Vienna Woods Law & Economics

From September 30 – October 1 of this year, I attended a conference entitled “The IP Platform: Supporting Inspiration and Innovation” that was sponsored by George Mason University School of Law’s Center for the Protection of Intellectual Property.  The extensive and impressive speaker’s list included a keynote speech by David Kappos, law professors from around the country, and innovators of all stripes.

The several panel discussions addressed intellectual property protection in general, and patent protection in particular. There was no dissent amongst the lawyers, professors, or creators regarding the economic engine that is intellectual property.  Having attended similar conferences over the years, I nodded absentmindedly to most of the comments about IP enforcement, economic incentives, piracy, and general bad behavior.

Upon reflection, two things stood out.

One, Morgan Reed, Executive Director of ACT The App Association, talked about the commodification of intellectual property.  He pointed out that once someone has bought a smartphone, any additional purchases related to that smartphone/mobile market were apps.  The device itself was an app delivery system.  For small innovative companies, he stressed the importance of a) creating a trademark/brand, b) services and support related to the brand, and c) employment agreements.  These practical business development pillars had not been articulated so clearly in other presentations.

Two, it appears that in order to make significant returns on any investment into IP or an IP driven company, a physical manifestation of the IP was crucial.  To prove my point, I want to talk about two speakers who were also creators – Marc Beeson a staff songwriter for Downtown Music Publishing and Garrett Brown the Oscar-winning Inventor of the Steadicam® Camera Stabilizer.  Both are in the entertainment business. Both created the products which return the money on which both live. One, Marc Beeson, is experiencing a severe decline in the returns on investment in the music industry, while Garrett Brown continues to receive royalties derived from the original patent for his camera stabilizer.

Professor Sean O’Connor of the University of Washington School of Law discussed and demonstrated the patent fueled history of the electric guitar, starting from George Beauchamp’s patent and the story of Charlie Christian.

Musicians, composers, publishers and affiliated industries lament the decline in music sales. Music streaming has increased, but returns to the composers and musicians have been abysmal.  According to Rolling Stone magazine, only 257 million albums were sold in any format in 2014, a drop of 11% from 2013.

The format that has been bucking the trend is vinyl records. In 2014, vinyl sold 9.2 million units.  By way of comparison, according to MBW analysis/Neilson Soundscan, in 2007, only 205,000 albums were sold.

The Kappos keynote contained a clue about what might explain the trend toward the physicality component of IP – its ecosystem.  Mr. Kappos quoted Brad Smith, the CEO of Intuit and said that functionality is not enough – emotion has to be built into the product.

According to an article entitled, “Here’s Why Music Lovers are Turning to Vinyl and Dropping Digital” by Meg Gibson on Time.com, what might be pushing this phenomenon is consumerism – people like others to know what they have and displaying ownership in public is a way of signaling identity.  According to Nik Pollinger who was quoted in the article “Making our taste in music visible has historically played an important role in such signalling for many people.”  This wasn’t discussed during the conference, but is worth considering as more and more arguments are being made to convert analog entertainment of all formats into digital equivalents.

Does the music delivery system, i.e., digital streaming, inhibit the emotions related to the music product?  Specifically, what do vinyl albums do that streaming does not?  Putting the digital genie back into an analog bottle may not be the answer, but in order for people to continue to invest in what appears to be an ephemeral industry, embedding the IP in a currently unknown or untested physical format may save the industry.

Stephen Haber, a professor at Stanford University and on the final panel, Innovation in IP Markets, addressed the positive trending relationship between national GDP and the strength of its IP rights. Ben Sheffner, VP of Legal Affairs at the Motion Picture Association of America said that any successful market economy must have 1) private property rights; 2) freedom of contract; and 3) rule of law to enforce these rights.

As many of us know, a good conference is one you leave with more questions than answers.  I think the attendees will have more than enough to think about until 2016.

Cynthia M. Gayton is an attorney practicing in Arlington, Virginia.  She is also an adjunct professor of engineering law at The George Washington University School of Engineering and Applied Sciences.  Her Linked-In page is here, and information about her law firm can be found here.  Ms. Gayton can be reached at cynthia_gayton@gayton-law.com.