Sunday, August 26, 2012

Winners Shall be Losers

Would that every citizen, prior to receiving suffrage or any other rights, be required to understand the judicial system in the United States of America.  Such literacy might serve as a poignant calibration on the copious fallacies underpinning many of our social impulses.  We may realize that, as egregiously demonstrated this week, the media-hyped Apple v. Samsung case was not a "win" for Apple or a "loss" for Samsung (stay tuned as I show you the context for this argument in the following post), but rather, a huge loss for society all around.  Apple didn't invent the tablet and its "winning" patents - declared invalid when first submitted to the United States Patent Office and issued only with pathetic horse-trading - do not represent the Constitutional intent from which they spring. 

Article I, Section VIII:  Congress shall have the Power: To promote the Progress of Science and useful Arts, by securing for limited Times to Authors and Inventors the exclusive Right to their respective Writings and Discoveries;

Neither "Progress of Science" nor the "useful Arts" were served by the abuse of a Constitutional right (the only property right granted in the Constitution) perpetrated by both Apple and Samsung with their "rounded edge rectangles", their "rubber-banding screens displays" and their "perpetually moving finger slide-to-unlock" devices.  To be clear, the jury, held in willful ignorance on the error of the presumption that either party had valid, Constitutionally compliant patents, were correct in finding what they were asked to find.  Aided by an explicitly biased foreman who used an illegal standard of, "If this were my patent, could I defend it?," he led his juror colleagues down a path that is in direct conflict with the standard of obviousness and novelty set for the issuance of a patent.  Judge Lucy Koh's blatant, emotionally-charged abuse of the Judiciary, facilitated by her evisceration of complete consideration of the facts in a case with billions at stake around indecipherable claims and restricted evidence, created the illusion of justice while presiding over the miscarriage thereof.  And, with willfulness, she may add insult to injury by trebling the damages for an award in excess of Apple's ridiculous assertions.

Eager to create the stock market hyped illusion of winners and losers, headlines scream their adulation for Apple's alleged victory.  Investors, like the throngs in the ancient Coliseum filled with gladiatorial savagery, rise and applaud when they see the tyrannical emperor mete out faux justice.  But, behind this defiling of the goddess Justitia - not merely blindfolded but eyes gouged out - the throngs celebrate today only to illumine their crucifix-strewn Appian Way to a greater loss tomorrow.  We reward the proclaimed victor only to puzzle over the stench of the charred corpse of Constitutional intent.

First of all - this case is not over.  Appeals are likely.  Restraint of trade that would make the authors of the Sherman Act turn over in their graves is inevitable.  Reprisals are certain.  And both Apple and Samsung will undoubtedly face opportunist patent holders with equally un-Constitutional "innovation" estates who will seek to pile on to the abuse just rendered.  Jury Foreman Velvin Hogan (faux-inventor of an un-maintained, abandoned U.S. Patent 7,352,953 issued in 2008 for recording personal videos on a "disk drive") and Apple's CEO Tim Cook want us to think that this verdict is about teaching the elementary lesson that copying is wrong - incompatible with Apple's or America's "values".  Neither admit the reality that their complicity in the contravention of the Constitution is a more fundamental abuse.

In the fuller light of day, this case reminds me of a seemingly unrelated matter several years ago.  And, fair warning, the following may be the ONLY blog post you ever read in which I actually fully agree with former President George W. Bush, so you may want to print it out and frame it.  When Dubai Ports World sought to purchase Peninsular and Oriental Steam Navigation Company (P&O) in late 2005 and throughout 2006, they followed the law and came to the Committee on Foreign Investment in the United States (CFIUS) to seek approval.  With the acquisition of P&O, DPW would become a major port manager in New York, New Jersey, Philadelphia, Baltimore, New Orleans and Miami.  But eager to fan anti-Middle Eastern bigotry, Congress led by Senator Charles E. Schumer (D-NY), successfully blockaded the full deal ultimately letting the P&O U.S. port interests be transferred to AIG for an undisclosed amount.  In the name of "intelligence" and "security" and over President Bush's objections, the U.S. Congress decided to scuttle a transaction that posed no security risk.  Obviously, AIG's Global Investment Group's acumen for security exceeded that of a bona fide operator.

At the time of this transaction, I pointed out that the "win" for America was ultimately going to be our greater loss.  You see, the same United Arab Emirates (their name had a "branding problem" with the A-word) that allegedly made a reputable, trusted operator a "security risk" also serviced the U.S. Navy's 5th Fleet in that cozy, placid backwater of the Persian Gulf and the Gulf of Aden!  Zim Integrated Shipping Services, Isreal's largest shipping firm referred to DPW as an entity they were, "proud to be associated with" while New York activists saw DPW as the enemy.  The Jebel Ali port - the most frequented foreign port for the U.S. Navy - was safely managed by the people who couldn't be trusted in New York.  But here's the kicker.  DPW knew that its "loss" was mitigated by two fully anticipated gains.  First, in the final P&O transaction, they would sell the U.S. port operations to AIG's GIG (now proudly owned by the U.S. taxpayer, fixed income investors, and pension holders) for between $783 million and $1 billion.  Second, they knew their provisioning and security contract with the Navy was up for renewal and, not surprisingly, they'd make up their economic loss by liberally charging higher fees to the Department of Defense (in other words, the U.S. taxpayer). 

You see, in a world where our consumerism requires that 80% of our goods originate in ports we neither own nor in which we oversee security controlled by "foreign" operators, we pretend that our local ports must be safe.  This paradox suggests that: a) in their off-loading, contents like dirty bombs, drugs, or weapons become unsafe; and, b) we've had an impenetrable success on controlling port activities to keep guns and drugs out of our nation.  By proving our duplicity - extolling fair competition in Doha (in an Arab country safe enough for trade negotiators) only to sully our national honor by clarifying that fair doesn't apply if you're Muslim - we lost the money in the transaction and permanently entrenched a geopolitical racism for which we suffer a perpetual, self-inflicted moral blight. 

How do Dubai Ports World and the Apple faux victory meet in the same critique?  The answers are quite alarming.

First, both of these cases are built on false pretenses that clearly undermine a greater societal good.  By celebrating an arrogant hegemonic pretext we punish the foreigner and then applaud our local "victor".  By creating an illusion of conflict using unsubstantiated assumptions of superiority derived from our national institutions (the faultless U.S. Customs and infallible U.S. Patent Office, respectively), we laud justice while besmirching our constitutional foundation. 

Second, we create Kangaroo proceedings to publicly humiliate foreigners and explicitly violate our own jurisprudence standards which we would find intolerable in any other venue.  While we gag disclosure of substantive information material to a considered review, we bias the public with a ruse.  Remember, in the Apple v. Samsung case, the jury was invited to apply trade-dress standards to a patent case courtesy of an activist judge.  In DPW, our "national security" interests in the Persian Gulf were somehow less relevant than they are in, say, Baltimore.

Third, our self-inflicted injuries cost in both economic and moral consequence.  Apple (and other U.S. manufacturers) will lose through reprisal actions in other countries.  Apple's desperate attempt to move into television - the only chance that investors could ever get real investment returns for it's stratospheric valuation - will be blocked by companies and countries who actually own the patents on TV and display.  To maintain or grow their business operations, U.S. contractors in the Gulf region found it necessary to abandon their U.S. nexus and relocate their operations (and their tax liabilities) to foreign countries harming direct and indirect economic national interests in the wake of DPW.  While lauding "innovation" and "intelligence", we displayed pure contempt for both in both instances undermining any vestige of credibility.  And, when we face a profligate patent issuance system (for example the explosion of patents in China), we will see our economic growth horizons curtailed for two decades while they apply our own ill-advised standards against our own export interests.  Courtesy of Chuck Schumer's Congress and Lucy Koh's courtroom, we've celebrated an impotent skirmish while entirely losing any claim to moral imperative.

We all lost this week.  Samsung executives were correct in saying that the U.S. consumer will lose in the short term vis-à-vis technological options today and chilling innovation options tomorrow.  But the greater loss to the general public is the reinforcement of an institution - the U.S. patent system - that promotes counterfeit "invention" as a necessary utility for masquerading trade biases.  And, like the DPW case, the quintessential casualty is the collective admission that our much celebrated successes are not based on absolute merit and quality (under such a standard, our greatness would be, well… less great) but rather based on our conspiracy with our social institutions and their manifest ignorance.  Should we actually seek to play on a level field - one where knowledge and transparency were unqualified standards - we'd find that our capacity for collaboration and competition would be atrophied or entirely paralyzed.

Do yourself a favor.  Use your iPhone, Galaxy IIIS, HTC, or Nokia and Blackberry if they survive their own, self-inflicted corporate suicides to liberally infringe bogus U.S. patents, and Tweet, LinkedIn, Facebook, hyperlink, re-post, digg, or do whatever else you do to share this post with all your friends.  In our name and preying on our ignorance, this system will persist until We the People call for a More Perfect Union.  That won't happen in passive diffusion but can only emerge if we recognize that there's no honor in hollow victories.  While Justitia may be blinded for the moment, do her a favor and hold her hand so we can safely cross the road to more suitable future. 

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Thank you for your comment. I look forward to considering this in the expanding dialogue. Dave