Intellectual Property Law and Copyrights, Property Ownership, Differential Pricing and the First Sale Doctrine in Law and Capitalism

The landmark copyright case Kirtsaeng v. Wiley will be argued today at the United States Supreme Court. Joe Mullin at Ars Technica has a nice write-up at How a Supreme Court ruling may stop you from reselling just about anything.

This is a non-political issue so that we expect a unanimous Supreme Court decision -- with the ratio decidendi in the opinion to run something like this:

"Differential pricing is a luxury of capitalism afforded to sellers of goods and services in the United States and all over the world. In fact, our antitrust law generally prohibits price-fixing among competitors in the offer of sale of any given product [Apple and consorts to the contrary]. Sellers engaging in potentially lucrative practices such as differential pricing in different markets must also be prepared to suffer the risks that such differential pricing encompasses, among these being the likelihood that someone could buy a given product cheaper HERE and sell it more expensively THERE. That, in fact, is the ESSENCE of the capitalist market system, and always has been.

In terms of the copyright law, the Constitution was not drafted to provide special privileges or advantages to authors in the manufacture or sale of their products, whether in domestic or foreign markets, but ONLY to protect their sole right to exploit their works, which has been interpreted by the courts to mean that the law will protect authors from unlawful copying by others, so that authors can sell their works themselves.

How they sell them is their choice, which is a question of authors' individual talents or those of their publishers, advertisers and marketers. But once sold, they are sold, and the deal has been done. The compensatory copyright rights are extinguished for the work sold because the author has been compensated for that particular work. Period. End of story.

That is all a part of how capitalism functions. Choices and results.

Authors who choose not to sell their works at ONE uniform price, but to engage in potentially more profitable or otherwise more desirable differential pricing in local, regional or world markets, can hardly expect the law and the courts to finance the risks involved in such a choice. Courts are not the handmaidens of traders or hawkers of wares. Moreover, the public via the legal system should not have to pay the bill to guarantee the success of marketing choices. That is outside the scope of copyright law.

If a copyright holder sells a copy of his or her copyrighted work in ANY form at ANY price in ANY place, it is considered sold, and, under the first sale doctrine, unless otherwise prohibited by law, it can be sold again to ANYONE at ANY price ANYWHERE. Our capitalist system tolerates nothing more and nothing less."

Nebraska Business Hall of Fame Inducts Bob Milligan and Cynthia Hardin Milligan 2012

Robert and Cynthia Hardin Milligan were inducted into the Nebraska Business Hall of Fame 2012 and it is well worthwhile to see the video below.

Bob graduated from the University of Nebraska one year before I did and Cynthia and I went to school together in Lincoln, Nebraska in our younger days.

They are both quite a success story and have some very positive things to say about the USA and Nebraska.

See the links Bob Milligan at NU (also at the U.S. Chamber of Commerce) and Cynthia Hardin Milligan (see also Cynthia H. Milligan at the Wikipedia).

American Homes, Elites, Wealth, Plundered Federal Lands and a Polarized Society of Haves and Have Nots

Wealth and land in America are greatly misunderstood topics in a country in which the federal government used to own almost all of the land and today owns 643 million acres of a total of 2.27 billion U.S. acres.

There are 36 million unmortgaged owner-occupied American homes (Bloomberg News 2012), and 68.4 mortgaged homes, which we count to the ownership of the banks and financial institutions. The average national median home lot size is 12,632 square feet or about 1/3 of an acre. 36 million homes x 1/3 of an acre = 12 million acres.

That is less than the 25 biggest landowners in America, who own 20 million acres, i.e. the 25 biggest landowners in America own more land than all American unmortgaged homeowners put together.

Even if we were to include ALL occupied homes, even the mortgaged ones, we would get only 38 million acres. And if we take all homes, including also those not occupied, a total of 132.6 millions homes, the median lot size gives us a total of only 44 million acres.

American homeowners -- and this is the inflated TOTAL -- thus own at best 2% of the land of the USA, and if we use unmortgaged owner-occupied homes as the standard, they own 1/2 of 1% of the total land of the USA. The federal and State governments own somewhere between 42 and 48%, so that 50% of the land of the USA -- the best land for agricultural and economic use, which is mostly East of the Rockies -- is owned by vested private interests.

We were brought to this issue by an article by Ross Douthat at the New York Times on Our Revolting Elites and Romney's famous 47% comment, which shows the extent of the current polarization of wealth, income and politics in the United States.

Jonathat Haidt and Marc J. Hetherington at the New York Times blog Campaign Stops in Look How Far We've Come Apart note, for example, that Congress is so polarized today that it is mathematically impossible to get any worse.

They suggest that polarization may be reduced in coming decades, which we doubt as long as current inequalities of wealth and income continue. People do not part willingly with what they "have", even if they have wealth far in excess of what they sensibly need. So how can "change" be accomplished? History provides sobering lessons to the greedy.

In the United States, only the Civil War led to an abandonment of formal slavery and the economic system affiliated with it (there is still a lot of informal slavery around).

In Europe, two world wars in the past century deposed many of the ruling elites of the Continent, most significantly in Germany and Russia, making way for change and new developments, and even there, you have new ruling elites in spite of the overthrow of the older elites. It is an endless process true to the old saying that "The King is dead. Long live the [new] King."

In some countries, the ruling elites have been retained, and the nobility in the United Kingdom is one example. Robert Home of Anglia Law School writes in Land ownership in the United Kingdom: Trends, preferences and future challenges:

"Unlike much of continental Europe, the UK has experienced little major redistribution of land ownership since the dissolution of the monasteries in the 16th century, apart from the temporary growth of state land ownership in the 20th century, some of which was reversed during the 1980's."

That was the vested system of ownership, rights and privileges that led to the founding of America by the colonists.

Americans -- immigrants all -- wanted to escape that system.

America thus presents a special case, since almost all U.S. land was initially owned by the federal government, i.e. by the people as a whole, and not by the wealthy vested interests we find as owners today. See History of Land Ownership in the United States. Indeed, even today almost half of all U.S. land is owned by federal or local governments, i.e. by the people.

Robert J. Smith (President, Center for Private Conservation & Senior Adjunct Scholar Competitive Enterprise Institute, Washington, D.C.; Speech to the Eighth Annual Conference on Private Property Rights, PRFA, Albany, N.Y. , October 23, 2004) wrote in Landownership in America that America has the most socialistic form of land ownership on the planet.

The specific statistics are misleading, however, as follows.

Of 2.27 total billion acres in the USA, the federal government owns 643.2 million acres, of which about 1/3 are in Alaska, leaving about 400 million acres or about 20% of all land in the continental United States. Of that land, almost all of that land is in the western part of the United States (mountains, desert).

For example, the federal government owns ca. 83% of Nevada and ca. 44% of California. The best land agriculturally and economically was in the the East and -- because of various government land grants over the years -- much land was gifted into private ownership through various Congressional acts (i.e. the people's land was largely given away by Congress), e.g.

• 94 million acres to the railroads
• 328 million acres were given away to States by virtue of Statehood (e.g. to schools , "land grant" colleges, etc.)
• 591 million acres were given away to private ownership for settlement of land (cheap purchases, homesteading and a lot simply by fraud).
• In modern times a lot of Alaskan land previously owned was also simply given away to Alaska and to the Native Americans.
  
  Rightly or wrongly - it was YOUR money, and it was a massive amount of wealth that was simply gifted, for political reasons, to State and private owners, by your elected representatives in Congress. YOU elected them.

People in America today who rant and rave about the involvement of the federal government in their modern affairs simply have little or incomplete knowledge of American history.

If the federal government had not given away half the land it once owned to private interests over the years, we, the people, would own almost everything, rather than this ownership being in the hands of the wealthy elites who control that land now and want to take all the spoils.

How much does an average American now own in terms of private land? VIRTUALLY NOTHING. Indeed, when we consider how much land an average American owns, we begin to understand the extent to which the country has been plundered and sold out to private interests over the years.

Let us look at the ca. 1.3 billion privately owned acres in the United States. Who owns that land?

We find that there are 132.6 million U.S. homes of which 18.5 million were vacant in the first quarter of 2012, according to Bloomberg News on April 30, 2012, i.e. 114 million homes. We presume the vacant homes are largely owned by banks. According to the Bureau of Census, 31.6% (36 million homes) of owner occupied homes had no mortgage, while the remainder of 68.4% (78 million) were mortgaged, i.e. essentially still owned by banks.

The average national median home lot size is 12,632 square feet or about 1/3 of an acre. 36 million homes x 1/3 of an acre = 12 million acres. Even if we were to include ALL occupied homes, even the mortgaged ones, we would get 38 million acres. And if we take all homes, including also those not occupied, a total of 132.6 million homes, the median lot size gives us a total of 44 million acres for American homes.

American homeowners -- and this is the TOTAL -- thus own at best 2% of the land of the USA, and if we use unmortgaged owner-occupied homes as the standard, they own 1/2 of 1% of the total land of the USA. The federal and State governments own somewhere between 42 and 48%, so that 50% of the land of the USA is owned by vested private interests, a small minority composed of the wealthiest individuals and corporations.

These are surely the same people who are complaining about taxes.

Trademarks, Trade Dress and Ownership

"[W]hat appear to be private disputes among hucksters almost invariably touch the public welfare. We shall therefore be concerned to ask, when courts protect trade symbols, whether their decisions further public as well as private goals. -- Ralph Brown Jr.

"The world has changed quite a bit since Ralph brown wrote his 1948 article. Trademark law and trademark economics have both made significant strides in the last fifty years, but unfortunately they don't seem to be marching in lockstep. Rather, the law has broken stride with economic thinking in dangerous ways. I don't think Brown would approve of the ways trademark law has changed in the last fifty years, but perhaps he would recognize them. He wrote:

"In an acquisitive society, the drive for monopoly advantage is a very powerful pressure. Unchecked, it would no doubt patent the wheel, copyright the alphabet, and register the sun and moon as trade-marks."

We seem to be moving down that road. Unless we are careful, we may end up in a world in which every thing, every idea, and every word is owned. And we will all be the poorer for it."

-- Mark. A. Lemley (William H. Neukom Professor of Law, Stanford Law School, Stanford University), The Modern Lanham Act and the Death of Common Sense, Yale Law Journal, Vol. 108, p. 1687, 1999

One of the most perverse, ill-based and -- in our opinion -- perhaps even unconstitutional laws in the field of law is the "trade dress" standard as found in the U.S. Federal Trademark Act of 1946, also known as the Lanham Act.

The Lanham Act by its very nature extends monopolistic product protection beyond the limitations otherwise provided by patent laws and the patent provision of the United States Constitution.

Section 43(a) of the Lanham Act provides as follows via text posted to the Wikipedia:

"Under section 43(a) of the Lanham Act, a product's trade dress can be protected without formal registration with the PTO.^[8] In relevant part, section 43(a) states the following:

"Any person who, on or in connection with any goods or services, or any container for goods, uses in commerce any word, term, name, symbol, or device, or any combination thereof, or any false designation of origin, false or misleading description of fact, or false or misleading representation of fact, which

(A) is likely to cause confusion, or to cause mistake, or to deceive [...] as to the origin, sponsorship, or approval of his or her goods, services, or commercial activities by another person, or

(B) in commercial advertising or promotion, misrepresents the nature, characteristics, qualities, or geographic origin of his or her or another person’s goods, services, or commercial activities,

shall be liable in a civil action by any person who believes that he or she is likely to be damaged by such an act."^[9]

This statute allows the owner of a particular trade dress ("container for goods") to sue an infringer (a person or entity who illegally copies that trade dress) for violating section 43(a) without registering that trade dress with any formal agency or system (unlike the registration and application requirements for enforcing other forms of intellectual property, such as patents). It is commonly seen as providing “federal common law” protection for trade dress (and trademarks).^[10]"

Such an over-broad blanket provision appears to us to be unconstitutional on its face because it wrongly expands the limited protection given to products by the patent clause of the U.S. Constitution, without which provision there is no "original" basis (that statement is directed to the "originalists" on the U.S. Supreme Court) to grant this kind of special protection to commercial enterprises and their products, i.e. beyond what the Constitution provides.

Indeed, the basics of the Lanham Act provision can be traced back to ancient medieval guilds that were established to gain, maintain and expand the monopoly power of merchants with respect to their products.

Little has changed since then as "merchant" monopolies have gotten worse than ever, which can be seen via the resulting and egregious wealth and income inequality in the USA.

The Lanham Act is generally not used to protect companies or consumers from actually "confusing" brands and products, but rather to further monopolies and conveniently get rid of possible competition.

The Lanham Act wrongly gives protection -- without the requirement of any kind of lawful, controlled and checked registration whatsoever (!) -- to elements of product and packaging design and appearance that otherwise would not be entitled to patent protection since features such as size, color, combinations of color, shape, packaging in general, and even the selling "atmosphere" or "look and feel" of a product would be barred from such protection because they relate to natural physical viz. geometric features not invented or discovered by the seller. Moreover, natural features are foreseen by prior art and are obvious to boot.

The grant of protection to the simple use of natural features of our world thus works as a severely limiting roadblock to innovation and competition.

Just imagine a painter claiming a particular "color" as his "trade dress".
Just imagine hundreds of painters claiming their particular "color" as their proprietary "trade dress".
Just imagine thousand of painters claiming their particular "color" as their proprietary "trade dress".
It would not be long before no new painter could paint anymore because all of the colors had been taken.
It is a terrible scenario, but corresponds well to the modern tech world and to erroneous judicial decisionmaking in the past.

The ill-conceived provisions of the Lanham Act and the unwise judicial interpretations of that act are leading us into a "trademark Armageddon".

Representing the extreme of this "trademark" example we find a greedy monopolist such as the commercial Apple firm arguing in court via "trade dress" rationales that it ALONE should be the ONLY company permitted to sell black-colored rectangular tablets viz. mobile phones with rounded corners and having a frame (bezel) holding the framed electronic display.

You think we are joking? Not at all. 
Take a look at all the Apple claims in the Samsung trial via The Verge.

Apple calls its phone or tablet designs (or non-designs) "minimalist" art because they are essentially purely geometric in form and have few unique identifying man-made features. Rather there is more or less an ABSENCE of specific designs of any kind. One "steals" primarily God-made geometry.

The upshot of the ridiculousness of the Lanham Act provisions is that a detailed and uniquely well-identifiable design by its uniqueness marks off very little IP trademark viz. "trade dress" territory, whereby an alleged "minimalist" design, due to the very fact that it is hopelessly generic, is amply found in prior art and is usually patently obvious, tries to mark off great swaths of IP territory as proprietary to one company.

This shows that the Lanham Act "trade dress" provision is extremely bad legislation, accompanied, as it has been, by really terrible judicial opinions. See the cases in George D. Royster, Halloran & Sage LLP, Protecting Business Assets Under the Lanham Act. Cynthia Clarke Weber, Trade Dress Basics. Robert J. Yarbrough, Protection of Trade Dress.

Mark A. Lemley had it right in his title
in The Modern Lanham Act and the Death of Common Sense.
That is where the law currently finds itself.  Make sure you read that article.

European Countries Protect Private Property Better by Law than in the Americas

Living in Germany, one sometimes gets the impression that people in the Americas think that private property rights do not count for much in Europe.

Wrong.

Mark Wilke has the story at the Vancouver Sun in Europe beats Canada on private property rights.

Litigation by Patent Trolls Has Cost Half a Trillion Dollars in Lost Wealth in the Last 20 Years and Decreased Innovation Incentives in Software and Related Industries

Litigation by patent trolls, also called non-practicing entities (NPEs) because they produce or manufacture nothing but merely manage patent portfolios, have cost a half a trillion dollars in lost wealth in the period from 1990 to 2010 or $80 billion per year according to a study by James Bessen, Jennifer Ford and Michael J. Meurer in THE PRIVATE AND SOCIAL COSTS OF PATENT TROLLS, Boston University School of Law Working Paper No. 11-45 (September 19, 2011), Revision of November 9, 2011. The authors write in their Executive Summary:

"[A] self-described new crop of NPEs has emerged that asserts patents and litigates them on an unprecedented scale, involving thousands of defendants every year in hundreds of lawsuits. Do these litigating NPEs improve markets for technology and increase incentives for small inventors? Or are they “patent trolls” who exploit weaknesses in the patent system?

This paper makes several findings about this litigation.

First, by observing what happens to a defendant’s stock price around the filing of a patent lawsuit, we are able to assess the effect of the lawsuit on the firm’s wealth, after taking into account general market trends and random factors affecting the individual stock. We find that NPE lawsuits are associated with half a trillion dollars of lost wealth to defendants from 1990 through 2010. During the last four years the lost wealth has averaged over $80 billion per year. These defendants are mostly technology companies who invest heavily in R&D. To the extent that this litigation represents an unavoidable business cost to technology developers, it reduces the profits that these firms make on their technology investments. That is, these lawsuits substantially reduce their incentives to innovate.

Second, by exploring publicly listed NPEs, we find that very little of this loss of wealth represents a transfer to inventors. This suggests that the loss of incentives to the defendant firms is not matched by an increase in incentives to other inventors.

Third, the characteristics of this litigation are distinctive: it is focused on software and related technologies, it targets firms that have already developed technology, and most of these lawsuits involve multiple large companies as defendants. These characteristics suggest that this litigation exploits weaknesses in the patent system. In our book Patent Failure, we argue that patents on software and business methods are litigated much more frequently because they have“fuzzy boundaries.” The scope of these patents is not clear, they are often written in vague language, and technology companies cannot easily find them and understand what they claim. It appears that much of the NPE litigation takes advantages of these weaknesses.

We conclude that the loss of billions of dollars of wealth associated with these lawsuits harms society. While the lawsuits increase incentives to acquire vague, over-reaching patents, they decrease incentives for real innovation overall."

[emphasis added by LawPundit]

Read the whole thing here.

The paper has been referenced by the blawg
beSpacific

Federal Spending on Academic Research and the Impact of Bayh-Dole on Patents, Revenues and University Research: Giving Away the Company Store: Another Reason Why the Federal Government Has No Money

The role of the federal government and federal spending in contributing to American innovation is an especially interesting aspect of intellectual property law.

Christine M. Matthews in Federal Support for Academic Research, June 17, 2011, Congressional Research Service, writes:

"Historically, the federal government has been the primary source of funding for basic research at colleges and universities. In FY[fiscal year]2008, the federal government provided approximately 60% of an estimated $51.9 billion of R&D funds expended by academic institutions.[National Science Foundation, “Universities Report $55 Billion in Science and Engineering R&D Spending for FY2009: Redesigned Survey to Launch in 2010,” InfoBrief, NSF10-329, September 2010, p.1. ]"

Prior to 1980, university research was not commercialized and academic discoveries and inventions flowed into the public domain where they could be used by all, greatly boosting the American economy. Since Bayh-Dole, it has been a downhill slide.

On December 12, 1980, as written at AUTM.net, the Association of University Technology Managers:

"The Bayh-Dole Act (P.L. 96-517, Patent and Trademark Act Amendments of 1980) "created a uniform patent policy among the many federal agencies that fund research, enabling small businesses and non-profit organizations, including universities, to retain title to inventions made under federally-funded research programs."

Essentially, the federal government by Bayh-Dole gave up its intellectual property rights to research that the taxpayers were funding via federal dollars and gave those IP rights as a gift to academic institutions and private persons -- who then patented the inventions for their own profit against those same taxpayers.

The Bayh-Dole Act has been lauded in many quarters, but a critical assessment by impartial observers indicates that the positive impact of Bayh-Dole has been greatly overstated by its supporters.

As written by Annetete Lin, Sarah Sorscher, Neha Gupta, Ethan Guillen and Krista Cox in a UAEM White Paper on the Proposed Indian Bayh-Dole Analogue:

"While the Bayh-Dole Act of 1980 led to a dramatic increase in patenting and licensing of publicly funded research, there is little evidence that the legislation was necessary for or successful in accomplishing the goals which inspired its drafting. The practice of licensing at universities in the US has raised serious concerns regarding the application of similar legislation in India."

See also As India Mulls Bill Modeled on Bayh-Dole, Critics Claim It May Stifle Innovation.

A more detailed view of American innovation and Bayh-Dole is presented at So AD, Sampat BN, Rai AK, Cook-Deegan R, Reichman JH, et al. 2008 Is Bayh-Dole Good for Developing Countries? Lessons from the US Experience. PLoS Biol 6(10): e262. doi:10.1371/journal.pbio.0060262, found online at
PLoS Biology: Is Bayh-Dole Good for Developing Countries? Lessons from the US Experience
where it is written:

"Throughout the 20th century, American universities were the nation's most powerful vehicles for the diffusion of basic and applied research results [16], which were generally made available in the public domain, where industry and other public sector researchers could use them. These activities were central to the rise of American technological success broadly and to the growth of knowledge-based industries, such as biotechnology and information technology, in particular.

Public sector research institutions also relied on generous public funding for academic research—from a highly diverse group of federal funding agencies—which grew dramatically after the Second World War, and on the availability of venture capital to foster the development of early-stage ideas [6]. These and other unique features of the US research and development system explain much more about innovation in the US after BD [Bayh-Dole] than the rules about patenting that BD addressed.

In the pre-BD era, discoveries emanating from public research were often commercialized without patents, although academic institutions occasionally patented and licensed some of their publicly funded inventions well before BD, and these practices became increasingly common in the 1970s [17]. Since the passage of the Act in 1980, US academic patenting, licensing, and associated revenues have steadily increased. BD accelerated this growth by clarifying ownership rules, by making these activities bureaucratically easier to administer, and by changing norms toward patenting and licensing at universities [6]. As a result, researchers vested with key patents sometimes took advantage of exclusive licenses to start spin-off biotechnology companies. These trends, together with anecdotal accounts of “successful” commercialization, constitute the primary evidence used to support emulating BD in other countries. However, it is a mistake to interpret evidence that patents and licenses have increased as evidence that technology transfer or commercialization of university technology has increased because of BD.

Although universities can and do patent much more in the post-BD era than they did previously, neither overall trends in post-BD patenting and licensing nor individual case studies of commercialized technologies show that BD facilitated technology transfer and commercialization. Empirical research suggests that among the few academic patents and licenses that resulted in commercial products, a significant share (including some of the most prominent revenue generators) could have been effectively transferred by being placed in the public domain or licensed nonexclusively [6,18].

Another motivation for BD-type legislation is to generate licensing revenues for public sector research institutions. In the US, patents are indeed a source of revenues for some universities, but aggregate revenues are small. In 2006, US universities, hospitals, and research institutions derived US$1.85 billion from technology licensing compared to US$43.58 billion from federal, state, and industry funders that same year [19], which accounts for less than 5% of total academic research dollars. Moreover, revenues were highly concentrated at a few successful universities that patented “blockbuster” inventions [20]. [emphasis added by LawPundit]

A recent econometric analysis using data on academic licensing revenues from 1998 to 2002 suggests that, after subtracting the costs of patent management, net revenues earned by US universities from patent licensing were “on average, quite modest” nearly three decades after BD took effect. This study concludes that “universities should form a more realistic perspective of the possible economic returns from patenting and licensing activities” [21]. Similarly, the head of the technology licensing office at MIT (and former President of the Association of University Technology Managers) notes that “the direct economic impact of technology licensing on the universities themselves has been relatively small (a surprise to many who believed that royalties could compensate for declining federal support of research)… [M]ost university licensing offices barely break even” [22].

It is thus misleading to use data about the growth of academic patents, licenses, and licensing revenues as evidence that BD facilitated commercialization in the US. And it is little more than a leap of faith to conclude that similar legislation would automatically promote commercialization and technology transfer in other, very different, socioeconomic contexts.
...

[T]he present impetus for BD-type legislation in developing countries is fueled by overstated and misleading claims about the economic impact of the Act in the US, which may lead developing countries to expect far more than they are likely to receive. Moreover, political capital expended on rules of patent ownership may detract from more important policies to support science and technology, especially the need for public funding of research. Given the low level of public funding for research in many developing countries, for example, the focus on royalty returns at the expense of public goods may be misplaced [61]. "

Today, we are faced with a federal government in the United States that is essentially bankrupt because of the inequality of income and because of reduced taxation for the increasingly smaller percentage of the population who increasingly have more of that income and who increasingly are hoarding more of the nation's wealth, while paying fewer and fewer taxes.

Those same people in America who have the wealth are unwilling to pay the taxes to keep the country afloat.

When we add to that development the fact of legislation such as Bayh-Dole which has been giving away the company store to private persons who now are milking the public for every penny they have through the ill-conceived patent system of the USA, then it is small wonder that the federal government has no money.

You can not give away the "company" assets and hope to survive.

Worse, Bayh-Dole has corrupted universities and unimpeded inquiry by turning them into avenues for private commercialization of taxpayer-funded research directed at private profit objectives. Janet Rae-Dupree at the New York Times in When Academia Puts Profit Ahead of Wonder writes:

"In trying to power the innovation economy, we have turned America’s universities into cutthroat business competitors, zealously guarding the very innovations we so desperately want behind a hopelessly tangled web of patents and royalty licenses."

Crossposted from LawPundit.

Poverty and Income: What is the "Real" Poverty Rate? via Paul Mattessich at Wilder Moments

Paul Mattessich at Wilder Moments
via the Minnesota Twin Cities Daily Planet
discusses What is the "real" poverty rate?,
an important parameter that reflects employment, income, benefits and ownership in America.

Social Capitalism May Just Be the Doctrine of Tomorrow: Navigating the Socio-Economic Future with the Right Navigator

Is "social capitalism" or "sociocapitalism" the new doctrine of the future?

To understand the world, we have to know where we were, where we are, and where we are going.

Many people do not care for history, so they do not know where we were.

Many people are not happy with where we are, and are concerned more with where we should be.

Many people try not to figure out where we are going, because like travelers dependent on GPS, who needs a map when you have a navigator?

For many people, that navigator in their world is their own political, economic and religious belief system, which tells them what to do and where to go.

But what if their navigator is out of date?
What if they have not "downloaded" the most recent update?
What then?

Such in fact may be the case for many people following what are arguably outdated non-updated doctrines in the political, economic and religious sphere.

The modern world has changed and is continuing to change, and the doctrines -- or navigators -- that people follow, surely should be "updated" to match the times, so that people get to where they think they are going and want to be.

A good argument can be made that something called "social capitalism" or "sociocapitalism" is emerging as THE NEW DOCTRINE.

R. Jagannathan in Socio-capitalism set to become the new economic doctrine? writes as follows:

"Socio-capitalism is an idea whose time has come. It may not be easy to define what it embraces, but what it abandons is clear: market and ideological fundamentalism."

If that actually turns out to be true, and there is much evidence that it IS or WILL BE true, then the adherents of fundamentalism in political, economic and religious spheres are following doctrines that are on the wane.

Something else is actually coming, now and in the future.

Today's Young Generation: The Really Hip Socially Responsible Hipster Entrepreneurial Generation: "Generation Sell" and Small Business Enterprise as the Ideal Social Form

Back to the basics?

What is the "really hip" Entrepreneurial Generation?

William Deresiewicz at the New York Times Sunday Review
has a sparkling analysis at Generation Sell

in which he discusses today's young generation and its character
as being marked by "social entrepreneurship"
-- the preferred way to make money responsibly via small businesses.

update:

Capitalism and social conscience combined?
Social capitalism?
Sociocapitalism?

Mortgage Rates Lowest Ever

Diane Tuman at Zillow Blog on History of Mortgage Rates writes:

"We keep hearing that mortgage rates are the lowest in recorded history and it is true. Presently, the 30-year fixed rate on Zillow Mortgage Marketplace is 3.88 percent, the 15-year fixed is 3.35 percent and the 5/1 ARM is 2.81 percent."

Intellectual Property and Freedom of Expression at the Cynical Musician writing on "Jefferson, Copyright and Natural Law"

See an interesting analysis of intellectual property and freedom of expression at Jefferson, Copyright and Natural Law.

I will have to re-read this to see if there is anything that I disagree with, but based on my first reading, it makes a lot of sense.

Wealth Redistribution and the Creation of Income and Wealth Inequalities: The Example of American College Football BCS Commissioners and Large Research University Presidents

How is wealth "redistributed" and how do inequalities in income and wealth arise?

The inexcusable inequality of income and wealth in the United States is exemplified by the situation in American college athletics, where hundreds of thousands of young people as athletes compete for no direct compensation (many of course get scholarships), while a handful of ruling university and related elites pocket big money at the expense of these virtually uncompensated student-athletes.

That is the state of the economy in general. Many work for low wages or none at all while a few of the clever ones profit exorbitantly. It is a situation that must change if America is to achieve badly needed reconstruction and renewal, including a narrowing of the gigantic gap between rich and poor.

In last night's college football game between Rutgers and Louisville, the Cardinals' senior cornerback Anthony Conner unluckily broke his neck when he banged his head on an opponent's knee, but as written by Teresa M. Walker, AP Sports Writer at Yahoo! Rivals.com: "the senior is not paralyzed despite the severity of the injury". It is a freak injury to be sure, but it is the bodies of the young people that are on the line in college athletics - just for fun, mind you. (Joe Pa is an exception)

This is a good time to compare the status of college football players in an allegedly "amateur" sport with that of the salaries of BCS college football conference commissioners in that same "amateur" sport.

For some people, the alleged "amateur" sport of college football is really a very good business to say the least, and that applies particularly to BCS football conference commissioners.

Based on 2009 IRS returns, as written by the Associated Press (AP) at ESPN College Sports in Four BCS commissioners made $1M:

"Four of college football's six powerhouse conferences paid their top executives $1 million or more, an Associated Press analysis of tax records shows, far eclipsing the compensation of most university presidents."

In fact, of the 6 BCS conferences, only one conference commissioner made less than the average salary of the median compensation of university presidents at large research universities, a median compensation of ca. $760,000 in 2008. So dear parents of students and student-athletes, you know where some of those outlandishly high tuition payments are going -- straight into the pockets of the ruling elites.

In our view, no conference commissioner should be paid more than 10 times the annual salary of the lowest paid commission employee, earning a minimum wage. That would put a stop to exploitation by compensation quickly. The world is full of competent people who could be conference commissioners at much lower salaries than currently paid. EVERYONE can be replaced -- easily, and at much lower salaries.

Similarly, no university president should be paid more than 10 times the annual salary of a 40-hour a week janitor at that same institution, where a good argument can be made that the latter is equally important as the former. If lawyers went on strike in New York City it would take quite a long time for that to be felt anywhere. When I was in New York City in the 1970's, however, there was a garbage strike, and the impact was immediate, as the stench made the city unlivable in a short period of time. EVERYONE is important, and sometimes, those less-paid are more important than those who are paid more. It all depends on how WE organize societal rules.

I know of no university where the present president could not be removed and replaced immediately with someone equally or potentially equally competent earning 1/20th less than the salary currently paid. Just hire younger people.

Should you doubt that statement - name ONE university president who is irreplaceable. Indeed, name ONE university president who has done something other than fit himself or herself into an already previously existing university culture and its attendant compensation scheme. That takes talent?

In fact, name ONE university president other than the one at your alma mater. Difficult. It is difficult because these people can be replaced, and indeed, ultimately, ARE replaced. ALL of them. But we have nothing against university execs. WE ALL are fungible. That is the way of the world. Hence, there is no excuse to pay exorbitant salaries that are exploitative of institutions and deplete their resources unjustifiably.

Here is an ad one could place for a university president's position at a much lower salary than currently paid, indeed, at 1/10th the current average:

Job Opening: University President at $76,000 per year. We are looking for a well-educated, bottom-line-focused individual with good references to head our institution and move it dynamically forward. You will represent our interests to the outside world. Social skills are a necessity. Future compensation will be based on individual performance and upon achievement of comparable increases for our entire university staff. Fundraising skills and experience are an asset. Only serious applicants willing to work around the clock for the good of our institution need apply.

Would you get any applicants?
Would you get any competent applicants?

Is the mailbox big enough?

The problem is that people are not paid in these elite positions for their actual personal VALUE to the welfare of any given institution-- they are paid whatever "the position pays" to whomever gets the job. Those are two different things. Salaries by "position" rather than by individual "value" are by nature exploitative of the finances of the institution to the benefit of the recipient, in part because it is not the money of the people who select applicants and make the final contracts. It is not "their'" money, it is "only" university money.

The same holds true for the U.S. economy. Once a certain kind of exploitative compensation scheme becomes the status quo in commercial companies and firms, it tends to continue on in existence, and get even more exploitative as it progresses, whether it is needed or not, and whether it is sensible or not. The result is the inequality of income and wealth we see in the United States today. Again, college sports and especially college football are a prime example of this phenomenon.

Ownership and Rampant Inequality in the American Economy and Unemployment, Corporate Profits, Wages, Income, Wealth, Executive Compensation, Average Hourly Earnings, Social Mobility

Take a look at these economic charts. Does your Congressional representative or candidate KNOW these facts, and if NOT, WHY NOT? And are you thinking of voting for someone who will CORRECT the situation, or make it worse?

As a political CENTRIST, favoring neither the GOP or the Dems, and without any allegiance to ANY political party, we continue to be appalled by the current imbalance in the U.S. economy and the inability of extremist political elements and candidates of Republican and Democratic parties in U.S. politics to recognize the obvious problems and their equally obvious, if painful solutions.

Henry Blodget at LinkedIn has a selection of 4 key charts from the BusinessInsider at
Here Are The Four Charts That Explain What The Protesters Are Angry About.

Actually, the slide show at BusinessInsider has 41 slide show pages, including numerous charts, essentially covering the following parameters:

1. The U.S. Unemployment Rate is at a record high rate, similar to 1980

The first chart shows the civilian unemployment rate (UNRATE) from the U.S. Department of Labor, Bureau of Labor Statistics, which is at a record high level corresponding to that early in the 1980's. This could be a cycle of about 31 years to my cyclical thinking, but there is no need for unemployment to hit as high as 10% (which is about 14 million people):

(image linked from Business Insider)

2. Wages as a Percentage of the Total Economy are at a Record Low

At the same time that unemployment is high, wages are at record lows.

(image linked from Business Insider)

3. Corporate Profits are at a Record High

And now comes the stunner. At the same time that unemployment is at a record high and wages are at a record low, corporate profits -- after taxes, mind you - have shot through the roof.

(image linked from Business Insider)

Based on the above statistic, America should be in great financial shape,
but neither wage-earners nor the government are sharing in the boom --
THEY are broke.

So where is that money going?
corporate investment?
research?
patents?

measures to improve and modernize America????

-- not a chance.

Those profits are going in ever greater amounts to an increasingly smaller elite who are stuffing their private pockets with the NATION's money.


4. Corporate Execs Are Earning Record Amounts by Pilfering Corporations (most all of it quite legally of course, since ill-devised laws, regulations, and inadequate income taxation enable that pilfering)

(image linked from Business Insider)

Should laws fix salary caps for corporate executives, just as in sports?

Definitely.

No CEO should be compensated more than a maximum percentage of an average worker's pay in his company (we suggest 10 times the lowest annual salary paid in any company -- that would eliminate gross income inequality and raise salaries at the lower end of the scale, quickly).

Anything paid above a sensible percentage, such as existed in e.g. 1960, should be regarded as outright thievery, as a plundering of corporate coffers by those sworn to watch over them. Right now corporate governance is a myth. It is everyone for himself, grabbing as much as he or she can.

5. CEO Pay Tripled since 1990 While the Minimum Wage Dropped 10%

(image linked from Business Insider)

Beyond outright thievery, what other term can be applied to corporate officers filling their pockets with company money above and beyond any rational economic basis, other than simple private greed?

Why should the people at the top of corporations be cashing in millions upon millions in salaries and bonuses (for what? - those execs are all fungible), while the basic hourly wage -- adjusted for inflation -- has remained virtually constant the last 50 YEARS. No corporate executive should earn immensely more than what people in his company earn -- earnings should go into company investment in research, new products, new facilities, etc., and not into the pockets of company executives.

(image linked from Business Insider)

6. The Top Pilferers are found in the United States of America, as this chart of Top 0.1% Income Share shows in a comparison to top incomes in Canada, the United Kingdom, France and Japan.

(image linked from Business Insider)

7. Social Mobility has Drawn to a Halt in America

What is the consequence of America permitting the above things to happen?

For one thing, social mobility has become nearly zero. Rich remains rich and poor remains poor, and never the twain shall meet, with little chance of change. Indeed, a downward plunge seems more likely than an upward surge. The American Dream has become a fata morgana -- a mirage.

8. Income Inequality has become Rampant

One result of financial imbalance in America is that the United States now ranks 93rd in world income equality, behind Iran, and barely ahead of Mexico -- not really what the Founding Fathers had in mind nor what people imagine when they call America "the land of opportunity".

That idea of endless opportunity is "a has been". We have a friend here in Europe who travels extensively on business in the good old USA and his opinion is that "life in America is hard".

The top 20% of U.S. citizens own 93% of the financial wealth of the country, the bottom 80% of citizens own 7%, and, if we include things like immovable property, the top 5% of U.S. citizens own 60% of the net worth of the country:

(image linked from Business Insider)

9. Who Owes Who in America? The American Dream for a Small Elite

The prevailing legal, financial, economic and social regulatory system over the years has so much favored the rich and the wealthy in America that all that remains today for middle classes and the poor is DEBT.

Regardless of the contributions made to America over hundreds of years by countless Americans in peace and in war, contributions which MADE, PRESERVED, and SUSTAINED the nation, a small minority of greedy but clever people have managed to corner THE WEALTH of the nation for their own possession.

At the same time they have deployed THE DEBTS of the nation to those not having any wealth. The right column in the graphic below shows that the bottom 90% of the population (who own only about 10% of the nation's wealth), own 73% of the debt:

(image linked from Business Insider)

This is a system totally skewed from top to bottom in favor of small financial elites who enjoy "the American Dream" at the cost of their fellows.


10. Those Who Profit Most From the American System are Paying Fewer and Fewer Taxes

The whole financial situation in America is a scandal. Yet, many ignorant politicians and uninformed voters are attempting to worsen the situation, even though -- for the last 100 years! -- wealth in the top echelons has been steadily increasing and the amount of taxes they pay has been linearly decreasing, as this graphic shows:

(image linked from Business Insider)

If American roads are falling apart and the bridges are falling down, the reason is clear. -The money that is there is being spent for other things. America, for example, is the largest market for LUXURY goods in the world. America's wealth is not being spent to keep America a great country. It is being spent to pamper the luxury wishes and vanity of the rich and the wealthy.

By the way, we have nothing against riches, wealth or property, nor against the accumulation of them. We just think EVERYONE should have them, especially in America.

Attaining that objective is elementary -- you simply have to institute laws and regulations into the existing system that enable those objectives and that prohibit small minorities from hoarding all the goods.

Much higher taxation of energy use, of high income levels, of luxury housing and of luxury products is one way to raise a lot of the money that America needs for reconstruction.

The rich and the wealthy would not greatly suffer from such taxation.

Quite the contrary, when a greater percentage of people have jobs and own their own homes and property, society becomes safer and more livable for everyone. When poverty is rampant, modern society disintegrates and the law of the jungle rules. That is not what the Founding Fathers intended. Just ask U.S. Supreme Court Justice Scalia (a self-proclaimed expert on intentions of the Founding Fathers).

See also:

Government Finance and the Question of Who Owes Whom? Everyone Talks About Government Debt but No One Talks About the Creditors

Laughing All the Way to the Bank - Dwight Garner reviews I.O.U.: Why Everyone Owes Everyone and No One Can Pay - by John Lanchester

Crossposted from LawPundit.

U.S. Economics, Anti-Government Views and Anti-Taxation : "Barbarians in the Grip of an Obscurantist Faith"

"Barbarians in the grip of an obscurantist faith" is a phrase coined by Paul Krugman in his New York Times article A Dark Age of macroeconomics (wonkish) of a couple of years ago.

Read that article to gain an inkling -- perhaps -- of the fact that extremist "vested interest" economics has little to do with economic understanding or reality.

Rather, as Rob Graham writes in one of the comments to that article:

"Knowledge in the feudal age was not meant to improve understanding of the world. It was meant to support the status quo. Its purpose was to make sure that things didn’t change, that those with power remained in power.

Whether such knowledge was in tune with the way the world worked or that knowledge improved the lot of society was not a consideration.

A pity we’ve returned to that time."

We wrote about America and the role of "change" in our previous posting.

Those who wish to keep the status quo of an incredible inequality in America as concerns money, earnings, property and wealth, may view themselves to be Americans, but in fact, that is not the philosophy that made America.

On the contrary, that is the selfish philosophy that historically has led all the great cultures of man's past into decadence and defeat.

When the Bible says that the "meek" shall inherit the Earth, they are not speaking of all the prosperous people in America who are unwilling to properly fund and finance the country which has granted them the life of advantage that they enjoy.

Small Businesses at the U.S. Economy Core

Small Businesses at the Economy’s Core is the title of an online posting at IIP Digital, an arm of the U.S. Department of State. There it is written that the linked article was excerpted from the book Outline of the U.S. Economy, published by the Bureau of International Information Programs.

Since that is government material and because the topic is so important, we reproduce that excerpted article below in full, adding the commentary that all the reactionaries in American politics both on the left and the right should read especially the last paragraph. Unfortunately, much of modern America has become more like the countries that most of the immigrants who fled to America wanted to leave.

"American entrepreneurs remain eager to risk their own savings to start small businesses despite the potential for failure that Schumpeter’s model predicts. The widely published and sometimes embroidered story of American Founding Father Benjamin Franklin was a potent symbol of aspiration and perseverance for generations of Americans, “defining our image of ourselves, shaping our sense of possibility,” says author Peter Baida.

The 15th child of a Boston soap and candle maker, Franklin quit school after two years to work in his brother’s printing business. He learned the printing trade and accounting, became the American colonies’ most noteworthy publisher and inventor, and then played his storied role in the struggle for national independence. Since Franklin’s time, Americans have hailed leading inventors and entrepreneurs as icons of opportunism, from Thomas Edison to Apple’s Steve Jobs.

Millions of entrepreneurs try to create their own versions of success. Government data show that, in 2006, an estimated 650,000 new employer-owned businesses were started up and 565,000 went out of business, out of a total of around six million such businesses nationwide. Similar ratios of births and deaths among small businesses are repeated year after year.

One obvious reason why so many Americans choose this path is the relative ease of starting a business. Professions such as law, medicine, and accounting have stiff licensing requirements. But compared to other Western economies, the United States offers an open road to a would-be business owner. The contrast with some Third World economies is monumental. A study by the Peruvian economist Hernando de Soto found that it took 289 days to open a small garment workshop in Lima, Peru. The absence of a vibrant small-business class is not due to a lack of entrepreneurs, he argued. In 1993, an estimated 150,000 vendors worked the streets of Mexico City, to cite but one example. But these vendors were blocked from becoming full-fledged business owners by many hurdles, de Soto says, including rigid class barriers, laws that discourage property ownership, and bureaucracies intent on preserving the status quo. In the United States, change is a way of life."

Politicians who argue AGAINST change in America simply do not understand the history of their own country. I merely add one proviso to "the rule of change"
-- CHANGE "for the better" is preferable.

Small Business Ownership: SBA Loans at Record High Levels Says You're the Boss Blog at the New York Times

Robb Mandelbaum writes at the You're the Boss Blog, the Small Business Blog at the New York Times, that S.B.A.-Backed Lending Set a Record in 2011, writing:

"The Small Business Administration did record business in 2011, guaranteeing more money in loans to small companies than in any year in its history. But the very smallest businesses, seeking the smallest loans, had more trouble getting an S.B.A. guarantee than in 2010."

When people talk about taxes, they often forget that taxes finance small business enterprises, which are the core of the economy, especially in the United States.

Intellectual Property Law in Substantial Need of Reform Writes Law Professor Jason Mazzone

Law Prof Jason Mazzone in his new book Copyfraud and Other Abuses of Intellectual Property Law (ISBN: 9780804760065), Stanford University Press, argues that Intellectual property law needs reform. Aria Munro writes at eNewsChannels.com that:

"Intellectual property law in the United States is on the verge of breakdown and needs to be reformed, argues law professor Jason Mazzone in his new book....

Read the whole article here.

OWNERSHIP is GOOD but Too Few People Have It

By the way, I am in no way against private property or ownership.
Quite the contrary.
Too few people have it!

The "Magic Dust" of Ownership: Sporting Estates on Sale in the United Kingdom, Large and Small

Caroline McGhie headlines at the Telegraph in Sporting estates are the greatest prize that:

"Every self-respecting billionaire should own their own country estate – it’s the ultimate prestige purchase...."

And, indeed, we have been looking for suitable accomodations.

As McGhie writes:

"What makes the perfect estate? There must be a big country house, a few cottages, outbuildings and land, with the value split roughly half and half between the house and the land. Magic dust is supplied by a spectacular setting."

We love that last sentence about "magic dust". Is that not the elusive substance of dreams? No one buys just "four walls". Ownership means more than that. In the end, it is the "magic dust" that counts.

Currently, we have our eyes on this property, as McGhie writes:

"Some buyers like fast access to London. On the borders of Hertfordshire and Cambridgeshire, 45 minutes by car from the capital, the Kingston Wood Manor Estate is being offered by Savills (020 7016 3780) and Carter Jonas (020 7493 0676) at £8.5-£9 million." [link added]

But if the bankers see it differently, we may have to settle, as McGhie writes, for this one:

"Small can be beautiful, too. At the other end of the country, in Cornwall, nine-bedroom Hamatethy farmhouse, with a pair of cottages, more than 500 acres and fishing rights on the River Camel is priced at £4 million." [link added]

Or perhaps, as McGhie writes:

"As the price of good arable land in England has soared in the past few years, reaching an average £6,000 an acre and performing better than gold, a balance has to be struck. "

Maybe real estate and especially "estate" ownership really ARE "magic dust", the dust of gold in the ownership of overpriced real estate properties.