We started our exploration of what the
United States owns with currency, and then went to the more tangible
real estate. This week we're moving towards the far less tangible
intellectual property. The laws governing IP enable creative people
to “own” their creations and thus profit from their exclusive
sale. For example, a composer writes a musical and copyrights it. She
then sells the music and the rights to it to a publisher in New York.
The show is picked up and produced on Broadway. That music cannot be
performed legally, for profit or not, without the consent (read:
rental!) from that publisher. And believe it or not, they check –
publishers have people scouring music programs for their titles to
ensure rogue performances aren't benefiting those who didn't do the
difficult work of creating the original music. The punishments are
severe enough to end the career of most average musicians, not to
mention the stigma of violating the music business sacrosanct.
But no IP attorneys enact vengeance like
those of tech giants such as Apple and Samsung. The two Goliaths seem to
be in constant legal skirmishes over patent infringements. Of course,
this market has been nothing but explosive, with sales nearly quadrupling in the last 5 years. Billions are at stake, and the loser
will fork over billions to the winner.
But how can Apple and Samsung even go
to court with one another? One is in California, subject to U.S. law,
and one is in Korea. Well, the United States has given a portion of
its trade sovereignty to the World Trade Organization. I was
surprised to find that it began in 1995 – I was under the
impression it had been around for much longer. Boil it down, and the
WTO represents the solution of an eight year set of talks called the
Uruguay Round that require member countries to have free trade
policies towards one another. If you're wondering who the members
are, check out this helpful map. Notable exceptions: Syria, North
Korea, Russia – wonder why we always see them in such a negative
light? They are quite willing to steal ideas and inventions and
refuse to offer a legal framework for justice for creative people.
I don't want to get too bogged down in
international trade policy. Suffice to say that most tariffs on imported goods are
gone, and those making things in Vietnam can sell them without
additional tariff in Austria or the United States, or in any member
nation. The idea is to encourage invention and innovation and to
provide the market with the best the world can come up with. The
winners make money, and the losers keep trying to stay ahead of the
curve. Globalization has nearly reached its peak.
This system has quite a lot of
weaknesses. Mainly, the legal costs of challenging an infringement
are so high that only large corporations can afford to fully protect
their inventions. I once investigated what it would cost to get an IP
attorney: $5000 to have them look at your case and investigate if
anyone already owns the patent. Thousands more if there is an actual conflict and even then there's no guarantee you would win. Average Joes can't go up against an
Apple or Samsung or even Broadway. There is no patent on ideas, only
on the creations utilizing them, so one must have a working prototype
or completed work in order to get a patent. And even then, if a large
company takes your idea, you have to retain counsel to sue them and
could be in court for years.
Transportation to get goods to the
market uses a tremendous amount of the world's energy; the costs of
getting goods to market rivals the costs of producing those goods. For example, trucking companies spend more on fuel than their employees.
Even IF global effects of this energy use are in dispute (and for the
record I believe this energy use is behind global climate change), a
televised sunrise because the real one is blocked by the smog in
Beijing shows there at least localized effects. Some day, we will have to pay the piper. We can do it with a little bit of extra currency to pay for
solutions, or we can pay by losing a sizable portion of real estate
in the tropics and subtropics.
Globalization in general has the
potential to cause greater income inequality. It's not as obvious to
us because we are currently the benefactors, but imagine a world in
which all invention is done by the already super-rich, and then the
production done only by the poor. Indeed, the inventors can live in
Darien or Los Altos while those who produce the physical goods live
in Mexico City or Shanghai tenements. Large companies quash new rival
inventions in capital intense legal fights and then buy up the
patents once the small company goes bankrupt. That company then uses
its new, purchased patent to become even larger. The potential result
is one that actually stifles innovation even though the intent of the
laws is to promote it.
But, for all of the negatives, the
United States is in a pretty good position as far as intellectual
property goes. While some decry the education system's poor
statistics, we have raised one of the most creative populations in
world history. Modern life looks nothing like it did in 1914 – a
hundred years ago our grandparents toiled in fields, walked to work,
and lived mostly a localized lifestyle. The inventions that make it
possible for me to write a blog that could be read the world over
began in the U.S., and many of those companies are still producing
new goods today. John Deere sold $35 billion worth of equipment in
2013, up from $10 billion in 2001. The world still buys our goods, if
those goods are great.
Of course, we cannot take this
advantage for granted. We as the public must realize that we are
better off bringing money in from the world than sending it away. We shouldn't borrow money from China to buy gas from the Middle East so that we can drive to work for an hour each way;-) We
also shouldn't be giving information and knowledge to the rest of the
world for free. For example, how many foreigners are attending U.S.
colleges on scholarship? This is perhaps needlessly anecdotal, but I
was friends with graduate assistants who sent part of their monthly
living stipends back to their families in South America and Asia.
Now, that's noble of them personally, but is it in our country's best
interest to be providing money at public universities for those in
other countries to live off of while we educate their children free
of charge? Canadian and Chinese colleges certainly aren't paying
American students to come there and earn degrees. In my undergraduate
computer programming class, we had graduate assistants who helped out
in the lab while we wrote programs. Every one of them was from
southwest Asia. I'm guessing that was similar at other colleges, and
today we have foreign computer hackers breaking into U.S. systems and
stealing credit card information from millions of Target shoppers.
Yes, there is nobility in education, but there is nothing to insure
ethical use of the information we teach people once they go home.
Protectionism? Of course it is. But do we just leave our front doors
unlocked for anyone to wander in and take what they want? Of course not!
My point here is that even though the
WTO has established a legal framework for the entire world, all
countries do not enforce those regulations equally. Chinese companies
frequently skirt the authority of the WTO, and China and other
countries engage in anti-competitive practices in their own markets
while insisting on open markets in the U.S. for their exports.
Organizations like the U.N. and the WTO are starting to realize that
the enforcement of their regulations is perhaps more important than
the regulations themselves. We have to all start playing the same
game with the same referees before we can decide who wins the game.
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