Clvr.Tv
Rss Feed
Linkedin button

Category: Innovation


This is an excellent post on the inventor Charles Brush from the excellent blog Ice Dynamo.

Charles Francis Brush was born March 17, 1849 on his family’s farm – a farm not so different from those sprinkled across Bainbridge. You can imagine the bemusement of his parents – both farmers – when seemingly from infancy Charles showed an insatiable interest in electricity. He was a mere twelve when he built his first static electric machine.

He graduated college when he was twenty, and immediately went to work repaying his student loan, granted to him by his uncle. Charles spent his days selling iron ore and his nights devising a new dynamo – an early version of the electric generator. He was twenty-eight when his tireless efforts earned him his first patent.

As abundant and reliable as electricity is for us today, it’s hard to imagine what Brush’s dynamo meant for nineteenth century Americans. At the time, electricity was so inefficient and uneconomical that it little more than a novelty; what lighting existed was almost exclusively in the form of kerosene lamps.

The dynamo was a great achievement, but for Charles Brush, it was just a stepping stone. He envisioned a world lit by arc lights (a technology similar to light bulbs). That vision required not only economical electricity, but efficient and reliable arc lights. Once he’d completed his dynamo, he turned his focus to arc lights, and received his first of four patents in 1878.

Charles Brush loved his own life too much to relegate himself to thankless toil in an obscure lab. He was eager for the world to benefit from his genius, and wanted to be remunerated for his effort. Thus, in 1880 he established the Brush Electric Company. It was a herculean undertaking; he competed directly with Thomas Edison’s titan of a company, General Electric. Nevertheless, in a few short years Brush’s arc lights illuminated the streets of cities such as San Francisco, Montreal, Boston and New York. His hydroelectric power plant in Minneapolis was one of the first in the United States to generate electricity from water.

When Brush was 42, he merged his company with General Electric and retired to the mansion he’d built in Cleveland. His home included a private laboratory in the basement and the world’s first automatic wind turbine generator. Even in retirement, he never stopped investigating scientific phenomena.

Charles Brush’s inventions – such as his dynamo – were incredible machines, but they were so much more. Those inventions were the product of a child who was born with a singular purpose, and never let being an iconoclast stop him from pursuing that purpose. They are the result of a young man’s inexhaustible dedication to his work, and an industrialist’s fearless determination to bring light to the world.

Which brings us to the article’s title. My favorite author described machines as “the frozen form of a living intelligence.”

 
$120 Per Smartphone in Royalties – Outrageous!

An academic paper claims that the cost for royalties ($120 per phone) is about the same as the cost of the components in a smartphone.  This was accompanied by a number of articles suggesting this was outrageous and unsustainable.  For example see:

* High smartphone patent royalties undermine industry profitability: report 

* The $120 Smartphone Patent Tax: Patent Royalties Cost More Than The Actual Hardware In Your Phone:   This one from my favorite patent Luddite site, Techdirt.

* Smartphone royalties now equal manufacturing costs

The logical flaw underlying all these articles is that the value of products is determined by the amount of physical labor and/or the cost of the underlying materials.  On this basis, the actual material costs of a cell phone are probably less than $5 and the labor (unskilled labor in the US is worth perhaps $10/hr) involved in making the phone might be worth $5, let’s throw in $10 for distribution and the hard costs of a smartphone are about $20.[i]  The rest of the costs are the result of intellectual property, much of which is in the form of patents, but some is in the skilled labor, copyrights and trademarks.  The actual cost of the intellectual property in a smartphone is closer to $380.00.  Much of these costs are hidden.  For instance, when Intel sells a microprocessor they charge you $50, for example, but the labor cost and material cost of the microprocessor is pennies.  The reason they can charge $50 is because of the intellectual property, which means patents.  From an economic point of view you are paying a dollar or so for the manufacturing and $49 in patent royalties.

Another logical flaw in these articles is that this is an unsustainable business model.  First of all the underlying paper points out that sales of smartphones and tablets is now bigger than all the rest of the consumer electronics space, with over a billion smartphones sold in 2013.  Clearly the business model is not falling apart.  Second of all, the cost of Microsoft Office Home and Business 2013 is $219.00 and none of that is manufacturing cost.  The cost of Microsoft Office is essentially all IP (Patents, Copyrights, etc.).  Solidworks, which is 3D CAD software, cost $4000.00 and also has essentially no manufacturing costs, which means you are paying the equivalent of $4000 in royalties.  The argument that the model is unsustainable is absurd.

 

Actual Paper

The paper that started this economic stupidity is The Smartphone Royalty Stack: Surveying Royalty Demands for the Components Within Modern Smartphones.  The paper is clearly designed to sway public and Judicial opinion in a manner that will be beneficial for Intel.  Namely, Intel wants a patent system that emphasizes manufacturing, not inventing.  Another goal of the paper is to get courts to reduce the amount of royalties that inventors receive.

“In particular, there has been significant recent focus on “royalty stacking,” in which the cumulative demands of patent holders across the relevant technology or the device threaten to make it economically unviable to offer the product.”

This statement is absurd on its face, as the paper itself points out.

“The market for smartphones has exploded. Smartphones sales for 2013 topped one billion units globally for the first time ever.  In addition, global revenues for smartphone and tablet sales in 2013 are estimated to have surpassed for the first time revenues for the entire consumer electronics markets (e.g., televisions, audio equipment, cameras, and home appliances).”

Here is the real point that this paper is pushing:

“Further, the available data demonstrate a need for licensees to advocate and courts to rigorously apply methodologies for calculating royalties that focus on the actual value of a claimed invention put in context of the myriad other technologies in a smartphone and the components in which the technologies are implemented.”

I will admit that having courts set royalty rates is not ideal and the results can be squirrelly, which is why eBay  should be reversed.  The courts used to just prohibit the infringer from using the patented technology and then the parties had to work out a deal.  But the Supreme Court decided that enforcing the only right you get with your patent is an injunction – actually it is not an injunction it is an exclusion order requiring the infringer to not trespass on (use) the patent owner’s property.

The paper admits that its methodology is limited and the actual cash cost going to pay royalties could be higher or lower.  For instance, the paper does not track cross licensing, pass through, or patent exhaustion, all of which could significantly reduce the actual royalties paid.  They clearly made an error if they did not account for patent exhaustion.  If patent exhaustion was part of the royalty costs, then almost every high value component’s price is mainly due to patents.  Correctly accounting for patent exhaustion would show a royalty per smartphone closer to the $380.00 per phone as explained above.

The paper is just dishonest when discussing the growth in the number of patents issued and the number of patent lawsuits.  It shows in 20 years the number of patents issued in the US has increased from 100,000 per year to 250,000 per year.  The implication is that this is an absurd increase in the number of issued patents, but if you do the math this turns out to be a 4.75% annual increase, about the same as the increase in worldwide GDP over the same time period.  The paper also shows a graph depicting the number of patent lawsuits exploding around 2011.  This increase is due to the America Invents Act, which limited the joinder of defendants in patent lawsuits.  This has been well documented, as in the article  The America Invents Act at Work – The Major Cause for the Recent Rise in Patent Litigation.  The paper’s failure to point this out is just outright fraud.  The fraud is perpetrated again when the paper points to the increase in the number of NPE lawsuits.  These authors seem to have gotten their training from Al Gore and French economist Thomas Piketty.

 

 


[i] In fact you can buy cell phones for less $30.00 on the Internet.  The cost of materials in a smartphone and a $30 cell phone is essentially the same.  The material costs in a cell phone include the plastic which costs several cents, the metal for the conductors which might be worth a dollar, the silicon which in its raw form is worth almost nothing.

 
PATENT=MONOPOLY – A LEGAL FICTION

The authors (Sven Bostyn and Nicolas Petit) of this paper, PATENT=MONOPOLY – A LEGAL FICTION,  argue that patents are not a monopoly based on standard antitrust analysis.  It is very unusual for an academic paper to take such an unpopular position.  They must have not got the memo that the goal of all academics is to vilify inventors, patents, and property rights.  Below are some the lines I thought were interesting and my comments are below.

“No other IPR is so thoroughly examined and evaluated as a patent.”

No other property right is so expensive, time consuming and expensive to obtain title to.

“In 2011, approximately 1,000,000 patents were granted across the globe.  This would mean that 1,000,000 monopolies would have been created worldwide. This clearly, cannot be true.”

“Competition is very valuable, but innovation is probably equally, if not more, valuable.”

 

My main critique is that they did not explain how patents are a property right or the history of property rights and patents.  Under Locke’s theory of property rights, patents and copyrights are property rights – they are granted because of the creative effort (labor) of the inventor/author.  This was picked up by Sir William Blackstone in his Commentaries, where he affirms that patents and copyrights are property and therefore natural rights.  This was enshrined in the constitution as “securing for limited Times to Authors and Inventors the exclusive Right to their respective Writings and Discoveries.”

 
Gary Boone Inventor of the Microcontroller Dies at 68

Gary Boone invented the microcontroller while working at Texas Instrument in the early 1970s.  I had the good fortune to know Gary Boone in the later part of his life, he had a brilliant mind and was a good friend.  It is sad day for the electronics industry and my heart goes out to his family.

IEEE did an Oral History with Gary that was lost for over a decade. You can see the agility and brilliance of this great inventor’s mind in the interview.  Please read the whole oral history.  Mr. Boone has a number of interesting insights in the interview.  For instance, he states that he invented microcontroller while at Texas Instruments because of boredom.  He was working in a group designing custom Integrated Circuits (ICs).  While designing these chips he began to feel “I’m tired of doing this.  I’m working long hours.  My family is not happy.  I have to find a better way of doing this.”  He also noticed that the basic requirements for all these projects were similar and this led to the idea that a general chip that was programmable could solve multiple customers’ requirements.  He also discusses the resistance in the community to this innovation.

After inventing the microcontroller, he moved to a start-up company, Litronix, that made handheld calculators.  The company was not aggressive about filing patents.  An overseas competitor was able to drive Litronix out of the market because of the differential tax rates, U.S. regulatory rules on consumer warranties, and their weak patent portfolio.

Because Mr. Boone was the inventor of the microcontroller, he ended being involved in numerous patent lawsuits.  This has caused him to have a unique perspective on the patent system.  One of the most interesting points he makes is that design teams often fail to review the patent literature before starting the design process.  Because of this, they often reinvent designs and reviewing patent literature results in better designs.

Gary will be missed by all that knew him.

 
Patents are Natural Rights

I have often pointed out that patents are a natural right under Locke’s theory of property rights.  Locke stated, in modern language, that you own yourself so you have the right to those things you create.  Many detractors have suggested that this absurd.  According to Locke the three chief natural rights are life, liberty, and property.  Locke states that protecting property rights is the main reason for forming governments.

Sec. 124. The great and chief end, therefore, of men’s uniting into commonwealths, and putting themselves under government, is the preservation of their property.[1]

Inventions are the result the inventor’s labor and therefore property under Locke.  Property is a natural right, so patents are natural rights.  Despite this logical connection, many people have continued to deny that patents (property rights in inventions) are a natural right.

Locke’s ideas were incorporated in the law of the United States by William Blackstone’s Commentaries on the Laws of England.  This treatise became the basis of common law in the US.  Here is what Blackstone said about patents and copyrights (intellectual property).  Note that he cites Locke’s ideas on property rights for his explanation for why intellectual property is Property.

There is still another species of property, which (if it subsists by the common law) being grounded on labour and invention is more properly reducible to the head of occupancy than any other; since the right of occupancy itself is supposed by Mr. Locke, and many others, to be founded on the personal labour of the occupant. And this is the right, which an author may be supposed to have in his own original literary compositions; so that no other person without his leave may publish or make profit of the copies. When a man by the exertion of his rational powers has produced an original work, he seems to have clearly a right to dispose of that identical work as he pleases, and any attempt to vary the disposition he has made of it, appears to be an invasion of that right.

Now the identity of a literary composition consists entirely in the sentiment and the language: the same conceptions, clothed in the same words, must necessarily be the same composition: and whatever method be taken of exhibiting that composition to the ear or the eye of another, by recital, by writing, or by printing, in any number of copies, or at any period of time, it is always the identical work of the author which is so exhibited; and no other man (it hath been thought) can have a right to exhibit it, especially for profit, without the author’s consent.

This consent may perhaps be tacitly given to all mankind, when, an author suffers his work to be published by another hand, without any claim or reserve of right, and without stamping on it any marks of ownership; it being then a present to the public, like building a church or bridge, or laying out a new highway: but, in case the author sells a single book, or totally grants the copyright, it hath been supposed, in the one case, that the buyer hath no more right to multiply copies of that book for sale, than he hath to imitate for the like purpose the ticket which is bought for admission to an opera or a concert, and that, in the other, the whole property, with all it’s exclusive rights, is perpetually transferred to the grantee.

On the other hand it is urged, that though the exclusive property of the manuscript, and all which it contains, undoubtedly belongs to the author, before it is printed or published; yet from the instant of publication, the exclusive right of an author or his assigns to the sole communication of his ideas immediately vanishes and evaporates; as being a right of too subtile and unsubstantial a nature to become the subject of property at the common law, and only capable of being guarded by positive statutes and special provisions of the magistrate.

The Roman law adjudged, that if one man wrote any thing on the paper or parchment of another, the writing should belong to the owner of the blank materials meaning thereby the mechanical operation of writing, for which it directed the scribe to receive a satisfaction; for in works of genius and invention, as in painting on another man’s canvas, the same law gave the canvas to the painter. As to any other property in the works of the understanding, the law is silent; though the sale of literary copies, for the purposes of recital or multiplication, is certainly as antient as the times of Terence, Martial, and Statius. Neither with us in England hath there been (till very lately) any final determination upon the right of authors at the common law.

But whatever inherent copyright might have been supposed to subsist by the common law, the statute 8 Ann. c. 19 hath now declared that the author and his assigns shall have the sole liberty of printing and reprinting his works for the term of fourteen years, and no longer; and hath also protected that property by additional penalties and forfeitures: directing farther, that if, at the end of that term, the author himself be living, the right shall then return to him for another term of the same duration: and a similar privilege is extended to the inventors of prints and engravings, for the term of eight and twenty years, by the statute 8 Geo. II. c. 13, and 7 Geo. III. c. 38, besides an action for damages, with double costs, by statute 17 Geo. III. c. 57. All which parliamentary protections appear to have been suggested by the exception in the statute of monopolies, 21 Jac., I. c. 3, which allows a royal patent of privilege to be granted for fourteen years to any inventor of a new manufacture, for the sole working or making of the same; by virtue whereof it is held, that a temporary property therein becomes vested in the king’s patentee. (emphasis added)

 

The idea that patents are a natural right is incorporated in early American law as the quote below shows.

“we protect intellectual property, the labors of the mind, productions and interests as much a man’s own, and as much the fruit of his honest industry, as the wheat he cultivates, or the flocks he rears.” (Davoll v. Brown, 7 F. Cas. 197, 199 [C.C.D. Mass. 1845].)

It is just obstinance or disingenuousness to suggest that patents are not part of natural rights.

 


[1] The Second Treatise of Civil Government; 1690; John Locke; CHAP. IX., Of the Ends of Political Society and Government.

 

A recent study report on PatentlyO  clearly shows that President Obama and the histrionic chorus of the surge in lawsuits by Patent Assertion Entities (Mythical Patent Creations) is just not true.  Changes in the law under the American Invents Act (AIA) that prohibited the joinder of defendants for the infringement of the same patent are the only reason for any apparent change and this was a known outcome of the AIA.  The complete paper “Patent Assertion Entities (PAEs) Under the Microscope: An Empirical Investigation of Patent Holders as Litigants” can be downloaded here.

 

 

Cotropia, Christopher Anthony and Kesan, Jay P. and Schwartz, David L., Patent Assertion Entities (PAEs) Under the Microscope: An Empirical Investigation of Patent Holders as Litigants (November 10, 2013). Illinois Program in Law, Behavior and Social Science Paper No. LBSS14-20; Illinois Public Law Research Paper No. 14-17. Available at SSRN: http://ssrn.com/abstract=2346381

 
What is not Economic Growth: Consumption and Destruction

Now that we have some idea of what wealth and economic growth are, let’s look at some examples of what is not economic growth.  When Tony slaughters a cow and eats it he has consumed some of his wealth.  He has one less cow, but he has food in his belly that he needs to live.  Is he wealthier now?  Well he needs food to eat in order sustain his life.  If he starves to death, he is certainly not wealthier.  However, Tony now has less of what he needs to sustain his life in the future.  Wealth is the surplus above what one needs to live today.  Consumption is not wealth.  Interestingly, being overweight was traditionally considered an indicator of wealth.  The excess fat meant you could sustain yourself without eating for longer because you could not find food, or because you were sick and could not hold food down.  In fact, it was fashionable for women and men to be overweight in the 1700 and 1800s.  Fat was an indicator of wealth, both because the person could sustain themselves without food longer and because it indicated that the person had plenty of food, compared to the calories they consumed.  In societies that live on the edge of starvation or what is called the Malthusian Trap, being overweight is a source of wealth.

               The Malthusian Trap is named after Reverend Thomas Malthus (1766 -1836), who postulated that human population would always grow faster than the food supply, dooming humans to subsistence living, i.e., living on the edge of starvation.  Oddly enough Malthus was correct until about the time he died.  The advent of the Industrial Revolution changed this situation; first for the people of England and the US, then the West and today for at least half of the world’s population.  The economist Gregory Clark has shown that policies to alleviate human suffering in a non-Malthusian Trap economy just result in additional misery in a Malthusian economy.[1]

Another example of what is not economic growth, but our present GDP measurements do count as increases in wealth is known as the broken window fallacy.  This was first explained by the French economist Frederick Bastiat (1801-1850).  The fallacy is explained by this story.  A window to your house is broken by a windstorm and you hire window installer to fix it, the window installer and the person who makes windows have additional work and income.  The window installer is wealthier, but is this economic growth?  The house is now in the same position it was before the window was broken, but you are out the cost of the window.  The amount of profit the window installer has made is less than you paid, because window installer has costs, such as the cost of the gas to get to your house, the cost of the glass.  Even adding up the profits of all the people the window installer paid does not add up to the cost you paid for the window.  The reason for this is we have to consume food and other resources to stay alive as we discussed above.  What this means is that your broken window has actually resulted in less wealth not more.  This is not surprising.  If our fisherman, Randy’s boat is damaged he is not wealthier.  Even after he fixes his boat, he lost out on time he could have been fishing.  Destruction does not create wealth, it reduces it.  Unfortunately, you will hear politicians and economists talk about natural disaster causing economic growth all the time.  An article in NPR discussing Superstorm Sandy that hit the U.S. northeast in 2012 stated:

But there may be a silver lining to all that destruction: Some economists argue that reconstruction from Sandy could help stimulate the national economy in 2013.[2]

The reason economists are confused about whether destruction causes economic growth is that our measurement of the GDP does not count the destruction of property and life.  This is like the gambler who only counts his winning.


[1] Farewell to Alms: A Brief Economic History of the World, by Gregory Clark, Princeton University Press 2000.

[2] Could Post-Superstorm Sandy Rebuilding Energize The Economy?, by Joel Rose, NPR, December 31, 2012, http://www.npr.org/2012/12/31/168363901/could-post-superstorm-sandy-rebuilding-energize-the-economy.

 
George Reisman: Are Objectivist Economists Consistent with Rand?

It is my contention that classical economics is not completely consistent with Ayn Rand’s Objectivist philosophy and even economists who are Objectivists have failed to provide an economic theory that is consistent with her ideas.  For instance, George Reisman is one of the well known economists associated with Objectivism and Professor Emeritus of Economics at Pepperdine University.  In his book Capitalism on page 40 he states:

Patents … derive their market value from the fact that they make it possible for the intellectual creators of new and additional wealth to benefit from their contributions by temporarily limiting the increase in wealth that their intellectual contributions bring about.

Now how does Dr. Reisman square his ideas with Rand on this subject?  Dr. Reisman later states that patents increase the supply of goods, so he appears to be somewhat inconsistent.  But on page 449 he states:

Intangible assets (patents) no more constitute capital than they constitute wealth.

Dr. Reisman does define wealth in Chapter 2 as material goods made by man.  So it is consistent with his definition, but how does he square this with Rand who states in Galt’s speech:

He cannot obtain his food without knowledge of food and of the way to obtain it. He cannot dig a ditch––or build a cyclotron––without a knowledge of his aim and the means to achieve it. To remain alive, he must think.”  Rand 1992, p. 1012.

An example might be useful.  Joe is a builder and knows how to make concrete but is not presently making concrete.  Is he wealthier than Jim who is a builder, in essentially the same position as Joe, but Jim does not know how to make (or get) concrete?  Clearly Joe is wealthier.  I think Reisman’s definition of wealth is flawed.

I also think it is inconsistent with Ayn Rand, who in Capitalism the Unknown Ideal, states:

Patents and copyrights are the legal implementation of the base of all property rights: a man’s right to the product of his mind.[1]

Is the value of a building worth more in a country with property rights or one without property rights?  In the property rights country, the owner can collateralize his property, he can obtain income from his property without having to hire thugs to enforce his rights, he can justify investing in improvements in this building.  In both cases there is the same material good, but the value is totally different.  Property rights are wealth, their contribution to wealth is secondary to the underlying asset, i.e., the building or the invention.

My main problem with classical economics or Austrian economics is they have not built a system around the fact that man’s main tool of survival is his mind.  That is the source of his wealth and the only source of real per capita increases in income/wealth.


[1] Rand, Ayn, Capitalism: The Unknown Ideal, Signet, New York, 1967, p. 130.

 
What is economic growth?

What is economic growth?  We all think we know the answer to this question.  It’s when GDP (Gross Domestic Product) is growing or positive, would be a typical answer.  That is an abstract answer for most of us.  We tend to focus more on the likely results of a growing economy, such as there are more high paying, high quality jobs; you are more likely to receive a raise above the inflation rate; you are more likely to have more money in your bank account; your access to education, health care, quality of food, etc. generally increase.  But if population growth is 5% and GDP growth is only 2% then none of these good things happen.  What we are interested in is real per capita increases in wealth.

              But what is wealth?  Is it the number of digits in your bank account, how many dollars you have in your pocket, how many dollars your 401K is worth?  The people in Venezuela have seen a huge increase in the number of digits in their bank accounts, and the number of dollars (Bolivars) in their pockets have increased, however they are getting poorer.  So did the people in the Weirmar Republic in the early 1920s, many of whom were billionaires (in Marks).  Wealth cannot be confused with the amount of currency (Dollars, Bolivars, Marks) one has.

Using currencies to denote wealth often causes confusion.  Let’s look at some examples separate from currency.  Image a farmer, we’ll call him Tony.  Tony has two cows, a dirt house with a thatch roof and no running water or electricity.  A year later Tony has ten cows and running water.  Clearly Tony is now wealthier than he was a year ago.  In fact, the quantity of livestock one owns has been a traditional indicator of wealth in many societies.  Wealth means having more of the things necessary to sustain one’s life.  But people in the US and the West are not like Tony, most of these people have more than they could possible need to sustain their life –right?  Actually, no.  A rational person, let’s call him Randy, does not just worry about whether they have enough food for today.  Randy’s a fisherman and just because he catches enough fish to feed his family today, does not mean he should stop fishing.  What if the fish are not biting tomorrow?  What if there is a storm tomorrow and he cannot fish?  What if his boat needs repairs and he cannot fish for a week?  Because Randy is rational he keeps fishing even after he has caught enough fish to feed his family that day, if there are fish to be caught and the day is not over.

But the average American, call him Sam, is not like Tony or Randy.  Sam has so much to eat he is overweight.  He is wealthy beyond the wildest dreams of Tony or Randy.  He lives in a nice house, has running water, electricity, three televisions, five cell phones, why should Sam care about being wealthier?  Well what if Sam gets sick and can’t work, what if he loses his job, what if his car breaks down, what if his child gets accepted to Harvard?  Only the uber wealthy have enough wealth to meet all their needs for the rest of their lives.  When you consider that a prolonged hospital stay can cost over million dollars, it would require a net worth in today’s economy of around ten million dollars or more.  All except the uber wealthy have a rational desire for economic growth (i.e., increasing wealth) and even the uber wealthy benefit from the new technologies and opportunities provided by economic growth.

 
How to Fix the Economy: USA falls to 17th on Index of Economic Freedom

Ever wonder why the US has a record number of people on food stamps now, why the median family income is declining, why the labor participation rate is the lowest since Jimmy Carter?  You need look no farther than the fact that the US has fallen from 2nd or 3rd in 2000 in the Cato/Fraser index of economic freedom to 17th.  It is not just our economic freedom we are losing as the NSA and IRS scandals make clear.  This is not just an academic exercise either.  As the report makes clear longevity, access to medical care, education opportunities etc all deteriorate with a declining of economic freedoms.

The irony of this report is that the CATO Institute has been inconsistent at best about supporting property rights, which is the key issue underlying economic freedom.  CATO has adopted a utilitarian basis for “property rights” that suggests they are just a useful artifact for efficiently distributing scarce resources.  So in fact, they do not support property rights but property grants or privileges.  This also means that they are confused that patents are not property rights.  Patents are the single most important property right to economic growth, especially in a developed country.  CATO is therefore in the position of being for property rights at an empirical level, but arguing against them on a philosophical level.  Interestingly this also means that CATO is inconsistent about supporting our Constitution, which requires that Congress secure the rights of inventors to their inventions.  No wonder the US is an economic basket case.

 

I have written extensively on the problems I see with IPXI’s model to market licensing rights to patents.  Their model is based on a commodities contracts type of model, where unit licensing rights can be bought and traded.  I believe a model based on how Amazon sells books would be more effective and open up the patent licensing market to smaller entities and inventors.  This sort of retail licensing system would allow inventors to post an invention that they are willing to license with a unit licensing rate for one instance of the invention.  For software enabled inventions the unit licensing rate might be based on a per execution basis or a time limited period.  The retail licensing system would issue a certificate that the licensor would use to prove that they had bought a license and only be good for one instance or execution.  It is my assumption that the unit licensing rates would be so low that it would be easier to license the invention than infringe.  The license would not come with any warranties of validity or non-infringement, but would come with a warranty of ownership of an issued patent.  In addition, there might be bulk unit licensing discounts and a chance for the inventor to sell their engineering talent to help implement the invention.

This system would reduce the cost of licensing.  Avoid some of the problems of IPXIs model, such as having a limited number of unit licenses and it would open up the market to individual inventors and small entities and spark an inventive wave that we would all profit from.

 
Hayek vs. Rand: Patents and Capitalism

David Kelley gave a talk on Ayn Rand vs. Friedrich Hayek On Abstraction.  (If you want to read Mr. Kelly’s paper on point click here)  This is a very important talk and explains the difference between Austrian economists and free market (objectivists).  It also helps explain why Austrian economists who say they are for free markets are against patents, which are property rights in one’s invention.

Ultimately, Hayek is a warmed over Platonist.  According to Hayek our perception and reason are limited (Plato).  It is this limit to reason that is Hayek’s justification for a free market.  Basically, Hayek argues that because our reason is limited it is sheer folly to suggest that central planning can ever work.  Rand on the other hand sees no limit to reason and notes that reason is man’s basic tool of survival.  But each man must reason for them self.  To force (central planning) someone to do something against their reason is immoral and eliminates the creativity and ingeniousness of everyone subject to the central planning decree.  This means we have a small group of people attempting to “solve” problems instead of many people and the people making the decision are not the ones that feel it’s effects.  As a result, central planning is an open loop process, which as any engineer knows is a very inaccurate process.  In addition, central planning does not take all the variables into account, since only each individual can know exactly what their circumstances and needs are.

I believe Austrians gravitate to Hayek’s ideas because it saves religion (Christianity) from reason and the free market.  Hayek’s ideas on the limits of reason puts him in the company of Kant, Hume and Plato.  Hayek in that sense is both anti-reason and anti-science, which leaves plenty of room for religion.

It also explains why Austrians do not understand patents.  Property rights to Austrians are based on social convention or utilitarianism but not based on reason.  According to the Austrians we have property rights (privileges, arbitrary grants) because of tradition or because they believe (not know – reason is limited) it results in the best use of resources.  As Hakek states:

[M]orals, including, especially, our institutions of property, freedom and justice, are not a creation of man‘s reason but a distinct second endowment conferred on him by cultural evolution.

Patents were once characterized as monopolies (see English history), so Austrians cannot reason out the difference between what were called patents before the Statute of Monopolies and what are patents today.  For Rand, creation is the basis of property rights and all human creations start with one man’s mind.  Because of this Rand made it clear patents/copyright (Intellectual property) are the basis of all property rights.

For more see Defending Capitalism: Ayn Rand vs. Hayek

 

More specifically on Hayek’s concept of Abstraction:

If Hayek’s ideas had any validity, then a person whose eyesight was restored after being blind from birth could immediately (visually) identify an apple or red, which we know is not true.  If Hayek’s ideas were true then we would have to have some inherent understanding of the double slit experiment in quantum mechanics or the idea that time slows down as we approach the speed of light, but this is clearly nonsense.

 
Earth Day: Environmentalists are Evil

Earth Day was created in the Nixon administration and the first was in 1970.  This day violates the 1st Amendment by the Federal Government “respecting an establishment of religion.”  Environmentalists are often portrayed by the Media as lovable, good natured people; people who only want to save some adorable furry creature and pick up trash.  Environmentalist groups target new technologies claiming that they are dangerous or unproven.  For instance, they killed off the nuclear power industry.  The policies they advocate are anti-innovation and have destroyed advances in medicine, food production, power generation, vaccines, and more.  These policies have resulted in the deaths of more people than Hitler, Stalin, and Moa combined.  These deaths are not the result of good intentioned policies gone wrong; these are the purposeful goals of environmental groups.  Environmentalists have consistently proven that they are willing to lie in order to achieve their objectives.  Being “Green” is worse than being a Nazi, worse than being a Marxist;  BUT  these policies do work hand in hand with these statists philosophies.

I will briefly outline three environmentalist policy areas where environmentalists have lied about the science and even more important than lying, these policies have killed millions of people.

 

DDT

Silent Spring by Rachel Carson resulted in the banning of DDT.

Deaths Caused by DDT Ban

In 1970, the U.S. National Academy of Sciences estimated that DDT saved more than 500 million lives during the time it was widely used.  http://www.wnd.com/2004/07/25428/  Banning DDT has resulted in about 100 million deaths, many of whom were pregnant women and children.  By comparison: Hitler killed about 6-7 million, Stalin killed around 10-14million, and Mao killed between 60-68 million.

FYI: The ban on DDT is why the US is currently having infestations of bed bugs; most people born after 1940 thought these were eradicated like polio.

Lies about DDT

Carson claimed DDT thinned the eggshells of birds resulting in fewer offspring that endangered raptors existence.  This was based on 1956 study by Dr. James DeWitt, published in the Journal of Agriculture and Food Chemistry.  However, DeWitt’s study actually showed that 50 percent more eggs hatched alive from the birds subjected to DDT than the non-DDT group.  Other claims suggested that raptor populations declined because of the use of DDT; however, raptor populations were failing before the introduction of DDT.   In fact, the Audubon’s Eagle counts from 1941 to 1961 actually increased when DDT was mostly widely used.  All the latest evidence shows, Carson’s claims were nothing but outrageous lies.

Goal of Banning DDT was to Kill People

Alexander King, founder of the Malthusian Club of Rome, wrote in a biographical essay in 1990:

“My own doubts came when DDT was introduced. In Guyana, within two years, it had almost eliminated malaria. So my chief quarrel with DDT, in hindsight, is that it has greatly added to the population problem.”  http://jiminmontana.wordpress.com/2012/01/15/environmentalism-the-green-religion-of-dehumanization/

 

Dr. Charles Wurster, one of the major opponents of DDT, is reported to have said,

“People are the cause of all the problems. We have too many of them. We need to get rid of some of them, and this (referring to malaria deaths) is as good a way as any.”  http://jiminmontana.wordpress.com/2012/01/15/environmentalism-the-green-religion-of-dehumanization/

 

 

Nuclear Power

Anti-Nuclear power activists claimed that nuclear power generation would result in the deaths of thousands of people.  This movement was able to kill off the nuclear power industry in the United States after the Three Mile Island accident in which no one was killed and the average person within ten miles of the accident received the equivalent on one chest x-ray of radiation.

Deaths Caused by Nuclear Power Ban

The main alternative to nuclear power plants,to date ,have been coal fired plants.  For each person killed by nuclear power generation (including deaths due to Chernoybal), 4,000 die from coal. The previous data is adjusted for how much power is produced by each method of power generation.  http://www.the9billion.com/2011/03/24/death-rate-from-nuclear-power-vs-coal/  The number of people killed per year in the US because of this change is at least 10,000.  These deaths are mainly due to particulate pollution (nuclear power has no particulate pollution). This figure also includes an increase in the number of mining deaths, and increases in the number of deaths due to the extra transportation required to move coal compared to transporting uranium.  In the United States alone: this environmental pogram has resulted in at least 300,000 deaths.  Why has this not made headlines??! While the rest of the world has not followed the U.S.’s lead completely, the anti-nuclear movement has definitely retarded the development of nuclear power plants around the world.  As a result, a reasonable estimate of the deaths worldwide because of this environmental policy is at least 600,000.

Nuclear power plants represent a huge reduction in air and water pollution.  Real reductions in pollution are the result of advancing technologies, not regulator schemes such as the EPA.  In fact, regulatory agencies can be credited with increasing pollution levels compared to what it would be without their influence.

The largest one time event fatality toll from energy production was in 1975.  30 dams in central China failed in short succession due to severe flooding.  An estimated 230,000 people died. The fatalities from hydroelectric power far outnumber deaths from all other energy sources.  http://www.newscientist.com/article/mg20928053.600-fossil-fuels-are-far-deadlier-than-nuclear-power.html  Of course, hydroelectric power is one of the environmentalists’ favorite sources of power.

Lies about Nuclear Power

The number one lie about nuclear power is that an accident could result in the death of thousands of people.  There is absolutely no evidence for this claim.  Another related boogey man of the environmentalists is that the half lives of the byproducts from nuclear power lasts tens of thousands of years.  What if the half life were infinite?  Wouldn’t that be worse?  If the half life were infinite, the elements (compounds) would be stable.  Longer half lives mean that there is less radiation.  Nuclear power plants accelerate the natural radioactive decay of uranium, so leftover fuel rods are less radioactive than the mined material.

Another lie of environmentalist s that nuclear power plants are too expensive to make economic sense.

Nuclear power is not intrinsically expensive. What drove nuclear plant costs up were environmentalist delays (caused by anti-nuclear “interveners” and the high interest financing rates—both perpetrated by those who wanted to kill nuclear power, and who now complain that nuclear costs too much.  Source: Electric Power Research Institute

Goal of Banning Nuclear power was to Kill People?

There does not appear to be any environmental wacko comments to this effect;  certainly  it has been the result and since the environmentalism movement believes there are too many people-well, it seems this was likely part of their goal in killing off nuclear power.

 

Global Warming

Man made global warming or Anthropogenic Global Warming (AGW) is the latest hoax being thrust upon us by Environmentalists, who I have already shown, have a very poor track record.

Deaths Caused by Global Warming Hoax

The United States is spending about $10 billion a year on Global Warming research.  http://frontpagemag.com/2011/01/28/the-black-hole-of-global-warming-spending/  I think it is safe to say that at least $100 billion has been spent worldwide on Global Warming over the last decade.  It costs about $20 to provide infrastructure for clean water for one person.  According to WHO, 30,000 deaths occur every week from unsafe water and unhygienic living conditions.  Most of these deaths are children under five years old.  That is over 600,000 deaths per year because of poor water infrastructure.  If the $10 billion being wasted on Global Warming research were instead applied to water infrastructure, this could save 50 million lives.  The Global Warming Hoax has cost the lives of at 6 million people.?

How AGW Advocates Have Lied

“The latest data released by the Met Office, based on readings from 30,000 measuring stations, confirms there has been no global warming for 15 years.” http://www.dailymail.co.uk/news/article-2096277/Global-warming-James-Delingpole-claims-green-zealots-destroying-planet.html#ixzz1xP61Eo2b

It is well known that the main driver of the temperature on Earth are the variations in the amount of solar energy the Earth receives.  “Experiments at the CERN laboratory in Geneva have supported the theory of Danish physicist Henrik Svensmark that the sun — not man-made CO2 — is the biggest driver of climate change.” http://www.dailymail.co.uk/news/article-2096277/Global-warming-James-Delingpole-claims-green-zealots-destroying-planet.html#ixzz1xP61Eo2b

The biggest greenhouse gas is water vapor – over 95%, but you never hear about this from AGW advocates.  http://www.creators.com/opinion/walter-williams/environmentalists-wild-predictions.html

“Natural wetlands produce more greenhouse gas contributions annually than all human sources combined.” http://www.creators.com/opinion/walter-williams/environmentalists-wild-predictions.html

 

Below, IPCC (Intergovernmental Panel on Climate Change -UN) Experts comment on the IPCC, which is the group at the UN that has been saying a consensus of scientist s “believe” in Global Warming http://ukipscotland.wordpress.com/2011/10/04/fifty-ipcc-experts-expose-global-warming-lies/

Dr Vincent Gray: “The (IPCC) climate change statement is an orchestrated litany of lies.”

Dr. Lucka Bogataj: “Rising levels of airborne carbon dioxide don’t cause global temperatures to rise…. temperature changed first and some 700 years later a change in aerial content of carbon dioxide followed.”

Dr Richard Courtney: “The empirical evidence strongly indicates that the anthropogenic global warming hypothesis is wrong.”

Dr Eigil Friis-Christensen: “The IPCC refused to consider the sun’s effect on the Earth’s climate as a topic worthy of investigation. The IPCC conceived its task only as investigating potential human causes of climate change.”

Goal of AGW

The goal of AGW is to kill capitalism and as a result kill millions of people.  Patrick Moore, a co-founder of Greenpeace explained.  (Environmentalism today is) more about globalism and anti-capitalism than it is about science or ecology….

“Ultimately, no problem may be more threatening to the Earth’s environment than the proliferation of the human species.”
— Anastasia Toufexis, “Overpopulation: Too Many Mouths,” article in Time’s special “Planet of the Year” edition, January 2, 1989. http://newsbusters.org/blogs/geoffrey-dickens/2012/04/19/earth-day-special-medias-top-25-wackiest-environmental-quotes#ixzz1xPBuQJxp

“Today, life on Earth is disappearing faster than the days when dinosaurs breathed their last, but for a very different reason….Us homo sapiens are turning out to be as destructive a force as any asteroid. Earth’s intricate web of ecosystems thrived for millions of years as natural paradises, until we came along, paved paradise, and put up a parking lot. Our assault on nature is killing off the very things we depend on for our own lives….The stark reality is that there are simply too many of us, and we consume way too much, especially here at home….It will take a massive global effort to make things right, but the solutions are not a secret: control population, recycle, reduce consumption, develop green technologies.”
— NBC’s Matt Lauer hosting Countdown to Doomsday, a two-hour June 14, 2006 Sci-Fi Channel special. http://newsbusters.org/blogs/geoffrey-dickens/2012/04/19/earth-day-special-medias-top-25-wackiest-environmental-quotes#ixzz1xPCThQaU
“My own doubts came when DDT was introduced. In Guyana, within two years, it had almost eliminated malaria. So my chief quarrel with DDT, in hindsight, is that it has greatly added to the population problem.”  http://jiminmontana.wordpress.com/2012/01/15/environmentalism-the-green-religion-of-dehumanization/

 

Dr. Charles Wurster, one of the major opponents of DDT, is reported to have said,

“People are the cause of all the problems. We have too many of them. We need to get rid of some of them, and this (referring to malaria deaths) is as good a way as any.”  http://jiminmontana.wordpress.com/2012/01/15/environmentalism-the-green-religion-of-dehumanization/

 

“A total population of 250-300 million people, a 95% decline from present levels, would be ideal,” Turner stated in 1996.[1]

A leading environmentalist, Dr. Eric R. Pianka advocated the elimination of 90 percent of Earth’s population by airborne Ebola in front of few hundred members of the Texas Academy of Science who rose to their feet, and gave him a standing ovation.[2]  Dr. Pianka attempted to deny this, but the evidence was overwhelming including his student evaluations.

 

 

Environmentalism is a Religion – and that religion is anti-human and EVIL


[1] Ted Turner Repeats Call For Population Curb, by Paul Joseph Watson Prison Planet Monday, April 28, 2008 http://www.prisonplanet.com/articles/april2008/042808_ted_turner.htm

[2] Meeting Doctor Doom, By Forrest M. Mims, III, The Eco-Logic Powerhouse http://www.freedom.org/board/articles/mims-506.html.

 
Supreme Court Hears Myriad Case: The Myth You Can Patent Human Genes

The Supreme Court is hearing oral arguments in the Association for Molecular Pathology v. Myriad Genetics No. 11-725  case that revolves around the myth that you can patent a person’s genes.  Typical of the idiocy surrounding this case is the article by the AP, which states that this case is about monopolies for human genes.  The author proves not only their lack of understanding of the science, but also the fact that they do not know that patents are a property right.  (For more on Patents, Property Rights and Monopolies see below)  A number of books have also pushed the agenda that human genes are patentable.  The CAFC’s ruling in this case sets the record straight.

 

CAFC ruling under reviewed

The ruling in the 2012 version of this case was very similar to the ruling in 2011 that I discussed in my post Association of Molecular Pathology v. USPTO.  Below I provide what I think are the most interesting excerpts from the opinion.

Composition claims are all eligible under 35 USC 101.

They (The isolated strands of DNA) are obtained in the laboratory and are man-made, theproduct of human ingenuity.  While they are prepared from products of nature, so is every other composition of matter.  All new chemical or biological molecules, whether made by synthesis or decomposition, are made from natural materials.  For example, virtually every medicine utilized by today’s medical practitioners, and every manufactured plastic product, is either synthesized from natural materials (most often petroleum fractions) or derived from natural plant materials.  But, as such, they are different from natural materials, even if they are ultimately derived from them.  The same is true of isolated DNA molecules.  PP. 38-39

The highlight portion points out a general rule of patent law (actually nature) – all inventions are combinations of existing elements, these elements are formed from natural materials.  You cannot create something from nothing – it’s called conservation of matter and energy.  Unfortunately, this simple rule of physics is often ignored by the courts – probably because most of them do not have a scientific background and are therefore unfit to rule in patent cases.

A composition of matter is not a law of nature.  P. 51

The anti-patent crowd has been trying to expand laws of nature to include anything that occurs naturally.  A law of nature is something that explains a host of data and can be used to accurately predict how things will behave in nature, such as gravity.  Using a counterbalance in an elevator uses gravity – a law of nature, but it is not a law of nature.

It is undisputed that Myriad’s claimed isolated DNAs exist in a distinctive chemical form—as distinctive chemical molecules—from DNAs in the human body, i.e., native DNA. P. 44

The critics of patenting human genes miss this point.  The claims do not cover native DNA, they cover DNA that does not exist but for the intervention and ingenuity of humans.

Claims 1 of the ’999, ’001, and ’441 patents, as well as method claims 1 and 2 of the ’857 patent—all of which consist of analyzing and comparing certain DNA sequences—not to be patent-eligible subject matter on the ground that they claim only abstract mental processes.  P. 55

I strongly disagree with this statement.  Myriad clearly showed that the analyzing step requires machines that are clearly described in the specification.  Even if a doctor had the print out of the results of analysis and then he compared the results without a machine, then this is contributory infringement.  The only justification for the CAFC’s decision is hyper technical analysis of the claim that requires a recited machine in the claims.  This sort of overly formal interpretation does nothing to protect the property rights of inventors, but does advance the interests of entities that want to steal other people’s inventions.

We once again, even in light of Mayo, arrive at the same conclusion of patent-eligibility because at the heart of claim 20 is a transformed cell, which is made by man, in contrast to a natural material.

By definition, however, performing operations, even known types of steps, on, or to create, novel,  i.e., transformed subject matter is the stuff of which most process or method invention consists.  All chemical processes, for example, consist of hydrolyzing, hydrogenating, reacting, etc.  In situations where the objects or results of such steps are novel and nonobvious, they should be patent-eligible.  P. 61

The idiots at the Supreme Court have attempted to break claims down and determine if each step is new.  You can’t create something from nothing and a step which is completely new does not meet the requirements of 35 USC 112.  This form of interpretation of the claims was specifically rejected by the 1952 Patent Act under 35 USC 103.  But the anti-patent Justices on the Supreme Court are not interested in logic, the Constitution, or the law.  They are only interested in forcing their policy visions on the American public.

 

Patents and Monopolies

Patents: Monopoly or Property Right a Testable Hypothesis

If patents are a monopoly, as some suggest, then it should led to certain outcomes.  A close examination shows that none of the supposed monopoly effects result from granting patents.

 

Monopoly/Rent Seeking vs. Property Rights/Intellectual Property.

This post explains the characteristics of a monopoly and a property right and poses three questions to show the difference.  Patents fit all the characteristics of a property right and none of a monopoly.  Note that professional license, such as a law license has some of the characteristics of a monopoly.

 

More on the Myth that Patents are Monopolies.

This post contains a number of quotes from philosophers explaining that patents are not monopolies.

 

Property Rights, Possession and Objects 

This post explains the difference in the concepts of property rights, possession, and objects.  Most economists and patent detractors confuse these concepts.  The origin, definition, and legal basis of property right are explained.

 

The Myth That Patents are a Monopoly 

This post compares the definition of a monopoly to the rights obtained with a patent.  It shows that the rights obtained with a patent do not confer a monopoly.

 

 
CLS Bank v. Alice: 35 USC 101 Presumption of Validity

The en banc rehearing of this case is considering whether the presumption of validity applies to under 35 USC 101.  The statute involved in this question is 35 USC § 282 which states:

(a) In General.— A patent shall be presumed valid. Each claim of a patent (whether in independent, dependent, or multiple dependent form) shall be presumed valid independently of the validity of other claims; dependent or multiple dependent claims shall be presumed valid even though dependent upon an invalid claim. The burden of establishing invalidity of a patent or any claim thereof shall rest on the party asserting such invalidity. (Emphasis added)

CLS Bank argued in their brief that validity and eligibility are different and 35 USC 101 is directed to the latter.  Nothing in the statute suggestions that there is a distinction between eligibility and validity.  How can a patent be valid and not meet the requirements of 35 USC 101?  It can’t.  When you turn the question around you see the absurdity of this position.  In addition, the reason for a Patent Office is to review inventions to determine if they are eligible for a patent.  If the courts are going to ignore the determinations of the Patent Office, then we should just have a registration system.  In every other area of law the courts are extremely deferential to administrative agency decisions, but not with patents.  Ask yourself why this is.  I would suggest the reason is that every other administrative agency increases the power of government, but the Patent Office increases the power of the people.  It is patently unfair that an inventor has to defend their patent, two, three or more times and on multiple issues.  If the EPA or the FCC or the FTC, etc. had to survive this scrutiny or legislation in general, almost none of the laws or regulations passed in the last decade would stand.  It is time to end the double standard that gives a pass for every regulation that increases government power, while forcing private people to jump through hoops.  In fact it is time to reverse the process, as the Founders intended.

 

NO RATIONAL person would buy CLS argument that there is a difference between validity and eligibilityBut that does not mean the Judges on the CAFC or Supreme Court will not buy into CLS argument.

 

For more on the earlier decision CLICK HERE.

 

Subscriber Count

    18

Advertise Here

Your Ad

could be right

HERE

find out how

Donations

Coming Soon