The arguments of IP critics in (purportedly) defending consumers, freedom and innovation often get a free pass from strict scrutiny because everyone agrees that these are good things for society. DRM opponents say that limitations between non-interoperable digital services and hardware controls what consumers can do with their legally purchased goods. Copyright policy and the DMCA are said to pose barriers to online commerce by forcing companies working under low capital structure to license content. Patent skeptics claim that the lack of independent inventor defense in patent law puts up an impenetrable barrier to new entrants in technology development.

While laudible in sentiment, anti-IP positions have in common a perfectionist view of consumer welfare, competition and the free market whereby these are stifled or decreased if opposing influences result from regulatory or industry schemes. IP critic perfectionists feel that there is diminishment of their values unless they exist without countering forces. Yet, innovation occurs in markets, not in a vacuum. In reality, innovation probably works best when producers figure into the policy picture (not just consumers), where there is not perfect competition and where "free market" is conditioned with considered regulation.

The views of IP critic perfectionists, if taken to inform American policy, would undermine those characteristics of the information economy that make it generative, profitable and innovative. It seems like IP critics have these red flags that pop up any time keywords like successful firm, legal liability, costs and appropriation even remotely appear, and thus they apply economic and policy analysis without considering the economic and innovation context of the situation. This sounds like a game of connect the dots, or, ahem, connect the keywords.

The major issues:

Consumer Welfare- entry is a good way of measuring healthy innovating activity. For small firms and entrepreneurs, entry allows them into the innovaton economy. For consumers, this spells new/substitute products, lower prices, more quality and an indication of access to continued innovation. Empirical evidence in the industries suggest entry is at a productive level, with high incumbent turn-over, low market concentration and healthy levels of firms entering markets. So what do IP critics argue? They argue that entities on the legal fringes should not be held back despite their business models not conforming to the American legal system that currently facillitates innovation. In my view, innovation will be better off if these entities are forced into regulatory frameworks, and reminded innovation will continue even if they persists in seeing legality as an insurmountable barrier to entry.

On (legal) Monopolies- IP critic perfectionists hate all forms of monopoly, but have you heard the phrase: “winner takes all.” This often occurs in high fixed-low variable cost industries where, as Professor Robert Merges puts it, firms compete for markets rather than in markets. Monopoly is a natural attribute of the information economy. Proprietary control is the bargaining chip firms have to work with other firms. This is especially true today in the era of “open innovation” where firms specialize and need IP as a licensing and exchange currency. And remember, monopolies are not inherently bad, when they are, they harm consumers, not competitors. An excerpt from Judge Hand is relevant: "the successful competitor, having been urged to compete, must not be turned upon when he wins."

Free Markets and Perfect Competition- an odd thing about IP critics is the level of generality at which they apply economic conepts. They take as non-free market the possibility for litigation in situations such as YouTube, a firm without a viable business model, that probably sought to delay copyright controversies while it built a non-profitable mass user bases with the intention of being bought out. YouTube is not that innocent:) Here, IP critics argue that copyright is a barrier to entry, thereby suggesting that legal concerns should not pose any barrier for firms. But barrers to entry pertain to markets, not individual companies that are not representative of a market. Many firms similar to YouTube go the legitimate route and license content.

Even Mark Lemley, a towering figure in IP, and often times an IP skeptic, sees the necessity and value in less than perfect free market and competition landscapes.

…economic literature in the Schumpeterian tradition… in its strong form holds that companies in a (perfectly) competitive marketplace have insufficient incentive to innovate. On this view, only strong rights to preclude competition will effectively encourage innovation. Mark Lemley, Policy Levers in Patent Law, 89 Va. L. Rev. 1575, 1604 (2003).

The IP critic perfectionist perspective of innovation has limitations from the outset. It assumes that consumers welfare is deprived when consumers can easily find substitutes of comparable quality. Perfectionists argue that any regulatory form of incumbency is a reduction of competition, thereby implicitly saying that the modern industry should follow Ken Arrow's perfect competition theory rather than follow its curren productive course. Perhaps the most odd opinion of perfectionists is that they think free markets cease to exist when there is any form of regulation, thereby implicitly endorsing some kind of anarchistic digital market.

IP critic perfectionists argue on principle (most perfectionists do), and say very little about how their views would affect innovation. At times it seems like they see cheap products, competiton and free markets as good within themselves, without even considering that the larger goal is sustaining innovation. They grow silent when it is pointed out that innovation in America is at a fine point, and has spurred our economic growth and standard of living. And to those who have spent years in innovation policy, don't fail to note that when you accuse IP critics of thinking that they know how innovaton works, they say yes:)