Today I’m happy to accept your warm wishes for my firm’s first birthday.

This day is very important for me.

Unlike my personal birthday, the birth of Mincov Law Corporation was something over which I had complete control. This makes it even more special.

Like any one-year-old, I’ve absorbed so much information and I’ve learned so many new skills during this past year, I can hardly contain my excitement going into the second year.

Now that I’ve been running my own business for 366 days, after I made hundreds of connections and helped dozens of clients, I have a much better understanding of the role that legal advice plays in the life of a startup. You allowed me to better see the value that I can provide to my clients at different stages of their businesses.

Stay tuned for two electrifying announcements that I will be making today!

And so, round one of Apple v. Samsung court saga is over.

A jury of nine Americans have unanimously handed Apple a victory in the form of a verdict for $1,049,343,540.00 in damages. Imagine a cheque for this amount: “One Billion Forty Nine Million Three Hundred Forty Three Thousand Five Hundred Forty Dollars and 00 Cents.”

Kyle Vanhemert has a great day-by-day rendition of the trial.

Wall Street Journal has an equally great chart showing the mutual patent and design patent claims of Apple and Samsung, and the jury’s decision as to each of these claims with respect to each of the allegedly infringing phone models.

Apple spokeswoman Katie Cotton in a statement to the New York Times said:

“We are grateful to the jury for their service and for investing the time to listen to our story and we were thrilled to be able to finally tell it. The mountain of evidence presented during the trail showed that Samsung’s copying went far deeper than even we knew. The lawsuits between Apple and Samsung were about much more than patents or money. They were about values. At Apple, we value originality and innovation and pour our lives into making the best products on earth. We make these products to delight our customers, not for our competitors to flagrantly copy. We applaud the court for finding Samsung’s behavior willful and for sending a loud and clear message that stealing isn’t right.”

Samsung Electronics issued the following statement:

“Today’s verdict should not be viewed as a win for Apple, but as a loss for the American consumer. It will lead to fewer choices, less innovation, and potentially higher prices. It is unfortunate that patent law can be manipulated to give one company a monopoly over rectangles with rounded corners, or technology that is being improved every day by Samsung and other companies. Consumers have the right to choices, and they know what they are buying when they purchase Samsung products. This is not the final word in this case or in battles being waged in courts and tribunals around the world, some of which have already rejected many of Apple’s claims. Samsung will continue to innovate and offer choices for the consumer.”

Google, the force behind Android OS, released the following statement:

“The court of appeals will review both infringement and the validity of the patent claims. Most of these don’t relate to the core Android operating system, and several are being re-examined by the US Patent Office. The mobile industry is moving fast and all players – including newcomers – are building upon ideas that have been around for decades. We work with our partners to give consumers innovative and affordable products, and we don’t want anything to limit that.”

A great comment came from Al Sabawi, a former IBM executive, who wrote:

“To all the lazy copycats out there who think cutting and pasting is an intellectual achievement, that hard work, sweat and tears don’t matter, that ideas, designs, and innovations can be stolen willy-nilly with no consequences: This is to you.”

It comes as no surprise that Samsung will now appeal the decision, and this is the decision of the appelate courts that would be of extreme interest to everybody – IP lawyers, innovators, copy-cats and consumers alike.

For now, I would like to share a couple of observations and comments about this case.

First of all, despite all today’s attacks against intellectual property and the forced “let’s all share” mentality, we have a unanimous decision of 9 non-lawyers who confirmed that patents as tools for protecting innovation are still worth something. In this case, they were worth a Billion bucks. In my opinion, Apple’s statement was very on point. The verdict is about values, it is about sending the message, as clearly as it gets, that taking something that’s not yours is improper.

Second, I’m baffled (although, not really) to read a great number of comments to the effect that Apple’s patents and the jury’s verdict will kill competition and rip off consumers of legitimate options. By definition, patents are about building a monopoly based on something you managed to invent, which had not existed before. Granted, there are tons of nonsense patents out there and a great number of patent trolls, we all know that. The real issue is that legitimate patents always create a monopoly, and there is absolutely nothing wrong with that monopoly.

Just because iPhones had tremendous success does not mean that the monopoly should be destroyed. This goes back to my argument on copyright laws when I reject that public interest should have a role in copyright protection: we don’t have copyright laws to protect works that no one wants to use, while creating loopholes for unauthorized use of works that are popular with the public. If no one wants to use a work, there is no need to have laws to protect it.

I remember the day when the first iPhone was released and all the usual Apple fans vs. Anti-Apple fan battles raging with renewed force. Essentially, after that day the world was divided into three groups: those who owned or dreamed of owning an iPhone; those who had no money or desire to buy an iPhone but wanted their phone to have an interface resembling the one of an iPhone as closely as possible; and those who for one reason or another disliked anything that Apple might put out on the market, didn’t want their phones to be like an iPhone but wanted them to have similar functionality.

The iPhone became and still is the measure of comparison for all cell phones on the market.

Apple knew the value of the innovation that it brought to the market with the release of the iPhone, and so it spent a lot of money in an attempt to protect this innovation. Its efforts have paid off – first with the massive acceptance by the market, and now when the jury confirmed the validity of its patents.

Is this a loss for consumers? Even if so, it is a loss of illegitimate advantage. To avoid an analogy with theft of tangible goods, imagine a situation when somebody came up with a way to trick PayPal into adding $10 a day to everyone’s balance. If at some point PayPal decided to fix the problem, would that be a loss to those who would stop receiving the undeserved benefits? Of course!

Samsung is a serious competitor with a pile of patents of its own. They certainly know how to innovate. Otherwise, it would be difficult for Samsung to win a record almost 20% market share for all LCD TVs sold worldwide. Don’t tell me they can’t come up with technologies that wouldn’t infringe on other company’s patents. At least, don’t tell me they can’t properly license such technologies from those who invented them first.

This is what competition in the XXI century is all about. It’s not about who can manufacture the best and cheapest version of a gadget, it’s about who can come up with a gadget that will redefine the way people live their lives.

Love it or hate it, but this is exactly what Apple did when it released the iPhone and the iPad.

And Apple didn’t precisely intend to prevent Samsung from selling competing phones. Apple actually offered Samsung to license its patents at $30 per smartphone and $40 per tablet.

Finally, and I’ve commented on this issue already, in my opinion, the litigation between the giants (especially, after it will have gone through all available appeals) gives us all a great benefit of having a better understanding of the limits of the modern patent system. Very few patent owners can afford to go out and start a full-blown patent litigation war. So we have been left with a plurality of lawyers’ opinions as to what should be considered obvious, what should be considered novel, and what is the proper subject-matter for a tech patent.

We will soon find out.

PS. Full disclosure: I don’t have an iPhone because it’s too heavy and too big for my taste. However, I’m slowly getting fed up with my current phone and will be investigating my options soon.

Would I, as a consumer, benefit from someone making a 3” version of an iPhone? Absolutely! Do I have a right to expect Apple to allow others to manufacture versions of Apple’s patented products simply because Apple does not see a big enough market for 3” iPhones? Absolutely not!

On July 12, 2012, the Supreme Court of Canada issued its reasons in five copyright cases: Alberta (Education) v. Canadian Copyright Licensing Agency (Access Copyright), Re:Sound v. Motion Picture Theatre Associations of Canada, Entertainment Software Association v. Society of Composers, Authors and Music Publishers of Canada, Rogers Communications Inc. v. Society of Composers, Authors and Music Publishers of Canada, and Society of Composers, Authors and Music Publishers of Canada v. Bell Canada.

The results, while quite predictable, are very disappointing for someone who values individual rights, freedom and capitalism.

Howard Knopf in his post, A Proud and Progressive Pentalogy Day in Canadian Copyright Law has provided a brief outline of what the five cases stand for. It’s a good summary of what the cases stand for, but I squarely disagree with Mr. Knopf on his conclusions. My issues with his position start with the title, namely the use of the word “progressive”. I trust that the use of it is intentional and is in reference to the progressive movement. You may or may not agree with Glenn Beck, but the important question to ask when using the word progressive, even outside the political context is, “what are we progressing to?”. In my opinion, we are progressing away from a system where interests of the individual trump interests of the society and towards a system where interests of the “society”, expressed by whoever has the power to claim to be in position to represent such interests, trump interests of each particular individual making up that “society”. This never ends well.

Leaving the technicalities for a future post, I have three big problems with the 5 decisions.

My biggest problem is with paragraphs 9 and 10 of the Bell case, where the Court unanimously held that:

[9] Théberge reflected a move away from an earlier, author-centric view which focused on the exclusive right of authors and copyright owners to control how their works were used in the marketplace: see e.g. Bishop v. Stevens, [1990] 2 S.C.R. 467, at pp. 478-79. Under this former framework, any benefit the public might derive from the copyright system was only “a fortunate by-product of private entitlement”: Carys J. Craig, “Locke, Labour and Limiting the Author’s Right: A Warning against a Lockean Approach to Copyright Law” (2002), 28 Queen’s L.J. 1, at pp. 14-15.

[10] Théberge focused attention instead on the importance copyright plays in promoting the public interest, and emphasized that the dissemination of artistic works is central to developing a robustly cultured and intellectual public domain. As noted by Professor David Vaver, both protection and access must be sensitively balanced in order to achieve this goal: Intellectual Property Law: Copyright, Patents, Trade-marks (2nd ed. 2011), at p. 60.

This is exactly the problem with the current trend. I strongly believe that interests of the public should be completely irrelevant to copyright laws and copyright policy. Whether copyright laws provide any benefits as a “fortunate by-product” or they actually hurt the public does not really matter. What matters is whether those who create something that had not existed before have a chance to offer it to the public on THEIR terms, rather than being forced in a situation where they should either not disclose it to the public or expect the public to dictate such terms.

Notice the difference between a situation when the market forces a manufacturer to lower prices not to be squeezed out by the competition (as in copyright owners voluntarily adopting new models depending on granting access to their works for free) and a situation when the government adopts laws that say that those who really want or need to use the manufacturer’s product are entitled to steal from the manufacturer, but no more than 20% of the manufacturer’s total output (as in the government telling copyright owners they cannot sell their works because the public should have the “user right” to use them for free).

No matter what the Supreme Court of Canada says, copyright is not about access. It’s not about dissemination. It’s not about the royalties. The only thing that copyright is about is control. Take away control and you have slavery, because then the author is in no position to decide on which conditions to offer the results of his work to others. Whether it’s the public, the government or the collective society that decides it – it’s not the most important person in the equation, the author and the copyright owner.

My second big problem is that all five cases regarded copyright in the context of tariffs. Based on the false premise that copyright is about royalties, the Court seems to have used the following logic: “We have all these tariffs. If we decide that this action involves the use of this right recognized by the Copyright Act, then it would mean that it would fall under this or that tariff. Would that be a fair result?”

I understand that the cases WERE about tariffs, and that tariffs are an integral part of the copyright regime in Canada, but tariffs are merely an extension of exclusive rights that authors are supposed to voluntarily delegate to collective societies. Just because a collective society adopted a tariff royally approved by the Copyright Board does not create or destroy exclusive rights.

In Supreme Court’s reasons, however, the underlying assumption seems to be that the only purpose of authors’ existence is to provide an opportunity for the collective societies to apply tariffs.

This goes back to the priority of the interests of an individual over the collective.

Finally, Supreme Court further expanded fair dealing. Not only did it endorse the horrific idea of “user rights” previously found in CCH, it went far and beyond by removing even those scarce limitations of what the public could do to exclusive rights of copyright owners if the public feels like it.

In my opinion, most categories of fair dealing should be reduced to presumptions, which a copyright owner can rebut by declaring that the copyright owner does not grant the right to use his works for such purposes that the Copyright Act presumptively considers “fair”.

For example, why do we assume that a library should have the right to carry every single book it feels would benefit the community? Why cannot there be a situation when a copyright owner chooses to disallow libraries to carry the copyright owner’s books? This would happen in dismally small number of cases, so fair dealing would play the role in facilitating the dealings that are supposedly fair. But just because most copyright owners would be OK with such use does not mean that ALL of them would be. Individual rights are not about averages, they are about individuals.

Very seldom a use is truly fair if the copyright owner openly opposes it.

Same goes for the education. Why do we assume that the purpose of educating the next generation of students justifies robbing the current generation of authors and copyright owners of their right to decide if they want to allow teachers to distribute copies of their works to students without paying for it?

In summary, this is a very sad day for Canada. Not because greedy collective societies and big corporations will be able to grab less cash from the “working people” and the “less fortunate among us”. Not because a certain provision of the Copyright Act was interpreted to mean one thing, and not the other.

It is a sad day because it confirms the shift in the paradigm – from protecting individual rights against being infringed by other individuals or the mob, we are “progressively” drifting to laws that are subjecting rights of each individual to the mythical interests of the “whole”.

I have not only studied history, I’ve lived the socialist nightmare. Those of you who think that government-sponsored mass murders can never happen in Canada, think again.

No, just because the Supreme Court of Canada recognized that the fair dealing exception for the purpose of private study also covers non-private study will not be the cause of the government rounding up millions of Canadians and shooting them in the head. But that’s what progressivism is all about. Slowly changing the paradigm. Slowly robbing individuals of their rights… until one day they realize that ALL of their rights are now subject to whether they benefit the rest of the “collective”.

Those cheering today for the victory of the “users” are cheering for their own destruction as holders of individual rights, whatever these rights may be.

Many people find it ironic when I say that Canada tends to have very little respect for intellectual property.

Hinting on my Russian background, they counter, “Yeah, right, how about this huge Russian torrents website, where you can get pretty much anything you want for free and with impunity?”

Indeed, this may seem like a contradiction at the first sight. However, not really.

While Russia’s piracy rates are huge, I’ve always felt that there the majority of people know that they are doing something wrong when they are downloading other people’s works without authorization. It’s more of an “I’m a bad boy, and I know it” kind of attitude.

Things are different in Canada. Here, the attitude is: It benefits the great majority of the public to have free access to this work, hence it should not be illegal for me to download it, even if the copyright owner protests.”

While taking something that belongs to another without permission is bad enough, I strongly believe that it is much worse to do it under the false pretense that there is nothing wrong with doing it.

It’s bad enough when a bully takes away a toy from a child. It’s much worse when the bully’s parents find a myriad of reasons why it was OK for the bully to do it and why the child should have shared the toy with the bully in the first place.

Of all the IP lawyers I know who are openly advocating for radical changes in the copyright system, William Patry is the only one who is not afraid to dig deep. Instead of founding his arguments upon novel interpretations of some obscure subparagraphs of legislative provisions or dictas in 18th century case law, Patry starts where any meaningful discussion about copyright should start – with the question why, why do we have copyright laws at all.

While I vehemently disagree with his conclusions and proposals, I have tremendous respect for Mr. Patry because, unlike most of those who agree with the substance of his proposals, he openly declares his goals and reasons, not hiding behind some illusory goal of pleasing everybody. It is an honour to have such an opponent in this philosophical debate.

William Patry has recently published his new book, “How to Fix Copyright”. In it he explains why today’s copyright laws make no sense, goes back to the foundations of copyright and asks the inevitable question why, offers an answer to that question and makes several proposals based on that answer.

Ironically, I tend to agree with most of what Patry wrote in his book. A great deal of it is nothing but brilliant and very useful. In fact, I wholeheartedly recommend it to both supporters of “stronger” copyright laws and destroyers of copyright.

As I mentioned, I disagree with Patry’s answer to the why question and, subsequently, to his proposals with respect to how copyright should be fixed. In this review, I will first briefly outline my fundamental disagreements with Mr. Patry and then illustrate them with examples from his book.

 Big problems with Patry’s position

There are several big problems that I see in Patry’s position.

The most important one is that he believes that the reason for existence of copyright laws is to benefit the public the most. I have been saying this for years: copyright laws can only exist for one of two reasons: either they focus on protecting the interests of creators and investors while disregarding the potential consequences for the public; or they focus on protecting the interests of the public while providing to creators and investors the minimal level of protection required to ensure that the public has the most amount of new works to consume.

The idea of balancing these interests is insane, even though it became mainstream. I am well known for comparing it to an attempt to balance the interests of rapists and their victims in a single piece of legislation – it just doesn’t work that way… I will be returning to this metaphor throughout this article. If you feel offended, stop reading.

The reason I respect Patry’s position so much is that he understands that the balance model is nonsensical. The reason I disagree with Patry is that in this resulting dilemma between protecting the public or the creators, he sides with the public.

Patry is in fact advocating for the Soviet model of copyright law where creators had no control over the use of their works and were only entitled to “fair” remuneration. As I wrote in my article, “Copyright and the Great Socialist Degradation”, authors created many great works in the Soviet times. Lack of exclusive right to control the use of one’s works, as Patry rightly notices, does not necessarily cause authors to abstain from creating. The problem with this, of course, is, in the words of Ayn Rand, “the man who produces while others dispose of his product, is a slave”. By taking away from the copyright owners to right to decide on what terms their works are to be used by the public, we are essentially enslaving them.

Secondly, Patry correctly makes a distinction between what the laws are and what the laws should be (in hid opinion). He understands that in order to get to the a destination, one cannot rely on the laws as they are today. He is not afraid to offer suggestions that go beyond attempts to reinterpret the existing norms. Yes, somehow he draws support from old copyright laws, such as Statute of Anne, when it tends to benefit his position.

I have two issues with this approach. You cannot have it both ways. Either we disregard all existing and past laws in the search of the perfect solution, or we are bound by such existing and past laws. Relying on provisions of the 1710 act as the basis for one’s proposals in 2012 is no more genuine than claiming that whatever laws that are in existence today are the way they should remain for the next 300 years. On the other hand, one should not forget that the Statute of Anne was adopted in the pre-Adam Smith era of capitalism, when individual rights and freedoms meant little and when the laws were but a system of privileges granted to groups and individuals. To look to these laws for guidance as to the fundamental principles of today’s copyright is no more genuine than using slavery laws as the inspiration for today’s employment standards.

Thirdly, while Patry correctly states that law is not the solution to business problems, he at the same time advocates that the new laws he suggests will be a good way to force businesses to adopt “good” business models to replace the awful retrograde business models that copyright owners around the world currently use in reliance on the outdated copyright laws. Again, you cannot have it both ways.

You don’t fix broken business models by stealing from those who attempt to run them. Free markets do a much better job at educating those whose business models are antiquated. As I explained in my article “Failed Business Models of the Past, Eh?”, piracy distorts the markets and prevents businesses relying on traditional copyright models from properly evaluating their viability.

Fourthly, Patry’s proposals are based on the assumption that today’s laws somehow prevent businesses from adopting “good” business models. They don’t. Everyone is free to relinquish control over the use of their works, and many have done so. Just because someone is prepared to give up control does not mean that the right to control should be taken away from others by force. Just because someone may be willing to pay more in taxes does not mean that everybody else should be taxed more. Even is someone (even a great majority) is prepared to sacrifice their firstborns in the name of some “higher” purpose does not mean that those who do not should be forced to do the same.

These are the big points on which we disagree. Below, I will illustrate this with specific examples from Patry’s book.read more…