Bad Idea Is Bad: Senator Sasse Wants To Give Whoever Patents COVID-19 Treatments 10 Extra Years Of Patent Protection

from the because-we'll-still-be-fighting-it-in-2050? dept

It's amazing how two people can look at the same situation and see the exact opposite conclusions. As experts are pointing out that to fight COVID-19 we should be relaxing intellectual property laws to enable more experimentation and collaboration, some have decided what we really need is more locking up of knowledge, and apparently Senator Ben Sasse falls into that ridiculous camp. We joked a few weeks ago about a law professor who's never seen an intellectual property law he didn't want to make worse, saying that pharma companies needed longer patent terms to incentivize the creation of treatments, but we didn't think anyone in power would actually take that nonsense seriously.

Senator Sasse, however, took up the ridiculous challenge, and has introduced the Facilitating Innovation to Fight Coronavirus Act. It's a bad, bad, bill that makes no sense at all, but it's separated into two sections that have no business being together in a single bill other than as a ridiculous way to try to convince people who want one provision to support the other. Let's start with the first provision, that actually does make sense. It would take away laws that are blocking some doctors from helping, and also blocking doctors from making use of unproven but potentially valid treatments:

Notwithstanding any other provision of Federal, State, or local law, no health care provider shall be liable in any Federal, State, or local civil proceeding for—

(1) using or modifying a medical device for an unapproved use or indication;
(2) practicing without a license or outside of an area of specialty if instructed to do so by an individual with such a license or within such an area of specialty; or
(3) conducting the testing of, or the provision of treatment to, a patient outside of the premises of standard health care facilities;

where such action was carried out to test, treat, or otherwise counter the effects of the Coronavirus Disease COVID-19 during the duration of the national emergency...

Those issues have been blocking doctors from being able to help during this pandemic. And, yes, there are reasonable fears concerning snake oil treatments and nonsense spewed by cranks and non-doctors, but most doctors are not pushing snake oil and aren't cranks. If they can help out, they should be able to do so -- and as we learn more and more about what works, having to wait until something is an "approved use" has already been frustrating many.

But, those good ideas are completely drowned in the muck of the horrible idea Sasse has tied to it: extending patent terms for COVID-19 treatments. First, the bill says that the patent term won't be considered to start until after the national emergency is over and then, on top of that, it grants any COVID-19 related patent 10 extra years of protection, which would mean more than 50% more than any other patent.

EFFECTIVE DATE.—Notwithstanding any provision of title 35, United States Code, with respect to an eligible patent, the term of the patent shall not begin until the date on which the national emergency declared by the President under the National Emergencies Act (50 U.S.C. 1601 et seq.) with respect to that disease terminates.

LENGTH OF TERM.—Notwithstanding any provision of title 35, United States Code, with respect to an eligible patent, the term of the patent shall extend for 10 years longer than it otherwise would under such title.

And what is an "eligible patent"? Well, basically anything that is helpful in treating COVID-19, even if it's already patented:

In this section, the term ‘‘eligible patent’’ means a patent issued for a new or existing pharmaceutical, medical device, or other process, machine, manufacture, or composition of matter, or any new and useful improvement thereof used or intended for use in the treatment of the Coronavirus Disease 2019 (COVID–19).

If this became law, you can bet tons of ancillary drugs and devices would suddenly try to claim those ten extra years of exclusivity. I'm not even sure how this law would apply to things that are already off-patent but are used. Would they suddenly go back on patent for 10 years? The bill is terribly drafted and appears to have been written by someone who doesn't understand how any of this works.

I get that there's a desire to create incentives for stopping the pandemic, and that some very ignorant people think the patent system is the only incentive lever that exists for innovation, but that's utter nonsense. You just need to look around. Tons of companies are stepping up to work on this problem, because another incentive is not watching millions of humans die. That's kind of a big one. Also, just being a good citizen of the world.

Second, it's difficult to see how any of this makes any sense anyway. If the treatment is something that's actually new and patent-eligible, then patents filed now won't be approved for quite some time, possibly over a year at which point one hopes that we're out of this pandemic. But, even so, the bill is written to suggest that we'll be fighting COVID-19 for the next 30 years. And if that's the case, we're going to have much bigger problems on our hands than how long some pharma company's patents last.

Finally, this is completely brain-dead public policy. The entire point of patents is to create a monopoly so that the creators can charge monopoly rents. We already have some general issues with how that makes any sense in a free market economy, but, in the midst of a worldwide pandemic, this makes less than no sense at all. It's a law that is literally designed to jack up the cost of treating COVID-19. Because that's what patents do. They create a monopoly so the sole supplier can increase prices. Right now we need widespread solutions that can quickly be deployed globally. Jacking up the price of it makes that impossible.

There is no sensible model in which this approach makes any sense at all.

Filed Under: ben sasse, covid-19, exclusivity, patents, rent seeking

After Nabbing Billions In Tax Breaks, AT&T's Promised Job Growth Magically Evaporates

from the Charlie-Brown-playing-football dept

Telecom monopolies have a pretty good racket going. They'll consistently demand all manner of tax cuts, subsidies, and other government perks in exchange for broadband networks they only half or partially deploy--or jobs that never materialize. The nation's telcos in particular have received countless billions in taxpayer subsidies to expand their broadband networks, yet time and time again we've shown how they've wiggled out of these obligations, leaving huge swaths of America left outside of the reach of fast, inexpensive, competitive broadband (that's particularly true if you're poor).

It doesn't matter how many times we go through this little stage play, it's a cycle that just never ends. AT&T's lobbying and policy folks are exceptionally good at routinely promising state and federal governments that a cornocopia of new jobs and amazing broadband investment is just around the corner, but only if AT&T gets what it wants: be that the death of net neutrality, a lower tax rate, more subsidies, or any number of protectionist or otherwise terrible laws designed largely to protect AT&T's non-competitive geographical fiefdoms. It's a cycle, and a level of institutional gullibility, that's pretty staggering in scope and repetition.

Yet somehow we never wise up. We never audit investment promises. And we certainly never hold giant telecom monopolies accountable. For example, AT&T spent most of last year promising all manner of incredible broadband investment, new jobs, and new innovations if the Trump administration was willing to give it a massive new tax cut. These cuts would, we were repeatedly told, result in a huge boon for broadband investment and "really good jobs":

"Lower taxes drives more investment, drives more hiring, drives greater wages," Stephenson said on CNBC's "Squawk Box." "All of this fits together."...For example, he said AT&T would have to add 7,000 jobs to execute on every $1 billion of capital investment. "There are jobs wearing hard hats … to put that capital into the ground or on cell towers," he said. "There are high-paying, really good jobs with great benefits. The correlation is tight — very, very tight."

The AT&T CEO said that reducing business regulations is another way to get companies to invest. Regulation is "effectively a tax on investment," he argued. "Take regulation down, you get investment up."

The Trump administration was happy to oblige, doling out cuts worth upwards of $20 billion for AT&T. But this theater ignored the fact that AT&T (and countless other companies like it) have long engaged in all manner of financial bookkeeping magic to ensure they already pay a relative pittance in taxes (especially true in telecom where complex mergers and gamesmanship like Reverse Morris Trusts can be used to endlessly dodge tax obligations). And it also ignored how many times AT&T has made these empty promises then failed to follow through.

And it's happening again. Despite its $20 billion in tax savings and record profits, AT&T continues to lay off thousands of employees in the wake of the Trump tax cuts:

"Though AT&T is earning record profits, spending billions on stock buybacks and is expecting an estimated windfall of $20bn in savings from Donald Trump’s tax reforms, it has continued to lay off workers and outsource jobs...In the last seven years, AT&T has closed 44 call centers, according to the Communications Workers of America labor union. Four closures, including the facility in Harrisburg took place this year. While some workers are able to relocate to other call centers in the US, many are left jobless. For some, their jobs are sent offshore, where workers can be paid less than $2 an hour."

Some of these job cuts reflect AT&T's waning interest in being an actual broadband company as it pivots (like Verizon) to more lucrative online advertising. Others reflect the company's efforts to manage the massive debt incurred from its endless quest to grow bigger for growth's sake via an endless wave of megamergers. Unsurprisingly (if you spend five full minutes reading a telecom history book), any real savings from tax cuts, mergers, consolidation and mindless deregulation of natural monopolies (like net neutrality) goes to executive compensation and investors, not to employees or back into the network.

Of course enriching investors and executives is the whole point. Yet we seem intent on adding a layer of bullshit onto these proceedings that try and suggest that such mindless fealty to AT&T is good for everybody, when that's simply not true. To sell the public and press on this manufactured idea, AT&T and other telecom companies (like Charter) promised employees bonuses (not to be confused with actual raises) as a direct result of the tax cuts. But there too AT&T was misleading, failing to mention those bonuses had already been secured as part of routine union negotiations:

"In a December 2017 news release advocating in favor of Trump’s tax cuts, AT&T promised bonuses of $1,000 to 200,000 employees over the next year. The news release omitted that unions had already previously negotiated those bonuses with AT&T before the tax cut bill was passed."

AT&T's broadband investment promises are also routinely hollow. One thing AT&T likes to do is take the CAPEX and network investment numbers it would have had anyway, and claim these are "new" goals only made possible if AT&T gets what it wants. Few in the press ever really bother to fact-check AT&T's math. Neither do lawmakers, who have come to rely on AT&T's generous windfalls to help fund their next election. The end result usually winds up being some scattered upgrades in more competitive areas, but huge swaths of America with decidedly last-generation DSL despite a parade of subsidies and tax breaks for AT&T (again, a trend especially notable in low-income AT&T markets).

Our immense gullibility to these bogus promises is a bit more stark to me than it is to most, having watched this play out countless times with nary a single penalty for AT&T over the last few decades. The drama played out again recently with the assault on net neutrality, a move that will result in countless anti-competitive headaches and rate hikes for captive customers, but was similarly framed as an incredible gift to consumers, innovation, American jobs and network investment. Someday we may learn our lesson and stop throwing billions at blatant grifters like AT&T, but it's abundantly clear it's not happening anytime soon.

Filed Under: broadband, job growth, promises, rent seeking, subsidies, tax breaks
Companies: at&t

Why Is The Hotel Industry More Focused On Harming Airbnb Than Improving Their Own Product?

from the innovate-and-compete,-guys dept

It's no secret that the hotel industry hates competition from Airbnb. Hell, politicians have even admitted to crafting anti-Airbnb policies to keep hotels from being disrupted. But, now, the NY Times has got its hands on a specific plan from the hotel industry to basically hamper Airbnb and burden it with legal and policy challenges (I should note, by way of some sort of disclosure, that I'm typing this while sitting at a desk at an Airbnb apartment in Washington DC -- and, similarly, that it's much nicer and significantly cheaper than comparable hotels, but I digress...).

Last year, Airbnb underwent a rough regulatory patch.

The short-term rental company became a Federal Trade Commission target last summer after three senators asked for an investigation into how companies like Airbnb affect soaring housing costs. In October, Gov. Andrew M. Cuomo of New York signed a bill imposing steep fines on Airbnb hosts who break local housing rules.

The two actions appeared unrelated. But one group quietly took credit for both: the hotel industry.

Years back, we wrote about writer Andy Kessler's concept of political entrepreneurs v. market entrepreneurs, which (loosely defined) were those who basically used policy making to lock up markets for themselves and restrict competitors as opposed to entrepreneurs who innovated and created more value in the market by serving customers. In more traditional economics, it's rent seeking v. market innovation and growth. Most people recognize how rent seeking is bad: it's using the levers of regulations and politics to limit competition and innovation, in order to extract a greater share of the revenue/profits (since there's less competition, if any) while similarly limiting innovation and economic growth that improve people's lives.

And the hotel industry seems like a prime example of this right now.

Both were partly the result of a previously unreported plan that the hotel association started in early 2016 to thwart Airbnb. The plan was laid out in two separate documents that the organization presented to its board in November and January. In the documents, which The New York Times obtained, the group sketched out the progress it had already made against Airbnb, and described how it planned to rein in the start-up in the future.

The plan was a “multipronged, national campaign approach at the local, state and federal level,” according to the minutes of the association’s November board meeting.

The NY Times report has many more details, but all of it is basically summed up as "annoy Airbnb and limit their ability to grow as much as possible." There doesn't appear to be anything in there about "providing a better experience to our customers so they might prefer us to Airbnb." There doesn't seem to be anything in there about "better competing with Airbnb." Nope, it's entirely about trying to undermine Airbnb. I've noted in the past (and in this post!) that I've used Airbnb a bunch, and have found it almost universally better than hotels. The experience is more unique, but also just... better overall. And I've spoken with many Airbnb hosts. It's true that some are running "businesses" renting out multiple units on Airbnb, but isn't opening up more people for running successful small businesses a good thing?

And, yes, I know lots of people like to claim that Airbnb is driving up rent -- even if the data doesn't currently support that claim. But even if true (and, again, it's the hotel lobby that has mostly been pushing this narrative, though plenty of well meaning folks have picked up on it), that's an issue to deal with in other ways (such as increasing housing stock, rather than limiting it with other regulations) rather than shutting down a useful business that opens up new opportunities, and can also increase tourism and local business.

Again, it's perhaps no surprise that the hotel industry has been fighting Airbnb, but with the NYTimes getting its hands on the actual strategy documents from the hotel industry, that industry has made it clear that it's seeking to shut down and limit competition, rather than innovate themselves.

Filed Under: competition, hotels, innovation, political entrepreneurs, rent seeking, startups
Companies: airbnb

Indian High Court Blocks Rent-Seeking Collection Societies From Seeking Any More Rent

from the laws-are-for-other-people dept

Ben Challis of the 1709 Blog reports that one of India's top courts has just cut a few performance royalty "collection societies" off at the knees.

In a blow to three Indian music copyright collection societies, the Delhi High Court has restrained them from granting any such licence till April 24th 2017. Justice Sanjeev Sachdeva, in an interim order, restrained the Indian Performing Right Society (IPRS), the Phonographic Performance Ltd (PPL) and Novex Communications Pvt Ltd from contravening section 33 of Copyright Act, which provides that only registered societies can grant licences in respect of copyrighted work(s).

None of the three collection societies are registered, which means they can no longer shake down everyone from doctors (for music played in waiting rooms) to concert venues for licensing fees and performance royalties. In the latter case, the societies were often instrumental in limiting the amount of live music available to Indians, even though they had no royalty claim on the live music itself.

PPL collects a fee if any recorded music is played at a concert. "Live concerts do not need our clearance. But who can ensure that no recorded music will be played in the time gap between different artists or before the concert begins? At times people responsible for giving out permissions take unfair advantage in charging money. We are taking note of that and strict measures will be taken," says Sowmya Chowdhury, country head and director of PPL.

Venue owners were so intimidated by the societies' per-seat royalty demands they'd often refuse to host a concert if the artist couldn't come up with all sorts of paperwork.

PPL happens to be Phonographic Performance Ltd and IPRS is Indian Performing Right Society, two pan-India autonomous bodies that report to the central HRD ministry and control the fate of live performances. Their roles are not even completely understood by musicians, which often leads to trouble before concerts. Pt Tejendranarayan Majumder was at a loss when he was asked for innumerable no-objection certificates before a recent concert at an auditorium.

[...]

Most auditoriums demand no-objection certificates from PPL and IPRS. Even police permission is given only after these are submitted.

Once again, we have an entity supposedly looking out for artists doing what it can to prevent artists from earning a living. This is what they won't be able to do now, thanks to a change in the nation's copyright law.

Blocking these societies from collecting performance royalties won't do much for the artists signed to them. But then again, the collection societies weren't doing much for artists in the first place. IPRS has been particularly shady. Many royalty collection societies are known for their extremely limited distribution of funds. Those that do pay out more regularly still tend to hand the bulk of it to charting artists, no matter who actually earned it.

IPRS, however, apparently didn't even bother with limited royalty dispersals.

The IPRS will be investigated under Prevention of Money Laundering Act (PMLA), 2002, after it was alleged that the company (which was once a society) has collected royalties on behalf of authors, composers and music publishers, and failed to distribute it among the rights holders.

Fourteen months later, the results of the investigation have yet to be made public, but chances that royalties will soon be flowing to artists remain slim. IPRS and PPL are no longer public societies. They are both private companies.

PPL's decision to go private followed IPRS's. Both moves appear to have been motivated by government scrutiny. The government is still looking into IPRS's royalty distributions, but the society's decision to go private appears to have been a failed attempt to prevent this investigation from taking place.

IPRS in its petition had submitted that it had ceased to be a ‘copyright society’ and therefore the Central Government had no power to investigate IPRS. The Bombay High Court in dismissing IPRS’ petition had observed that the allegations for which the inquiry had been instituted were committed when IPRS was still a ‘copyright society’.

This move has completely backfired on IPRS. It didn't manage to avoid the investigation of its current collections, and it's now being prevented from collecting anything else for the next few months. And it very much looks like any fees it obtained between its opting out of India's "copyright society" and now were collected illegally.

These societies claim to be in the copyright business, but apparently can't bothered to adhere to the nation's copyright laws. And if those in the copyright business don't respect the law, they can't really get too bent out of shape if no one else does either.

Filed Under: collection societies, copyright, high court, india, performance rights, rent seeking

Motorola Deal Showing Massive Loss To Innovation Caused By Patents

from the dead-weight-loss dept

In response to Google's deal to buy Motorola mostly for its patents (most people are now saying that the patents represented at least half the value of the deal), we're seeing two responses. The first is that companies with lots of patents are suddenly being re-evaluated for their patent value. Because of the demand, otherwise practicing firms are suddenly being told their patents may be worth more than they are. Such is life in a market where the value of patents is massively inflated due to dangerous thickets, where patents are necessary to play.

But at the same time, more people are finally realizing what a massive economic and innovation loss this represents, entirely contrary to the intentions and purpose of the patent system. That last link is to the NY Times, which quotes Harvard economist Josh Lerner (who warned of this problem years ago) highlighting what a ridiculous economic loss it is when patent values are so ridiculously inflated:

�You�d much rather see Apple spend some of that $4 billion on new inventions, and Google invest that $12 billion to generate new knowledge,� said Josh Lerner, an economist at the Harvard Business School. �It�s a transfer of wealth from innovators to bondholders and stockholders who have no motivation to innovate. It�s disturbing.�

It's beyond disturbing. It's harmful. It hurts these companies' ability to innovate. It hurts our economy's ability to grow. It costs consumers a massive amount in economic rents, and it acts as a massive shift in wealth from consumers and companies that actually innovate... to those who aren't innovating. It's really dangerous, and will open up more opportunities for foreign competitors to focus on real innovation, while we move money away from innovation to lawyers.

So, we can now add the NY Times to the list of mainstream publications highlighting the problem. Why is Congress still focused on a patent reform bill that does nothing to address this problem?

Filed Under: dead weight, innovation, loss, patents, rent seeking
Companies: google, motorola

Lawyers Write Law, And Then Are The Only Ones To Make Millions Directly Off Of It

from the regulatory-capture-and-rent-seeking dept

It's difficult not to become even more cynical when you read stories like the following one. Sent in by Eric Goldman, it's about a state law in California that was mainly written by two lawyers: Joaquin Avila, a law professor from Seattle, and Robert Rubin, the "legal director" for the Lawyers' Committee for Civil Rights of the San Francisco Bay Area. So, here's the interesting thing: since this state law has been put in place (seven years ago), the only lawsuits have been brought by Rubin's committee or Avila and they've made themselves over $4 million with a few more lawsuits pending and a bunch more threatened (again, all from either Avila or Rubin's committee).

What a great deal: write a law, and then be the only lawyers to use the law to make millions.

As for the law itself, it was a law that apparently very few people were asking for -- requiring that state courts carve out specific districts that favor minority groups, so they are not excluded from local elections. Here's how the AP describes it:

The California statute targets commonly used "at-large" elections -- those in which candidates run citywide or across an entire school district. Avila said that method can result in discrimination because whatever group constitutes the majority of voters can dominate the ballot box and block minorities from winning representation. As a remedy, the law empowers state courts to create smaller election districts favoring minority candidates.

Officials in several California communities said they never heard complaints of voter discrimination until the lawyers stepped forward. In one case, the Tulare Local Healthcare District, now known as Tulare Regional Medical Center, was sued even though its five-member governing board is a rainbow of diversity -- two emigres from India, a Hispanic, a black and a white. The lawsuit argues Hispanics, who make up about a third of local voters, have been shortchanged.

Of course, there are many reasons why the exact makeup of a governing board might not match the exact percentage of the population (including the simple fact that most people vote on issues, not the ethnicity of the people they're voting for). But, even if there was a problem it seems highly questionable that the two lawyers who wrote the bill are now profiting tremendously from it and appear to be the only ones who do so.

It's stories like this one that make us so nervous about so much legislation. This is the type of law they create: it maysound good (who's going to argue against diversity?). But, the actual law appears to have been nothing more than a way for these lawyers to go around collecting millions, while disrupting communities and schoolboards, and sending their taxpayer money to these lawyers.

Filed Under: california, joaquin avila, laws, lawyers, monopoly rents, regulatory capture, rent seeking, robert rubin