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March 09, 2007

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» Law and Switching Costs from Werblog
University of Chicago law professor Randy Picker hits on a significant issue in his blog entry on the legal aspects of switching costs. As more an more of our data resides in the cloud, who controls it? And what are... [Read More]

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Erasmussimo

What makes the interoperability issue so difficult is the impossibility of predicting whether a given product will become a standard. A software designer with an idea for a new product has no idea whether his product will crash and burn or blast off and become The World Standard. Moreover, building it for interoperability slows it down, makes it clumsier, and raises the cost of development and deployment. Therefore, the designer ends up ignoring interoperability considerations.

Then, a few years later, he discovers that his product is in fact The World Standard, and lots of people are copying his idea and there are all manner of interoperability issues. Mr. Software Designer is really torn. On the one hand, a lot of his users have their IP on his product, and he knows he has an ethical if not legal responsibility to give them control over their IP. On the other hand, if they migrate to a competitor, it's because the competitor has stolen Mr. Software Designer's IP -- why should he assist them?

The problem here is that the IP created by the consumer has mixed ownership. It was created by the consumer, but using the IP of Mr. Software Developer. For legal purposes, we'd love to have a nice way to disentangle the two IPs so that we can allocate rights cleanly, but in some cases, that simply isn't possible.

Here's an example: suppose our software developer has created an animated face display program. It allows the user to create an image of a human face. The user does so by adjusting various numbers that control the shape of the face. Suppose that one of those numbers is the "pinchiness" of the face. A face with a high value of "pinchiness" is a very pinched face, while a face with a low value of "pinchiness" is broad. Clearly, the consumer owns that number. But the number is only meaningful when interpreted by the software developer's algorithm. If we know that the pinchiness is 27, that doesn't mean a damn thing until you plug that number into the face display algorithm -- which is owned by the software developer. The real information here is owned by BOTH the software developer and the consumer, and if we separate the two, then what each individual owns is meaningless. The consumer owns a "27" -- not much of value there. The software developer owns an algorithm -- without data, that's meaningless, too.

The solution, of course, is for the software developer to take out patents on his work or keep it a trade secret. But such efforts obviate competition -- which is not good for the consumer. Still, we have already established the principles behind patents and I think that these principles should not be abandoned.

Doug Lay

>> Design choices that create unnecessary switching costs aren’t likely to be embraced by the law in the long run.

I'm not sure why the law should be "embracing" design choices at all, but I wonder if this offhand comment means you're finally seeing the writing on the wall regarding your foolish embrace of TPMs and the DMCA anti-circumvention provision.

I looked at Prof. Epstein's op/ed in the FT. Love the disclaimer the FT tacked on at the end. "Extensive ties with Microsoft" - they may as well have written "shill" across his forehead.

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