Patent troll IP is more powerful than Apple’s
June 7, 2022
Originally published at pluralistic.net
I was 12 years into my Locus Magazine column when I published the piece I’m most proud of, “IP,” from September 2020. It came after an epiphany, one that has profoundly shaped the way I talk and think about the issues I campaign on.
That revelation was about the meaning of the term “IP,” which had been the center of this tedious linguistic cold war for decades. People who advocate for free and open technology and culture hate the term “IP” because of its ideological loading and imprecision.
Ideology first: Before “IP” came into wide parlance – when lobbyists for multinational corporations convinced the UN to turn their World Intellectual Property Organization into a specialized agency, we used other terms like “author’s monopolies” and “regulatory monopolies.”
“Monopoly” is a pejorative. “Property” is sacred to our society. When a corporation seeks help defending its monopoly, it is a grubby corrupter. When it asks for help defending its property, it is enlisting the public to defend the state religion.
Free culture people know allowing “monopolies” to become “property” means losing the battle before it is even joined, but it is frankly unavoidable. How do you rephrase “IP lawyer” without conceding the property point? “Trademark-copyright-patent-and-related-rights lawyer?”
Thus the other half of the objection to “IP”: its imprecision. Copyright is not anything like patent. Patent is not anything like trademark. Trade secrets are an entirely different thing again. Don’t let’s get started on sui generis and neighboring rights.
And this is where my revelation came: as it is used in business circles, “IP” has a specific, precise meaning. “IP” means, “Any law, policy or regulation that allows me to control the conduct of my competitors, critics and customers.”
Copyright, patent and trademark all have limitations and exceptions designed to prevent this kind of control, but if you arrange them in overlapping layers around a product, each one covers the exceptions in the others.
Creators don’t like having their copyrights called “author’s monopolies.” Monopolists get to set prices. All the copyright in the world doesn’t let an author charge publishers more for their work. The creators have a point.
But when author’s monopolies are acquired by corporate monopolists, something magical and terrible happens.
Remember: market-power monopolies are still (theoretically) illegal and when companies do things to maintain or expand their monopolies, they risk legal jeopardy.
But: The corporate monopolist who uses IP to expand their monopoly has no such risk. Monopolistic conduct in defense of IP enjoys wide antitrust forbearance. What’s the point of issuing patents or allowing corporations to buy copyrights if you don’t let them enforce them?
The IP/market-power monopoly represents a futuristic corporate alloy, a new metal never seen, impervious to democratic control.
Software is “IP” and so any device with software in it is like beskar, a rare metal that can be turned into the ultimate corporate armor.
No company exemplifies this better than Apple, a company that used limitations on IP to secure its market power, then annihilated those limits so that no one could take away its market power.
In the early 2000s, Apple was in trouble. The convicted monopolist Microsoft ruled the business world, and if you were the sole Mac user in your office, you were screwed.
When a Windows user sent you a Word file, you could (usually) open it in the Mac version of Word, but then if you saved that file again, it often became forever cursed, unopenable by any version of Microsoft Office ever created or ever to be created.
This became a huge liability. Designers started keeping a Windows box next to their dual processor Power Macs, just to open Office docs. Or worse (for Apple), they switched to a PC and bought Windows versions of Adobe and Quark Xpress.
Steve Jobs didn’t solve this problem by begging Bill Gates to task more engineers to Office for Mac. Instead, Jobs got Apple techs to reverse-engineer all of the MS Office file formats and release a rival office suite, Iwork, which could read and write MS Office files.
That was an Apple power move, one that turned MS’s walled garden into an all-you-can-eat buffet of potential new Mac users. Apple rolled out the Switch ads, whose message was, “Every MS Office file used to be a reason not to use a Mac. Now it’s a reason to switch to a Mac.”
More-or-less simultaneously, though, Apple was inventing the hybrid market/IP monopoly tool that would make it the most valuable company in the world, in its design for the Ipod and the accompanying Itunes store.
It had a relatively new legal instrument to use for this purpose: 1998’s Digital Millennium Copyright Act; specifically, Section 1201 of the DMCA, the “anti-circumvention” clause, which bans breaking DRM.
Under DMCA 1201, if a product has a copyrighted work (like an operating system) and it has an “access control” (like a password or a bootloader key), then bypassing the access control is against the law, even if no copyright infringement takes place.
That last part – “even if no copyright infringement takes place” – is the crux of DMCA 1201. The law was intended to support the practices of games console makers and DVD player manufacturers, who wanted to stop competitors from making otherwise legal devices.
With DVD players, that was about “region coding,” the part of the DVD file format that specified which countries a DVD could be played back in. If you bought a DVD in London, you couldn’t play it in Sydney or New York.
Now, it’s not a copyright violation to buy a DVD and play it wherever you happen to be. As a matter of fact, buying a DVD and playing it is the opposite of a copyright infringement.
But it was a serious challenge to the entertainment cartel’s business-model, which involved charging different prices and having different release dates for the same movie depending on where you were.
The same goes for games consoles: companies like Sega and Nintendo made a lot of money charging creators for the right to sell games that ran on the hardware they sold.
If I own a Sega Dreamcast, and you make a game for it, and I buy it and run it on my Sega, that’s not a copyright infringement, even if Sega doesn’t like it. But if you have to bypass an “access control” to get the game to play without Sega’s blessing, it violates DMCA 1201.
What’s more, DMCA 1201 has major penalties for “trafficking in circumvention devices” and information that could be used to build such a device, such as reports of exploitable flaws in the programming of a DRM system: $500k in fines and a 5 year sentence for a first offense.
Deregionalizing a DVD player or jailbreaking a Dreamcast didn’t violate anyone’s copyrights, but it still violated copyright law (!). It was pure IP, the right to control the conduct of critics (security researchers), customers and competitors.
In the words of Jay Freeman, it’s “Felony contempt of business-model.”
And that’s where the Ipod came in. Steve Jobs’s plan was to augment the one-time revenue from an Ipod with a recurrent revenue stream from the Itunes store.
He exploited the music industry’s superstitious dread of piracy and naive belief in the efficacy of DRM to convince the record companies to only sell music with his DRM wrapper on it – a wrapper they themselves could not authorize listeners to remove.
Every $0.99 Itunes purchase added $0.99 to the switching cost of giving up your Ipod for a rival device, or leaving Itunes and buying DRM music from a rival store. It was control over competitors and customers. It was IP.
If you had any doubt that the purpose of Ipod/Itunes DRM was to fight competitors, not piracy, then just cast your mind back to 2004, when Real Media “hacked” the Ipod so that it would play music locked with Real’s DRM as well as Apple’s.
Apple used DMCA 1201 to shut Real down, not to stop copyright infringement, but to prevent Apple customers from buying music from record labels and playing them on their Ipods without paying Apple a commission and locking themselves to Apple’s ecosystem, $0.99 at a time.
Pure IP. Now, imagine if Microsoft had been able to avail itself of DMCA 1201 when Iwork was developed – if, for example, its “information rights management” encryption had caught on, creating “access controls” for all Office docs.
There’s a very strong chance that would have killed Apple off before it could complete its recovery. Jobs knew the power of interoperating without consent, and he knew the power of invoking the law to block interoperability. He practically invented modern IP.
Apple has since turned IP into a trillion-dollar valuation, largely off its mobile platform, the descendant of the Ipod. This mobile platform uses DRM – and thus DMCA 1201 – to ensure that you can only use apps that come from its app store.
Apple gets a cut of penny you spend buying an app, and every penny you spend within that app: 30% (now 15% for a minority of creators after bad publicity).
IP lets one of the least taxed corporations on Earth extract a 30% tax from everyone else.
Remember, it’s not copyright infringement for me to write an app and you to buy it from me and play it on your Iphone without paying the 30% Apple tax.
That’s the exact opposite of copyright infringement: buying a copyrighted work and enjoying it on a device you own.
But it’s still an IP violation. It bypasses Apple’s ability to control competitors and customers. It’s felony contempt of business-model.
It shows that under IP, copyright can’t be said to exist as an incentive to creativity – rather, it’s a tool for maintaining monopolies.
Which brings me to today’s news that Apple was successfully sued by a patent troll over its DRM. A company called Personalized Media Communications whose sole product is patent lawsuits trounced Apple in the notorious East Texas patent-troll court.
After software patents became widespread – thanks to the efforts of Apple and co – there was a bonanza of “inventors” filing garbage patents with the USPTO whose format was “Here’s an incredibly obvious thing…with a computer.” The Patent Office rubberstamped them by the million.
These patents became IP, a way to extract rent without having to make a product. “Investors” teamed up with “inventors” to buy these and impose a tax on businesses – patent licensing fees that drain money from people who make things and give it to people who buy things.
They found a court – the East Texas court in Marshall, TX – that was hospitable to patent trolls. They rented dusty PO boxes in Marshall and declared them to be their “headquarters” so that they could bring suits there.
Locals thrived – they got jobs as “administrators” (mail forwarders) for the thousands of “businesses” whose “head office” was in Marshall (when you don’t make a product, your head office can be a PO box).
Productive companies facing hundreds of millions – billions! – in patent troll liability sought to curry favor with locals (who were also the jury pool) by “donating” things to Marshall, like the skating rink Samsung bought for the town.
Patent, like copyright, is supposed to serve a public purpose. There are only two clauses in the US Constitution that come with explanations (the rest being “truths held to be self-evident”): the Second Amendment and the “Progress Clause” that creates patents and copyrights.
Famously, the Second Amendment says you can bear arms as part of a “well-regulated militia.”
And the Progress Clause? It extends to Congress the power to create patents and copyrights “to promote the Progress of Science and useful Arts.”
I’m with Apple in its ire over this judgment. Sending $308.5m to a “closely held” patent troll has nothing to do with the “Progress of Science and useful Arts.”
But it has everything to do with IP.
If copyright law can let Apple criminalize – literally criminalize – you selling me your copyrighted work, then there’s no reason to hate on patent trolls.
They’re just doing what trolls do: blocking the bridge between someone engaged in useful work and the customers for that work, and extracting a toll. It’s not even 30%.
There is especial and delicious irony in the fact that the patent in question is a DRM patent: a patent for the very same process that Apple uses to lock down its devices and prevent creators from selling to customers without paying the 30% Apple Tax.
But even without that, it’s as good an example of what an IP marketplace looks like: one in which making things becomes a liability. After all, the more you make, the more chances there are for an IP owner to demand tax from you to take it to market.
The only truly perfect IP is the naked IP of a patent troll, the bare right to sue, a weapon made from pure abstract legal energy, untethered from any object, product or service that might be vulnerable to another IP owner’s weapons.
A coda: you may recall that Apple doesn’t use DRM on its music anymore: you can play Itunes music on any device. That wasn’t a decision Apple took voluntarily: it was forced into it by a competitor: Amazon, an unlikely champion of user rights.
In 2007, the record labels had figured out that Apple had lured them into a trap, selling millions of dollars worth of music that locked both listeners and labels into the Itunes ecosystem.
In a desperate bid for freedom, they agreed to help Amazon launch its MP3 store – all the same music, at the same prices…without DRM. Playable on an Ipod, but also on any other device.
Prior to the Amazon MP3 store, the market was all DRM: you could either buy Apple’s DRM music and play it on your Ipod, or you could buy other DRM music and play it on a less successful device.
The Amazon MP3 store (whose motto was “DRM: Don’t Restrict Me”) changed that to “Buy Apple DRM music and play it on your Ipod, or buy Amazon music and play it anywhere.” That was the end of Apple music DRM.
So why hasn’t anyone done this for the apps that Apple extracts the 30% tax on? IP. If you made a phone that could play Ios apps, Apple would sue you:
And if you made a device that let you load non-App Store apps on an Iphone, Apple would also sue you.
Apple understands IP. It learned the lesson of the Amazon MP3 store, and it is committed to building a world where every creator pays a tax to reach every Apple customer.