iPod, TiVo Would Never Make it To Market in 2011

Love your iPod, YouTube and your TiVo? If these technologies were developed today, they probably would be litigated right out of the marketplace.

Current copyright and patent regulations are suppressing innovation and hurting the economy, says a law professor who has written a book on the subject.

Michael Carrier of Rutgers Law School in New Jersey said the current copyright and patent systems inadvertently punish some of the most innovative companies.

“Right now the law is set up so you're pushing these really innovative technologies out of the marketplace,” said Carrier, author of “Innovation for the 21st Century: Harnessing the Power of Intellectual Property and Antitrust Law” (Oxford University Press, 2011).

For example, current copyright law states that the copyright holder is entitled to up to $150,000 in compensation every time his or her work is reproduced illegally, which could be fatal a blow to a small business . Furthermore, it has been ruled that a company that did not infringe on the copyright is still liable if it created technology that permitted others to illegally reproduce a copyrighted work. This allowed Viacom to sue YouTube for as much as $24 billion for helping users to copyrighted videos.

“That's just ludicrous,” Carrier told BusinessNewsDaily. “No one ever expected it to be billions of dollars in damages.”

While large companies like Google, which owns YouTube, have the funds and the clout to fight or settle such suits, small start-ups often end up like “carcasses on the side of the road” after copyright challenges. A company called Bolt, which offered a similar video-sharing service to YouTube, was forced to put itself up for sale after being sued by Universal Music for the unauthorized use of copyrighted videos.

“These laws affect small-business owners far more than the large,” said Carrier.

In terms of the patent system, the largest problem involves the pharmaceutical industry, Carrier said. Because legal ambiguity leaves both parties unsure whether a patent on a drug is valid, companies that make brand-name medications pay generic companies millions of dollars not to come out with a cheaper alternative. For example, Bayer AG paid Barr Industries Inc. $398 million not to produce a generic version of Cipro, an antibiotic used to counteract anthrax poisoning.

Ultimately, Carrier said, consumers suffer by paying higher prices for medications.

Carrier argues that much needs to be done to overhaul the copyright and patent systems for the sake of innovation, but that both Democrats and Republicans believe in the status quo.

“Everyone is marching in the wrong direction,” he said.

One small victory was a bill passed by the Senate March 8 that allows for challenges to a patent after it has already been granted, but Carrier contended the window to file such challenges needs to be much larger to really make an impact.

Many agree with Carrier that changes need to be made to copyrights and patents , although they may not draw the same conclusions. Brett Frischmann, a professor at Yeshiva University's Benjamin N. Cardozo School of Law, said Carrier makes many valid points but that the copyright restrictions don’t affect innovation on a wide scale. Rather, it is a certain class of technologies that feels the brunt of these restrictions.“Copyright and patents shape the kind of innovation that gets done,” Frischmann said.

For Frischmann, one of the biggest threats to innovation – especially for small business – is the possibility of restrictions on Internet neutrality that Congress is currently considering.

“One of the largest engines for innovation for small business has been the Internet,” said Frishmann.

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