Felten on Property Rights Management

by Henry Farrell on August 14, 2006

This is a very interesting “post”:http://www.freedom-to-tinker.com/?p=1052:

bq. The second trend I identified in the talk was toward the use of DRM-like technologies on traditional physical products. … some printer makers have their printers do a cryptographic handshake with a chip in their cartridges, and they lock out third-party cartridges by programming the printers not to operate with cartridges that can’t do the secret handshake. … Doing this requires having some minimal level of computing functionality in both devices (e.g., the printer and cartridge). Moore’s Law is driving the size and price of that functionality to zero … so it will become economical to put secret-handshake functions into more and more products. Just as traditional DRM operates by limiting and controlling interoperation (i.e., compatibility) between digital products, these technologies will limit and control interoperation between ordinary products. We can call this Property Rights Management, or PRM. … A pen may refuse to dispense ink unless it’s being used with licensed paper. … A shoe may refuse to provide some features, such as high-tech cushioning of the sole, unless used with licensed shoelaces. …Will these things actually happen? I can’t say for sure. I chose these examples to illustrate how far PRM might go. …What we can say, I think, is that as PRM becomes practical in more product areas, its use will widen and we’ll face policy decisions about how to treat it.

There’s an economic case to be made that this would be efficient and promotes innovation (see “Austan Goolsbee”:http://www.nytimes.com/2006/04/27/technology/27scene.html?ex=1303790400&en=37d41d9406c1d512&ei=5090&partner=rssuserland&emc=rss in the _NYT_). I think that the negative distributional consequences (i.e. the transfer of bargaining power from consumers to producers that it would lead do) would be more important. Other opinions?

Update: Link to Felten’s post added. Duh.



Matt 08.14.06 at 9:58 am

There’s a cost to trying to enforce these rights– lawyers, patents, etc.– as well as the occasional public relations disaster when a company oversteps what, to it, is an invisible line between acceptable and unacceptable behavior. And do you really want your shoelaces to phone home every time you walk into a shoe store?


SamChevre 08.14.06 at 10:09 am

This case is one where the law matters. DRM is only popular with marketers of content because DMCA and copyright law make it nearly illegal to circumvent. If anyone can use DRM, and anyone who wants to circumvent DRM can do so (in other words, if the same law applied to music as to car parts), then there isn’t a huge transfer of bargaining power. The transfer of power is in the law, not in the technology.


rm 08.14.06 at 10:34 am

This is dystopian. It reminds me of the Phil Dick novel _Ubik_ where the hero, Joe Chip, has to deposit money to open his apartment door. When he runs out of cash, the door threatens to sue him.

It’s dystopian, so it probably will happen.


abb1 08.14.06 at 10:35 am

I read the NYT piece, and I found it unconvincing: how would making iTunes compatable with other mp3 players slow innovation? Au contraire, making iTunes compatable with other gadgets is innovation. And if it becomes a burden for Apple, they’ll sell it to someone else, that’s all there is to it. Wider application = faster innovation.


Peter 08.14.06 at 10:35 am

Felton’s blog is at http://www.freedom-to-tinker.com/

Lexmark tried this with printer cartridges.
Lexmark v Static Control is the case, and last I heard, they lost on appeal. I think they missed a deadline to appeal to the US Supreme Court.


France has an odd legal concept: private individuals may not possess encryption technology without disclosing the keys to the French government. Which is why many francophone users of windows software tell the software that they live in Quebec, so as to use 128+ bit encryption technology. Things may have changed in the last 2 years, since I stopped paying attention to the matter.

My opinion on the French issue with iTunes is that they are worried about Apple becoming the next Microsoft, and rather than have a nasty lawsuit down the road, head them off at the pass.


kth 08.14.06 at 10:44 am

If the product is better enough to offset the inconvenience/restriction to the consumer (like the DVD), consumers will go for it. But if there’s no direct benefit to the consumer (“this CD is just like the old ones, except it will install a rootkit on your computer”), they won’t.

In few, why would I want to buy a car which didn’t permit the installation of aftermarket parts? Especially since I’m sufficiently the free-market naif to assume that a non-PRMed option substitute (at worst, keeping my old car) would always exist.


Cranky Observer 08.14.06 at 10:52 am

> There’s an economic case to be made
> that this would be efficient and
> promotes innovation

Yes, because historically in the absence of competition in the laser printer toner market HP and Canon (the patent holder) were really driven to lower cost to the consumer and improve cartridge yield. It was only when low-cost, high-yield competitive cartridges appeared on the market that HP raised their cartridge prices to extortionate levels.

Oh wait…



bi 08.14.06 at 12:00 pm

kth: Of course, the next logical step is to outlaw all cars which allow installation of after-market parts, or cast aspersions on them.

On a related note, I’m not sure whether I should see trusted computing as a good or bad thing, but I get really miffed when people make veiled attempts to outlaw Linux using various bogus pretexts.

“[iTunes’] success comes largely from two crucial innovations. First, Apple’s music store is simple and works extremely well with the iPod. Find the music. Click ‘Buy It.’ Drag the files onto the iPod icon.”

Man, that’s some innovation. Like putting nice shiny buttons and boxes with rounded boxes on your windows. Or painting iMacs with different colours. If only we had more such “innovations”, we’d have been much much closer to utopia.


bi 08.14.06 at 12:01 pm

(The quote’s from the NYT article by the way, not the LWN article.)


C. L. Ball 08.14.06 at 4:02 pm

A shoe may refuse to provide some features, such as high-tech cushioning of the sole, unless used with licensed shoelaces

Actually, this would be an innovation. I’d finally be able to buy copies of the shoelaces that came with my shoes. Right now, virtually no retailer carries extra pairs of the shoelaces that come with the shoes they sell.

O course, PRM capability exists now — make hoses that only fit certain nozzles, specialized batteries, or watch-bands that use a non-standard mechanism (e.g., many Skagen watches) — but in most cases it not worth the hassle to capture such profits. By contrast, laser printer manufactures have developed a business model similar to video-game machine makers — the printer or player is sold below production cost and the profit is made on the toner cartridges or games.

Let’s face it, the next step would be to license the use of hardware in addition to software. So your car can be legally driven only by the single owner; otherwise, you would have to buy a multi-driver license from the manufacturer. This could be enforced using advanced biometric devices.


Matt Kuzma 08.14.06 at 5:48 pm

Recently I heard an article about television ad effectiveness dropping because increasing numbers of people are using TIVO and skipping the commercials. In response, said the article, some grocers were going to start selling ad space on eggs, for example. So now eggs could come emblazoned with an add for some product, painted on the shell of each individual egg.

I bring this up because I see this all as part of a great tug-of-war between vigilant consumers and clever companies. The companies try to take advantage of consumers in every way they can: advertise on eveything, even the shirts you buy for yourself, limit your options for compatibility and modification of products, force consumers to resupply their devices only by going through you for the highest price, and the list goes on. And vigiliant consumers try to ensure that they’re getting the best product for their money. We don’t buy products that limit our options, that require us to divulge our personal information, that allow companies to advertise to us in our own homes, that force us into a monopoly with the original vendor rather than going to the open market for parts.

If consumers as a whole are vigilant enough, eggs won’t come covered in ads because those eggs will languish on shelves unbought. And when all egg-producers band together to switch to ad-eggs, they’ll be slapped by anti-trust. But this all requires a vigilant populace, much in the way corrupt government required a vigilan populace to thwart it.


albert 08.14.06 at 5:59 pm

A shoe may refuse to provide some features, such as high-tech cushioning of the sole, unless used with licensed shoelaces

>Actually, this would be an innovation.

Yes, but I can also see shoe companies not manufacturing enough laces to enourage people buy new shoes when their laces break. A whole new form of planned obsolescence.


Bernard Yomtov 08.14.06 at 6:01 pm

If consumers as a whole are vigilant enough, eggs won’t come covered in ads because those eggs will languish on shelves unbought.

Not if the egg ads are effective enough. Then ad eggs will be cheaper, or free, like broadcast TV.

I don’t think the ads will be effective, but I can imagine getting a premium price for eggs with some people’s faces printed on them. For a few cents extra you get to smash [fill in politician of choice] when you crack the egg.


Cranky Observer 08.14.06 at 8:17 pm

> I bring this up because I see this all as
> part of a great tug-of-war between vigilant
> consumers and clever companies.

The typical consumer goods company has hundreds if not thousands of people working 70 hours weeks using the most sophisticated research, tools, etc. known to man to persuade (generous interpretation) or trick (more reasonable interpretation) the consumer into buying its product. The consumer has about 7 seconds at the grocery store (or 7 minutes if considering a big ticket item) to make a choice. How do you think this tug-of-war will come out?



bad Jim 08.14.06 at 10:43 pm

The popularity of pirate regalia may be evidence of a self-consious countercurrent, or just another Southern Californian fad. The young adults I know are enthusiastic audio and video downloaders and militantly disrespectful of intellectual property rights.

My new Verizon-branded RAZR phone has much of its USB functionality disabled, in order to compel me to share a few shekels with the phone company should I ever want to send a photo or acquire a ringtone (which I haven’t yet). A few minutes’ googling found tools to circumvent the crippling by flipping a couple of bits in the flash memory.

With so many young, energetic and clever people ranged against them, I don’t think I’d bet on the eventual success of anyone relying on DRM to protect their IP. Distribution models which don’t actually disadvantage their most ardent consumers are more likely to prevail.


Rob Knight 08.15.06 at 4:40 am

A pen may refuse to dispense ink unless it’s being used with licensed paper

But who is going to buy those pens? Pens are easy and cheap to manufacture, so there will never be a shortage of suppliers offering ‘universal pens’ which work on all traditional writing surfaces.

A shoe may refuse to provide some features, such as high-tech cushioning of the sole, unless used with licensed shoelaces

This is only sustainable if the advantages of the high-tech cushioning outweigh the restrictions on laces (in other words, if the customer continues to get better value-for-money from that shoe as compared to rival products). A combination of poor shoe design and lace restrictions would lead to extremely poor sales, so the lace restrictions only become viable if shoe quality is high enough (again, relative to the other competing products).

Let’s go back to the printer cartridge problem, since that has some basis in the present. It is possible that a printer company might be able to offer consumers better deals by tying them into a particular brand of ink cartridge – it enables the manufacturer to predict future cartridge demand based on sales of printers, which improves their efficiency and lowers their costs. They can then pass this saving on to the consumer and everyone wins. The purchase of a printer essentially acts as a future bulk order of cartridges (with payment deferred) and so you get a similar discount effect on the price per cartridge. (I think this is the point that was obliquely made in the original post, and missed by Cranky @ #7).

In the absence of such a saving, why would any consumer buy a printer that tied them into a deal where they were forced to pay over the odds for cartridges? Brand loyalty, exposure to advertising and so forth must be factors for consideration. But I would think that, in the printer market, many of the purchasing decisions will be made by companies, not individuals. In small companies, the decision will probably be made by an IT manager who is likely to be reasonably well aware of the issues and in regular contact with other IT managers (via mailing lists, forums, industry publications and the like). Since IT people talk to each other, they would quickly identify which printers were bad value for money and which were not. The internet provides an easy means for this information to be widely disseminated and fed into decision-making processes worldwide. A company which gets caught out trying to tie its customers into seriously bad deals is going to suffer a fall in sales.

None of this necessarily precludes the very real negative possibilities here, but I think we need some better examples than ‘omg they might make a pen that only writes on certain paper!!1122’. And the call for ‘policy choices’ is distinctly worrying; on past form, the choice most likely to be taken by government is ‘bend over and give big business whatever it wants’!

Final point, re Matt @ #11: I would certainly choose to buy the eggs with ads, happy in the knowledge that some idiot corporation has subsidised my egg purchase by paying for ads that I won’t bother looking at.


bi 08.15.06 at 5:07 am

Cranky Observer: But you also have to take into account things like organizational snafus. If you stare hard enough, you may find that the “hundreds if not thousands of people” turn out to be just a small number of astrologers and voodoo priests and alchemists who eat a lot and use state-of-the-art market analysis techniques based on wackology. So I guess I’m hopeful, but not too hopeful.


Cranky Observer 08.15.06 at 7:18 am

> So I guess I’m hopeful, but not too hopeful.

Having worked for a consumer goods company, I will agree with you that much of what goes on in the market research and advertising departements is in fact money-wasting pseudo-religion, but that some is not. And what isn’t is still 1000x more than what any except the most fanatical and dedicated individual buyer can bring to the table in terms of research and information. Hint: 99.9% of American buyers are not “fanatical and dedicated”.



Tom Giovanetti 08.15.06 at 5:20 pm

There’s a certain logic to allowing manufacturers to ensure the compatibility of parts, such as in the auto biz, where Toyota is already able to detect whether you installed a certified part by having chips emplanted in the parts, which are authenticated by the on-board computer.

For instance, who gets sued if an accident in a Toyota is caused by a faulty or counterfeit part? Toyota does. So don’t they have the right to ensure that the part is compatible, or at least to build a historical record that the owner installed non-certified parts?

It’s the litigiousness of our society that drives at least part of this.

But what is the alternative to companies exercising their existing rights to do these sorts of things? Some weird new antitrust doctrine that assume that every product is a platform for anti-trust enforcement, and that manufacturers are forbidden from taking steps to ensure that they maintain a dominant market share on their own product? I think that would be far worse.


tzs 08.15.06 at 6:51 pm

Limited value in hardware. If you make it impossible for third-party add-ons, you render the value of your equipment less. We had this problem with interfacing with a certain microscope by company X. We were unable to put a widget between part A and part B because A and B were talking to each other.

…guess why we decided to design to interface with competing microscopes instead?


bi 08.17.06 at 3:42 am

Tom Giovanetti: What? People bring on stupid lawsuits, therefore in addition to the protection against stupid lawsuits that companies already enjoy, we should give companies the God-given “right” to sell things as whole enchiladas?

So e.g. Liebeck scalded herself while drinking coffee, so she sued McDonald’s. Now McDonald’s lost the lawsuit, of course — but how could it have protected itself with futuristic PRM technology? Let’s see: Liebeck was seated in a car and wearing cotton sweatpants which absorbed the hot coffee. If only the car she was in, and the pants she was wearing, had guarded her against her act of opening the cup in that fashion, then this whole nonsense wouldn’t have happened. The way forward is clear: anyone who wants to drink McDonald’s coffee in a car wearing cotton sweatpants, should only be allowed to do so if she were seated in a McDonald’s-certified car, and wearing McDonald’s-certified cotton sweatpants. Best to make sure she lives in a McDonald’s-certified house too, in case she starts drinking coffee and then there’s an earthquake or something.

Comments on this entry are closed.