Saturday, June 24, 2006

Two great stories make TIF's and patents the stuff of high drama

As I write this early Satursday aftertoon, the sun is shining, so get out and enjoy. Weather forecasters, however, are predicting it will grow dark and rainy, and if you're forced indoors, it's as good a time as ever to take on some great reading on a couple of disturbing topics.

The TIF Scam - The Chicago Reader's Ben Joravsky has another great article on how the Chicago's burgeoning tax increment financing districts are turning into a vast, corrupt quagmire that put the patronage hiring scandals currently hogging the front pages to shame. Originally designed to subsidize the revitalization of depressed areas, TIF's have become a giant - and legal - patronage system with billions of dollars at its disposal. Just last week, the Daley administration PR machine was greasing the skids for a renewal of the Central Loop TIF, currently siphoning off about $90,000,000 in property taxes a year, by announcing TIF's would help fund a billion dollar plan to construct 24 new Chicago schools.

As Joravsky explains, not only is this spending on tax-exempt properties a complete corruption of TIF's original purpose to encourage private development and expand the tax base, it is also a cynical shell game that still leaves the city's schools with hundreds of millions of dollars less than they would have received if the TIF's were abolished.

But wait, there's more!

Joravsky exposes how the corruption has now also captured state finances. Accordingly to Joravsky, the TIF's have lowered the city's tax commitment to schools below a mandated state threshhold, which the State of Illinois then makes up for, by Joravsky's estimate, to the tune of $112,000,000 in 2004.

So let's summarize:
1. TIF's, created to subsidize private development to expand the tax base, are now funding public development that pay no taxes.
2. TIF's, meant to be a temporary solution, are so addictive to politicians that not one is currently scheduled to be phased out.
3. Taxpayers get to pay for the TIF's twice, once through their property taxes, and then again through their state income taxes when the state steps in to reimburse city schools for property tax revenues lost through the TIF's.
4. Because of this shell game, politicians continue to cynically claim that they haven't raised taxes.

The New Ideas Trust - The current Business Week's cover story is an eye-opening look at the Intellectual Property empire currently being built by Microsoft's former head tech guru Nathan Myhrvold. It starts out bright and shiny and positive as it describes a brainstorming session where Myhrvold has brought together some of the most brilliant minds in the country to come up with ideas on how surgery can be improved. Then the camera pulls backs, and we see that everything they say is being monitored by a bank of patent lawyers, who snatch the ideas like so many soap bubbles in the air to transform them into patents that will be owned by Myhrvold's company, Intellectual Ventures. According to Business Week, Myhrvold has a billion dollar war chest with which he's already bought up thousands of patents.

This makes Myhrvoid the world's biggest patent troll. A patent troll is a company that holds or buys up patents which it has no intention of using - Myhrvoid proudly tells Business Week his company manufactures nothing - but uses the dormant patents to shake down companies, who may well have also come up with the same idea on their own, and who actually DO want to manufacture the products or create the services that are improved by the ideas in the patent. Think of SCO's spectacularly unsuccessful, but still damaging, effort to shut down Linux with patent troll litigation. Think also of the U.S.'s amazingly broken patent system, which hands out patents promiscuously for obvious business processes such as Amazon's patent for one-click shopping, where your credit number is remembered so you don't have to reinput it on subsequent visits.

Can a big lobbying push to extend the lives of patents be far behind? Big media companies have already eviscerated copyright law. Originally, copyright law was to make sure authors were compensated for their work. Authors, of course, have a mortal life; corporations, defined as "persons" under the law, do not. Even when corporations die, their assets merely get subsumed by another, succeeding corporation. Barring a complete collapse of society, corporate personhood is immortal. What our Founding Fathers defined as a "reasonable period" for copyright has been turned into perpetual ownership by a Congress hijacked by industry lobbyists. Under the current law's provisions, not a single work created after 1923 will enter the public domain until 2019, if then.

"Not invented here" used to be a slam at inept businessmen who couldn't recognize any good idea unless it came from within. "Only invented here" is the dark promise of Myhrvoid's brave new world - a single company that monopolizes invention, converting every possible idea into a patent that they have the exclusive rights to, which they then sit on until they can sue some company who actually has made a commitment to make the innovation real (Myhrvoid denies this is his intent, but 30% of his employees are patent lawyers), or, as is actually happening, he shakes down corporations for $50,000,000 (for now) "contributions" to be assured they won't be sued by his company. Can anyone believe that such an "Ideas Trust" will do anything other than constrict, perhaps fatally, America's capacity to innovate and compete?

To bring a famous quote from Al Capone up to date, "When I separate a guy from his money with a baseball bat, it's called extortion. When a lawyer does it, it's called Intellectual Property."

No comments: