Authors@Google: Kal Raustiala

FEMALE SPEAKER: Hi everyone, I'm Kat.
I am with the Authors@Google program here
at Google Los Angeles.
Welcome.
We're very happy to host professor Kal Raustiala today.
Professor Raustiala is a professor at UCLA Law School
and also a director at Ronald W. Burkle Center for
International Relations at UCLA.
Professor Raustiala is a graduate of Harvard Law
School, and he is also a frequent media contributor to
publications like "The Wall Street Journal," "The New
Yorker," "The New York Times," and "The Financial Times." His
latest book, written with Christopher Sprigman, is
called "The Knockoff Economy," and it was published in
September 2012, this year.
And we're very happy to have him today.
He's going to talk a little bit about how copying and
imitation actually spurs creativity and innovation.
Welcome, professor.
[APPLAUSE]
KAL RAUSTIALA: Thank you.
[APPLAUSE]
KAL RAUSTIALA: OK, thanks, everyone.
As Kat just said, this book, which I did write with a
co-author who teaches at UVA, is really about copyright,
patent, and how they connect to innovation and creativity,
so issues that I think would be of interest here at Google.
So I'm really glad to have the opportunity to come here.
I've never been to this building.
I've driven by it a million times.
So it's great to be here.
Let me start off with a few just basic points about what
we try to do in the book.
And then I'm going to run through some examples to give
you a taste.
But the basic gist of the book is that we are interested in
how copying affects the incentives to create and how
it helps sustain or undermine creativity.
So I think, as many of you know, the underlying idea
behind our intellectual property system is that
copying is bad for creativity.
That's the basic concept.
Copies usually out-compete originals because they're
cheaper than the originals.
And so we restrict that form of competition by awarding a
copyright or a patent.
I'm going to mostly talk about copyright today.
But we restrict that competition and give the
originator a window of time in which they have a monopoly
over that design.
So in the case of patent, it's 20 years.
In the case of copyright, it sort of depends, but it's
much, much longer.
So that's the basic gist of our system, and it's been that
way since the framers of the Constitution first put in a
clause about the need to promote progress in the useful
sciences and arts.
So that's the underlying concept.
So what we're interested in in this book is not whether or
not that's true.
We think that that's generally true, and we're generally
supportive of intellectual property.
Some people do actually argue for the abolition of copyright
and patent.
We don't really do that.
But we are interested in whether it's truly necessary
to have these copyrights and patents in place, these
monopoly rights protected by the government, to have those
in place to have sustained creativity.
When that's true, why it's true, to what degree it's
true, some of those sorts of questions.
And the way that we come at it in the book is a little bit
different than most work that's been done.
So a lot of people who look at these issues focus on things
like the music industry.
This has been a hot issue for a long time, really, ever
since Napster.
And so people have been really interested in, what happened
to the music industry, and is online
downloading a bad thing?
Most people say yes, some people say it's a
good thing, et cetera.
They debate it by looking at copyright-protected industries
or, increasingly, the film and television industries.
We don't really do that, though we do have an epilogue
at the end of the book about music.
What we do instead is look at industries that don't have
intellectual property protection, and we try to
understand what happens in those industries.
How do they operate?
How do they sustain their innovation?
And those industries are somewhat unusual.
So I'm going to start off today with one that I think
exemplifies sort of the flavor of the book.
And that's the fashion industry.
So I'm going to guess that a lot of you are not frequent
shoppers at Faviana.
Maybe you've been to other stores--
so Faviana actually does not even have a
brick-and-mortar store.
It's just a website.
They sell to other places.
And you directly order dresses.
But what's important about Faviana, and you can see from
this website, is its whole business
model is knocking off.
So typically, one of their big business areas are
girls going to a prom.
They go to one of these pictures, they say oh, I saw
Angelina Jolie on the red carpet at the Oscars last year
wearing this great dress.
I want to have that dress.
And then they can order it.
It's not the same dress.
It's going to be significantly cheaper.
It might be a few hundred dollars rather than a few
thousand dollars or maybe even tens of thousands of dollars
for the original.
It's not going to look exactly the same.
The material might not be exactly the same.
But it's a pretty close facsimile.
And that's their basic business model.
You can see similar sorts of things if you walk into
Forever 21.
Now, some of you may have done that.
So if you go into a Forever 21, you'll see lots of
examples of knocked-off designs.
And I want to pause for a moment just to explain what I
mean by a knockoff versus a counterfeit.
So if you buy a dress or a pair of sunglasses in a place
like Santee Alley downtown or Canal Street in New York, and
you see a fake label that says, like, Prada, or maybe
Prado, or some version like that, that's a counterfeit.
So what they're trying to do is say, hey, you think you're
buying this Prada handbag or pair of sunglasses, but you're
really not.
You're buying something else.
That's counterfeit, and that's really dealing with trademark
and the brand.
What we're talking about here is the actual design.
So the look of the dress that Angelina Jolie's wearing in
that picture, or Megan Fox, the way it's cut, the design,
the shape, et cetera--
those things are all completely legal to copy.
So the counterfeit example is absolutely illegal.
The design, however, is completely legal to copy.
And it's been that way in the United States forever.
We've never protected fashion designs from copying.
So the fashion industry has for decades operated without
any effective intellectual property protection over its
core product, which is the look of the actual--
and it's not just dresses, obviously.
Any kind of clothing, accessory, and so forth,
without any protection for that.
And what's interesting about that is it's a
pretty vibrant industry.
And I want to just take a moment just to say that
knocking off is not limited to companies like Faviana or, for
that matter, Forever 21.
So this is drawn from "US Weekly" a few months ago.
And you can find features like this in a lot of these kinds
of magazines.
So one actress is wearing the original.
One's wearing a copy.
The copy's always much cheaper.
I shouldn't say always--
often much cheaper.
It depends.
But typically, it is significantly cheaper.
And these kind of knockoffs are everywhere.
And since I mentioned Forever 21, I'll give you an example,
in a moment, of a Forever 21 example.
But so you can see these outfits look pretty similar.
From a distance, you could not tell the difference.
So these copies are quite similar.
Now again, just to step back to where I began, I think
you've all seen this warning.
And this warning gets at the underlying principles of our
system of intellectual property.
So why is it not only illegal but, in fact, a criminal
offense to make a copy?
Because we think that protecting against copies is
such a significant factor in our intellectual property
system that we have to police it in that way.
So that makes the fashion industry really unusual--
though it's only one chapter in the book, and I'll go
through some of the other examples.
It's not unique.
It's just unusual.
So I mentioned Forever 21.
So this is an example we talk about in "The Knockoff
Economy." So the dress on the left, I believe--
I can't even tell, because they look so much alike-- is
the original.
The one on the right is the Forever 21 version.
So the original sold for maybe $400 a few years ago.
The copy sold for about $40.
Paris Hilton wore the dress on David Letterman, and all of a
sudden, orders started flooding in to Forever 21.
It became a big thing.
But again, the designers could do absolutely
nothing about it.
That's just the way of the industry.
OK, so how does fashion work?
What makes it work as a system?
To make the point clear, why is it that this kind of
copying is not destroying the incentive to create in the
fashion industry in the way that our intellectual property
system supposes?
And I'll give you two basic answers.
There's a much longer version of this, obviously, in the
book, but two basic things to think about.
The first is that fashion has some special qualities that
are grounded in the fact that it is something that's
expressive and public and has a status component to it.
Now, a lot of us don't pay attention to fashion.
We don't really care about it.
That's sort of one end of the spectrum.
There's a middle group of people who do care a little
bit, and then there's a small group of
people who care a lot.
So people divide up in those ways.
For people who really care about fashion, this
status-expressive component is really significant for the
following reason.
So we've known for, really, centuries that things come
into style, and they go out of style.
So Shakespeare talked about the fashion wearing out more
apparel than the man in "Much Ado About Nothing."
And what Shakespeare was getting at was the idea that
you don't typically wear your clothes
until they're destroyed.
You wear them until you're kind of sick of them, or until
somebody tells you you've really got to
get rid of that thing.
And you get something new, or you just feel like it's time.
So that's how most of us change our clothes, for the
most part, especially in a place like the United States.
It's not because we're wearing them out.
It's because there's something new out there, some
new style out there.
So things come into style, they go out of style, that's
the fashion cycle.
That's been long recognized.
What's important, and I think relatively unrecognized--
this is what we emphasize in our book-- is that the freedom
to copy that flows from the fact that our copyright law
does not address fashion, means that that fashion cycle
can turn even faster.
And the reason that it turns even faster is that once a
dress like this comes into style and Forever 21 copies
it, now the original might have sold a few hundred, maybe
even a thousand, maybe a couple of thousand copies.
That's it.
But the copy sold tens of thousands, maybe hundreds of
thousands of versions.
So it spreads out into the marketplace very quickly.
And so now the people who spent $400 on the original
start to see, maybe, the girl down the street wearing the
$40 version.
And they're kind of annoyed about that, and they're
annoyed that it's everywhere.
And we spoke to the designers of this original dress, and
they were peeved.
And they talked about customers coming in and
complaining that they had chosen it for some event or a
bridesmaid's dress or whatever it might be, and now the
specialness had been destroyed by the copy.
So what effect does that have?
Well, it drives people to go and say, well, I want
something new.
I want something different.
I'm not going to keep wearing this dress anymore.
So in other words, it makes that
fashion cycle turn faster.
And so designers then have to offer something faster.
So in fashion, unlike technology, the new, new thing
is not better in any way.
It's just different.
Clothing doesn't improve in any meaningful way.
Sometimes people come up with a new fabric that repels heat
or water or something-- that's unusual.
Most of it is just sort of changes.
And so how you get people to get a new phone is you tell
them, hey, this newer phone has a million features that
your old phone didn't have, so get rid of your old phone.
With clothing, you have to have some other means to
induce that desire for consumers to buy.
And that's partly driven by the ability to copy.
And that relates to a second point, which is trends.
So if we think about the fashion industry, it's a
trend-driven industry.
There are trends, and if you read magazines like "US
Weekly" or "Vogue"--
again, I'm going to guess a lot of us don't.
But if you do, if you look in those, you'll see that
there'll be discussions of what's in style this season,
what's coming in next season, what was on the runway, et
cetera, et cetera.
So trends are a major part of fashion.
And if you think about a trend, a trend is just a
series of things that look alike.
That's what makes it a trend.
It's a bunch of things that are similar in some way.
So here again, the freedom to copy that our copyright system
allows the fashion industry also allows trends to develop.
And as those trends develop, they give people something to
latch onto if they want to be stylishly dressed.
So they could say, OK, the trend this season is X. I'm
going to follow X.
So it also helps with the kind of information gathering issue
for fashion consumers.
What is it you buy in a marketplace that offers
thousands of choices?
Trends help kind of define that.
So the bottom line is copying has a paradoxical effect in
the fashion industry.
It doesn't drive out creativity.
It actually promotes it.
It acts like this turbocharger, spinning that
fashion cycle faster and faster and leading designers
to come up with new designs even faster.
So far from destroying innovation, it's promoting it.
Now, fashion is not alone in doing that.
Here's an example of something I'm guessing a lot of you have
eaten at some point or another, right?
So the molten chocolate cake.
If you look at the world of cuisine, it's surprisingly
similar to the fashion world.
The molten chocolate cake, whether the recipe or the cake
itself, is unprotected by copyright or patent.
So for example, a recipe is, strictly speaking,
uncopyrightable.
So if you buy a cookbook, the cookbook is copyrightable.
And the stuff around the recipe, where the chef says,
well, I was vacationing in Tuscany, and I saw this
wonderful--
that kind of stuff is all copyrightable.
But the actual recipe itself is not.
So that's why you can go online to a place like
Epicurious or cooks.com or any of these websites and find
tons and tons of examples of recipes.
Totally legal.
Likewise, you can walk into a restaurant and
say, I love this dish.
And if you're a good chef, you can reverse engineer that
dish, figure out what the components are, what the
techniques are, and then make it yourself, and maybe even
serve it at the restaurant across the street.
Totally legal to do.
And as a result, things like this get invented and then
migrate around.
So there's a little bit of a dispute over who the true
inventor of the molten chocolate cake is.
But many people would place it in a restaurant on the Upper
East Side of Manhattan in sort of the late 1980s.
And now you can find this in Chili's.
And you can, in fact, find the Chili's recipe online.
You can find it in almost any restaurant today.
If you've had miso-glazed black cod--
I'm guessing some people have eaten that dish.
Somebody invented that somewhere in Japan, and it
spreads out.
And there are example after example like that.
So nothing stops the copying of cuisine.
Does it mean that copying has driven out
creativity in cuisine?
No.
I think actually the opposite.
I think today we live in probably the most creative
time ever for cuisine.
And there's incredibly inventive cooking going on.
So there's some very basic and delicious and excellent
cooking going on.
If any of you have been to Bazaar on La Cienega, you know
what I'm talking about, right?
So people are coming up with extremely creative dishes
using new techniques, in some cases.
And just as a footnote, some of those techniques can be
patented, but most aren't.
But the dishes themselves, as long as you can figure out how
to do it and you have the right tools, you
can recreate them.
So just like in the fashion world, the culinary world has
not been destroyed by copying.
And in fact, if you talk to chefs-- and in the book, we
discuss many examples and also quote from many of the chefs
that we interviewed, great chefs here and in New York.
And also, we draw on some other studies that looked at
places like Paris.
If you talk to chefs, they're very divided on this issue.
Some of them feel that they're artists, much like fashion
designers sometimes feel.
They're artists, and their art should be protected the same
as music would be protected, the same as poetry is
protected, the same as novels are protected, et cetera, et
cetera-- paintings.
Others think-- and I think this is the majority view--
that innovation is assisted by an open framework, which you
can view as roughly akin to a kind of open-source model of
innovation.
So rather than saying, I own this molten chocolate cake,
and you cannot copy it, or for that matter, produce anything
that's substantially similar, which is our legal standard
for copyright, to it, instead a lot of chefs believe that
the ability to share and to trade and to tweak and to
improve upon what others have done actually produces more
creativity and better products in the long run.
And that openness is promotive of innovation, not destructive
of innovation.
So the world of chefs is quite similar.
Let me just add one other point about chefs.
I mentioned Paris.
One of the things we talk about in the "The Knockoff
Economy" is a very interesting study by two people at MIT who
went and interviewed high-end chefs in Paris.
These are chefs that had Michelin-starred restaurants.
If you know about the Michelin system, you know even one star
is a huge deal.
So these all had at least one star or more.
And these chefs had a system of social norms amongst
themselves, so the study argued--
and we think it's a well-done study--
that constrain the types of copying that took place, but
really focused not so much on restricting copying but on how
you copied.
And the key issue is really attribution.
It was perfectly fine to copy a cake or much more elaborate
dishes, as long as you attributed it to the
originator.
So it's a little bit like the labeling issue I talked about
with fashion.
As long as you don't tweak the trademark, that's fine.
So I'll come back to this issue of brands
versus designs later.
This is a football formation.
Now again, football is not an industry we normally think of
as being driven by or undergirded by
intellectual property.
But actually, the NFL has been involved in a lot of IP cases.
They have huge investments in their brands.
They have very good and very high-priced lawyers.
They know all about intellectual property.
However, what they haven't done is been able to copyright
a formation, even though in theory, there is a category
for choreographic works in our copyright statute in the
United States.
And a football formation is a form of choreography.
It just happens to involve throwing a ball and hitting
people, rather than dancing on a stage.
But is choreographic.
No one's been able to successfully make this
argument to the copyright office.
But substantively, they're quite similar.
So put that aside for a moment.
The fact is, formations and plays are fully copyable.
Totally legal to copy a formation and play.
Now again, does that stop football coaches from coming
up with new formations?
No.
So we go through many examples in the book where we talk
about things like--
some of them are very simple, like the no-huddle offense,
where as it sort of suggests, there's no huddle.
You just go from play to play to play very quickly.
Quite effective.
To things that are more complicated and variants on a
theme, so the spread, the spread option, et cetera,
pioneered both at the college level, sometimes even at the
high school level, and in the NFL.
Now again, why is it that the ability to copy a formation
doesn't stop coaches or constrain them from creating
the way that our copyright system assumes in most cases?
We think the answer is really two-fold, and I'm going to
focus on one in particular.
The first is football is an intensely competitive
enterprise.
So particularly when you're talking about college football
and pro football, winning or losing a single
game is a big deal.
And especially if that game is something like the Super Bowl,
that's a career-winning issue.
There's also a powerful first-mover
advantage in football.
So if you think about a formation or a play, it's easy
to say, hey, I see this play, I understand it, I'm
going to copy it.
What's difficult to do is actually to get your team to
execute it well, and in some cases, to build the proper
team that can execute this type of play well.
So in other words, you may need bigger or smaller
players, faster players, different types of players.
That may take some time to recruit.
So that's a marginal issue, but it's not insignificant.
You also have to train.
You have to perfect it.
So there's a period of time between the moment a new play
is unveiled on a field and the time that competitors can
really use it to their advantage.
So economists call that first-mover advantage.
We see that in a lot of industries.
And here, that natural advantage, no laws involved in
that, gives enough of an incentive, especially in a
very competitive industry, for coaches to continue to create.
So here again, we see creativity coupled to copying,
and the two seem to fit very well together.
Now, is that a unique thing?
I'm going to argue that it's not.
I'm going to just play you something
quickly from this guy.
[VIDEO PLAYBACK]
-Good artists copy.
Great artists steal.
And we have always been shameless about
stealing great ideas.
[END VIDEO PLAYBACK]
KAL RAUSTIALA: OK, I don't know if you could hear the
first thing.
He thinks he's quoting Picasso.
It's not really clear that Picasso ever said this.
But he's saying, good artists copy, great artists steal, and
we at Apple have always been shameless about stealing.
Now, that was Steve Jobs in the '90s, I think roughly 1994
or so, when Apple was not quite what it is today.
And of course, their attitude--
in particular, his attitude--
about copying underwent quite a transformation as Apple's
size and influence grew.
I think you all are familiar with that.
But let me say a little bit about this issue of stealing
and copying in other arenas, and especially in technology.
So the examples that we talk about in the book are
obviously unusual ones.
So food, fashion, et cetera, these seem quite different
from something like inventing the iPad.
And they are, but there are some interesting similarities.
And I think when you step back a little bit and think about
it, one of the things that all of the examples that I've
given you so far feature is that there's a system, a kind
of ecology of innovation in which people can borrow from
what others have done and improve upon
it by refining it.
So we call that in the book tweaking versus pioneering.
So we kind of divide the world of innovation into two types--
tweakers and pioneers.
And I think for most people, their conventional
understanding of innovation is that you want big new ideas
that are pioneering.
And so people think about someone like Thomas Edison and
the light bulb, and that's the kind of
thing we want to promote.
That's why we have a patent system, to do that.
Now, if you stop and think about even that example,
Thomas Edison didn't really invent the light bulb.
So when he was putting out his light bulb, there were already
over a dozen examples of light bulbs in existence
that he drew upon.
What he did is he figured out a better filament, bamboo,
that worked a little bit better inside, so he was not
actually a pioneer in the way that our lore has it.
He was tweaking existing ideas and making them better and
making them workable.
Someone like Steve Jobs--
and I'm not limiting this to him at all.
He's just a high-profile example of this--
did a lot of the same things.
And I think a lot of innovation is of this sort.
Now obviously, it's a matter of degree.
But so I think most of you are probably familiar with this.
Not a great picture, but if you look at the top, you see
this crude early mouse.
And then at the bottom, you see a series
of early Apple mice.
So that top mouse is the one that was in the Xerox PARC
research facility that Steve Jobs visited in the late '70s
in a famous trip.
The ones at the bottom are some of his early, I would
say, tweaks of that mouse.
So if you think about both the graphical user interface, the
mouse, the whole way that we tend to think of computing
today, this is something that the early components could be
found at Xerox PARC, the things like this
kind of crude mouse.
And Jobs, being someone who, as he said, was shameless
about stealing, didn't hesitate to say, hey,
I really like that.
That's an amazing idea, but it's not
that wonderfully executed.
I'm going to execute it better.
And so over time, he slowly executed it better and better
and better.
And I think that's a good example of
the power of tweaking.
Now to do that, he had to copy some fundamental attributes.
And in those days, yes, patents were available for
hardware, but they were not nearly as thick or as commonly
given or as broad as they see today.
So if you were to try to do the equivalent in today's
legal climate, you would run into a thicket of patents.
And that's the phrase that lawyers often use-- "patent
thickets." There's so many of them in each component,
whatever it might be-- a mouse, a computer, the CPU--
thousands and thousands and thousands of patents
overlapping and interacting and causing barriers that you
have to overcome through licensing deals or worry about
being sued by a patent troll.
So there's a lot of difficulties involved in this
kind of basic improvement, which presupposes some degree
of copying.
Likewise in the copyright context.
Same kinds of thing.
And also, by the way, in the design context, when design
patents are at issue.
So in the Samsung-Apple litigation that's been going
on all over the world, with many different results--
I think most of you know, up in Silicon
Valley, Apple prevailed.
In other countries, it's been different.
So it varies.
There's been litigation in Korea, in Japan, in the
Netherlands, in the UK, et cetera.
But in those cases, what's at stake are a
number of design patents.
And a design patent is a very particular type of thing.
It is a patent, but it's over a design feature.
So the ones that often get talked about are things like
pinch-to-zoom.
But also included are the actual shape of the eye
pattern in the iPhone.
So I have an iPhone right here.
When you look at the shape, is there anything really special
about the shape?
Well, it's a rectangle.
It's got rounded corners.
And this is very similar to shape of the iPad.
The rectangle itself is not an unusual shape for content
consumption.
So here's another example of a rectangular content device.
Very basic.
I think when Moses brought the tablets down, they were also
rectangular.
So this is not a new idea.
It's a tweak on an existing idea.
Let's round the corners a little bit.
Let's do a few other things.
Let's put this big Home button here.
But that's it.
Nonetheless, Apple is claiming, and in some cases,
succeeding on claiming, that it has a design patent over
that particular shape--
I'm exaggerating only slightly--
with some certain kind of attributes.
And it's been able to uphold at least some of those against
Samsung, in certain cases.
So I think the big point to take home is that tweaking--
and the ability to tweak--
depends, in many cases, on the ability to copy.
So whether we're talking about industries where there's free
and legal copying like the fashion industry, or we're
talking about things like high technology, where there's not
free and legal copying, we still want to think about what
is the right balance between the ability to copy and
therefore to improve, to refine, and the protection
that is often needed so that innovators who are putting
money up, investing in their innovation, can reap the
proper reward.
Not a fair reward, but the reward that will keep them
innovating over time.
That is the critical issue.
So just to give you an example, I was in Shanghai a
couple weeks ago.
Now if you take a close look, you may notice that is not a
picture of an Apple on the back of that phone.
It's the Peach.
So I think as some of you know, in China today, there's
a vibrant, what's called the "shanzai," culture of copying
in which a lot of copying is taking place.
Now, this is a major issue for American companies.
And there's a lot of attention to it.
Since I'm at Google, I'll throw out one anecdote.
We tried to get on Facebook in our hotel in Shanghai, and you
know, just weren't really thinking, little jet lag.
Try to get on Facebook, not working, not working.
After the second time, a little message popped up on
the Google page saying, "In our experience, if you
continue to try to reach Facebook, your access to the
internet will be shut down." And we
stopped right after that.
And that was in a Western hotel.
So thank you, Google, for letting us know.
In any event, there's a lot of copying like this going on.
Now, some of it is just blatant mimicry.
But in some cases, there's some interesting innovation.
So for example, the dual SIM card cell phone.
So you have two SIM cards inside, and that way you can
have two phone numbers.
It can work in two jurisdictions, so this is a
big deal in China, where Hong Kong actually is treated
administratively quite differently
than the rest of China.
So in Shenzhen, right over the border, there are all these
factories where they're putting these things out.
And they are, in some cases, tweaking and improving.
So there's a vibrant world of that going on.
Now again, it is a problem to some degree, but it's also a
solution in a sense, because it's bringing us ideas that
hadn't existed before.
So I just want to come back to what I said a moment ago.
It's about a question of calibration and balance.
So we recognize-- and we talk about this, I think, pretty
forthrightly in "The Knockoff Economy"--
that copying has destructive effects.
That's why we have intellectual property laws.
But it also has productive effects.
It has an upside.
And that upside is often not appreciated fully.
So in part, the point of the book is to
say, there is an upside.
And moreover, in a world in which copying is ever more
common, like this, we want to understand copying, because
fighting it doesn't actually work very well.
Look at the music industry.
The music industry's been fighting copying through
copyright law for over a decade, and it has done very
little good for it.
I'll close on this note.
The music industry has, I think, failed miserably at
stemming the perils of copying for it.
Has that destroyed music?
Quite the opposite, right?
So if you think about music today from the point of view
of us as consumers, it's a golden age.
There's more music available, online and elsewhere, than
ever before.
So 20 years ago, you walked into the biggest record
store-- let's say Tower Records up on Sunset--
it didn't have 1/100th of what you could find in a second on
Amazon and iTunes and any number of
other legal music sites.
So from a consumer's point of view, there's tons of music,
great music, it's all out there, much more accessible,
much more easily found.
From a producer point of view, is it a worse situation?
Well, it depends.
If you ask certain acts who've be around for a long time,
they'll say, yes, it's terrible.
If you ask music industry executives, they'll tell you
it's horrible.
But if you ask musicians, it's divided.
So a lot of the same technologies that allow for
the basic idea of the internet, of digital
technologies, of home computing, all those things
that permitted online copying also permit production in your
bedroom with a couple of software packages of an entire
album that would have, in the past, required a studio,
expensive engineers, a distribution network, physical
shipping of discs to places, all of that.
Whereas today, you can do that on your own, and you see many
examples of this.
So music has been both enabled and disabled by these
disruptive technologies.
So even in the poster child for the perils of copying, the
music industry, it's a more mixed story than I think we
often acknowledge.
So I just want to close with that, to say it's not just
about unusual industries like the fashion industry.
There are important lessons, I think, to be drawn across
these industries.
And that's what we try to do in the book.
And I'm happy to talk about any of those or spin out any
of these connections in the Q&A.
So with that, I'm happy to take questions.
Should I take my own questions?
OK, sure.
AUDIENCE: Well, I was thinking in particular with the fashion
and the food industry, and one of the characteristics seemed
to be that innovation was relatively quick and
inexpensive.
You didn't have to invest a lot in designing a
new recipe or dress.
KAL RAUSTIALA: Absolutely.
AUDIENCE: Is that a characteristic of the areas
where copying works better than in places where you have
to invest a lot?
KAL RAUSTIALA: Yeah, that's a great question.
Yes, it is a characteristic.
And one of the things that we're careful to do is to
illustrate and to underscore the point you just made.
There is a spectrum of costs to creation.
So at one end of the spectrum, if we think of this across all
forms, we might put the pharmaceutical industry, where
there's maybe hundreds of billions of dollars of upfront
cost into a particular pharmaceutical.
Film can be almost as expensive.
You think about a movie like
"Avatar," incredibly expensive.
So that's one end of the spectrum.
The other end of the spectrum is something where something
pops into your head in a second.
That could include the music industry, which has always
been fully protected.
Certainly poetry, other forms of short-form
writing, and so forth.
But fashion and cuisine and others that we discussed have
that attribute.
So there is definitely a spectrum of cost.
Now the question is, what do we do with that fact?
Our current intellectual property system does
nothing with that.

If something falls under copyright, whether it's music,
film, whatever, we treat it the same way.
Likewise with patent.
We don't distinguish between the patent length for--
there are some minor doctrines that may allow for some
extension, in certain cases.
But for the most part, patents are 20 years for everything
regardless, and copyrights are life of the author,
that kind of thing.
It's the same.
So we don't really distinguish it.
So I think one thing that would be really useful is if
our intellectual property system had more fine-grain
calibration along those lines.
Now does that mean you can't learn anything from these
lower-investment examples?
I don't think so.
I think you have to be careful about the lessons you draw.
So you can't just simply kind of extrapolate.
So we don't look at the fashion industry and say, oh,
that means we can get rid of software patents, for example.
Though, actually, that might not be a bad idea.
But they don't flow from one another in any way.
But it does suggest that we need to be careful about those
sorts of things.
You're absolutely right.
I think if we think about the cost issue, though, we also
want to think about the benefit side.
And when we start thinking about benefits, this is a
bigger topic, but it's not so much what
you actually receive.
It's what you think you will receive through your
creativity or your innovation that spurs your moment of
creation, your investment in creation.
And I think we know from a lot of work in behavioral
economics that people are very bad at guessing in the future
how they will do.
So I know when I ask my students, how will you do on
the exam in this class?
They're all going to get an A. If you ask people who are
getting married, will you get divorced?
People say no, even though close to
50% will get divorced.
So we have optimism bias built into us.
And that optimism bias also plays out.
So cost is very important, but you also want to think about,
how are benefits distributed?
This is a bigger topic, but I'll leave it at that.
Other questions?

AUDIENCE: So the canonical example that you're using of
places where there's been a lot of fight about copying is
the music industry, but it occurs to me that the copying
they're talking about is more the counterfeit situation that
you described, versus the kind of institutionalized way of
doing knockoffs.
Like cover recordings of a same composer's work is
licensed, basically, automatically.
KAL RAUSTIALA: Correct.
AUDIENCE: So it's interesting to me that on the one hand,
they're fighting tooth-and-nail this one kind
of copying, but they're really good at benefiting from this
other kind.
I was wondering, are there examples of places where an
industry was harmed before they took on these kind of
copy protections?
Or is it mostly in places where the copy protections
became part of the business model, and then there was some
kind of tension?
KAL RAUSTIALA: Yeah, that's a really good question.
So first of all, on the issue of cover songs, just so
everyone understands.
So it's completely legal to make a cover
version of a song.
The story's actually really interesting.
We talk about it in the book.
It all stems from player pianos and player piano rolls
back in the early 20th century.
That was the hot technology at the time.
And as it was coming out, there was a lot of concern
about this company called the Aeolian Company, which maybe
was like the Google of its day.
It was the dominant company.
Everybody was a little bit worried about how much control
they would have.
And as a result, Congress, lobbied by Aeolian's
competitors, passed this law that basically said, you can
make a cover version of a song as long as you pay a certain
statutory amount.
So the cover has always been a part of recorded
music as we know it.
And by the way, there's no evidence that covers--
of which, again, there are many examples--
have in any way stopped or constrained
creativity by musicians.

It's hard to know how to come at that, but there's certainly
no evidence in favor of that proposition that we can find.
OK.
So you started off by saying that the online downloading
example is a little bit more like counterfeiting.
It is, in some ways.
But that's not the only way that copyright constrains
copying and music.
So if you think about sampling,
sampling is maybe a hybrid.
So you can take a short little signature bit of a song--
and this was much more common in the 1980s--
and plug it into your song, and that was perfectly legal
at the time.
The courts have rapidly constrained that to the point
where sampling is almost always illegal today.
Even three notes--
just three notes of another song-- have been held to be
illegal copying, infringing of the copyright in
the original song.
So that's an extreme understanding of it.
So it's just to say, yes, if you just think about a digital
file that you find on the Pirate Bay, or something,
that's one thing.
But there are many other gradations.
And again, we talk about this in greater detail.
The underlying question is really, as I understood it, is
were there industries where there wasn't copyright
protection, and then they gained it, and
did anything change?

There are some.
Architecture's a good example.
So you didn't used to be able to
protect the actual building.
So this building is pretty unusual, right?
Binoculars.
You don't often see that.
Until the Architectural Works Protection Act--
I can't remember the exact name of that statute-- went
in, I think, 1990, that changed it.
Now, are there more creative buildings today than there
were before then?
That's a judgment call I probably can't really make.
But my gut sense is no.
Not a big difference.
But you can also look cross-nationally.
So fashion is unprotectable in the United States, but it's
protected in Europe.
Is there a big difference in terms of creative designs in
European designers versus American designers?
Again, I don't think so.
The people who argue in favor of changing American law point
to the ways in which, for example, French law is more
protective of designers as artists, and that that's more
appropriate.
But they don't really point to the fact that the industry's
more vibrant, more successful, more
creative, or anything else.
So there aren't that many over time examples, but there are
cross-national examples, and I think they tend
to support our view.
AUDIENCE: So if the two classic industries described
as not having much copy protection are cuisine and
fashion, if they were in the process of potentially finding
out that they were about to come under, let's say, design
patent coverage, which they currently don't have.
So suppose they were going to find out they were going to
get this, what would be the reaction of the industry?
And how would the industry change if that turned out to
be successful?
KAL RAUSTIALA: Good question.
By the way, just to mention the other things we do talk
about in the book--
fonts, databases.
So databases are another one of these cross-national ones
where they're unprotected.
The content, the layout organization of the content,
unprotected in the United States, protected in Europe.
Our database industry is much more vibrant.
I mentioned fonts, financial innovations,
and stand-up comedy.
So those are some of the other ones we looked at.
But you're right, these are some core examples.
The best one is really fashion, because fashion,
that's actually a live issue right now, not for design
patent but for copyright.
So there was currently a bill introduced most recently by
Senator Schumer of New York to amend the copyright statute to
create a three-year quasi-copyright.
So it'd be very short and very specific, but it would allow
for protection of some of these dresses,
something like that.
It would allow for protection of the overall design of that
dress, again, something that was sort of quite similar.
So in other words, this kind of knocking off would be
illegal, this kind of exact knocking off.
Congress has considered this several times.
And in fact, if you go back to the Depression, you can find
examples of discussions about the perils of copying.
So we quote this in the book, a very interesting story in
"Time Magazine" from the 1930s called "Dress Wars," which was
all about the New York garment industry and the fact that
copying was happening so rapidly--
within 24 hours, somebody would copy a design from one
house to another house--
and how terrible that was.
At the time, there was something called the Fashion
Originators' Guild, which was what today we would consider
to be a kind of cartel, a cartel of
designers and retailers.
And that policed copying within its membership.
Ultimately, the Supreme Court said that's an illegal
restraint of trade.
It violates the antitrust laws.
It was overturned, 1941.
When it gets overturned, it's the middle of World War II.
People aren't that focused on fashion.
By the end of the war, the original head of the guild and
the leaders of the fashion industry in New York are
agitating before Congress to say, we need a Fashion
Protection Act, a copyright amendment, or else we're going
to lose hundreds of thousands of jobs and
we're going to be destroyed.
And they've been saying that ever since.
And again, it's continued to be, in many ways, a very
vibrant industry.
Now, that's not to say they won't get it this time.
So first of all, the industry itself is split.
So if you talk to people here in California, which is the
biggest center of garment manufacturing in the United
States, the California Fashion Association is totally opposed
to this bill.
The New York equivalent is in favor, and is in fact the
motive force behind it.
So there's a division amongst the industry about it.
If it were to pass, I think a lot of bad things would occur.
I don't think it'd be terrible, but I think there'd
be some bad things.
I think the main bad thing would be, you would have
litigation over these kinds of cases, which would be costly.
You would have to have a kind of pre-clearance, if you were
a designer.
And a lot of these are small mom-and-pop kind of
operations.
You'd have to have lawyers around or lawyers on contract
to come and say, well, would this be violative of--
you can find some differences, if you look closely.
These are not great images, but there are some
differences.
Would this be violative of that?
And you'd have to be consulted on it.
And then what happens if you weren't sure?
And you'd start to get the kind of clearance culture that
you see today in the film industry in this town, where
people are very worried about, in a documentary, let's say,
oh, if the TV's on in the background, we gotta get
license because they're playing "The Simpsons" or
something like that, or there's a work of art or
whatever hanging on the wall.
So I think it would lead to--
it would be a boon for lawyers, but I think it would
be costly for the industry.
And I think ultimately, it would lead to less vibrant and
more creative industry.
And the reason I think that is not that it's so terrible in
Europe, because it's not.
But Europe is a very different legal climate.
There are many fewer lawyers.
There are often loser-pays provisions.
So in other words, if I sue you because I think you're
copying me, but you win, now I have to pay all your fees.
We don't have that in the United States.
So that's a constraint on plaintiffs bringing cases.
And just in general, we're much more litigious, and there
are many other features, I think, that
make this more dangerous.
So I think the results would ultimately not be--
I think the cure would be worse than the disease.
Not that it wouldn't stop certain--
this is kind of an egregious example, and I feel bad for
the designers.
But I think at the end of the day, as a policy matter, we're
better off with this system.
So actually, we testified before Congress about this
very issue in opposition.
And my prediction is it's not going to go anywhere, because
it hasn't for 75 years.
But someday, it might, and I think it would be unfortunate.
Anything else?
Yes.
AUDIENCE: So one area that I think is kind of interesting
with this sort of thing is video games, where for some
types, like the web games, often a smaller company will
innovate, and then a bigger company will copy but with
better graphics and sort of lock out the smaller company,
like in the case of the "Farmville"-style games.
Then there's other areas, like first-person shooters, where
the smaller companies innovate and succeed based on that
because the bigger companies are fighting over best
graphics or best story or things that are peripheral to
the actual game.
And this sort of exists because rules to a game are
one of those things you can't copyright.
So I'm curious if there's other industries where whether
you're small or big matters to people's
attitudes about copying.
KAL RAUSTIALA: Yeah, that's interesting.
Video games were one of the things we wanted to look at,
and we just kind of ran out of time.
I think it's a really interesting area for it.
I do think smallness and bigness does matter.
So I just mentioned New York versus
California, in terms of apparel.
For the most part, the big names, the names that you see
advertised in, let's say, in "Vogue Magazine," are
concentrated in New York.
The LA apparel industry is different.
We tend to focus here on things like jeans--
virtually all denim products are made here in LA County--
sportswear, surfwear obviously, a lot of casual
clothing, often with labels that are not that well-known
or not that big.
So you could argue that that's an example where there's a
small/big kind of issue.
Now that said, the arguments that are often given in
Congress for apparel protection are that small
designers are hurt by the current system and would be
better off if they were protected.
Because they get swallowed by the big guy, who says--
Forever 21--
it was Foley & Corinna who were the designers for this
dress, small designers with a store in New
York and one in LA.
Not a big operation, a few million dollars a year, versus
Forever 21, which is a monster.
So that's often the way it's seen.
But I don't know that that's really true.
Because again, I think big companies have big lawyers,
and big lawyers know how to write letters
that intimidate others.
And so I'm not sure that that's actually
how it would work.
You know, in the culinary context, it's similar.
The people who really care about patent and copyright in
cuisine are not the chefs at great restaurants.
It's the people who own big food companies that sell
things like frozen foods.
So someone who kind of crossed over would be
like Wolfgang Puck.
So he started off with restaurants like the one down
the street.
But then he now has a gigantic empire, and those people tend
to start to care more, because they have bigger investments.
So I think there is a divide, but I think it's sort of
industry by industry.
It is an interesting issue.
And then it's an interesting question, do we always want to
protect small businesses versus big ones?
And if so, why?
That's across the board.
I don't think there's an obvious answer to that.
Yes.
AUDIENCE: So it seems like there's a couple things that
I've noticed that maybe color the copying, or aren't exactly
just sort of the act of copying,
that affect the situation.
Maybe in fashion, it's that the trademark
sometimes is the product.
With football and the small chefs, there's a big execution
component to it.
KAL RAUSTIALA: Absolutely.
AUDIENCE: The small chefs and the big food industries.
Are there other things like that, in other industries,
that affect the copying or the trade-offs?
KAL RAUSTIALA: Yeah.
Yeah.
I think just to riff on the execution point for a second,
that's a really good point.
So execution is really important.
And I think one of the points we make is that if you want to
protect yourself against copying, the more you can
shift your product from a digital or easily-copied
product-- especially a digital product--
to an analog product, the better off you are.

Another thing we talk about in the book, kind of at the end
of the chapter on food, is cocktails and high-end bars.
So those are a really good example, where bartenders have
a very open culture, again, a kind of quasi-open-source
environment for bartenders.
There's a lot of creativity in cocktails.
But the execution is really important.
But even more important is that when you get a drink,
it's really like-- sitting at a bar is like a live
performance venue.
That's really what it's about.
You could take that same exact drink and put it in your
cafeteria here, and you're not going to pay $12 for it.
You probably don't pay anything for your cafeteria.
[LAUGHTER]
KAL RAUSTIALA: But you know what I mean?
It's not the same thing.
And the same thing with restaurants.
It's not the same thing.
And so that live element is difficult to copy.
Same thing with music.
So one of the most successful areas of the music industry
right now is live performance.
And I think the ability to copy is pushing things more
and more into live performance.
And so that has advantages if you're concerned about ease of
copying in a world where bandwidth is increasing, and
you're just going to be able to kind of--
yes, you can record live concerts, but it's not the
same thing as being there.
So experiential factors become increasingly significant.
And that can play a role for a lot of industries.
So even the movie industry, it's under siege by the
ability to stream at home.
And obviously, all the torrent sites make it really easy.
But yet the Arclight Cinemas are doing really well and have
gone from being one location on Sunset Boulevard to now
having four, even though they charge almost double what the
national average is for a ticket.
Why is that?
I'm sure a lot of you have gone to the Arclight.
It's because you go, it's kind of special.
The seats are great, the viewing is
great, you get a drink.
It feels like an event.
It's not just a consumption of a digital product.
It's a live performance, even though it's not really a live
performance.
So all of those things, I think, make those industries
more successful.
So the more you can shift in that direction, towards
something where it's live and execution-oriented and
personalized, the better.
That doesn't work for everything, but it does work,
I think, for many industries, if you're creative about it.
Well, thank you, everyone.
[APPLAUSE]