May 27, 2009 | By Fred von Lohmann

Two New Books On Innovation Colliding With Law

We at EFF have long lamented that, too often, incumbent industry leaders use law as a weapon to quell disruptive innovators, to the detriment of competition, innovation, and the public. Here's how Larry Downes puts it in a recent Forbes interview about his forthcoming book due out in October, The Laws of Disruption:

Where innovators must improve is anticipating legal challenges at the heart of their products and services. These come not from the government but from competitors, who use the legal system to slow or stop the progress of innovations they don't like. The more radical the innovation, the more likely that traditional competitors will use the courts to slow or stop your progress. That's a natural consequence of the widening gap between technology's potential to change our lives and our ability to adapt quickly. The tendency for technological innovation to change the rules of an industry is invariably faster than the industry wants to change. Law is one of the principal weapons of resistance.

When it comes to using copyright law as a "weapon of resistance" against innovation, there are plenty of recent examples. Hollywood uses it (see, e.g., the lawsuits against the VCR, DVR). The music industry uses it (see, e.g., the lawsuits against the player piano, first MP3 player, P2P software). Columbia Law Prof. Tim Wu has written the definitive essay on those battles, which are continuing all around us.

But it's worth remembering that it's not just the entertainment industry that has deployed copyright to block new market entrants who promise to bring valuable new tools to the public. Gary Reback, one of the most accomplished Silicon Valley lawyers of the last 20 years, has just published Free the Market, an excellent book covering some of the pivotal legal battles that have defined the competitive landscape among technology companies.

While the whole book is a good read, two chapters tell the story of the Lotus v. Borland case, where spreadsheet market leader Lotus sued upstart Borland, asserting the dangerous (and ultimately unsuccessful) legal theory that menu hierarchies are protected by copyright.

Forbidding the competitive use of Lotus's menus was not going to spur the creation of other software products. Just the opposite. Unless potential competitors could employ the Lotus menus, they would not even try to enter the market, all but eliminating the prospect of meaningful competition. Consumers would lose both the lower prices and the product improvements competition offered. [In ruling against Borland, Judge] Keeton denied the obvious. In the name of protecting innovation, he gave an entrenched company in a self-reinforcing market a strategic weapon, the legal power to crush a new generation of innovators and deny customers the benefits of competition. ...

Market incumbency automatically confers a formidable array of advantages--a well-recognized brand, user familiarity with the incumbent's product, long-standing relationships with corporate customers, an experienced engineering staff, and enormous financial resources. Borland accepted the challenge of competing against a dominant firm on these terms. The greater impediment to Borland's success came from a legal system that worked against market entry. Few challengers could ever muster the resources to weather years of litigation just for the privilege of competing on a playing field that already favored the incumbent.

If you want to know how it turned out for Borland, you'll have to read the book!


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