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About this weblog
Here we'll explore the nexus of legal rulings, Capitol Hill policy-making, technical standards development, and technological innovation that creates -- and will recreate -- the networked world as we know it. Among the topics we'll touch on: intellectual property conflicts, technical architecture and innovation, the evolution of copyright, private vs. public interests in Net policy-making, lobbying and the law, and more.

Disclaimer: the opinions expressed in this weblog are those of the authors and not of their respective institutions.

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In the Pipeline: Don't miss Derek Lowe's excellent commentary on drug discovery and the pharma industry in general at In the Pipeline

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October 22, 2012

Megan McArdle Takes Issue With The Knockoff Economy

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Posted by Alan Wexelblat

A couple weeks back I noted that authors Raustiala and Sprigman would be excerpting from The Knockoff Economy, their recent book, in the blog Volokh Conspiracy. I've read their posts with some interest but haven't had time to talk about it in depth. I do recommend the book for Copyfighters, as one view on how industries (particularly food and fashion) that have low or no IP protection thrive.

Whether you read the book or the V.C. posts, I also recommend you read McArdle's response in The Daily Beast. In her column she takes issue with the core argument that experiences with low-IP industries are comparable to, or can serve as any guide for, high-IP industries. Her key point is that in the low-IP industries, copies are generally inferior in quality whereas in digital industries copies are perfect. Also, digital copies are far easier to mass-produce than copies of physical objects like clothes.

Sadly, while I agree with her major theses, I think she then goes off the deep end. For example, she believes that a low-IP model would "impl[y] the end of drug discovery." That's just grossly overstated, and ignores several things. One is the option of using much-cheaper small-scale discovery steps, which I discussed back in 2011. It's possible that a low-IP model won't ensure drug-company profits on a multi-billion-dollar pipeline that produces one blockbuster drug every few years, but why should that business model be sacred?

Second, it ignores the "Advil effect." Briefly put, the effect is this: Advil was only patent-protected against generics for two years, and that was over 20 years ago. Despite that, brand-name Advil still controls over 50% of the market for ibuprofen. That is at least prima facie evidence that lifelong patent exclusivity isn't required for a drug to be successful across decades.

Her discussion of the music business is even worse, being at best anecdotal and in places outright insulting. For example, she bemoans the (implied if IP protection is weakened) death of blockbuster-producing major label acts. Excuse me if I don't cry a river over the removal of corporate manufactured acts from the airwaves, hopefully clearing the way for some of the hundreds of thousands of hard-working non-major-label musicians to get airplay. McArdle's phrase "low-productivity artisinal profit model" almost made me snarf. Imagine the reaction of, say, Amanda Palmer to being told she is "low-productivity".

Again, McArdle enshrines the current business models as sacrosanct. Palmer may sell 1/10th the number of units of someone who gets pushed to the front racks at Wal-Mart, but so what? If those front racks disappeared entirely would we be any worse off? There's no quality difference I can discern in the disc I got from Ms. Palmer through Kickstarter compared to the disc produced by a major-label factory. And if I'm getting a quality product and am a satisfied customer/fan, isn't that the point? I don't require a Big Corporate Seal of Imprimatur in order to hear good music and I see no reason why intellectual property regimes should privilege BCSI over AFP who, it should be noted, offered the entire album as a digital download with no DRM for $1.

By the end McArdle softens her critique somewhat. She admits that her points are "not necessarily arguments against looser IP". Well, yeah. That's sort of a shame, as I think there are some core things to be said about reproduction fidelity and relative cost in response to Raustiala and Sprigman. Maybe once I've dug myself out of this backlog I will return to the topic, if I have anything new to say.

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