what is the result? The child becomes indifferent to practice, for when music can be heard in the homes without the labor of study and close application, and without the slow process of acquiring a technic,… the tide of amateurism cannot but recede, until there will be left only the mechanical device and the professional executants. (John Philip Sousa, “The Menace of Mechanical Music,” Appleton’s Magazine 8 [1906]: 278)

  Sousa’s worries have, of course, come to pass—far fewer Americans learn to play musical instruments than during Sousa’s time, and amateur musicianship long ago receded from American life.

  * The fee was initially set at $0.02 per copy, or about 48 cents in 2011 dollars. It is now just over $0.09 per copy for most songs. In other words, the cost of covering a song has been slashed by about 85% since the 1909 act was passed.

  * Which may be a good thing—though in practice there is a huge (and almost all copyright-infringing) world of “fan fiction,” in which fans rework, sometimes in X-rated fashion, characters and plots drawn from their favorite books and films. Unsurprisingly, there are several Star Trek fan fiction archives on the Internet.

  * Google Books allows users to search an enormous database of books—Google has digitized over 15 million, and its ambition is to reach all the books ever printed. Google does not allow access to copyrighted books unless it has an agreement with a book’s publisher. Instead, users receive a list of books that include their search term. Click on a book, and Google shows as much as its publisher has authorized, or, if there is no agreement with the publisher, Google shows only a few lines of text containing the relevant terms. Google Books also provides, for the first time, access to millions of orphaned books.

  * Not quite as far-fetched as it may seem; the nonfiction book Freakonomics (Steven D. Levitt and Stephen J. Dubner, Freakonomics: A Rogue Economist Explores the Hidden Side of Everything [William Morrow, 2005]) spawned not only a blog (to which we are contributors), but a motion picture documentary and a radio show.

  * The first font was the “Donatus-Kalendar” letter style designed by Peter Schoeffer, the scribe that Gutenberg enlisted to design the first typeface for his new invention. Schoeffer’s font mimicked ornate 13th-century German handwriting.

  * Times New Roman is called “Times” because it was commissioned by the Times of London in 1931, and was created by Cameron Latham of the UK firm Monotype.

  * There is one small qualification: once a font is rendered in computer code—which is the form in which modern fonts are employed by almost all users—the code itself can be copyrighted. In practical terms, however, this does not amount to much. Just as a funny idea can be expressed in many different ways, any particular letter shape can be described in many ways in computer code.

  * Maybe too much so. In the fall of 2009, at the depth of the pain on Wall Street, Calvin Trillin wrote in the New York Times of meeting a Wall Street veteran who, sitting next to him in a bar, proclaimed he could explain the collapse in one sentence. “Let’s hear it,” said Trillin. The system collapsed, the man said, because “smart guys had started working on Wall Street.” Calvin Trillin, “Wall Street Smarts,” New York Times, October 14, 2009.

  * Recently, Wall Street banks called on New York senator Charles Schumer to provide relief from a particularly nettlesome patent plaintiff, a Texas entrepreneur named Claudio Ballard, who owns patents on a method for processing digital copies of paper checks. Ballard has asserted his patents successfully against many of the biggest banks. In 2011, Schumer inserted a provision into the America Invents Act, signed into law by President Obama on September 16, 2011, that would allow the banks to get Ballard’s patents reexamined by the PTO.

  * These data were subject to California public records laws that made them widely available—so even if there were broader copyright protection for data generally, information like this would remain largely free for the taking—but the example is nonetheless illuminating.

  * And the originator might not even survive the process that it sparked. In the once-decaying meatpacking district of New York the quirky bistro Florent was a pioneer, but today—in a neighborhood where a handful of meatpacking operations eke out an existence amid an onslaught of restaurants, clubs, hotels, and high-end retail—Florent is a just a memory.

  * As we discuss further, creation and distribution are not the same, and music illustrates this well. Creating a new song has always been relatively cheap. But distributing it was, until recently, expensive. Technology has changed that in ways that have important implications for how we think about the threat of copying.

  * As it turns out, IP law does not take this wide spectrum of costs into account. Whether a work is cheap or expensive to produce matters not at all to whether, or how long, it is protected by a copyright or patent.

  * Though there is some latitude at the upper reaches of fashion. In the 1980s, for instance, Japanese designer Issey Miyake sold three-sleeved sweaters; the third sleeve hung down the back.

  * As Conrade says to Borachio in Much Ado about Nothing, “I see that the fashion wears out more apparel than the man.”

  * This is yet another way in which technology can alter these dynamics. As Spike Lee depicted in Do the Right Thing, in the ancient era of the boombox, owners could broadcast their tastes and identity to everyone nearby (at least as long as the batteries lasted). Radio Raheem would have been a very different character in the age of the iPod.

  * By which we mean American-based; many of those we interviewed are actually foreign-born or foreign-trained.

  * As alluded to earlier, the greater effect of copies may be to promote the original—in a way akin to advertising—and also to promote the originality of David Chang. We say more on t
his later in the chapter.

  * The recent embrace of 3D theater technology only adds to this dynamic—at least until 3D televisions, which are increasingly common, improve in quality and price.

  * Though in a strange twist, the occasional tribute band member has crossed over to the original. When in 1992 lead singer Rob Halford left Judas Priest, for instance, he was replaced by Tim Owens of the Judas Priest tribute band British Steel.

  * Hollywood’s US box office take in 2011 declined by 4.5%; observers blamed a deepening recession and an unusually weak crop of big-budget films. Meanwhile, Hollywood’s foreign box office receipts continued to swell in 2011, growing by 7% to a new record of $13.6 billion.

  * As we noted earlier, cover bands are of course an attempt. But they pose little risk to most popular bands and might even be thought to whet the appetite and keep the flame alive for many fans of the real thing.

  * We’re old enough to remember using paper encyclopedias, but we used the Wikipedia entry for “Wikipedia” to gather much of the basic information we just gave you about Wikipedia. (And then we fact-checked it using other sources.)

  * As we discussed in Chapter 5, while it is theoretically possible to claim that a football formation is a choreographic work, and therefore capable of receiving copyright protection, no one has ever successfully done so.

  * In response to a generation of would-be lawyers raised on Google and fed up with complex database programs, the legal databases are moving toward much simpler interfaces that require less training to use effectively—but are likely to produce less stickiness in the user base.

  * Ultimately, a revised federal trademark law was upheld on other grounds.

  * More than 70 years ago, the Supreme Court in Kellogg Co. v. National Biscuit Co., 305 U.S. 111 (1938), held that the shape of Nabisco’s shredded wheat biscuit was functional and therefore could not be protected by trademark law. The shape of the Nabisco wheat biscuit was originally patented, as were other famous cereals such as Kellogg’s Corn Flakes, but those patent rights have long since expired. And yet these classic branded cereals continue to enjoy a significant pricing premium over unbranded rivals.

  * No buyer believes that a Canal Street watch is the real thing, but some copies mimic originals in ways that are very hard to detect—and sometimes are not detected until the owner tries to get the item repaired. Elizabeth Holmes, “The Finer Art of Faking It: Counterfeits Are Better Crafted, Duping Even Sophisticated Shoppers,” Wall Street Journal, June 30, 2011.

  * In fact, Lefebvre’s brand is strong enough that he has dispensed with standard features of restaurants altogether (such as fixed addresses), operating only his roving “LudoBites” pop-up operation, whose seats sell out over the Internet almost instantly, and his even-more roving “LudoTruck.”

  * Not to mention the Mermaid Oyster Bar, which opened maybe 100 yards away from Pearl Oyster Bar. Or Jack’s Luxury Oyster Bar, a few blocks farther east.

  * Great Britain created a prize in the 18th century for the first person to develop a reliable way to measure longitude; more recently, Netflix created a $1 million prize to improve its online recommendation feature. The X Prize Foundation has offered several prominent prizes, such as the Google Lunar X Prize for the first privately funded mission to send a robot to the moon.

  * We discuss Radiohead’s famous “pick your price” download experiment in the Epilogue to this book.

  * Again Louis C.K.: “I really hope people keep buying it a lot, so I can have shitloads of money, but at this point I think we can safely say that the experiment really worked. If anybody stole it, it wasn’t many of you. Pretty much everybody bought it.” Of course this needs to be taken with a grain of salt. Lots of research on taxation shows that people are much more likely to comply if they believe others are complying. So Louis C.K. is smart to say that almost no one stole it, whether that is in fact true or not.

  * This is the fundamental insight of Chris Anderson’s book The Long Tail (Hyperion, 2006): online, even items that sell in very low numbers can be profitable, because the costs of inventory and distribution are extremely small.

  * Some have suggested that the labels failed to make a deal with Napster because the labels didn’t have the legal right to license online distribution of their artists’ recordings. Major label contracts are not public, but the evidence we’ve seen suggests that most contracts included “all media” clauses, which appear to have given labels the right to contract for online delivery. The fight over online delivery at the time between artists and labels was less about whether the labels had the right to license for online distribution, and more about whether artists would be compensated at the royalty rate applied to distribution via CD, or via a lower royalty rate applied to new media.

  * In the fall of 2011, Microsoft threw in the towel and canceled Zune.

  * According to the Motion Picture Association (the international counterpart of the MPAA), in 2005 losses due to piracy were 80% overseas and only 20% domestic. It will surprise no one that China was identified as public enemy #1; http://mpa-i.org/pdf/leksummaryMPA%20revised1.2008.pdf.

  * There is undoubtedly an element of trend and fashion attached to the resurgence in vinyl—young people in particular, who never experienced the heyday of the LP, may be attracted to the older technology simply because it’s novel to them and looks cool. And for older listeners, the act of slipping the record out of the sleeve and dropping the needle is special in a way that clicking a mouse will never be.

  * We are both bloggers for Freakonomics but were not involved in the film.