Last week Solveig Singleton released a Progress on Point about (mis)use of the term "monopoly."

Solveig tells us that while IPRs fit several broad definitions of monopoly, IP as a legal monoploly has few interesting policy implications. In likewise situations, the NIH, US Postal service and physical property can be considered legal monopolies, yet they do not draw the misinterpretational flourishes forced onto IPRs. Economists have more interesting formal definitions of monopoly, pertaining to price and output, than that rightfully attributable to IPRs, which very rarely fall under these formal economic models of monopoly and when they do its seldom for reasons arising from IP doctrines.

Solveig finds that one of the main confusions in current IP discourse arises when different meanings of monopoly are conflated. Years ago, Edmund Kitch called this an "elementary and persistent error" in understanding IPRs. Today, such false analytical mechanics lead IP critics to define as monopolies anything protected by IP (technology underlying Apple’s FairPlay, the FairPlay DRM, market share of iTunes or its compatible music players), and apply welfare costs analysis relevant only to other kinds of monopolies. These arguments tend to ignore many things in describing "harm" caused by their rendition of "monopoly," including: the real product market, common economic indicators, product substitutes, market entry and industry turnover.

Relatedly, there is an analytical error when drawing conclusions on competition from improperly analogizing IP and monopolies. Mark Lemley has stated IPRs: "merely prevent others from competing to sell copies of a particular product, not from selling different products that compete with the original." Based on this lesson, Apple’s IP prevents the selling of FairPlay and iTunes copies, but allows the creation of different products to compete with Apple. IP critics who conflate IP, monopoly and competition often cite some floundering firms and technology movements, as examples of stifled competition, yet seldom note that these entities fail to adopt standard legal compliance measures and viable revenue models.

Kitch touched on another point Solveig has made: “the marginal cost fallacy.” IP, (erroneously) considered as a monopoly, still cannot be blamed for fending off some marginal cost ideal. He writes the “problem with this argument is that the marginal cost of making copies is not the relevant... cost... marginal cost should include all ...costs necessary to bring the good to market, and there are many other costs than the costs of making a single copy.” Kitch refutes DRM critics who claim DRM is simply a means for hiking digital content prices, thus imposing social costs on consumers. The claim ignores how DRM brings to consumers digital content and helps creators recoup costs and account for capital risks.

Now that Solveig has helped clarify the term monopoly, the next challenge lies in salvaging the word “freedom.”

posted by Noel Le @ 8:28 AM | DMCA, DRM & Watermarks, etc., Free Culture Movement, Markets: Business, Investment & Innovation, Patents

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