Project Paperless LLC, a strange company whose ownership is shrouded in mystery, wants $1,000 for every person in your company who scans documents and e-mails them. They claim that they have a valid patent covering this ‘‘invention,’’ and while $1,000 per employee is a lot of cabbage, it’s nothing compared to what it would cost you to prove to a court that the patent is as bogus as we all know it to be.
They’re ‘‘patent trolls,’’ part of a massive, corrupt industry that extorts an estimated $29 billion from American companies every year. They exploit the fact that the US Patent and Trademark Office is chronically underfunded and that it has a howling void instead of a sense of solemn responsibility when it comes to ensuring that it only grants patents on actual inventions that were actually invented by actual inventors. The USPTO rubberstamps patents on every conceivable ‘‘invention,’’ from a method for making ‘‘sealed peanut butter sandwiches,’’ to podcasting, to putting links in e-mail, to operating an online shopping cart, to scanning documents and e-mailing them, to using a GPS to tell transit passengers when the next bus will be along.
Everybody pays the price for this: products cost more, companies hire fewer employees (or don’t get started at all), public services like city buses charge more or serve less. The patent trolls don’t produce products, they produce lawsuits. They make derivatives traders seem socially useful. And though the Obama administration has pushed for some kind of patent reform, I’d be totally amazed if any really toothy legislation gets passed in this government or any other in the foreseeable future.
That’s patent trolls. But there are copyright trolls, too: law firms owned by interlocking, anonymous shell companies who send out letters to hundreds of thousands of Internet users threatening to sue them for downloading hardcore pornography with juicy, embarrassing (often LGBT-inflected) titles. Pay us now, the demand letters say, or we will forever link your name with Untamed Anal XVII in the public record, where it will fester and surface every time a potential mate or employer googles you. It will cost you hundreds of thousands to defend yourself, and even if you win, you’ll lose. Or you could just pay us a couple grand and we’ll go away and pretend this never happened. Needless to say, copyright trolls do only the most cursory research to establish the guilt of their victims, many of whom have never downloaded the videos in question – but even the totally innocent are likely to arrive at the conclusion that paying the blackmail is the safe and smart path.
If patent trolls manage to make derivatives traders look good by comparison, then copyright trolls make even the patent trolls look upstanding. One German firm specifically targeted members of the clergy, staff at Arabic embassies, and cops, on the grounds that these people would be especially vulnerable and so likely to pay with a minimum of fuss.
Finally, there are the out-and-out copyfraudsters, companies who claim to hold copyrights they don’t own – sometimes copyrights that expired decades ago, though that doesn’t stop them from threatening people who use ‘‘their’’ copyrights without paying for a license. The best example of this is probably ‘‘Happy Birthday’’, which Warner/Chappell claims to own a copyright over. Anyone who researches the matter – as plenty of credible scholars have – will tell you that ‘‘Happy Birthday’’ wasn’t written when Warner says it was, that its copyright wasn’t renewed when they say it was, and that in any event, the renewal wasn’t correct – and that there is absolutely no question that ‘‘Happy Birthday’’ is in the public domain. None.
And yet, people pay for it. Millions. If you’ve eaten in a chain restaurant where they sing some stupid ‘‘birthday song’’ you’ve never heard of, that’s because they’ve decided to write their own music rather than paying danegeld to Warner, and they’ll have forbidden their employees from singing the familiar words. Every time you’ve heard ‘‘Happy Birthday’’ performed in a movie – even a documentary, where real people are captured really singing the song we all sing in their own homes – that performance has included a license fee. Part of the price of every movie with ‘‘Happy Birthday’’ you’ve ever bought, rented or downloaded went to Warner in license fees for a copyright that they don’t own. ‘‘Happy Birthday’’ isn’t Warner’s copyright. It belongs to no one. Or everyone. They have stolen a song that we sing around our tables in moments of joy and claimed it for their own. They are charging rent on the public domain.
But not for long, maybe. Good Morning To You Productions Corp, producers of a forthcoming documentary, aims to fight Warner over the question of ‘‘Happy Birthday’’’s copyright in court. The subject of the documentary is ‘‘Happy Birthday’’ and Warner’s monumental, decades-long fraud, so getting sued by Warner is effectively part of their production plan. Which is good news for ‘‘Happy Birthday,’’ but not so much for all the other works claimed by copyfraudsters.
Why has Warner gotten away with its theft of ‘‘Happy Birthday’’ for so long? Because the interests of all the people who pay the license fee are diffused, and Warner’s interests are concentrated. For any one licensor, the rational course of action is paying Warner, rather than fighting in court. For Warner, the rational course is fighting in court, every time.
In this regard, Warner is in the same position as copyright and patent trolls: the interests of the troll are concentrated. Their optimal strategy is to fight back when pushed. But it’s the reverse for their victims: the best thing for them to do is to settle.
Collectively, though, the victims are always out more than the cost of a defense. That is, all the money made by a troll from a single stupid patent is much more than the cost of fighting to get the patent invalidated. All the money made by Warner on ‘‘Happy Birthday’’ dwarfs the expense of proving, in court, that they weren’t entitled to any of it.
The reason the victims don’t get together to fight back is that they don’t know each other and have no way to coordinate among each other. In economists’ jargon, they have a ‘‘collective action problem.’’
That’s where the Internet comes in. The Internet has many profound effects on society, but lowering the cost of collective action is the most significant, and it’s just getting started. Take Kickstarter, for example: Kickstarter implements an old idea called ‘‘The Street Performer Protocol.’’ This is a thought-experiment for making money on creative works, inspired by buskers.
Imagine a busking magician who does a series of tricks – some card magic, a bit of this-and-that with coins, some knife-juggling. Then, as the crowd reaches its peak size, she says, ‘‘All right, for my grand finale, I’ve got an amazing trick. I will make my arms change place with my legs, right before your eyes. And I will do this trick as soon as there is $100 in my hat.’’
The magician doesn’t care who pays, nor who watches. She just cares about getting $100. If there is $100 in the hat, she does the trick. If there isn’t, she goes home. If she does the trick, everyone gets to see it, even the people who put nothing into the hat.
The Street Performer Protocol proposes that an artist with some following could make a go of it by releasing some material for free, then withholding the climax until sufficient donations have materialized. Various attempts have been made to make the Street Performer Protocol work over the decades since its codification, but Kickstarter is the first runaway success. At a guess, I’d say that this is because Kickstarter stripped back their implementation to bare basics.
Previous SPP solutions have concentrated on the issues of trust in collective action – specifically on escrowing the money until the ‘‘performer’’ delivers the ‘‘trick.’’ You get the $100 in the service’s hat, prove that you did your bit, and then the service gives you the $100. That makes sure that ‘‘performers’’ don’t just take the money and run, but it also means that the service is only useful for projects where you aren’t using the money raised to capitalize the thing you’ve promised – great for novels, not so much for feature films.
Kickstarter made a bet that by ditching escrow-until-delivery, they’d succeed where others failed. That is, they bet that the losses from the occasional screw-up or rip-off would be offset by the greater variety of projects on offer and the massively reduced administrative costs from not having to confirm that the trick had been done to spec before the money was released. They adopted Brian Eno’s wise aphorism: ‘‘Be the first person to not do something that no one has ever thought of not doing before.’’ It worked.
Back to the trolls and the copyfraudsters, and their victims’ collective action problems.
Imagine a Kickstarter-style service for a new kind of class-action lawsuit: the class-action defense.
Class-action lawsuits are an important mechanism for solving collective action problems. A single large company can make millions by cheating its customers out of a few dollars apiece. For those customers, the individual cost of paying to sue for redress dwarfs their losses. But if a canny, motivated lawyer can get a class of plaintiffs certified as representing everyone who got screwed by BigCo, she can make millions suing the company on their behalf. The company then has to refund everyone their small handful of dollars – which means they lose the millions they ripped off – and they have to pay the class-action lawyer’s fees – millions more. The mere threat of class-action suits has kept untold companies on the straight-and-narrow.
Class-action suits rely on an official mechanism for solving the collective-action problem. Lawyers who want to represent a class of plaintiffs convince a judge to ‘‘certify’’ their class, which means they can represent all of the aggrieved parties without having to track down each of them, one at a time, and talking them into joining the suit (the members of the class can still opt out of the settlement at the end of the process, if they think they can get a better deal on their own). Without certification, there would be no class-action suits.
There is no certification for class-action defenses, because until trolls and copyfraudsters, there was virtually no need for such. Convincing Congress to create class-action defenses might take as long as simply convincing them to fix the patent and copyright messes, and would leave innumerable victims to hang in the meantime.
What would a Kickstarter for Class Action Defense look like? Imagine if you could pledge, ‘‘I promise that I will withhold license fees/settlements for [a bad patent/a fraudulent copyright fee/a copyright troll’s threat] as soon as 100 other victims do the same.’’ Or 1,000. Or 10,000. Hungry, entrepreneurial class-action lawyers could bid for the business, offer opinions on the win-ability of the actions, or even start their own kickstarters (‘‘I promise I will litigate this question until final judgment if 1,000 threat-letter recipients promise to pay me half of what the troll is asking.’’)
Basically, it’s the scene where the villagers decide to stop paying the bandits and offer the next round of protection money to the Magnificent Seven to defend them.
There’s a lot to like about this solution. Once a troll is worried about a pushback from his victims, he’ll need to raise a war-chest, and since the only thing a troll makes is lawsuits, he’ll start sending more threats. Those threats will attract more people to the kickstarter, raising its profile and its search-rank. The more the troll wriggles, the more stuck he becomes.
We could spin out a thousand possible variations on this – a pro-rated refund if the lawyer wins without spending all the money, or preferential shares to early entrants; a traditional plaintiff’s side class-action sister-project that goes after trolls who’ve lost their suits and uses their defeat as the basis for stripping them of every asset to their underwear and redistributing it to victims (and lawyers, of course – though that’s not a bad outcome, since it means lawyers might be willing to spend more on the ‘‘defense’’ part of the action in the hopes of a bigger payout down the line).
It’s not all perfect. There’s still the collective action problem of getting people to pay what they’ve promised. And the named defendant in the suit has to be willing to hang in there for the long haul, possibly through a decade-long ordeal of appeals. The trolls will play games, dropping suits against participating defendants, so you need to have a lot of defendants in line to take their place.
In the case of patents, there’s an additional wrinkle in that a win for one might not be a win for all – some claims in the patent might survive the suit, and some defendants might be violating those claims.
But if there’s one common thread running through the stories of people on the receiving end of these threats, it’s outrage. Getting screwed by thieving, amoral ripoff artists sucks. The reason people give in to the blackmail is because it is unimaginably, impossibly expensive to fight back. I think that if we can nudge ‘‘unimaginable and impossible’’ into the realm of mere ‘‘expensive and time-consuming,’’ we’d have armies lining up to hand these crooks their asses.
What’s more, this is a generalizable solution with a problem-space much larger than mere trolling. Economists talk about ‘‘negative externalities’’ – when someone does something that benefits him a little, and costs society a lot. If you dump your toxic waste into the water, you save a little money, and we pay a fortune to get it out of the water again. The cost of proper disposal is a tiny fraction of the cost to society, but it’s still more than the savings you make from tipping waste into the river.
But the interests of people who rely on the water are diffused, and the interests of polluters are concentrated at the point of the effluent-pipe.
Ideally, regulators, watchdogs, and cops will solve this problem, but for that, we need good laws. Guess what? The interests of people who profit by polluting, selling unfit-for-purpose merchandise, pushing poison as food, getting rich on exotic financial derivatives, and every other corrupt enterprise are concentrated, with the pointy end of that concentration represented by an industry association and a K Street lobbyist’s office in Washington DC. The interests of those of us who get bilked, poisoned, and screwed eight ways to Monday? Diffused.
The important thing is that the victims bear a higher cost than the profit they generate for their attackers. A robo-signer in a foreclosure mill makes a little on the house he steals; the cost to the family that lived there is vastly higher. If the victims could locate each other, pool their resources, and fight back, they could outspend, outmaneuver, and out-flank the whole herd of rough beasts and the paymasters whose brand they wear.