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One thing Doctorow suggests is to remove anti-circumvention, thus allowing adversarial interoperability.
Is that a principle that is ethical in general?

Like is it ethical to put in my ToS that you get a free api but you can’t use it to make a competing service? I feel this is quite common

Anti-circumvention is the thing that makes it illegal to jailbreak something. Hitting a server's API is not part of it, I think.