Age of the Winklevi

Vanity Fair published a piece this week on a lawsuit against the Huffington Post by two Democratic political consultants “for failing to acknowledge what they claim was their critical role in the creation of the Huffington Post”. Politico reported the story about two months ago under the headline “2 Dems claim Arianna Huffington stole website idea”.winklevoss

Wait, what?  What exactly was the “idea” for the Huffingon Post?

According to VF, “[plaintiffs] Daou and Boyce say that they were the ones who conceived of ‘a Democratic equivalent of the Drudge Report'”.  If that doesn’t exactly sound like an idea you can steal, that’s because it isn’t.

The actual charge, reports Politico, is “that Huffington and partner Ken Lerer designed the website from a plan [Daou and Boyce] had presented them, and in doing so, violated a handshake agreement to work together.”

This is a strange case, and commenters are already expressing skepticism about the strength of the plaintiffs’ claim, but I’ll defer to lawyers on whether or not any contract was breached.

What disturbs me most about this case is how it’s been presented.  The idea for a liberal Drudge just is not the kind of idea that is protected by our intellectual property regime, and for good reason.  Though the case actually seems to revolve around breach of contract, you wouldn’t necessarily gather as much from how it’s presented in the media.  The Politico headline, in particular, obscures the real issue.

Why does this matter?  My fear is that in the age of constant suits over intellectual property (music, film), and high profile suits that may seem to be about intellectual property (against Facebook or Huffington), we might forget that not every idea is protected by law, and that that is a good thing! Ideas that are protected by law are rightfully the exception, not the rule.

Lawrence Lessig explains how to think about this in The Future of Ideas.  I wish everyone who read the Vanity Fair piece would also read this:

This is a hard fact for lawyers to understand (protected as they are by exclusionary rules such as the bar exam), but most of production in our society occurs without any guarantee of government protection. Starbucks didn’t get a government monopoly before it risked a great deal of capital to open coffee shops around the world. All it was assured was that people would have to pay for the coffee they sold; the idea of a high-quality coffee shop was free for others to take. Similarly, chip fabricators around the world invest billions in chip production plants, with no assurance from the government that another competitor won’t open a competing plant right next door.

In each of these cases, and in the vast majority of cases in a free economy, one person’s great idea is open for others to take. Burger King and McDonald’s; Peet’s Coffee and Starbucks; Peapod and Webvan. No doubt the first movers would like it if others couldn’t use their idea or if others wouldn’t notice their idea until long after a market is set. But it is in the nature of the limits on patent rights, and in the nature of transparency in the market, that innovators in the ordinary market can’t keep their good ideas to themselves.

Some protection for ideas, and a bit more for expression, is provided by the legal system. But this protection is incomplete or leaky. Perfect control is never its character.

Innovators nonetheless innovate. And they innovate because the return to them from deploying their new idea is high, even if others get the benefit of the new idea as well. Innovators don’t simply sit on their hands until a guaranteed return is offered; real capitalists invest and innovate with the understanding that competitors will be free to take their ideas and use them against the innovators.

Thus, rather than puzzling about why anyone would code for free systems, we might as well puzzle about why anyone would innovate without a government-granted monopoly to protect them. Indeed, history will teach that, at an earlier time, this was very much the view. Mercantilists believed that exclusive rights were needed before any investment made sense; the English monarchy at an earlier time protected many ordinary investments through a state-backed monopoly.

Free markets, however, function on a very different basis. We don’t grant every merchant a guaranteed market; we don’t reward every new marketing plan with a twenty-year monopoly; we don’t grant exclusive rights to each new way of doing business. In all these cases, because the market produces enough incentive on its own, the fact that others can free-ride doesn’t kill innovation. (The Future of Ideas, pgs 70-71)