Re: Do patents really foster innovation?

From: Rafal Smigrodzki (rafal@smigrodzki.org)
Date: Sun Mar 09 2003 - 15:21:51 MST

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    ----- Original Message -----
    From: "Hal Finney" <hal@finney.org>

    > Rafal writes:
     How does Palladium work?
    >
    > Basically Palladium attempts to let the computer user prove to a
    > remote computer what program he is running locally. It achieves this
    > through a rather complex system involving cryptography, secure
    > hardware, and special extensions to the operating system.
    >
    > Perhaps the remote server will download some data to the user, but only
    > to a program which it knows will observe the Digital Rights Management
    > (DRM) rules built into that data. The user can use Palladium to prove
    > to the remote system that he is running one of the programs which will
    > follow the DRM rules. In this way the transfer can go forward on terms
    > which are mutually acceptable to both parties.

    ### Thanks for the explanation. This is by itself a good idea, it makes
    error-free content copying a hassle, but not impossible (at least in the
    case of text), so there is some balance between the copyright holder and the
    user - if the owner has too high demands, he will get pirated, but the
    reasonable ones will have users willing to pay what they see as reasonable
    fees.

    On the other hand, if this type of hardware became mandatory, the situation
    would be very bad - you would be barred from owning general-use computing
    devices, and the owners would have extreme advantage over users. A very,
    very bad idea.

    Any solution must provide a balance between the short-term interests of
    content providers and content users (which are at cross-purposes), to
    achieve maximization of long-term gains for both. The optimal balance point
    changes with time, due to technological progress (MP3) and can be influenced
    by political pressures (e.g. DMCA). This is bad, because it limits
    efficiency of the system. In a discussion here with Lee Crocker I once
    outlined a system of dynamic copyright where the provider would buy an
    injunction against copying from an enforcing/distribution agency (one of
    many competing ones), for a fee depending on the cost of enforcement. The
    cost would increase exponentially with time and the number of copies made,
    so that the price of subsequent copies would be automatically lowered or
    else piracy would make further enforcement impossible. Of course, the
    customer would also have the choice of enforcement companies, with varying
    fee structures and varying schemes for monitoring compliance (with different
    levels of intrusion into the user's life). The enforcement companies would
    develop a set of multilateral agreements on supporting each other's content
    portfolios, but they couldn't push their cooperation too far, or else new
    entrants would simply disregard their agreements and live fully off pirated
    stuff. The effective copyright duration would not be set as a law, but would
    emerge from the interaction of large numbers of players, and would depend on
    the type of content (e.g. music copyright would very quickly become
    unenforceable, but only after providing the producer with income
    proportional to the number of copies made, while copyright on abstruse
    technical handbooks would stay longer, because of the smaller number of
    users who would be most likely willing to pay more per copy). This would be
    a dynamic, free-market scheme for balancing the two sides, similar to David
    Freeman's competing private court system.

    Rafal



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