Category: Philosophy
The CATO Institute are reiterating the findings of the flawed paper The Private and Social Costs of Patent Trolls , Boston University School of Law Working Paper No. 11-45, by James E. Bessen, Michael J. Meurer, and Jennifer Laurissa Ford. This paper looks at lawsuits filed by NPE (Non-Practicing Entities) and the subsequent drop in the stock price of the company being sued. The paper suggests that this loss of wealth is all “deadweight” loss, since little of the money ends up with the original inventors of the technology. This last part is an intellectually dishonest slight of hand. The authors make no attempt to determine if the cases are meritorious. If the firms are infringing a valid patent, then the filing of the lawsuit represent the cost to society of deterring the theft of inventions. This cost discourages further theft by companies. If half the patent lawsuits (by cost) are meritorious then the net cost of these lawsuits is zero. Unless you assume that the cost of protecting property rights has no value, which I am afraid is the ultimate problem with anti-reason people at Reason Magazine and CATO. Neither of these organizations seems to understand property rights.
This lack of understanding of property rights causes multiple errors in both the paper and CATO’s and Reason’s analysis of this issue. For instance, once you understand that patents are property rights you understand the purchase of patents by investors is not different that the purchase of a building from the builder. The profits by the subsequent purchaser of the building are not “DEAD WEIGHT” costs and neither would a lawsuit by the purchaser to demand rent for someone squatting in their building. When the (paying) occupancy rate for buildings is high this encourages the building of new structures. The same is true for patents – when owners of patents receive good returns on their assets then inventors create more of these assets.
Unfortunately, the CATO Institute has become hopelessly lost on the issue of property rights. They have adopted the Utilitarian point of view that property rights are just an efficient way of allocating scarce resources. Professor Adam Mossoff has commented on this nonsense. Mossoff states that Jeremy Bentham’s ideas are at the root of Libertarian’s attack on IP. Bentham basic philosophy was Utilitarianism – the greatest good for the greatest number. Bentham stated that the reason for property rights was because of scarcity and conflict resolution not natural rights. Mossoff then points out that the followers of Bentham argue that there is no conflict between people using the same ideas like there is with land. Ideas can be copied and used endlessly. This argument fails for because there is a conflict when a physical embodiment of the idea (invention) is created. The copier has clearly limited the return for the inventor and patent law only prohibits the physical embodiment. I discuss the fallacies behind the scarcity theory of property at my post Scarcity: Does it Prove Intellectual Property is Unjustified and Scarcity -2 and Scarcity -3. Mossoff points out that this is the philosophical point of view used by the Cato Institute and the Von Mises Institute to attack patents (IP).
Utilitarianism’s “greatest good for the greatest number” always leads to totalitarianism. It also never leads to the purported goal. The reason for this is that utilitarianism is merely a justification for short term actions. Once something has been produced, it always looks like the greatest good is to redistribute the creation. However, this is clearly only true in the short term. In the long term it is clear that this always destroys the economy. This is the theory behind the USSR, North Korea, and all socialist states. As Ayn Rand pointed out you only need open your eyes to see that these countries do not produce the greatest good for the greatest number. This is because stealing the product of one’s mind (mental labor is labor) is no different than banning free speech. It stifles the mind, which source of all economic progress (values).
The CATO Institute’s article is under the header “Regulation.” This again demonstrates that the CATO Institute does not know the difference between property rights and regulations. Here are three easy questions for Libertarians, Socialists, and Economists to determine if a right is a monopoly (rent seeking) or a property right.
1) Does the right arise because the person created something?
2) If someone else was the creator would they have received the right in the creation?
3) Is the right freely alienable?
Patents meet all the tests of property rights. They are not a regulation. Enforcing property rights does not result in dead weight costs.
Another great article on this issue can be found at Gametimeip entitled Myopic Patent Cynicism.
The phrase “I am my brother’s keeper” is used to explain a moral goal or imperative. The word ‘brother’ does not mean your biological brother, but those people in your community, or country, or really every other human being in the world. The word ‘keeper’ is used to mean that you have a moral responsibility to help every other human being in the world. This responsibility means that you are to put their needs before your interests and your moral goal is that people exist to serve others. In other words, the phrase ‘I am my brother’s keeper’ enshrines SLAVERY as a moral goal. Slavery is the condition in which you have no right to exist for yourself, your only right to exist is to serve others. Note that all 
slaves need a master and as a result it is no surprise that President Obama has used this phrase to explain his policies as he is an avowed socialist and wants to be our master.
Wherever this moral goal has been tried it has resulted in human suffering, misery, disease, famine, death, and torture. North Korea is the country that most encapsulates this moral goal today and it is a living hell. The Soviet Union and Communist China also tried to implement this moral imperative and it resulted in the largest genocides in the 20th century, resulting in the death of over 100 million people. Attempting to following this moral code also resulted in the Dark Ages under the direction of the Catholic Church. It is also why the Christian right is often ineffective at countering socialists arguments, since they accept the same moral goal. These bad outcomes do not occur because the wrong people are in charge, they occur because slavery is immoral and this is the logical result of following an immoral goal.
The opposite moral imperative to ‘I am my brother’s keeper’ can be found in our Declaration of Independence – namely the RIGHT to Pursue One’s Own Happiness.
We hold these truths to be self-evident, that all men are created equal, that they are endowed by their Creator with certain unalienable Rights, that among these are Life, Liberty and the pursuit of Happiness.
This right to pursue your own happiness is the exact opposite of slavery. It states that no one has the right to enslave you (or anyone) morally or legally. Wherever this moral ideal has been tried it has always resulted in human happiness, abundance, technological innovation, increasing life spans, increase health care, and yes fewer environmental problems. There is no contradiction between what is moral and economic abundance and human happiness. This has not occurred because the right people have been in charge, it is the result of pursuing that which moral, namely FREEDOM.
Why should a blog directed to patents and inventions care about such a subject? Because this idea of ‘I am my brother’s keeper’ has been raised in the cases Association of Molecular Pathology v. USPTO (which was original called ACLU v. Myriad) and in Mayo v. Prometheus and it is used by opponents of patents. They all argue that the inventor has no right to his invention and the only reason we allow them to invent is to serve their fellow man. In the ACLU case this argument was re-crafted as property rights should not stand in the way of science.
Slavery is immoral and a moral goal of slavery, even if it is suppose to be voluntary, is immoral. Those who push the moral goal of slavery are advocating human misery, death, famine, and genocide.
MERRY CHRISTMAS
Today is Mark Twain’s 176th birthday, which makes it a perfect time to review some of his thoughts on the patent system. Mark Twain wrote extensively about the patent system. In the book, Innocents Abroad, he explains the virtues of our country and moral decay of Europe by contrasting the patent system to the preservers of art. Remember, Twain was first and foremost an artist and he held this opinion. He states:
The Popes have long been the patrons and preservers of art, just as our new, practical Republic is the encourager and upholder of mechanics. In their Vatican is stored up all that is curious and beautiful in art; in our Patent Office is hoarded all that is curious or useful in mechanics. When a man invents a new style of horse-collar or discovers a new and superior method of telegraphing, our government issues a patent to him that is worth a fortune; when a man digs up an ancient statue in the Campagna, the Pope gives him a fortune in gold coin. We can make something of a guess at a man’s character by the style of nose he carries on his face. The Vatican and the Patent Office are governmental noses, and they bear a deal of character about them. (Emphasis added)
In the last fifteen years we have extended the copyright term to be almost infinite, we have criminalize willful copyright infringement and we have had numerous government programs to protect intellectual property, which always means copyrights and perhaps trademarks, but not patents. Alternatively, we have spent the last fifteen years stealing the fees inventors pay to the patent office, we have forced the publication of U.S. inventors’ patent applications for the world to see and steal, we have vilified the actions of our greatest inventors such as Edison, calling them trolls and some have even suggested that Edison really made incremental improvements on other people’s inventions, and called inventor’s monopolists. Twain would be horrified by our capitulation to Europe. It says something about our character that we are following in the Popes footsteps.
Deadly Monopolies: The Shocking Corporate Takeover of Life Itself–And the Consequences for Your Health and Our Medical Future, by Harriet A. Washington
There have been several books suggesting that you can patent human genes or parts of humans. The latest is entitled Deadly Monopolies, which appears to be a rehash of David Koepsell’s Who Owns You?: The Corporate Gold-Rush to Patent Your Genes. The first person to raise this issue was Michael Crichton. None of these people are patent attorneys and they all misinterpret the claims of patents to be broader than they are. We know Ms. Washington does not understand patents, because she mislabels them as a monopoly in the title of her book. Ms. Washington also does not understand property rights. Patent are property rights and you obtain title to your invention because you created something. Monopolies are granted based on political decisions.
In Washington’s blog, she suggests that Myriad Genetics has patented a part of John Moore’s body. This is clearly incorrect on its face. The patent is for an isolated form of a gene that is an indicator of breast cancer. The critics of gene patents have made this outrageous accusation that a patent covers a part of your body. With the implication that just by being alive you are violating their patent. This is complete nonsense, but great propaganda. It appears that Ms. Washington really adds nothing to the discussion, but is just rehashing points that have already been made and proven wrong.
The Court of Appeals for the Federal Circuit when ruling on the Myriad case provided the following insights “Isolation of a DNA sequence is more than separating out impurities: the isolated DNA is a distinct molecule with different physical characteristics than the naturally occurring polymer containing the corresponding sequence in nature.” (P. 11 Slip Opinion – Judge Moore) He further states, “I decline to extend the laws of nature exception to reach entirely manmade sequences of isolated DNA, even if those sequences are inspired by a natural template.” P. 14 Moore. He further explains the difference between this case and purified vanadium or uranium as, “Given the chemical differences highlighted by Judge Lourie’s opinion and discussed supra, the mere fact that the larger chromosomal polymer includes the same sequence of nucleotides as the smaller isolated DNA is not enough to make it per se a law of nature and remove it from the scope of patentable subject matter. The actual molecules claimed in this case are therefore not squarely analogous to unpatentable minerals, created by nature without the assistance of man.” P. 15 Moore. Harriet Washington, seems to have ignored all this information or simple does not understand the science and certainly does not understand the patent law. I attempted to find out about Washington’s background to determine if she had a scientific background. The only information I could find was that she had been a medical ethicist at Harvard, but nothing about her education.
While I have not read the book, Deadly Monopolies: The Shocking Corporate Takeover of Life Itself–And the Consequences for Your Health and Our Medical Future, by Harriet A. Washington, all indications are that the author does not understand the science or the law involved in this topic. Her statements on her blog that gene patents spur profits not cures is example of the shallowness of her research. See David E. Adelman & Kathryn L. DeAngelis, Patent Metrics: The Mismeasure of Innovation in the Biotech Patent Debate, 85 Tex. L. Rev. 1677, 1681 (2007), as clearly showing biotech patents have resulted in increase innovation. Washington’s book is not about science, the law, or the truth, it is a propaganda attack on patents, property rights, and the pharmaceutical industry.
Two Singapore professor show patents result in significant economic growth. Their paper, Patent Rights and Economic Growth: Evidence from Cross-Country Panels of Manufacturing Industries concludes “the effect of strengthening patent rights on economic growth was substantial in economic terms.” P. 16
In the abstract of the paper, they conclude:
Our results have important implications for public policy. One is that patent laws and their enforcement matter for economic growth. However, our findings also suggest that patent rights vary by country and industry. We show that patent rights have a smaller impact on economic growth in poorer countries and in less patent-intensive industries. Since patent intensive industries account for a smaller share of the economies of the poorer countries, our results imply that the welfare gain in terms of economic growth for these countries is more likely to be outweighed by the welfare loss due to lower end-usage, and hence, tip the balance towards weaker rights being socially optimal. Abstract
The paper’s conclusion with respect to “poorer” countries being better off with a weak patent system is pure conjecture and was not part of their study. The reason that poor countries do not see a big boost by having stronger patent laws is: 1) poor countries are technologically backward and can advance economically by copying (purchasing) existing non-patented technologies, and 2) poor countries have poor property rights systems diminishing the effectiveness of their patent systems. A poor country is poor because of its low level of technology. Just raising a poor countries level of technology to the same level as the United States twenty years ago would result in huge economic gains. The reason poor countries have a lower level of technology is because they have weak property right systems that results in under investment in technology (Capital Spending). The paper hints at this point:
Our patent rights index depended on an assumption that enforcement of patent rights was correlated with enforcement of property rights in general, as measured by the Fraser index (The Fraser Institute does a study of economic freedom for all countries once a year). P. 10
In Figure 1, we plotted the Fraser index against the GP index (Patent Strength) scaled up by a factor of two. The two indices were highly correlated. P. 10
In other words, there is a strong correlation between the strength of property rights in general with the strength of a patent system in a country. This should not be surprising since patents are property rights in inventions. If you did a study of arbitrary government grants or monopolies versus the strength of patents in countries, you would find they are highly uncorrelated. Despite the nonsense that suggests that patents are monopolies.
Another interesting point in the paper:
Among 15 Western countries over several centuries, enactment of patent law was associated with higher rates of scientific discoveries, inventions, and innovations.
Hu , Albert G.Z. and Png , I.P.L., Patent Rights and Economic Growth: Evidence from Cross-Country Panels of Manufacturing Industries, August, 2010.
Professor Mark Lemley has asserted that inventions are really created by society and the idea of individual inventors coming up with important inventions is a myth. I have shown that the broad macroeconomic facts do not support his theory. Now John Howells and Ron Katznelson have written a paper showing the specific facts Lemley uses to support his thesis are just plain wrong. Dr. Katznelson has a Ph.D. in electrical engineering and is a highly successful inventor and entrepreneur, unlike Professor Lemley who does not have a technical background and is not a patent attorney. 
This makes Dr. Katznelson eminently qualified to examine Lemley’s assertion of multiple simultaneous invention. Dr. Howells also has a technical background. A common mistake of non-technical people, who do not understand a technology, is to group two inventions together that are distinct and both important. For instance, they may consider the invention of AM radio, FM radio and superheterodyne receivers as all the invention of the radio. However, each of these inventions is both distinct and highly significant.
Howells and Katznelson explain, “that Lemley has most of his facts wrong, misstates the holdings of several court cases, and misunderstands the commercial realities that surrounded implementation of these technologies.” They show the Lemley does not clearly define each invention. As the paper explains “under patent law‘s formal definition, the word invention refers to a single idea—Edison‘s high resistance filament, the Wright brothers’ wing-warping, Watt‘s steam engine condenser, etc.” Anyone with even an elementary familiarity of patents knows that simultaneous inventions are very rare. The Patent Office has a procedure (soon to be extinct) to determine which of two or more people are the true inventors of an invention. These cases are extremely rare involving around 0.01% of all patent application filed.
As an example of Lemley’s gross negligence of the facts, with respect to Edison’s invention of the high resistance incandescent light bulb, the authors show that a court found:
It is very clear to us that, in the original application for the patent sued on, the applicants had no such object in view as that of claiming all carbon made from fibrous and textile substances as a conductor for an incandescing electric lamp. Nothing on which to base any such claim is disclosed in the original application. We have carefully compared it with the amended application, on which the patent was issued, and are fully satisfied that, after Edison’s inventions on this subject had been published to the world, there was an entire change of base on the part of Sawyer and Man, and that the application was amended to give it an entirely different direction and purpose from what it had in its original form. (emphasis added)
But Lemley ignores this part of the history and asserts that this is a case of simultaneous invention.
The actual invention of Sawyer and Man was:
improvements were directed at having a lamp filled with an absorbent of carbonic acid gas, a spring-loaded feeder feeding a vertical carbon pencil upwards as it was consumed and a design for cheap carbon pencil renewal with easy sealing and exhausting of air. Lemley neglects to tell us that despite these improvements, and even after Edison’s invention, many of the [Sawyer & Man] lamps failed to last more than a few hours.
Lemley also ignores that :
the electrical resistance of these (pre-Edison) lamps was typically only a few Ohms and thus required large currents to power them, rendering power losses through long distribution wires prohibitive. Lemley also neglects to tell us that Sawyer & Man‘s light bulbs could not be used effectively more than a few feet away from a generator, and therefore had little commercial practicality
Please read the whole paper, A Critique of Mark Lemley’s “The Myth of the Sole Inventor” http://bit.ly/Lemley-Critique. I will leave you one final quote from the paper.
One can only speculate how much longer it would have taken someone else to come up with Edison‘s idea had it not been for Edison‘s reliance on the patent system and the revenue it protected to support his research and development over the two years that he spent on inventing his incandescent electric lamp.
There has been a lot of confusion about Ayn Rand’s position on patents and intellectual property among her fans. I have written about this before in Ayn Rand on Intellectual Property. However, I thought it might be interesting to catalog every case where patents and inventions are mentioned in Atlas Shrugged for people researching this issue and to further illuminate Rand’s position on patents. The references are to the Kindle edition of Atlas Shrugged, which unfortunately has a large number of typos.
There are three main inventions in Atlas Shrugged, Rearden metal, the static electric motor, and the sonic destruction ray (aka Project X). The story is intimately woven around these three inventions.
Below are the quotes (bolded) and context where necessary with my commentary.
1) Location 5796-5802 ”…’he didn’t invent smelting and chemistry and air compression. He couldn’t have invented HIS metal but for thousands and thousands of other people. HIS Metal! Why does he think it’s his? Why does he think it’s his invention? Everybody uses the work of everybody else. Nobody ever invents anything.’ (Jim Taggart) She (Jim Taggart’s Wife) said, puzzled, ‘But the iron ore and all those other things were there all the time. Why didn’t anybody else make that Metal, but Mr. Rearden did?’”
Rand anticipates Open Source socialists. This idea that no one invents anything is the standard argument of collectivists, but it does not stand up to scrutiny. Why has inventing been concentrated in the last two centuries in relatively small populations of the U.S. and western countries?
2) James Taggart angry about Rearden’s success
location 5832- “‘…And Dr. Pritchett, the old fool, is going around saying that he knows Rearden didn’t invent that Metal- because he was told, by an unnamed reliable source, that Rearden stole the formula from a penniless inventor whom he murdered!”
This anticipates the defense of every infringer.
3) location 5808-5810 “I’m not sure it was so great-inventing this new Metal, when so many nations are in need of plain iron-why do you know the People’s State of China hasn’t even got enough nails to put wooden roofs over peoples’ heads?”
Fast track for green tech at the PTO – Why, except for politics, are so-called green tech inventions more important than other inventions?
4) location 5812-5822 “No sensitive person these days-when there’s so much suffering around us- would devote 10 years of his life to splashing about with a lot of trick metals. You think it’s great? Well, it’s not any kind of superior ability, but just a hide that you couldn’t pierce if you poured a ton of his own steel over his head! There are many people of much greater ability in the world, but you don’t read about them in headlines and you don’t run to gape at them at grade crossings-because they can’t invent non-collapsible bridges at a time when the suffering of mankind weighs on their spirit!”
5) location 5827 “The country gave Rearden that Metal, now we expect him to give the country something in return.”
Dr. Ferris, State Science Institute response on the Bill Directive 10-289
6) location7042-7046 ” ‘Did you hire any research men of your own?’ ‘ Yes, yes, some- but let me tell you, I didn’t have much money to spend on such things as laboratories, when I never had enough funds to give me a breathing spell. I couldn’t even pay the bills I owed for the absolutely essential modernizing and redecorating which I had to do- that factory was disgracefully old-fashioned from the standpoint of human efficiency…’”
Lee Hunsaker, owner of 20th Century Motor Co. after a lawsuit forced Midas Mulligan to sell, and then Mulligan Galted
Our accounting rules don’t value inventions. No accounting system shows any return for an invention. I and other have written about how our accounting rules inhibits investment in the inventing process. See Accounting Inhibits R&D http://hallingblog.com/accounting-inhibits-rd/
7) location 7111 “Our aim was not to produce gadgets, but to do good.”
Sounds like President Obama or President Bush’s 1000 points of light.
location 7126 ” Don’t you know any words but ‘engineer’?”
Ivy Starnes, sister of Gerald Starnes, last owners of 20th Century Motors, on their “great plan” to change the factory that caused its failure and response to Dagny’s urgency for the names of the engineers working on the revolutionary motor
Do we value our engineers? Sales people and marketing managers are compensated more than corporate inventors/engineers. Perhaps this is related to our dysfunctional accounting systems.
9) location 7300-7302 “‘The secret you are trying to solve involves something greater-much greater-than the invention of a motor run by atmospheric electricity. There is only one helpful suggestion that I can give you: By the essence and nature of existence, contradictions cannot exist.’”
Dr. Akston, professor of philosophy, speaking to Dagny about why people have Galted
10) location 196 “Anyway, this should be my lead for the character of John Galt. He, too, is a combination of an abstract philosopher and a practical inventor; the thinker and the man of action together…”
Ayn Rand, forward to Atlas Shrugged
Iillustrating the fallacy of the “tinker-er, mad professor/inventor”
11) Location 152-154 “ [ Galt represents]…For Dagny, the ideal. The answer to her two quests: the man of genius…is expressed in the search for the inventor of the engine.”
Forward to Atlas Shrugged
12) Location 3758- 3763 “He [Rearden] had devised a new type of truss. It had never been made before and could not be made except with members that had the strength and lightness of Rearden Metal. ‘Hank,’ she [Dagny] asked, ‘did you invent this in two days?’ ‘Hell, no. I “invented” it long before I had Rearden Metal. I figured it out while making steel for bridges. I wanted a metal with which one would be able to do this, among other things.’”
Dagny asking Hank about the invention of his new bridge truss
An illustration of advanced inventing: what could I do if… I have written on this process before, see How to Build a Patent Portfolio that Dominates Your Market Place http://hallingblog.com/how-to-build-a-patent-portfolio-that-dominates-your-marketplace/
Evolutionary vs. revolutionary technologies: how one invention opens up myriad new inventions. This passage illustrates that each invention can open up the possibility of more inventions and there is no finite number of inventions to be created.
13) Location 6377 Hank and Dagny find motor
14) Location 7777-7780 “’ A man with the genius of a great scientist, who chose to be a commercial inventor? I find it outrageous. He wanted a motor, and he quietly performed a major revolution in the science of energy, just as a means to an end, and he didn’t bother to publish his findings, but went right on making his motor. He did he want to waste his mind on practical appliances?’ ‘Perhaps because he liked living on this earth,’ she [Dagny] said involuntarily.”
Dr. Stadler speaking with Dagny
France vs England at the beginning of Industrial Rev. France was just as advanced in science, if not more so, however, their scientists didn’t work on practical applications or with practical inventors. Only those admitted to the French Academy of Sciences were considered worthy – there was a stiff hierarchy. In England, practical inventors interfaced with the scientific community aided by a patent law that did not care (as much) if the inventor came from the Academic Community. For more information see The Most Powerful Idea in the World http://www.amazon.com/Most-Powerful-Idea-World-Invention/dp/1400067057.
15) Location 8968-8972 “Then is money made by the man who invents a motor at the expense of those who did not invent it? Is money made by the intelligent at the expense of fools?…Money rests on the axiom that every man is the owner of his mind and his effort…”
Francisco d’Anconia response to Money is the root of all evil
Anticipating the absurd arguments of Von Mises economists who want to use the inventions without paying the creator
Man’s mind is the key factor in production for humankind
15) Location11722- 11724 “Point Three. All patents and copyrights pertaining to any devices, inventions, formulas, processes and works of any nature whatsoever, shall be turned over to the nation as a patriotic emergency gift by means of gift certificates to be signed voluntarily by the owners of such patents…the Unification Board shall then license the use of such patents and copyrights to all applicants, equally and without discrimination, for the purpose of eliminating monopolistic practices…”
Directive 10-289
Rand anticipated the nonsense of considering patents a monopoly.
This anticipates the actions of the Bush administration’s response to the anthrax scare: threatening a drug company to lower their prices on the antidote, or they would compulsory allow other companies to manufacture
It also anticipates Obama proposal to reduce the length of pharma’s patents to 7 years
And anticipates Liberals demanding that the drug companies reduce their costs for elderly, poor, and 3rd world. Most countries already have made use of these compulsory measures, which leads to higher costs in the US where the inventions originate.
This illustrates people’s lack of understanding about the importance of property rights
16) location 11729 “Point Four. No new devices, inventions, products, or goods of any nature whatsoever, not now on the market, shall be produced, invented, manufactured or sold after the date of this directive. The Office of Patents and Copyrights is hereby suspended.”
Sounds like the failure to fully fund the PTO and
Dudas’ irrational rationing of issuances of new patents
17) Location 11765 “A man’s brain is a social product. A sum of the influences that he’s picked up from those around him. Nobody invents anything, he merely reflects what’s floating in the social atmosphere…”
Dr. Ferris’s view there is no such thing as genius
Of course this begs the question, why are the majority of inventors in this world concentrated in so few countries?
18) Location 11817 “ We won’t have to worry about new inventions upsetting the market”
Explains why large multi-nationals want to pass the America invents act- to stifle disruptive competition
19) 11839 “There’s been enough invented already-enough for everyone’s comfort-why should they be allowed to go on inventing?”
You are either moving forward or moving backwards. You cannot remain static. The reason why is in post Sustainability isn’t Sustainable http://hallingblog.com/sustainability-isn%E2%80%99t-sustainable/.
20) location13028 “…the boy had cared for nothing but his studies, not for sports or parties or girls, only for the vision of the things he was going to create as an inventor.”
Young genius commits suicide on eve of passage of Directive 10-289
21) Loc 11880 “…Taking over the patents is fine. Nobody’s going to defend industrialists. But I’m worried about taking over the copyrights. That’s going to antagonize the intellectuals. It’s dangerous. It’s a spiritual issue…”
Lawson responding to Mouch on impact of Directive
See the Copyright Term extension Act vs. America Invents Act- We are constantly weakening patent rights on one hand and strengthening copyrights.
This anticipates that Congress is always concerned about artists but could care less about inventors
22) loc 15001”… Dwight Sanders? Where was the inventor of her motor?”
23) loc 15237 “…in whose arms? ‘ why the inventor of the motor.’ She gasped, closing her eyes; this was one connection she knew she should have made.”
24) Loc 15318 “The young inventor of the 20th century motor company is the one real version of the legend, isn’t it?”
Dagny on crashing into Galt Gulch
25) Loc 15587 “…I ask less of the men to whom I trade it for the things I need. I add an extra span of time to their lives with every gallon of my oil that they burn. And since they’re men like me, they keep inventing faster ways ways to make the things they make- so every one of them grants me an added minute, hour, or day with the bread I buy from them, with the clothes, the lumber, the metal…”
Wyatt on living in the Galt Gulch
This is a response to the whining about paying inventors or their patents stifling competition is nonsense, unless you want something for nothing
26) Loc 15777 “she was looking at the inventor of the motor, but what she saw was the easy, casual figure of a workman in his natural setting and function…”
Dagny observing Galt at work in the Gulch
27) Loc15989 “…no more than we consume for our immediate needs-with not a penny nor an inventive thought left over to harm the world. It is evil to succeed, since success is made by the strong at the expense of the weak?”
Galt explaining to Dagny why they are on strike
28) Loc 16896 “that sacred fire which is said to burn within musicians and poets-what do they suppose moves an industrialist to defy the whole world for the sake of his new metal, the inventors of the airplane, the builders of railroads, the discoverers of new germs or new continents have done through all the ages?”
This demonstrates the absurd argument that artists are creative but inventors and scientists aren’t creative
29) Loc 17033 “…john intended to be an inventor, which meant that he was to be a physicist…”
Dr. Akston on the three brilliant students
30) Loc 17709 “…fraudulently solemn voice magnified by the microphone inventor’s ingenuity into the sound and power of a giant…”
Mouch getting ready to announce Directive 10-289.
31) Loc17745 “…Project X would not have been possible, this great invention will henceforth be known as the Thompson Harmonizer!”
32) Loc 17785 “..who invented that ghastly thing?”
Dr. Stadler talking to Dr. Ferris about the Thompson Harmonizer (Sonic Destruction Ray aka Project X)
33) Loc 17791 “’ what is the practical purpose of this invention? What are the ‘epoch-making possibilities’? ‘Oh, but don’t you see? It is an invaluable instrument of public security. No enemy would attack the possessor of such a weapon.”
Stadler asking Ferris about Project X, realizing it was his research that led to the invention
34) Loc17819 “…voice galloping across the continent with a description of the new invention…”
Dr. Ferris on Project X
35) Loc 17828 “This great invention was the product of the genius of a man whose devotion to the cause of humanity is not to be questioned…”
Wesley Mouch discussing Project X.
36 Loc 17836 “…the new invention was an instrument of social welfare, which guaranteed general prosperity… this invention, the product of dr. Robert Stadler…”
Announcer to the world on project x
37) Loc 17852 “…if people should misunderstand the nature of the new invention, they’re liable to vent their rage on all scientists. Scientists have never been popular with the masses.”
Dr. Ferris talking about Project X
38) Loc 17853 “…this invention is a great, new instrument of peace…”
More on Project X
39) Loc 17875 “ Dr. Stadler could not believe it at first-that the new invention was to be greeted with particular gratitude by the mothers of the country.”
More on Project X
40) Loc 17956 “…fraudulent voices talking about some sort of new invention that was to bring some undefined benefits to some undefined public’s welfare.”
Dagny overhearing the broadcast
41) Loc 18603 “…he is the man who invented the motor we found…”
Dagny telling Hank that John Galt exists
42) Loc 19113 “wondering whether some invention of his own, some device of rays and lenses, permitted him to observe her every movement…”
Dagny wondering how Galt has followed her progress the past 10 years
43) Loc 19403 “They were both performing an expected routine, a routine invented by someone and imposed upon them, performing it in mockery, in hatred, in defiling parody on its inventors.”
Taggert with Lillian Rearden
44) Loc 20698 “…while you were combing the country for the inventor of my motor…”
Galt explaining to Dagny that he was working as a lineman for Taggert Transcontinental all this time
45) Loc 21962 “that the alleged short-cut to knowledge, which is faith, is only a short-circuit destroying the mind-that the acceptance of a mystical invention is a wish for the annihilation of existence and, properly, annihilates one’s consciousness.”
Galt radio speech
46) Loc 22391 “…you would not be able to fulfill or even to conceive your wishes. You would not be able to desire the clothes that had not been made, the automobile that had not been invented, the money that had not been devised…”
Galt radio speech
47) Loc 22396 “just as your mystics of spirit invented their heaven in the image of our earth, omitting our existence, and promised you rewards…”
Galt radio speech
48) Loc 22454 “physical objects cannot act without causes. That his organs of perception are physical and have no volition, no power to invent or to distort, that the evidence they give him is an absolute, but that his mind must learn to understand it…”
Galt radio speech
49) Loc 22495 “a student reading a book understands it through a process of-blank-out. A scientist working on an invention is engaged in the activity of-blank-out.” [how most teachers explain the world]
Blank-out is Rand’s way of showing that people refuse to acknowledge the process of reason, of thinking
50) Loc22577 “You who have never grasped the nature of evil, you who describe them as ‘misguided idealists’-may the God you invented forgive you!”
Galt radio speech
51) Loc 22594 “…when I worked in your world, I was an inventor. I was one of a profession that came last in human history and will be first to vanish on the way back to the sub-human. An inventor is a man who asks ‘Why?’ of the universe and lets nothing stand between the answer and his mind.”
It is interesting that Rand points out that being an “inventor” was one of the last professions in human history. Perhaps the first person to take on the profession of a being an inventor was Galileo, who lived in Venice. Venice passed the first modern patent laws in 1474. The U.S. has been the preeminent producer of people who made their living as inventors. The America Invents Act is another step along the path of ensuring that no one will make a living as an inventor in the U.S. anymore.
In fact, whenever you see great periods of prosperity, you see large numbers of new inventions. Whenever you see a lack of inventors inventing, you can be assured we are stagnating economically
52) Loc 22621 “…whether you would be able to invent a wheel, a lever, an induction coil, a generator, an electric tube,-then decide whether men of ability are exploiters who live by the fruit of YOUR labor…”
Galt radio speech
53) Loc 22631 “…dream of enslaving the material providers who are scientists, inventors, industrialists…”
Galt radio speech
54) Loc 22644 “…and to exile from the human race the hero, the thinker, the producer, the inventor…”
Galt radio speech
55) Loc 22875 “you failed to recognize the motor I invented-and it became, in your world, a pile of dead scrap.”
Shows nations and people are wealthy because of their mind-embodied by their inventions and technology-not their natural resources, labor and land.
56) Loc 22947 “…Nor will he give ten years of unswerving devotion to the task of inventing a new product… they will seize his rewards and his invention”
Galt radio speech
57) Loc 22958 “…for the work of the inventor who created the product which you spend your time on making, for the work of the scientist who discovered the laws that went into the making of that product…”
Galt radio speech
58) Loc 22974 “in proportion to the mental energy he spent, the man who creates a new invention receives but a small percentage of his value in terms of material payment, no matter what fortune he makes, no matter what millions he earns. But the man who works as a janitor in the factory producing the invention, receives an enormous payment in proportion to the mental effort that his job requires of him.”
Hear, Hear
59) Loc 23002 “…they deliver their science to the service of death, to the only practical purpose it can ever have for looters: to inventing weapons of coercion and destruction.”
This is not about self-defense, it is about the policies we pursue that force us to spend so much time and talent and money on defense
60) loc 24304 “I’m Robert Stadler- he had thought-it’s my property, it came from my discoveries, they said it was I who invented it…”
Stadler on seizing Project X under his control and rule the country
61) Loc 24400 “’I invented it! I created it! I made it possible!’ ‘You did? Well, many thanks, but we don’t need you any longer. We’ve got our own mechanics.’ ‘Have you any idea what I had to know in order to make it possible? You couldn’t think of a single tube of it! Not a single bolt!’…’What claim do you have to it?’ Meigs patted his holster. ‘This.’”
Mayo clinic’s management is pursuing a business strategy of efficient infringement – more commonly known as theft of other people’s inventions. This immoral course of action is exemplified by Mayo’s involvement in the frivolous patent lawsuit Mayo v. Prometheus and Mayo researcher’s intellectual support for ACLU, Mayo et al. v. Myriad and in their support, through their lobbying organizations, for the America Invents Act (H.R. 1249 & S.23). The Act is nothing but a power grab by large multinational companies to steal the inventions of individuals and startups. The researchers at Mayo better wake up and realize that their managements’ actions, if successful, will not be limited to stealing the intellectual effort of non-Mayo inventors.
The Myth of the Sole Inventor, By Mark A. Lemley, Stanford Law School http://papers.ssrn.com/sol3/papers.cfm?abstract_id=1856610
Professor Mark A Lemley has written a paper suggesting that sole inventors and individual genius does not exist. Mr. Lemley teaches patent law and intellectual property law at Stanford University. However, Mr. Lemley is not a patent attorney, does not have a technical 
background and as his paper proves has not understanding of technology. Mr. Lemley’s idea of collectivist invention ignores three basic facts:
1) Groups of people are made up of individuals.
2) Every individual has to think for themselves – you cannot think for someone else, which is a source of frustration for every parent (child).
3) Throughout history the rate of invention was very slow until we introduced property rights for inventions (patents).
Lemley purposely downplays Edison’s achievement. The fact is that Edison created the first high resistance, long lasting, incandescent light bulb. This was a huge achievement that made electrical lighting commercially feasible. Many “experts” with Ph.D.s from the most prestigious universities at the time said electrical lighting was impossible commercially. Lemley also has his history wrong. Swan was the most important inventor of the light bulb, before Edison. He mentions Man and Sawyer, who I find no reference to in any history of the incandescent light bulb. Lemley appears to have no regard for facts. His analysis of the Wright brother’s achievements is similarly sloppy and just plain wrong.
Lemley’s argument that great inventions are created by multiple people simultaneously has been examined by numerous scholars and found to be incorrect. For instance, see Jacob Schmookler and his ground breaking book, Invention and Economic Growth, which examined this issue. People like Lemley attempt to smear together multiple inventions as being the same invention. For instance, they see Swan’s light bulb and Edison’s light bulb as simultaneous inventions of the light bulb. Lemley may have made this mistake because he does not have the technical background necessary to understand the issues surrounding the invention of the light bulb. However, I suspect that Lemley is not interested in the truth, he is interested in pushing a political theory of collectivist invention. If Lemley’s ideas held any water at all, then you would expect either: 1) the USSR/North Korea should have been one of the greatest sources of inventions in the history of the World, and/or 2) the greatest population centers would be the biggest creators of new technology. The facts are that neither are true. The first is self evident. The second appears to be true until the creation of property rights for inventions. When England and the U.S. create an effective property rights system for inventors almost all significant inventions for the Industrial Revolution are invented in the U.S. and England, even though their populations are much smaller than France, China, India, etc.
Lemley is pushing an old worn out socialist idea that individuals do not matter only the collective. This paper is not novel and its thesis has been proven false over and over again. But socialists do not believe in an objective reality.
The paper is an example of the intellectual and moral bankruptcy of many of our academic institutions.
The Myth of the Sole Inventor, By Mark A. Lemley, Stanford Law School http://papers.ssrn.com/sol3/papers.cfm?abstract_id=1856610
The Ayn Rand Institute held a lecture on intellectual property (IP). The talk was given by Adam Mossoff a law professor at George Mason University School of Law. There are eight parts to the lecture. I provide a short synopsis/comment about each video with a link below in case you want to skip to a particular section of the talk. I have previously written on Ayn Rand’s views of intellectual property, see Ayn Rand on Intellectual Property. My post is more about the issues of patent law, while this lecture is more about how IP is the most fundamental of all property rights.
Part 1 of 8: Introduction
This part is a general discussion of the state of the economy and how Ayn Rand’s ideas apply. Mossoff argues that intellectual property has risen to prominence and discusses all the new advances in technology that are based on IP. He explains that Leftists and Libertarians have joined in an all out attack on IP, particularly patents. He also argues that “Net Neutrality” is an attack on IP. He notes that recent Supreme Court cases have significantly weakened patent rights. He concludes with the idea that all property is really intellectual property.
Part 2 of 8: All Property is Fundamentally Intellectual Property
From this point forward the lecture focuses on patents and inventions. Ayn Rand stated that patents are the heart and core of property rights. The talk is about the moral justification for IP. All property is based on two concepts: 1) the nature of value, and 2) man as a rational animal and his mind is his basic tool of survival. It is only life that makes the concept of value possible. Unlike other animals, man has to first determine what values are necessary to sustain his life using his mind.
Professor Mossoff seems to be making an argument that all products/services we use are/were inventions (products of the human mind). They may have been invented a long time ago, but they do not exist in nature (separate from man) and therefore they had to be invented by man before they could be produced. He then points out that human needs do result in the creation of products/services to fill those needs. First, the solution to the need has to be invented and produced and only then can the need be satisfied.
The birth of Industrial Revolution corresponds with the creation of property rights in inventions, i.e., patents. I make this point in my post, Source of Economic Growth.
Part 3 of 8: The Industrial Revolution
The Industrial Revolution was an explosion of inventions that occured when patents were created. Daniel Webster argued that an invention is the product of the inventor’s mind and he has more rights to his invention than any other property. Mossoff quotes a US judge in the 1800s who states that patents are a natural right. Mossoff argues that theUSpatent system (first modern patent system) was the key reason theUSsurpassedEnglandas the driving force of the Industrial Revolution. This explosion of inventive and economic activity in theUSamazed Europeans.
Ayn Rand in Atlas Shrugged refers to machines as the frozen form ingenuity.
Mossoff states that Jeremy Bentham’s ideas are at the root of Libertarian’s attack on IP. Bentham basic philosophy was Utilitarianism – the greatest good for the greatest number. Bentham stated that the reason for property rights was because of scarcity and conflict resolution not natural rights. Mossoff then points out that the followers of Bentham then argue that there is no conflict between people using the same ideas like there is with land. Ideas can be copied and used endlessly. This argument fails for two reasons. One, there is not conflict between ideas, but there is a conflict when a physical embodiment of the idea (invention) is created. They the copier has clearly limited the return for the inventor. Second, a specific purpose of patent laws is to spread the knowledge behind the invention so that other inventors can take advantage of this knowledge – so patents do not limit access to knowledge they increase it. I discuss the fallacies behind the scarcity theory of property at my post Scarcity: Does it Prove Intellectual Property is Unjustified and Scarcity -2 and Scarcity -3. Mossoff points out that this is the philosophical point of view used by the Cato Institute and the Von Mises Institute to attack patents (IP).
Utilitarianism’s “greatest good for the greatest number” always leads to totalitarianism. It also never leads to the purported goal. The reason for this is that utilitarianism is merely a justification for short term actions. Once something has been produced, it always looks like the greatest good is to redistribute the creation. However, this is clearly only true in the short term. In the long term it is clear that this always destroys the economy. This is the theory behind theUSSR,North Korea, and all socialist states. As Ayn Rand pointed out you only need open your eyes to see that these countries do not produce the greatest good for the greatest number. This is because stealing the product of one’s mind (mental labor is labor) is no different than banning free speech. It stifles the mind, which source of all economic progress (values).
Part 4 of 8: Libertarians Assume Resources
Mossoff shows that Libertarians ignores the creation of these inventions. They just assume they exist. The Leftists version of this in theUSis the statement “theUSis the wealthiest Nation in the World” and therefore we should be able to afford X (national health care, social security, free education, fill in the blank). Both groups ignore how and why these resources were created.
Libertarians deny the very foundation of all property rights in their attacks on IP – the rational mind. Libertarians embrace the anti-mind collectivist premises that Leftist use to attack all property rights. I made the same point in my book The Decline and Fall of the American Entrepreneur.
Part 5 of 8: Why the Utilitarian Defense of IP Fails
Mossoff points to the ACLU v. Myriad, see my post ACLU – Gene Patent Non-Sense.
Value creation is the source of property rights according to Ayn Rand. Mossoff states that it is no coincidence thatRandin Atlas Shrugged had the state nationalize all patents in the infamous Directive 10-289. It was because patents are the most fundamental of all property rights. Man’s mind is the root of all material value ever produced in the world.
Mossoff argues that Locke’s labor theory of property is incorrect. He argues that Locke was specifically talking about physical labor. Note it takes calories and effort to perform mental labor, so the distinction between physical labor and mental labor is not that one involves the physical transform of the world. (A similar point seems lost on computer programmers). I would argue that Locke never intended labor to mean “physical labor” but productive effort in modern terms. However, Locke also never clearly defined that all material values comes from the mind.
Part 6 of 8: Question -1
The question is from a teacher at theHenryGeorgeSchoolwho suggests that Kilby and Noyce’s decision to resolve the interference (who owns the patent) to the integrated circuit by not pursuing a patent resulted in faster development of the IC. Mossoff points out that this is fallacy. First, other people would have been inspired to design around the patents or license them and there is no evidence that the development of the IC would have been slowed down. (Most patent attorneys will tell you that there has never been a patent that cannot be designed around eventually) Second, the macroeconomic evidence shows that countries with weak patents are slow to adopt new technologies. Third, Mossoff points to the Bayh–Dole Act, which was enacted because federally funded research was not being commercialized. The reason it was not being commercialized was that the ownership rights were uncertain. This is a typical tragedy of the commons problem. Fourth, Mossoff points out that when the uncertainty about the ability to patent genetically modified life forms was removed in theUSthe biotech industry took off. Biotech languished inEuropefor another decade because of their resistance to recognize patent rights in genetically modified organisms.
The questioner clearly did not listen to a single thing that was being said during the lecture.
Part 7 of 8: Question – 2 & 3
Another question from a teacher at theHenryGeorgeSchool. He suggest that land is special. He argues that the value of land is often enhanced by what is done around your parcel of land and has nothing to do the owner’s labor. As a result, he argues that people should pay “society” a rent for the use of the land. The questioner is confusing externalities with property rights. Externalities and spillover benefits have been used over and over by socialists to justify stealing from producers for the socialists pet projects. The questioner also confuses luck with property rights. Just because someone is lucky and becomes wealthy does not justify stealing from them.
Mossoff points out that land has value because people used their mind to create value from land. Land has no inherent value.
The next questioner asks about multiple people who contribute to the invention of a chair. In patent law this is why patent are a right to exclude, not the right to make something. This ensures that all contributors have rights to the invention. If we did not have a right to exclude, then the final inventor (or first inventor) would be the only one who would receive an economic return.
Part 8 of 8: Question – 4 . . .
Is IP enforcement of copyrights censorship? Mossoff points out that if a Leftist comes into your house and spouts off socialist nonsense it is not a violation of their free speech rights to force them to either leave or shut up. The right to free speech does not give you the right to use someone else’s property. The government’s enforcement of your property rights is not a violation of the 1st Amendment because you do not have a right to free speech while on or using someone else’s property. Milton Freedman showed that free speech is actually impossible without property rights.
Another question suggests that IP slows down the adoption of new technologies. There is absolutely no statistically valid evidence for this point of view. There are anecdotal stories of this happening, but the actual evidence is that countries with weak patent rights have slower adoption rates of new technologies not vice versa.
I was confronted with the statement that there are “Hugh transaction costs related to patents.” This statement implies the assumption that these transaction costs are unjustified. I disagree with the premise, but since all systems can be improved I will provide a number of specific proposals to reduce the transaction costs.
The alternative proposed by the author of this statement, was to shorten the length of patents and increase government funding of R&D. The proposed system of government funding for research is not effective substitute for patents. The history of government funding for research is mixed at best and much more expensive than patents. The US patent system is completely funded by user fees (in fact Congress has been stealing user fees to pay for their pet projects). The patent system has been significantly more effective at stimulating innovation than government funded projects – see Zorina Khan’s work including her book The Democratization of Invention: Patents and Copyrights in American Economic Development, 1790-1920 (NBER Series on Long-Term Factors in Economic Development) also see The Most Powerful Idea in the World: A Story of Steam, Industry, and Invention, by William Rosen.
Assumptions
Litigation Costs: There has been a very effective propaganda campaign to suggest that the patent litigation is out of control. The implication is that there is an explosion in patent litigation. This is just not true.
“The real facts of the so called litigation crisis are that for the past two decades the number of patent lawsuits commenced annually has been about 1.5 percent of all patents granted. In 2006, it was 1.47 percent. This is business as usual. Most patent lawsuits, moreover, settle before trial. In 1979, some 79 percent of patent cases settled before trial, while in 2004 almost 86 percent did. Matters are actually improving.
Also, the U.S. has few patent trials. For instance, in 2001 only 76 patent lawsuits were tried and only 102 went to trial in 2006. By no measure can 102 patent trials be considered a national litigation crisis. The annual report of Federal Judicial Caseload Statistics, which is on the Internet, provides the factual antidote to false claims of a litigation crisis (www.uscourts.gov/ caseload2006/contents.html).” see http://www.manufacturingnews.com/news/07/0629/art2.html
Even though this data is a little old nothing has changed in the last several years. In a $14.4 trillion economy built on technology this is anything but a litigation crisis.
There is also a myth that there is a patent quality issue in the US. This is not supported by the facts.
“As to the massive numbers of “unworthy patents” argument, the real-world test is how many patents are challenged and the outcome of those challenges. Between 1981 and 2006 the USPTO issued more than 3.1 million patents. In that period, 8,600 were challenged at the Patent Office through inter partes and ex parte reexaminations. The number challenged amounts to less than three-tenths of one percent. Of those challenged, about 74 percent resulted in claims narrowed or cancelled. In addition, almost 60 percent of the relatively few patents challenged in a court trial are sustained.
My point is that the USPTO’s work is certainly not perfect, but the Patent Office is also not pouring out a stream of bad patents.” http://www.manufacturingnews.com/news/07/0629/art2.html
By every objective measure: R&D per patent, GDP per patent, and number of citations per patent patent quality is increasing. See http://hallingblog.com/2010/01/07/patent-quality-nonsense/ and http://hallingblog.com/2009/08/18/patent-quality-myth/.
Cost and Time to Obtain a Patent: When Edison applied for his light bulb, he received a patent in 3 months. The reason it takes so long to obtain a patent today is because Congress has been stealing money from the Patent Office.
I have an angel investor friend who was a highly successful entrepreneur who complained that when he invested in a company he did not know about hidden prior art and this created a large amount of uncertainty. He supported the idea of publication of patents. However, the answer was not publication of patents, which breaks the social contract, but fully funding the patent office – as the Edison example above proves.
Disingenuousness of Libertarian Argument about Costs of Patents: All property rights systems have some costs involved in them. GE employs 600 attorneys to comply with tax laws, it probably employs another 600 to comply with SOX, discrimination laws, environmental laws, health and benefit laws. However, it probably employs less 100 patent attorneys. Their patent costs are a drop in the bucket compared to dealing with tax and other regulatory laws. The Libertarian attack on patents in light of all the other burdens imposed on business is disingenuous.
Patents are property rights and companies’ purposeful infringement of other people’s property rights is not a regulatory burden, it is the result of purposeful belief that they can get away with the theft. It is called efficient infringement. See “Technology Theft as a Business Strategy” http://hallingblog.com/2010/03/24/pat-choate-technology-theft-as-a-business-strategy/
Solutions
Patent Litigation: While patent litigation costs are similar to litigation costs generally, there are a number of things that can be done to make the system more efficient. Some are changes to government and some are private sector initiatives.
Secondary Market/Title Insurance for patents. Before the advent of title insurance it was very expensive to buy a piece of land. You had to pay an attorney for a title report that did not come with any insurance. Lawsuits over the boundaries of real property were epidemic before the advent of modern survey tools. Patents are in the same position where no title insurance has been created. Unfortunately, antitrust law undermined the first efforts to create a title insurance/secondary market for patents. Patent pools were a way to determine the validity of patents, enforce patents, and widely license the patents in a cost efficient manner. But the antitrust idiots said that they were illegal. Today, Luddites are using the rallying cry of “patent troll” to kill off the beginning of a secondary market – see http://hallingblog.com/2009/09/18/in-defense-of-patent-trolls/ For more information see Jump Starting a Secondary Market for Patents http://hallingblog.com/2009/11/16/jump-starting-a-secondary-market-for-patents/.
Accelerated Patent Court: A new court similar to the ITC that has expertise in patents and accelerates the patent litigation process is needed. The court should be sufficiently funded and have procedures that allow patent cases to be resolved in under a year. Perhaps the court would be limited to issuing injunctions as a remedy as opposed to economic damages. The goal of this new court is to establish the US as the premier arbiter of patent rights. The US is the best positioned country to protect patent rights, despite our recent history. This would increase the US’s standing as a technological leader in the world and draw innovative companies and people to the US.
Judges: Appoint judges with technical backgrounds and who have passed the patent bar to adjudicate patent cases. Judges without these qualifications make silly mistakes, such as stating that any invention that is just a combination of known elements is suspect whether it should obtain a patent. All inventions are combinations of known elements – it is called conservation of matter and energy. You cannot create something from nothing. (For more on the Supreme Court’s ignorance see http://hallingblog.com/2010/01/19/ksr-supreme-ignorance-by-supreme-court-2/ )
Patent Acquisition
Patent Reciprocity: One of the largest costs of obtaining patent protection is foreign filing. Patent reciprocity would significantly reduce this cost.
If you drive your car across the border into Canada you do not lose title to your car. If you take your manuscript across the border into Canada you do not lose the copyright to your manuscript. But, if you take your invention across the border into Canada, you lose your patent protection and anyone can steal the invention – not the physical embodiment, but the underlying invention.
Patent reciprocity would automatically provide patent rights in a foreign country when you obtained a patent in the US and vice versa. This idea was first proposed by the US in the mid 1800s according to B. Zorina Kahn’s book “The Democratization of Invention: Patents and Copyrights in American Economic Development, 1790-1920“. Unfortunately, the idea died and since then patent rights have been part of the convoluted process of trade negotiations.
Patent reciprocity would significantly increase the value of patents and increase the value of research and development. As a result, it would spur investment in innovation. Reciprocity would increase the valuation of technology start-up companies in all countries that participated. It would also increase per capita income.
Eliminate Maintenance Fees: Maintenance fees are the major cost associated with a patents filed outside the US.
Maintenance fees are a backhanded way of introducing a “working requirement” to patents. Working requirements for patents have always been rejected in the US. These fees favor large entities and reduce the effective life of patents.
A strong patent system pays for itself several times over in increased tax revenues from increased economic activity. The supply side returns from a strong patent system probably exceed the return resulting from lowering the capital gains tax.
Reduce Formalism in Patents: A large part of the cost of obtaining and litigating a patent is overly formalistic requirements. The Non-obviousness requirement should be repealed. It is not logically a part of the definition of an invention and is the source of uncertainty, and increases the cost of both obtaining and enforcing/defending patent lawsuits. For more information see Non-Obviousness a Case of Judicial Activism http://hallingblog.com/2010/06/18/non-obviousness-a-case-study-in-judicial-activism/.
Some of the other overly formalistic requirements include the rules on restrictions, the inequitable defense, and the silly requirements related to section 101. Restrictions are required for trivial differences that are embodiments of the same inventive idea. The doctrine of equivalents has been dead for over a decade. Formalism over logic rules in the realm of inequitable conduct. USC 101 issues related to software inventions also place form over function that require absurd recitations to computer hardware. All of these formalistic 
requirements favor patent thieves at the expense of real innovators.
This book has an extremely intriguing title. The book’s goal is to explain why the Industrial Revolution happened and how it happened. The book explains that there are over two hundred theories for why the Industrial Revolution occurred. The author points out that most of these theories miss the most obvious point, “which is that the Industrial Revolution was, first and foremost, a revolution in invention.” (Italics in the original) It further explains, “For a thousand centuries, the equation that represented humanity’s rate of invention could be plotted on an X-Y graph as a pretty straight line. . . . Then during a few decades of the eighteenth and nineteenth centuries, in an island nation with no special geographic resources” it changed. Ultimately, the Industrial Revolution was a perpetual innovation machine.
The author explains that England’s patent laws democratized invention and this combined with the advent of limited liability companies and the new capital markets resulted in an explosion of new inventions that created unimaginable wealth.
“The best explanation for the preeminence of English speakers in lifting humanity out of its ten-thousand-year-long Malthusian trap is that the Anglophone world democratized the nature of invention.
In England, a unique combination of law and circumstances gave artisans the incentive to invent. . . . Human character (or at least behavior) was changed, and changed forever, by seventeenth-century Britain’s insistence that ideas were a kind of property. This notion is as consequential as any idea in history.” (emphasis added)
The United States went on to create the first modern (non-archaic) patent system that was considerably more democratic (this is small d democrat) than England’s. This was a major reason why the U.S. became a world economic power in less than 100 years. Unfortunately, the U.S. is presently considering legislation, the America Invents Act (aka Patent Reform), that will again make inventing undemocratic and the province of the wealthy.
The book explains the history of patent law, the history of the science of steam (thermodynamics) as well as the history of the technology and economics of steam engines. The writing style is easy to read and very informative. Despite the bold initial statements in the book, it really focuses on the story of the Industrial Revolution instead of supporting its thesis.
The Most Powerful Idea in the World: A Story of Steam, Industry, and Invention, by William Rosen.
Business Insider: Google Gets An Absurd Patent For Its “Google Doodles”, by Matt Rosoff
An article in Business Insider, argues that Google’s patent (USPN 7912915) on Google Doodles is absurd. The patent describes a computerized 
method of creating a new company logo associated with an event. The modified company logo is associated with a link. Google uses this on their search page. The goal is to entice people to visit the webpage and increase the webpage’s traffic. A major goal of most websites is to increase their page views and the patent describes a new technology to achieve this goal.
The article demonstrates the ignorance of the author, Matt Rosoff. A patent is a property right in an invention. An invention is a new creation. This means that it has to be useful and to be an invention it has to use technology to solve the problem. This is exactly the sort of invention that patents were designed to protect. If someone copies Google’s technology, then they are clearly free loading off the efforts of Google. If the invention has no value, then the patent will not hamper anyone’s development efforts. If the invention has value, then using it without authorization is theft. As someone who has been enticed to click on the modified Google logo, I would say the invention appears to have value.
The author is so typical of anti-patent religionists that either ignore or are ignorant of what the true limits of a patent are. The author describes the patent as:
The actual methods described in the patent don’t seem to be anything special — it’s not like Google has some amazing unique way of changing its logo daily. It’s just creating a new image, storing it on a server, and uploading it to the Web server.
The scope of a patent is defined by its claims and the above characterization is much broader than the actual claims and makes it sound like there is no new technology involved in the patent. The claims require modifying the link to be associated with an event. The modified logo has to be linked to another page. And even my characterization does not capture all the limitations in the independent claims.
The anti-patent crowd misinterprets (purposely?) the scope of a patent making it much broader than it actually is, ignoring the real technology behind the invention. They then use these misinterpretations to demonstrate the absurdity of the patent. This dishonest technique has successfully hoodwinked the public and has resulted in exactly the outcome the author is against: namely a patent system that is biased in favor of large corporations at the expense of individual inventors and startups.
Business Insider: Google Gets An Absurd Patent For Its “Google Doodles“, by Matt Rosoff
Intellectual Property’s Great Fallacy,by Eric Johnson
This paper starts with a bold statement that the theoretical underpinning for intellectual property (patents & copyrights) “has been washed away.” Shortly thereafter it states “it’s hard to imagine big-budget Hollywood movies being made without copyrights. And many new pharmaceuticals would not have been brought to market without the inducement of the patent laws.” The paper never attempts to 
resolve this contradiction. But this is far from the only problems and errors with the paper.
Property Rights: Mr. Johnson does not seem to understand the basis of property rights or the difference between property rights and monopolies. He incorrectly states that patents and copyrights are monopolies. Patents and Copyrights are property rights and any definition of monopoly that includes patents also includes all property rights. This of course leads to the nonsense that all property rights are monopolies. For more information see The Myth That Patent are Monopolies.
Mr. Johnson tries to denigrate patents and copyrights by showing that their origin is from arbitrary government grants. In the case of patents this was reformed by the Statue of Monopolies. The exact same thing can be said of all property rights. All land was considered to be owned by the King and he arbitrarily gave monopolies over certain areas of land. This usually included the right to profit from the peasants on the land. If the noble who received this arbitrary grant of land crossed the King, the King could and did take back the grant. This practice continued at least until the U.S. Revolutionary War. For instance, most of the colonies were arbitrary grants of land and President Washington was given large tracts of land for his service in the French and Indian War. It was not until Locke that the theoretical basis for property was established, which is productive effort. Patents and copyrights are property rights given for the inventor’s or author’s productive effort. This theory of property rights acknowledges the reality that but for the creator the property would not exist and therefore the creator is the owner.
Extrinsic vs. Intrinsic Rewards: The main thesis of the paper is that creative activities do not need extrinsic rewards. In fact, the author argues that extrinsic rewards actually reduce the amount of creativity. His evidence appears to be survey data. However, survey data tends to be subject to a number of bias errors. The paper ignores the actual empirical evidence. The industrial revolution was an outpouring of new inventions. As explained in the book The Most Powerful Idea in the World “For a thousand centuries, the equation that represented humanity’s rate of invention could be plotted on an X-Y graph as a pretty straight line.”[1] “Then during a few decades of the eighteenth and nineteenth centuries” in England and the US that equation changed.[2] Michael Kremer published a study (Population Growth and Technological Change: One Million B.C. to 1990) that argued that inventive talent and motivation are randomly distributed throughout the population. His model works well until the industrial revolution. Then England and other common law countries significantly out invent the rest of the world and their GDP per capita also grows much faster than the other countries in the world.[3]
Mr. Johnson also repeats the myth of the First Mover Advantage. Even the author of the seminal paper on the first mover advantage has admitted that he overstated the case. There are numerous business books that have argued that it is better to be a copier, including In search of Excellence and more recently Copycats: How Smart Companies Use Imitation to Gain a Strategic Edge. For more information see More Evidence that Stealing Invention is a Business Strategy. My post Invention – A Financial Analysis, show that an inventor is always disadvantaged compared to a copier without property rights in his invention.
The paper argues that R&D managers at large corporations believe there are plenty of incentives for companies to invent aside from patents. First of all this survey data is selective. There are plenty of studies that show patents are critical for the success of start-ups. See Patent Signaling, Entrepreneurial Performance, and Venture Capital Financing . Once again Mr. Johnson’s data is selective at best. Large corporations are not highly inventive. According the SBA most emerging technologies are created by individual inventors and startups. See An Analysis of Small Business Patents by Industry and Firm Size.
Free Markets and Patents
Mr. Johnson makes a number of statements like “While intellectual property entitlements are conceded to be modes of interfering in a free market, they are nonetheless understood to be necessary to address a problem of “market failure.” This statement is based on the “Efficient Market Hypothesis.” This hypothesis has been an major excuse for interfering with markets and property rights by statists, while pretending to support free market capitalism. For instance, it is used to justify government involvement in education, labor markets, and limiting property rights through antitrust laws. Free market capitalism is not based on the efficient market hypothesis. It is based on property rights and contracts and the right of individuals to exercise these rights without government interference.
Value of Patents
Mr. Johnson makes the outrageous and completely unsupported statement that, “Patents have turned to be largely worthless to own, and, even worse, costly to defend against.” As shown above Patents (property rights for inventions) were essential for humans in escaping the Malthusian Trap. Patents have been shown to be critical for startups, see Patent Signaling, Entrepreneurial Performance, and Venture Capital Financing. IBM makes over $3B a year from licensing fees. Once again Mr. Johnson’s assertion is selective at best and perhaps purposely misleading.
Open Source
Mr. Johnson argues that the low cost of inventing has opened up opportunities for most people to be inventive and they are doing so in increasingly large numbers. Again his data is selective at best if not outright misleading. Since the advent of the open source and anti-patent movement the U.S. has faded from the clear technological and innovation leader of the world to being a second tier country according to most observers. People in the US are not talking about the explosion of innovation, but the implosion. Mr. Johnson seems to live in an academic fantasyland.
Conclusion
This paper may pass for an academic paper in today’s world, but it is not science. At best is a selective survey of existing research in this area. It does not add any new data, informatio, or conclusions. If it were a patent application, it would not pass the novelty test. However, this appears to be the norm for most of what is considered academic research today.
Intellectual Property’s Great Fallacy, by Eric Johnson
[1] Rosen, William, The Most Powerful Idea in the World”: A Story of Steam: A Story of Steam, Industry, and Invention, Random House, Kindle Version, location 258-264, 2011.
[2] Rosen, William, The Most Powerful Idea in the World”: A Story of Steam: A Story of Steam, Industry, and Invention, Random House, Kindle Version, location s64-270, 2011
[3]Kremer, Michael, Population Growth and Technological Change: One Million B.C. to 1990, Quarterly Journal of Economics, Vol 103, p. 681-716, 1993.
Larry Kudlow in an article titled How to Combat an Arrogant China, suggests that China’s economy is based on the theft of our intellectual property.
They’re stealing our technology, violating all sorts of patent-protection laws, hacking into Google and infringing on intellectual-property rights. In fact, 80 percent of Chinese software is reportedly pirated from American companies.
It is great to see Mr. Kudlow wake up to the value of intellectual property. Unfortunately, he seems to imply that enforcing intellectual property is not consistent with free trade.
As a strong free-trader myself, I recognize the many benefits free and open trade offers both China and the United States. But like many others, my free-trade patience with China is wearing thin.
If China stole its raw materials from the US, would it be a violation of free trade to then to demand that China pay for its raw materials? The single most important raw material that China uses to produce it products is intellectual property.
It is nice to see the Larry Kudlow is beginning to wake up to the importance of intellectual property particularly patents. Note that the US spent a lot of political capital in the 90s to get a mechanism to force other countries to strengthen their intellectual property as part of the TRIPs treaty. But no president has had the courage to actually use the mechanism to force other countries to live up to their agreements.[1] Perhaps this is because every president since Reagan has been ambivalent about patents at best. Only Hollywood and the software industry’s copyrights are able to get the attention of Washington. However, patents are much more important to the US’s economic future.
Perhaps now that Mr. Kudlow has woken up to the fact that the economy is driven by more than Wall Street, tax rates, and the money supply, he will help advance some initiatives that will strengthen patent laws both here an abroad for American inventors. Here is a short list of suggestions
1) Patent Reciprocity: If you drive your car across the border into Canada you do not lose title to your car. If you take your manuscript across the border into Canada you do not lose the copyright to your manuscript. But, if you take your invention across the border into Canada, you lose your patent protection and anyone can steal the invention – not the physical embodiment, but the underlying invention.
Patent reciprocity would automatically provide patent rights in a foreign country when you obtained a patent in the US and vice versa. This idea was first proposed by the US in the mid 1800s according to B. Zorina Kahn’s book “The Democratization of Invention: Patents and Copyrights in American Economic Development, 1790-1920”. Unfortunately, the idea died and since then patent rights have been part of the convoluted process of trade negotiations.
Patent reciprocity would significantly increase the value of patents and increase the value of research and development. As a result, it would spur investment in innovation. Reciprocity would increase the valuation of technology start-up companies in all countries that participated. It would also increase per capita income.
2) Repeal the Publication Requirement: This would restore the social contract
3) Repay PTO: Congress should repay the over $1B it stole from inventors with interest.
4) Repeal KSR: A subject standard of patentability just increases costs and uncertainty associated with the patent process. KSR makes bureaucrats the ultimate arbiter of what is patentable instead of logic.
5) Repeal eBay: This decision is logical absurdity. If a patent gives you the right to exclude, then if you win a patent infringement case you must be able to enforce your only right – the right to exclude
6) Eliminate “Combination of Known Elements”: The fact that the Supreme Court does not understand that every invention in the history of the world is a combination of known elements is pinnacle of ignorance. Have they ever heard of “conservation of matter and energy”?
[1] Pat Choate has documented this issue extensively
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