Category Archives: Business and Economy

U.S. intellectual property enforcement actions: the report

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CNET News alerted me to yesterday’s release of the 2010 U.S. Intellectual Property Enforcement Coordinator Annual Report on Intellectual Property Enforcement (92 page PDF):

The 92-page report…reads a lot like a report that could have been prepared by lobbyists for the recording or movie industry: it boasts the combined number of FBI and Homeland Security infringement investigations jumped by a remarkable 40 percent from 2009 to 2010.

Nowhere does the right to make fair use of copyrighted material appear to be mentioned, although in an aside on one page Espinel mentions that the administration wants to protect “legitimate uses of the Internet and… principles of free speech and fair process.”

This is the first annual report released by the Office of the United States Intellectual Property Enforcement Representative (official website) since its creation in late 2008 and the Senate confirmation of the first Intellectual Property Enforcement Coordinator (“copyright czar”) in late 2009.  Although it covers a wide range of intellectual property issues, I will mostly limit this post to copyright-related items.

Here are some “highlights” from the report:

1.  Policy statement regarding Internet enforcement actions (pp. 5-6):

The debate over the proper role of government in the online environment extends to the issue of intellectual property enforcement: that is, reducing the distribution of pirated or counterfeit goods online or via the Internet, including digital products distributed directly over the Internet or physical products advertised or ordered via the Internet. The choices made in the area of intellectual property enforcement can have spillover effects for government action, regulation or intervention in other areas. Therefore, this office has given considerable thought to the best approach towards enforcement in the online environment. As outlined below, we believe the right approach is one that combines forceful criminal law enforcement with voluntary and cooperative action by the private sector consistent with principles of transparency and fair process. [emphasis added]

Almost as an after-thought, the report later notes (p. 7) that,

without mandating business models, we believe it is important to encourage the development of alternatives for consumers that meet their legitimate needs and preferences. We note some activity in the marketplace to develop new and more flexible methods of distribution and will look for opportunities to support those efforts.

2.  Summary of the current state of the proposed Anti-Counterfeiting Trade Agreement (ACTA) (Wikipedia backgrounder) (pp. 22-23):

ACTA requires, among other things, that signatories establish effective intellectual property enforcement legal frameworks, including obligations to:

  • establish criminal procedures and penalties for willful trademark counterfeiting or copyright piracy, or importation or use, on a commercial scale, and aiding and abetting criminal conduct, and authorizes criminalizing camcording;
  • establish laws that impose imprisonment and destruction as penalties for criminal violations of enforcement laws;
  • establish civil enforcement laws that enhance the tools available to rightholders to crack down on counterfeiting and piracy, including by providing for meaningful damages for rightholders, the destruction of counterfeit goods and also including appropriate safeguards against abuse and to protect privacy as appropriate;
  • ensure that civil and criminal enforcement laws are equally applicable to copyright infringement occurring online; and
  • establish anti-circumvention laws to protect the use of technological protection measures (digital locks).

3.  Summary of successful efforts to recruit private-sector actors into IP enforcement (pp. 27-28)

We believe that most companies share the view that providing services to infringing sites is inconsistent with good corporate business practice and we are beginning to see several companies take the lead in pursuing voluntary cooperative action.

For example, earlier this year, MasterCard withdrew services from Limewire, a well-known file-sharing site. In addition, MasterCard has done an internal assessment of its processes to address infringing sites and has begun a number of cooperative discussions with rightholders….On December 2, 2010, Google announced a number of steps it will take to make its response time to complaints more rapid, to limit the ability of websites used to sell infringing goods to obtain ad revenue and to increase access to legitimate sites….We need to eliminate financial gain derived from infringement. While some products are sold directly, other sites obtain revenue from advertising. The IPEC is in the process of gathering information about the online advertising business to see if there are means to limit illegal sites from using ad revenue as a business model.

4.  Statistical summary of (generally) increased investigations/enforcement/arrests/convictions/seizures (pp. 31-32):

  • In FY 2010, ICE HSI intellectual property investigations increased by more than 41% and ICE HSI arrests increased by more than 37% from FY 2009.
  • In FY 2010, FBI intellectual property investigations increased by more than 44% from FY 2009….
  • In FY 2010, courts sentenced 207 intellectual property defendants. More than half—121—received no prison term, 38 received sentences of 1-12 months in prison, 27 received sentences of 13-24 months in prison, 10 received sentences of 25-36 months in prison, 7 received sentences of 37-60 months in prison and 4 received sentences of more than 60 months in prison….
  • CBP and ICE HSI had 19,959 intellectual property seizures in FY 2010. The domestic value of the seized goods—i.e., the value of the infringing goods, not the  manufacturer’s suggested retail price (MSRP) for legitimate product—was $188.1 million. The estimated MSRP of the seized goods—i.e., the value the infringing goods would have had if they had been genuine—was $1.4 billion.

***

A final note:  the report trumpets success–a lot.  Examples abound, but perhaps the most amusing is a case involving counterfeit Cisco equipment sold to the Marines for use in battlefield-critical networks in Iraq.  I’m certainly glad that the government caught this, but do they really have to mention it three separate times (on pages 5, 41, and 50) in the report?

Roundup of additional commentary:

How Wal-Mart plans to regain its edge

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Here is an interesting summary of Wal-Mart’s corporate plans for the near future. The headline of the article says it all: “Wal-Mart, humbled king of retail, plots comeback.”

Three years ago, Wal-Mart ruled for convenience, selection and price. But today it is losing customers and revenue, and smarting from decisions that backfired.

Wal-Mart is not in danger of ceding its place atop the retail world. But competitors have begun to chip away at its dominance.

Over the last year, revenue at Wal-Mart stores open at least a year has fallen by an average 0.75 percent each quarter, according to the International Council of Shopping Centers. Revenue rose by an average of nearly 1.7 percent at Target, 8 percent at Costco and 5.9 percent at Family Dollar.

To fight back, Wal-Mart is again emphasizing low prices and adding back thousands of products it had culled in an overzealous bid to clean up stores. It’s also plotting an expansion into cities, even neighborhoods where others dare not go.

Even as the article talks about stagnant or slightly declining sales at existing stores plus some questionable decisions (like reducing the number of products on the shelves), the main issue seems to be perceptions. On the business side, Wal-Mart has been challenged, particularly on the lower end by dollar stores. But business has not tanked and Wal-Mart still thinks it has new markets to tap in the United States, particularly in urban areas. What do investors and shareholders think – is it just about stronger growth right now? On the public image side, stores like Target have offered an enticing alternative. And yet Wal-Mart has changed the layout and design of its stores to look more like Target and this seems to have helped. Ultimately, the article says Target’s revenues are still one-sixth of that of Wal-Mart.

It sounds like Wal-Mart thinks they need to make some changes. There is no guarantee that any business, even a behemoth like Wal-Mart, will continue to expand or even be profitable. And just by virtue of its size, Wal-Mart’s actions will continue to be scrutinized.

Complaint: “they knew and didn’t say”

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For those of you wanting to dig into the recently unsealed legal complaint against J.P. Morgan that it turned a blind eye to the Madoff fraud, the Wall Street Journal has posted all 121 pages here (PDF).

I’m working my way through it right now.

Found hypocrisy; still searching for clarity

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In case you haven’t heard, a few days ago Google started publicly accusing Microsoft’s Bing of stealing its search results.  Juan Carlos Perez over at PCWorld has published an interesting roundup of reactions to Google’s new “strategy” of public accusations:

While the merits of Google’s accusation are up for debate — Microsoft denies the charge — the fact that Google chose to complain in such a loud and agitated manner has become fertile ground for analysis and comment by industry observers.

Opinions range from those who view Google’s actions as hypocritical to others who say the company did the right thing by airing its grievance.

PCWorld’s link to Daniel Eran Dilger reaction over at Roughly Drafted is especially worth checking out.  Personally, I come down on the “Google is being hypocritical” side of things.  It’s hard to have the expansive view of copyright law and fair use that Google embraces for its own activities and then to complain with any legitimacy about Microsoft’s alleged behavior.

Unfortunately, copyright law in general (and fair use in particular) is notoriously unclear, malleable, and subject to judicial whims.  It’s doubtful that Google will actually sue Microsoft over this, so we may never know what the “answer” is.

However, even if a U.S. court upheld Microsoft’s right to copy Google’s search results (assuming that’s what happened here), that would only give us an answer (1) on these specific facts (2) as between parties willing to litigate (and maybe even (3) before that particular judge).  Given the high costs of litigation, most non-Fortune-500 copyright users claiming fair use rights usually find it is in their best interest to settle for a few thousand dollars when saddled with a copyright infringement lawsuit.  Indeed, there are companies based on this very business model that are out there suing people; the number of copyright infringement suits is rising.

This latest spat between Google and Microsoft is, to some extent, a sideshow, but it does highlight some of the problems that uncertainty breeds within copyright law.  I’m not worried about Microsoft’s ability to defend itself:  it’s a multi-billion dollar company with lawyers and PR specialists both in-house and on speed dial.  I am worried about the start ups that are seeking to be the next Google or Microsoft:  they generally can’t afford to get anywhere close to the line because they know that an infringement lawsuit may mean millions in legal fees and damages, so they back off and play it safe.

That’s the real cost of un-clarity in copyright law.

ABA wants free trade in legal services?

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The International Business Times is reporting that American Bar Association President Stephen N. Zack is lobbying India to refrain from shutting U.S. lawyers out of the Indian legal market:

Currently, U.S. lawyers are allowed to travel to India on an “in-and-out basis” to advise their clients on non-Indian aspects of law. That “status quo” should be maintained as the [Bar Council of India] considers the broader issue of whether to allow the practice of law by foreign law firms in India, Zack said….”The ABA believes that allowing such activities is critical not only for the mutual benefit of the legal practitioners in both countries,” [Zack’s] letter said, “but also for fostering the vital and already close relationship between India and the United States and to promote the robust growth of trade and investments between our two countries. Allowing such activities is also essential in making India a preferred venue for international arbitration proceedings.”

This is a huge issue, and only going to get bigger in the coming years.  In most countries, including the U.S. and India, the legal profession is highly regulated and heavily skewed toward protectionism (i.e., preserving a pre-globalization status quo).  For example, in order to “practice law” in the U.S., one must generally graduate from college, attend law school for 3 years, and pass a state-specific bar exam.  Other countries have similarly stringent requirements.  Obviously, most people who have been through the trouble (and expense) of this process are vehemently opposed to competition from anyone else–including (and especially) lawyers licensed in other countries.

Which is what makes the ABA president’s statements so interesting.  Supposedly, U.S. lawyers currently provide Indian businesses with “consultancy legal services” (to use the article’s phrase) rather than “practice law” (which is the magic phrase to denote what one cannot do without an official license in a given state/country).  However, such verbal formulations are notoriously vague, and everyone who argues over their precise meanings are lawyers with a vested interest in either (1) expanding their own market for legal services or (2) keeping new competition out.

To date, new competition has mostly been kept out, especially here in the U.S.  It will be interesting to see whether the ABA president’s recent lobbying in India represents a first step moving toward a free trade in legal services between the U.S. and India.

Line-drawing and merits in job hunting

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Although not tailored to the specifics of the legal job market, an analogous debate concerning the mechanics of the academic job market is taking place over Inside Higher Education (hat tip:  Tax Prof Blog).

First up:  Joshua A. Tucker in Academe as Meritocracy, arguing

  1. that only the paternalistic would stifle the dreams of potential Ph.D students, and
  2. that a robust meritocracy exists within the academy.

As Tucker puts it:

Like major league baseball, a successful academic career is a very good gig. Do we really owe every 22-year-old who is admitted to a Ph.D. program the right to that career solely on the basis of getting into a Ph.D. program? Or is it enough to give them a chance to succeed, knowing full well that not all of them will?…Like it or not, academia is a meritocracy. It may be a highly flawed meritocracy susceptible to overvaluing labels or fads of the day, but ultimately tenure is bestowed on those who earn the respect of their peers, and the more of your peers that respect you, the more job offers you are going to get and the more money you are going to make.

Tucker does recognize that a certain amount of truth-in-advertising is necessary, but he seems comfortable with letting admitted Ph.D students decide for themselves whether they should actually attend:

I fully believe we need to be honest with graduate students about what they are getting themselves into — the same way a minor league baseball player needs to know what the odds are of making it to the majors — but if they want to take a shot at achieving success in this kind of a career, I see no reason why we should excessively limit the number of people who have the opportunity to do so. And at the end of the day, that’s the trade-off here: the fewer students we admit to Ph.D. programs, the earlier we make the decision regarding who gets to be the next generation of professors.

While I sympathize with Tucker’s paternalism argument, I think his analysis fails to appreciate that lines must be–and are–drawn somewhere.  All of us are unfit for certain occupations, and each of us must either (1) realize this ourselves or (2) be told this by others.  Moreover, this must happen (1) sooner or (2) later.  Tucker does not escape the inevitable moment of line-drawing simply by choosing “later”, i.e., after his Ph.D. admission committee has sent out its acceptances.

Perhaps I can illustrate what I mean by expanding on Tucker’s example of professional baseball.  Personally, I am objectively unfit to play for a minor league baseball team, let alone to be drafted into the majors.  Let us suppose that, for whatever reasons, I am too deluded to realize this for myself and will need to be told by others that I will never be a major league baseball player.  Should a minor league team still admit me to its roster?  What about a college team?  High school varsity team?  At what point should I be told, “Kid, you don’t stand a chance of ever playing in the majors.  You should pursue another career”?

This is a difficult question that will need to be answered differently for different individuals based on their own specific circumstances.  Tucker, however, does not attempt to answer this question or provide guidelines on how it should be answered under various circumstances.  Rather, he simply implies that Ph.D. students should be admitted first and allowed to sort themselves out later, regardless of changing job market conditions or the odds of success.

In contrast to Tucker’s faith in the meritocratic process, “Dean Dad” responds in “Meritocracy and Hiring” that the academy is NOT the sort of meritocracy that should be generating smug feelings of superiority:

As someone whose job it is to actually hire faculty, I can attest that merit is only a small part of the picture….In this funding climate, we can only afford to staff a few of the positions (whether faculty, staff, or administration) that we need. If the position doesn’t exist, then the relative merit of the prospective candidates means exactly zero….Of course, there’s also the basic incompatibility of life tenure with the idea of meritocracy. If incumbents don’t have to keep proving themselves against newcomers, then you do not have a meritocracy. Tenure violates the foundational assumption of meritocracy.

The key is to recognize that hiring is always more about the employer than about the employee. Employers hire to solve problems they consider important. If you’re the best darn German professor who ever walked the planet, congratulations, but I don’t need you. I don’t doubt your brilliance, your hard work, your civic virtue, or your habit of helping old ladies across the street. They just don’t matter. It’s not about you.

I think Dean Dad is onto something here.  In discussions about job markets, the “right-place-at-the-right-time” factor is far too often overlooked .  Despite, for example, evidence that simply graduating from college in the middle of a recession can permanently lower lifetime earnings.  Dean Dad helpfully reminds his readers that failure to land a job in one’s chosen profession does not necessarily have moral overtones:

I’m convinced that one reason some people won’t let themselves let go of the dream, despite years of external signals suggesting that they should, is a sense that it would reflect a personal moral failing. They’ve identified so completely with the ‘meritocracy’ myth that they feel a real need to redeem themselves within it….[T]hey see the status of “tenured professor” as a sort of validation of everything they’ve done. Leaving the academy would be admitting defeat and accepting failure; lifelong “A” students, as a breed, aren’t very good at that. It’s not what they do….[L]et’s recognize the academic job market as the uneven, unpredictable, often unforgiving thing that it is. Good people lose. Frankly, some real losers sometimes win. It’s not entirely random, of course, but it’s a far cry from a meritocracy.

Although Dean Dad is writing about the academic job market, I think this is also a helpful point for recent law graduates to remember, especially in the midst of a recession.  Things don’t always work out, and that’s OK.  Sometimes, you just have to let it go and try something new.

The sun never sets on legal un(der)employment

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John Flood, a U.K. legal scholar and sociologist, comments on the well-documented travails of recent U.S. law graduates, noting that their U.K. counterparts are facing similar difficulties as globalization changes the practice of law the world over:

What we’ve seen in the UK is a disjunct between the numbers of law students coming into the academy and the numbers of jobs available. For many the problem is that the academy is producing too many law graduates and should be more sensitive to job availibility rates….[T]here is also a big rise in the use of paralegals and I don’t mean those trained to be paralegals. Rather the unemployed would-be lawyers are turning to paralegaling in the hope that a training contract might open up while they are there.

What will entrench the stratification of the market is the opening up (de- and re-regulation) of the legal services market that’s now taking place. Fewer jobs will need to be done by fully-qualified lawyers. They can instead be carried out by a range of people qualified for certain legal and quasi-legal tasks. This is where corporatized law meets Tesco Law. [Tesco is a U.K.-based retailer similar to Wal-Mart.]

The US legal profession still thinks it can maintain a headlock on the control of the profession. How long for? At the expense of a cheap shot, [Egyptian President] Mubarek is finding a 30-year rule coming to end; [former British Prime Minister] Tony Blair only lasted for 10 years before he was ejected. Permanent monopoly becomes increasingly hard to justifiy, especially in a global market.

Flood also references a recent Above the Law article, which noted that Thomson Reuters recently

announced that it was exploring the sale of BAR/BRI, its bar exam prep business, and purchasing Pangea3, a legal process outsourcing company. That’s a strong message that they think there’s more of a future in hiring people to do low-end legal work, work that technically doesn’t constitute “practicing law” under legal ethics rules, than in training the practitioners of the future.

I’d like to see a quantitative analysis backing up some of Flood’s assertions, but his general points are well taken:

  • There are more lawyers than jobs.
  • Many law jobs do not, objectively speaking, require lawyers.
  • Much legal work can be done at a distance–even across international borders–as a back-office service.
  • In the long- (and maybe even the short-) run, the established legal cartels are no match for these forces of globalization.

A growing number of “encore careers”

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Retirement is an interesting topic these days in the United States: can people retire after the losses in the recent economic crisis? How will society pay for Social Security and medical benefits when all those Baby Boomers retire? How will states (and other organizations) pay for pensions that have been underfunded?

One answer: have those who have retired enter an “encore career.”

Daly is part of the growing “encore careers” movement — an effort to match older workers who can’t or don’t want to retire with public service jobs that benefit society. The movement, begun in the late 1990s, has spawned non-profit groups and programs from Boston to Portland, Ore., aimed at helping older workers find new work. Many of the programs are run by people who have made the transition.

At a time when 77 million Baby Boomers ages 46-65 are moving toward traditional retirement age, analysts say the movement could grow exponentially in the coming decades. A 2008 survey by MetLife Foundation and Civic Ventures, a national think tank on boomers and work, found more than 5 million Americans in encore careers. Half of those ages 44-70 expressed interest in them.

Moving from one career to a more altruistic job late in life isn’t easy, however. Analysts say there aren’t enough of those jobs yet, the pay is usually low and employers often favor younger applicants.

It seems to me that there is a larger issue underlying these practical obstacles: as a society, do we value the kinds of contributions older citizens can make? Those who have retired or are nearing retirement have a wealth of experience, related to jobs and working but also a variety of important life lessons and skills,  that the rest of society could benefit from. But if we are a society that tends to value youth and novelty, then these encore careers might not be something we encourage.

Ultimately, a movement like this could end up being a nice solution to some of the demographic and financial issues that face the country in the next few decades. If the number of these jobs could grow, those who have retired can share their experiences and wisdom while also earning some money in order to ease the financial burden on broader society.

About that New Jersey radio ad running in Illinois and asking businesses to relocate

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On the drive home from work last week, I heard a new radio advertisement where New Jersey governor Chris Christie appealed to Illinois businesses to take advantage of New Jersey’s business-friendly climate. The typical appeal was made: possible tax breaks or incentives, proximity to New York City and other notable cities, and an able work force await in New Jersey. Hear the ad here. (And New Jersey is not the first state to make an appeal in Illinois since Illinois raised its personal income and business tax rates.)

On the question of whether such radio advertisements actually do draw businesses to another state: I would guess that the success rate is low. In fact, perhaps the main goal is not to attract businesses from Illinois but rather to alert New Jersey residents that the state government is doing all it can to attract businesses and jobs and that it has a good business climate compared to other states. States have certain options by which they can attract jobs or make direct appeals to businesses and an opportunity like this, where a state notably raises taxes, presents an opportunity to make a comparison.

A few other pieces of information would be helpful in interpreting this advertisement:

1. How exactly does New Jersey’s business climate compare to Illinois in areas like the tax rate, labor force, etc.? How many businesses have moved back or forth in recent years?

2. Is Christie’s ad politically motivated? Here is a chance for a Republican governor to tweak a Democratic state.

h/t Instapundit

More Americans eating at home

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One of the questions to emerge out of this recent recession is which pre-recession patterns will return once the economic climate improves. One report suggests that although spending levels have increased again, eating at home might be a more permanent pattern:

Restaurants traditionally have led other types of businesses out of a recession. This time, they’re at least a year and a half behind retailers. Sales of clothing grew 5 percent last year and autos rose 11 percent, as Americans started feeling better about their finances. At casual sit-down restaurants like Outback Steakhouse, the increase was just 1 percent. Some analysts say that could be the new norm…

Americans lead the world in restaurant spending. About 44 percent of food dollars are spent outside the home — a figure that started rising sharply in the 1970s, as more women joined the work force. Full-service restaurant revenue rose 5 to 7 percent a year in the decade leading up to the Great Recession, which halted growth. Over the next decade, visits to restaurants are forecast to increase less than 1 percent a year, according to the NPD Group. That’s less than the population will grow.

Instead of handing their money over to mediocre eateries during the week, people are saving up for the occasional nice meal, says Stifel Nicolaus analyst Steve West. Meanwhile, cooking has become hip, says Rick Smilow, president of the Institute for Culinary Education, where registration for recreational courses was up 10 percent last year.

It would be interesting to see more data on this: how many of these meals at home are made out of mostly fresh ingredients? What kind of food are people spending money on – taking that restaurant money to buy more expensive items or trying to eat on the cheap? How much less are people spending on food overall as they eat out less?

The perception about eating at home might be crucial. The idea that cooking is now “hip” could be tied to a number of factors including more upscale grocery stores (the equivalent of shopping at Whole Foods versus Wal-Mart), a number of celebrity chefs, and around-the-clock cooking shows. Eating at home may be good for the financial bottom line but it will appeal to a lot more people if it is cool.