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Posted on: 07.14.2014

“Net Neutrality” and The New Enclosure (Part I)

by Sylvia Kraemer
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Posted in Current History, History of Ideas, Intellectual Property, Open Systems, Politics

Those of us who oppose allowing Internet service providers to impose tolls on users wanting to use higher broadband transmission speeds are rowing upstream.  This is not only because powerful interests—among them, AT&T, Verizon, and cable companies—want to exploit U.S. policy’s current treatment of Internet access as a commercial commodity, rather than a public utility.

We are also rowing upstream because we are caught in a seemingly inexorable current spreading proprietary capture of the public sphere, a current that has flown with increasing amplitude through Washington since the 1980’s. This is the first of three interrelated posts examining the continuing private enclosure of the public ‘commons’ in this country.

* * *

Shane, Jack Schaefer’s much loved 1949 novel, was brought to movie theaters in 1953 by George Stevens and starred Alan Ladd.  The film was inspired by the Johnson County, Wyoming range war of 1892.   That conflict, which required the U.S. Cavalry to ‘resolve,’ climaxed years of violence among the region’s homesteaders, owners of open ranging cattle, and ranchers who unfurled barbed wires for miles to keep those cattle out.

We now find ourselves in the midst of a new enclosure movement.  While not lending itself to novels and films, it is changing this country’s political economy in ways no less historic and profound.  Unlike prairie grass, what is being enclosed is invisible.  Its absence is unlikely to be missed until the political, cultural, and economic consequences of its loss are felt.

Slowly being enclosed behind proprietary fences today is public information necessary to policy debate.  Paralleling this new enclosure is the gradual proprietary capture of publicly developed intellectual capital vital to our material progress.   With the election in 1980 of Ronald Reagan the nation transitioned from a democracy of citizens toward “monetized democracy,” a transition implicit in  the widespread and generally bi-partisan belief that democracy and free-market capitalism are mutually inseparable.   The currency of this new political economy is information.

Since the mid-20th century public access to government information in the United States has been protected by ‘sunshine’ or open-access laws.  Their foundations were laid in the 1940s during the federal government’s rapid expansion in response to the demands of the Great Depression and World War II.  Ten years in the making, the Administrative Procedures Act of 1946 sought to ensure openness and transparency in the operations of dozens of federal agencies.

The Freedom of Information Act of 1966 (et. seq.), which began life as an amendment to the 1946 legislation, has served as a model for similar state laws.  A companion measure, the Federal Advisory Committee Act (FACA) of 1972, arose from fears first voiced in the 1950s that industry groups and well-heeled political donors were capturing policy-making behind closed doors in secret federal ‘advisory committee’ meetings.

That such fears were justified was publicized in 2002 when the press reported that 18 of the energy industry’s 25 most generous donors to the 2000 Republican presidential campaign met with Vice-President Cheney’s energy task force, which subsequently produced a supply-side energy policy favoring more oil and gas drilling, along with construction of well over a thousand electric plants powered largely by coal.[i] A federal appeals court ruling in May, 2005 accepted Cheney’s argument that the FACA did not apply to Cheney’s visitors from the oil, coal and gas industries, who were not technically members of the energy task force.

In an earlier FACA case involving the Clinton administration’s National Health Care Reform task force, the White House asserted that the FACA did not apply to its meetings because “the working group was so massive, fluid, and disorganized, that it lacked the structure, organization, and fixed membership that are essential to a FACA committee.”[ii] In 1994, before the federal district court could try the case, the White House mooted it by publicly releasing all the working group documents.  In both instances technical readings or applications of the FACA weakened the ostensible intent of the law, which was to reduce the disproportionate power of insiders to influence the shaping of policy choices.

The belief that greater “sunshine” over the operations of government would ensure greater participation in policy-making has turned out to be naive.  The effectiveness of the FOIA and the FACA at ensuring openness is necessarily limited, since government lawyers’ clients have deeper pockets than most “sunshine” litigants—unless they happen to be large institutions not favored by the current administration—and are well-equipped to argue government secrecy cases on technicalities (e.g., when is a First Lady a federal employee?).  And there is always the possibility that the government will settle a case without acknowledging wrong, and insist on a silencing “gag” order on plaintiffs in a settlement.  To paraphrase former Secretary of Defense Donald Rumsfeld,  “we will never know what we didn’t know or don’t now know.”

Yet powerful commercial or political interests have no monopoly on subverting openness in the conduct of the people’s business, or imaginative ways in doing so.  In 1997 the Supreme Court let stand a lower court ruling that the 600-odd advisory committees operated by the federally chartered National Academy of Sciences are not subject to the FACA.  Yet most, of the Academy’s work is funded primarily by tax dollars through contracts with federal agencies, much of which is accomplished by convening and operating advisory committees of scientific experts. (The definition of ‘advisory committee’ rests on its non-operational or non-executive functions.)

The Academy argued—as do most claims for exemption from the FACA’s open meeting requirement—that advisors must feel free to give candid advice to the President and government officials.  Many observers accept this argument—thus revealing the extent to which the precept of ‘attorney-client privilege’ has migrated into government officialdom, which is historically rich in attorneys.[iii]

But one must ask:  Setting aside genuinely private or national security matters, what sort of knowledge necessary for informed government action should not, could not, or ought not, be made public?  Are we citizens not the ultimate clients for any substantive policy discussions occurring in our name?  What ethical or judicial code enshrines the notion that candor and honesty require concealment?

This trend has also been accompanied by the enclosure of a democracy’s other essential asset:  the proprietary capture of public intellectual capital.  (See following post, The New Enclosure-Part II).

[i] Don van Natta, Jr. and Neela Banarjee, “Top G,O,P, donors in Energy Industry Met Cheney Panel,” New York Times (March 1, 2002); Abramowitz, Michael; Steven Mufson, “Papers Detail Industry’s Role in Cheney’s Energy Report,” Washington Post (July 18, 2007).

[ii] “Association of American Physicians and Surgeons, Inc. et. Al. v. Clinton, et. Al., 989 F. Supp. 8 (D.D.C. 1997), FACA Case Digest, Federal Interagency Databases Online, downloaded January 4, 2009.

[iii] In a partial victory for the public, legislative language consistent with the FACA provided by Rep. Henry A. Waxman (D-CA) specified that the Academy would still be expected to publish the names of committee members, avoid conflicts of interest among committee members, and ensure that a balance of interests is represented on its committees.

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Posted on: 07.14.2014

The New Enclosure (Part II)

by Sylvia Kraemer
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Posted in Environmental Policy, Intellectual Property, Open Systems, Science and Engineering in the Law, Science and Policy, Technology in US Politics, Uncategorized

The notion that the things we create belong to us is not new; it dates back at least to 560, when Ireland’s King Diarrmait ruled against the monk Colmcille, who had secretly copied his mentor Finnian’s psalter.  (Legend records Diarmait’s judgment as “To every cow belongs her calf, therefore to every book belongs its copy.”)

But that is not how President Andrew Jackson’s appointee to the U.S. Supreme Court Justice John McLean applied the principle in his majority opinion in Wheaton v. Peters (1834).  Scholars can debate whether ownership of one’s own original works is in fact a natural or common law right, as King Diarmait supposed, or whether it is a privilege granted by the sovereign.[i] But Justice McLean could find in the United States no common law right to the exclusive use of one’s creations.

At issue was whether Henry Wheaton enjoyed a common law copyright in the annotated  reports, with opinions, of the Supreme Court that he had prepared and published, a copyright that Richard Peters had violated when he published cheaper, abridged editions of  Wheaton’s reports.

Two lower courts had held, as McLean would affirm, that:

“It is clear there can be no common law of the United States. The federal    government is composed of twenty-four sovereign and independent states, each of which may have its local usages, customs, and common law. There is no principle which pervades the union and has the authority of law that is not embodied in the Constitution or laws of the union.”[ii]

Only the Congress, by virtue of section eight of the first article of the Constitution, has the power “to promote the progress of science and useful arts, by securing for limited times, to authors and inventors, the exclusive right to their respective writings and discoveries.”  “Congress,” wrote McLean, “by the act of 1790, instead of sanctioning an existing perpetual right in an author in his works, created the right, secured for a limited time, by the provisions of that law.”[iii]

And then, at the end of his majority opinion, McLean added:

“It may be proper to remark that the Court is unanimously of opinion that no reporter has or can have any copyright in the written opinions delivered by this Court, and that the judges thereof cannot confer on any reporter any such right.”

Thus it was that the U.S. Supreme Court established, almost as an afterthought, that the information generated by those in whom the “People of the United States” have vested their  legislative, executive, and judicial powers, belongs to the people of the United States, and that any proprietary right in that information can be granted only by the Congress, as provided in Article I, Section 8.

In the modern world intellectual capital is the purest coin of any realm.  No less than the metallic coin of economics, its greatest social benefits accrue from widespread accumulation and circulation.  Before World War II the largest accumulation of intellectual capital owned by the federal government took the form of census data, information gathered by regulatory agencies, and scientific and technical information collected by the departments of Agriculture, Interior, the US navy, army, and coast guard.  Of comparable value for the continuation of democracy was the growing body of  interrelated reports prepared by the legislative, judicial, and executive branches of government and their administrative agencies.

World War II and the Cold War resulted in the unprecedented expansion of publicly directed and funded research. Federal investments in research and development (R&D) increased at over twice the rate of the total federal budget between 1940 and 1980.  This research produced new ideas and knowledge—information necessary for effective understanding and action—of inestimable value.

Most of those federal dollars—which grew from $186 million in 1940 to over $72 billion in 2000—flowed as contracts and grants  through the procurement offices of the departments of defense and energy, the National Institutes of Health, and the National Aeronautics and Space Administration.   Those dollars then began to substantially support the budgets of an expanding aerospace and healthcare industry, as well as research universities. The accumulated skills of these private sector institutions at obtaining federal grants and contracts, and their lobbying to sustain the federal research and development programs that produced them, ensured that they would receive the lion’s share of the public’s R&D investment for decades to come.

At the start of the 21st century three fourths or more of the R&D budgets at each of the principal federal research and development agencies[iv] went to a relatively small group of corporations that included such familiar heavy-hitters as Lockheed-Martin, Boeing (which absorbed McDonnell Douglas in 1997), Raytheon, Bechtel, TRW, and Science Applications International.  Beneficiaries among academic institutions included the universities of California, Michigan and Washington, Columbia, Stanford, and the Johns Hopkins University.

Before the 1980s, once a sponsoring agency obtained information from a recipient of one of its research grants or contracts,  members of the public could, in turn, request that information under the federal Freedom of Information Act or FOIA (subject to the usual privacy or national security exemptions).  Most agencies, however, settled for research reports, accepting their contractors’ or grantees’ claims that data must be withheld from the public in order to protect the identity of human research subjects, sequester data prior to its publication in peer-reviewed research journals, or to protect the data’s potential proprietary value.

Waiving delivery of research data as a matter of policy received the imprimatur of the U.S. Supreme Court in 1980, when it ruled (in Forsham v. Harris) that if a federal agency did not actually create or obtain research data itself, such data could not be considered federal records and subject to the FOIA.  Forsham was a boon to academic research institutions that had wandered from their ideological moorings of disinterested science into the sporty waters of high-technology business, a process well-captured in Daniel S. Greenberg’s Science for Sale: The Perils, Rewards, and Delusions of Campus Capitalism (2007).

Then, critics of the national air quality standards released by the Environmental Protection Agency in 1997 during the Clinton administration, led by Senator Richard Shelby (R-AL), complained that not only would the standards burden industry with ruinously high compliance costs, but several studies of toxic effects of air and water pollutants had later proven faulty.  Thus, given their serious policy consequences, data collected by the EPA for setting its standards should be available for public inspection.  Shelby attached to the Omnibus Appropriations Act for fiscal year (FY) 1999 an amendment requiring federal agencies to disclose “all data produced under a [federally funded research] award.”  The scientific community arose in alarm.[v]

Led by the National Academy of Sciences, the scientific establishment persuaded the White House’s Office of Management and Budget (OMB, which oversees the writing of regulatory language implementing federal statutes) to define research data subject to public disclosure in a way that would serve its expanding proprietary interests.  The OMB ultimately excluded from research data subject to FOIA disclosure any data supporting regulations having an impact of less than $100 million, and “materials necessary to be held confidential by a researcher until they are published, or similar information which is protected under law” (e.g., intellectual property.)  The Shelby amendment, once it emerged from OMB’s process, had a lethal weakness: What constituted research “data” under OMB’s ‘clarifying’ definitions could be determined only by those who held it, viz., the same research scientists wanting to retain the data for their own uses.[vi]

Just how important public access to the results of its own investment in intellectual capital had become was evident with the completion in 2000 of the joint U.S. and British Human Genome Project.  Prime Minister Tony Blair’s and President Bill Clinton’s joint statement that “the genome should be made freely available to scientists everywhere” sent bio-technology stocks plummeting.  Investors had concluded that the federal government would oppose patenting human genomic data.  In a hasty effort at damage control, the White House urged the securities markets to read the leaders’ joint statement more carefully, where they would find: “Intellectual property protection for gene-based inventions will also play an important role in stimulating the development of important new health care products.”[vii] (To continue reading about the proprietary capture of public intellectual capital, see The New Enclosure-Part III).

 

[i] Adam Mossoff, “Who Cares What Thomas Jefferson Thought about Patents?  Reevaluating the Patent ‘Privilege’ in Historical Context,”  Cornell Law Review, Vol. 92, No. 953 (2007).

[ii] U.S. Supreme Court, Wheaton v. Peters, 33 U.S. (8 Pet.) 591 (1834).

[iii] U.S. Supreme Court, Wheaton v. Peters, 33 U.S. (8 Pet.) 591 (1834).

[iv] Departments of Defense and Energy, the National Science Foundation, National Institutes of Health, and the National Aeronautics and Space Administration.

[v] National Research Council, Bits of Power: Issues in Global Access to Scientific Data (Washington, DC: National Research Council, 1997).

[vi] Sylvia Kraemer, Science and Technology Policy in the United States: Open Systems in Action (Rutgers Univesity Press, 2006, pp. 102-108.

[vii] White House Office of Science and Technology Policy, “Joint Statement by President Clinton and Prime Minister Tony Blair of the U.K.,” March 14, 2000.  Alex Berenson and Nicholas Wade, “The Markets: Stocks & Bonds; A Call for Sharing of Research Causes Gene Stocks to Plunge,” The New York Times (March 15, 2000).

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Posted on: 07.14.2014

The New Enclosure (Part III)

by Sylvia Kraemer
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Posted in Current History, Intellectual Property, Open Systems, Science and Engineering in the Law, Science and Policy, Technology in US Politics

 

Discussions of patent policy in the United States and elsewhere often overlook the fact that the original intent of issuing patents (not to be confused with sovereign-granted commercial privileges) was to encourage the disclosure and spread of novel devices to stimulate manufacturing and trade.  The earliest patents (such as those awarded by the Republic of Venice in the 15th century) were designed for this purpose.

Patents issued to the U.S. government were comparatively few before World War II.  (Military contractors typically retained patent rights by default.)  By the height of U.S. involvement in World War II, research in federal laboratories, along with industry contracts with the military services, had contributed to a ten-fold increase in federal government patents.

Until the 1980s federal policy treated most of the intellectual property produced by research funded with public dollars as presumptive public property.  Using royalty-free licenses issued by federal research agencies, the private sector could develop and market products incorporating information contained in federally owned patents.

When Congress created the Atomic Energy Commission (AEC) in 1946, the national security ramifications of the AEC’s work meant that the federal government would remain the owner of inventions produced by the AEC’s private sector contractors as well as in its own government operated laboratories.  Four years later, the first uniform federal government-wide patent policy, issued by President Truman, extended the AEC’s patent policy to any invention made by a federal employee, “on government time,” or with federal dollars.

Neither then, nor now, has anyone seriously argued that the federal government is equipped to compete with the business sector, nor that it should, by itself, attempt to commercialize the innovative products that could result from federally funded research.  But as the tensions of the Cold War began to subside, fewer and fewer members of Congress questioned whether taxpayers should have to pay twice for marketable innovations based on public intellectual property.

The pro-business Republican ideology that carried Ronald Reagan into the White House in 1980 embraced the notion that taxpayers could pay for the research that produced innovations, and then pay again for those innovations when they appeared in the marketplace.  Meanwhile, corporate interests that did indeed finance the risk of product development and marketing, complained that government contributed nothing but impediments to American technological progress.  And so a moral barrier between private lucre and public good began to weaken against political pressure to “commercialize” the public’s intellectual capital.

Most economists agreed with Attorney General Nicholas Katzenbach when he told the Senate Small Business Committee in 1965 that he knew of no “data, studies, or facts of any kind at all which could possibly support” the notion that giving patent rights to federal contractors would “foster the prompt working of inventions.”[i]

Notwithstanding the conclusions of numerous economists and his own Attorney General, when President Kennedy issued patent policy guidelines to executive branch agencies, buried in the policy language was a subtle transfer of the public’s presumptive intellectual property rights to the private sector.  Kennedy’s policy directed that if two or more potential government contractors offered otherwise competitive proposals, “the willingness to grant the government principal or exclusive rights in resulting inventions will be an additional factor in the evaluation of proposals.”[ii] Thus might the public obtain what it had previously owned.  The die was cast.

A bi-partisan consensus emerged (and persists) supporting the enclosure by the private sector of publicly generated intellectual capital in the unsubstantiated belief that commercializing all scientific discoveries is in the public interest, and that patents singularly motivate the development and marketing of innovative products.  This consensus enabled the Nixon administration to allow government agencies to grant exclusive licenses to commercial developers of inventions covered by federal patents, patent applications, or government contracts (subject to a loose array of criteria likely to be met by anyone seeking such a license).  Also enjoying bi-partisan support were the 1980 “Bayh-Dole” amendments to the patent and trademark laws, which invited non-profit organizations and small businesses to “elect to retain title” to inventions made under a federal contract or grant.

The credulity of the Congress and the White House in allowing the steady enclosure—or proprietary capture—of the public’s intellectual property created through research and development funded by the federal government was rationalized in two ways.  First was the argument that the private sector was better suited to commercializing marketable innovations, an argument that could have been met through licensing rather than transfers of patent ownership.  Second was the expectation that patent ownership would ensure public disclosure and dissemination of the knowledge embedded in a newly patented invention.

However, suppose the recipient of a right to patent fails to patent the invention, instead concealing the invention as a trade secret?  Then the intellectual capital is irretrievably lost from the public ‘commons’ as well as public ownership.  Its absence is unknowable, and its loss invisible.  By the end of the 20th century, concluded the Government Accounting Office, the principal federal research agencies (DOD, NSF, NIH, NASA and the DOE) were unable to account for over two thirds of the more than 1,700 patents issued by the US Patent and Trademark Office as government-originated inventions.  Nor had NASA and DOE effectively tracked the outcomes of patent rights waived to their contractors and grantees.[iii]

Economists have been unable to isolate a singularly significant causal relationship between patent ownership and the successful commercialization of innovations.  Effective capitalization, systems integration, exploitation of tacit knowledge, and mastery of production and marketing strategies, along with the ability to pursue incremental product improvements, matter as much if not more than patent ownership.  The most promising business model may require universal adoption, rather than monopoly control, of system components—consider the open system VHS videocassette recorder, or the USB (universal serial bus) that standardized the market for all kinds of computer peripherals.

Far from promoting technological innovation, intellectual property itself can be the basis of an income stream of license fees or royalties, secure corporate debt, or deployed to “corner the market” with patent pools that capture for investors monopoly control over the critical technologies in an industry as well as known alternatives.  “Patents have recently become hot property,” noted Forbes in 2005, enabling small companies “armed with patents but little or no product” to fill their coffers with the fruits of their victories in patent infringement suits against “large business.”[iv]

Indeed, an ‘explosion’ of patenting since the early 1980‘s could be doing more harm than good.[v] Michael Heller’s The Gridlock Economy:  How Too Much Ownership Wrecks Markets, Stops Innovation, and Costs Lives (Basic Books, 2008) contributes to the growing disenchantment with the lucre-driven private sector lionized by Ayn Rand and Ronald Reagan.  The financial crisis of 2008 showed that the private sector cannot even manage its own greed.

The Congress’s decades long conversion of publicly generated intellectual capital into the private sector’s intangible assets has accomplished something only a few might have intended: the engorgement of investment portfolios with a ‘wealth’ of mysterious, if not vaporous, intellectual property.  Securities, analogous to bundled mortgages, promise revenue streams from intangible assets, e.g., royalties for the use of copyrighted materials and licenses for the use of patented technologies.[vi] Notwithstanding the enormous challenge of valuing securities that bundle patents or patent rights (a challenge that has spawned yet another new field of financial acrobatics, ‘intangible property valuation.’[vii]), intellectual property has grown as a significant component of the asset base of the S&P 500.

Successful democracies combine the most critical intangible asset any society can offer—the free flow of ideas—with the assurance that their citizens will share equitably in the material fruits of their enterprise.  The incremental proprietary capture of the public sphere that we have seen since the 1960’s threatens the free flow of ideas and citizen prosperity in perilous ways for all of us.  The failure of our policy makers—inadequately prodded by our citizens—to ensure an Open Internet may be one of the final nails in the coffin of an authentic American democracy.  (See also post for February 16, 2013, National Public Wi-Fi: Why it Matters to You.)

 

[i] Katzenbach quoted in The Washington Post, July 30, 1965.

[ii] Federal Register, 28 (200), “John F. Kennedy, Memorandum and Statement on Government Patent Policy,” (October 12, 1963), pp. 10943-46.  Federal inventions with national security significance continue to be presumptively ‘titled’ to the government, typically in the cases of the Department of Energy and NASA, which can, however, waive its patent rights.

[iii] General Accounting Office, “Technology Transfer: Reporting Requirements for Federally Sponsored Inventions Need Revisions,” GAO/RCED-99-242 (August 1999).  Sylvia Kraemer, “Federal Intellectual Property Policy and the History of Technology: The Case of NASA Patents,” History and Technology, Vol. 17 (2001).

[iv] Chad Huston, “Survey of IP Monetization Techniques,” IP Today, Vol. 11, No. 10 (October 2004); Margaret M. Blair, Steven M.H. Wallman, Unseen Wealth: Report of the Brookings Task Force on Intangibles, Brookings Institution Press, 2001; Juergen H. Daum, Intangible Assets and Value Creation (John Wiley and Sons, 2002).  Licensing income from intellectual property grew from $18 million in 1990 to an estimated $500 billion in 2005.

[v] Giovanni Dosi, Luigi Marengo, Corrado Pasquali, “How Much Should Society Fuel the Greed of Innovators: On the Relations Between Appropriability, Opportunities and Rates of Innovation,” LEM [Laboratory of Economics and Management, Sant’Anna School of Advanced Studies] Working Papers, 17 (July 2006); Michael A. Heller and Rebecca S. Eisenbery, “Can Patents Deter Innovation?  The Anti-commons in Biomedical Research,” Science, Vol.280 (May 1, 1998); Adam Jaffe and Josh Lerner, Innovation and Its Discontents (Princeton, 2004); Don E. Kash and William Kingston, “Patents in a World of Complex Technologies,”  Science and Public Policy (February 2001); David Mowery, Richard Nelson, Bhaven N. Sampat, and Arvids A. Ziedonis, “The Growth of Patenting and Licensing by U.S. Universities: An Assessment of the Effects of the Bayh-Dole Act of 1980,”  Research Policy, Vol. 30 (2001); James Surowiecki, “The Open Secret of Success,”  The New Yorker (Mayb12, 2008).

[vi] Karen Richardson, “Bankers Hope for a Reprise of ‘Bowie Bonds,’” The Wall Street Journal (August 23, 2005).

[vii] Stephen Bennett, “The IP Asset Class: Protecting and Unlocking Inherent Value,” Vol. 5, The John Marshall Review of Intellectual Property Law (2006).

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