Raymond L. Gifford

Raymond L. Grifford

- represented the McCain campaign at the "Intellectual Property Policy and the Presidential Election - A discussion on its future by Leading Policy" along with Ed Reines, senior partner at the law firm of Weil, Gotshal, and Manges (http://www.iptoday.com/news-article.asp?id=2828&type=ip)
- partner at the law firm of Kamlet, Shepherd & Reichert where he is head of the Communications, Internet and Intellectual Property practice area (http://www.ksrlaw.com/AttorneyPage.aspx?id=Gifford)
- most recently president of the Progress & Freedom Foundation, a conservative tech think tank (http://gtk8d.rmxpres.com/gtk8d/viewer/NoPopupRedirector.aspx?peid=c6992a8e-644f-4638-9836-cb60cca95872&shouldResize=False#)

Quotes:

"Standards in the Digital Age," by Raymond L. Gifford, PFF Progress on Point 12.2, March 31, 2005(http://www.ipcentral.info/print/)

"Proprietary standards have two principal strengths. First, a firm property right in a standard gives incentives to innovate and compete. This is so even if that right might even eventually be renounced. Second, proprietary standards economize on transaction costs by vesting the right with the party in the best position to decide what to do with the right. Presumably, the rights-holder will be able to best gauge how to use or implement a standard, and whether to “open” it up to encourage adoption of and innovation within the standard.

Non-proprietary standards have the strength of encouraging firms to innovate within or on top of the standard. TCP/IP – an open standard that forms the basis for the entire packet structure of the Internet – is a great example of a non-proprietary standard succeeding. Because firms know there is no proprietary claim going to be asserted with regard to TCP/IP, they can freely innovate and write on top of it, without fear of being held up or subject to later royalty demands.

At the same time, non-proprietary standards have a cost. Because no one stands to gain from improvement ofnon-proprietary standards, there is no incentive to innovate with the standard. The transition from IP4 to IP6 and beyond is an example of how an open, non-proprietary standard can become stagnant. Because no party stands to gain from innovation within an open, non-proprietary standard, no investment to innovating with the standard will be made. Furthermore, a “bad” non-proprietary standard creates unfortunate path dependence that leads to blind alleys and foreclosed innovation “above” the standard."

Open/Closed

There are fewer and fewer instances of completely closed standards in the digital space. Consumer demands for interoperability drive firms to more open standards. This is one of the drivers of “openness” – open standards increase adoption and the likelihood that a given standard will be adopted. It should be pointed out that whether or not royalties are paid to the rights’ holder in immaterial to the question of open standards. Thus, we witness so called-FRND and RAND terms throughout digital industries – openness is achieved but the property rights in the standard are still honored.

Open standards are not costless though. With open standards, you tend to trade off competition for the standard for competition within the standard. Some times this is necessary if a standard would not succeed but for its openness. Consumers properly fear lock in effects and being stranded on the wrong standard — think of all those poor owners of Betamax machines — and so the market may be driven to open standards because of consumer demand.

In some ways, we should be the most respectful of these closed, proprietary standards because they probably represent the best form of Schumpeterian competition for the standard – entailing big risk but promising enormous reward if successful. This is where we would expect the innovation to be the most pronounced and the integration to be the most beneficial.

Again, the great example of beneficial use of closed standards – though, to be sure, not everywhere – is Apple Computer, and its companion the iPod, which builds tightly integrated platforms and minimizes the openness of (some) of its standards. To be sure, the market has over time driven the relatively closed Apple standards toward openness. At the same time, a more “closed” standard then may have quality superiority over an open one. There is value for consumers in tight integration, and quality and interoperability within narrow parameters may be best maintained through closed, proprietary standards.

One thing is that public policy should not foreclose this option or condemn the closed standards play. Schumpeter and his love of competition for markets would smile at the audacity of digital business plays for closed, proprietary standards.

Open Source and Open Standards

Now, a key taxonomic distinction lies between open standards and open source. These are categories, to be sure, which overlap and share some similarities. In the end, open source and open standards are quite distinct. In my scheme, open source falls into the “open/proprietary” quadrant – to be sure close to the “non-proprietary” line, but entirely dependent on proprietary norms of copyright to achieve its ends. Open source – and its variety of licenses – is one way to achieve an openness of a sort. But open source should not obscure other attempts to achieve open standards through private ad hoc
consortia or formal standard setting bodies. Indeed, the prescriptive nature of the open source licenses suggests that open source is committed to a particular type of standards process, a particular type tightly prescribed business model and a particular type of standards imperialism.

Is the open source superior? Maybe, but we cannot say so with any metaphysical certainty. And, to be sure, we should leave other parties with the liberty and freedom to work within alternate models – to achieve openness, interoperability and consumer benefits." (pp.5-6)

"The Place for Property and Commons," by Raymond L. Gifford, PFF Progress on Point 12.17, September 13, 2005. (http://www.ipcentral.info/print/)

"That experience (historical analogy to the fight between the Tories and the Whigs), in my mind, shows that societies organized under norms of property tend to be more prosperous and enjoy more liberty than regimes where ownership is in common or at the will of the state." (p.4)

(…)

" (From my vantage, I see more ideologues among the commons adherents, but perhaps self-conscious evangelists like those in the Free Culture movement require such fidelity to an inner-orthodoxy. In the alternative, it might be that center-right libertarians like myself have become irredeemably corrupted by the consequentialism of the law & economics movement, and so have lost our natural rights sense about property.)" (p. 4)

"Intellectual Property and Innovation in the Digital World, by Raymond Gifford," Remarks at Digital Europe 2006, January 17, 2006. (http://www.ipcentral.info/print/)

"Thus, to get to some concrete examples, we see the U.S., a major creator of intellectual goods, strongly urging the protection of intellectual property; by contrast, we see countries that consume but do not create as much intellectual property urging the weakening of intangible rights. We see large companies with large patent portfolios, urging a continuation of the “mutually assured destruction” equilibrium of cross-licensing and pooling between firms, and also complaining about new business models of firms that just hold IPRs, labeling these firms “trolls.” By contrast, these would-be trolls argue that they are a new form of industrial organization, an outsourcing of the innovation function, if you will. We can, of course, get more detailed about the political economy struggles involved in IPR. The issues surrounding open source software – from a political economy perspective – involve the losers of the operating system standards war ganging up against the winner of that war, for perfectly understandable reasons, I might add. It only becomes objectionable when the next step is taken: to preference, by law, one software model over another in the name of a gauzy sense of “openness.”" (p.1)

"Thus, we have the political economy bottom line of intellectual property law: I like my rights and want them protected; I do not like your rights, and want them limited or eliminated.

But we have protections in current law against this quite natural behavior of countries, firms and individuals. Too strong IPRs are just as damaging to innovation as too weak of ones. Again, because we do not know the exactly right balance to strike between static and dynamic efficiency and between rights properly-defined and too-narrowly or too-broadly defined, we need certain legal doctrines as hedge against naked self interest in defining IPRs." (p.2)

(…)

The political economy pressure on intellectual property rights will not abate; rather it will increase as IPRs account for an increased share of nations’ economic output. While equilibira will exist – something like the mutually assured patent destruction now found between US tech companies – they are not optimal, and furthermore will be upset by the emergence of new business to models where firms exist only to hold patents. It is not a scandal that intellectual property law is driven by political economy pressures. It is simply reality.

In the end, policymakers should hesitate before engaging in wholesale reform of IPRs, looking to make improvements on the margin and where clear and agreed problems exist. However, private ordering should lead the way toward defining the contours and limits of intellectual property rights. This is because private ordering better understands the specific circumstances at hand, and is less prone to political economy manipulation. Now, in some ways, I am just avoiding the hard question: private ordering is much more difficult when rights are not well-defined. Nevertheless, changes to positive law should be approached with trepidation.

Our best hedge against the political economy pressures on intellectual property rights is humility toward changing them. Are IPRs good and necessary? The prudential judgment of most industrialized countries is that they should be respected. Is there room for improvement in those laws? Absolutely, and the economic forces made possible by the digital revolution will stretch and challenge current intellectual property law doctrines, and create uncertainty in the application of IPR. In the end, countries’ prosperity and level of innovation will be best served by honoring intellectual property rights, and improving them gradually and carefully." (p.2)