Posts Tagged ‘Adam Mossoff’
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 following letter from a number of Law Professors deals with the Constitutionality of a First-to-File system as contemplated by the America Invents Act (H.R. 1249 and S. 23)
The following letter from a number of Law Professors deals with the Constitutionality of a First-to-File system as contemplated by the America Invents Act (H.R. 1249 and S. 23)
June 17, 2011
By Email
Speaker John Boehner
Office of the Speaker
H-232 U.S. Capitol
Washington, DC 20515
Democratic Leader Nancy Pelosi
Office of the Democratic Leader
H-204 U.S. Capitol
Washington, DC 20515
Re: Unconstitutionality of “First-Inventor-to-File” Provision in H.R. 1249
Dear Speaker Boehner and Leader Pelosi:
We are writing concerning the issue of the unconstitutionality of § 2 in H.R. 1249, the provision titled “first-inventor-to-file.” It is the belief of the signatories to this letter, all of whom are law professors who specialize in intellectual property law, that this provision is unconstitutional under the Copyright and Patent Clause in Art. I, § 8, Cl. 8.
Section 2 of H.R. 1249 violates both the plain terms of the Copyright and Patent Clause and the historical interpretation of this clause by Congresses and the federal courts. Although there are many legitimate concerns about H.R. 1249’s impact on innovation, this unconstitutional provision by itself is sufficient to justify withdrawing this bill from consideration. At a minimum, this is a justifiable reason supporting the 54 House Members who have joined the June 1, 2011 letter to the Rules Committee in expressing their concerns about the constitutionality of H.R. 1249.
H.R. 1249 Unquestionably Takes Patents Away From Inventors
Although the word “inventor” appears in the title in § 2, which confusingly uses the phrase “first-inventor-to-file,” it nonetheless creates the same first-to-file rights that existed in the patent reform bills that had been introduced in prior Congresses and which were universally recognized as creating a first-to-file patent system. It also creates the exact same first-to-file rights that exist in other countries that have adopted first-to-file patent systems in both name and substance, such as Canada. Section 2 has to create a first-to-file patent system if only because one of the primary justifications for this provision in H.R. 1249 is that the United States should harmonize with other countries’ first-to-file patent systems. In sum, despite the confusion created by its title, H.R. 1249 unquestionably creates a first-to-file patent system.
The Constitution Only Empowers Congress to Give Patents to “Inventors”
The basis of the 220-year-old first-to-invent patent system in the United States is the Copyright and Patent Clause, which states that Congress has the power:
“To promote the Progress of Science and the useful Arts, by securing for limited Times to Authors and Inventors the exclusive Right to their respective Writings and Discoveries.” U.S. Const., Art. I, § 8, Cl. 8 (emphasis added).
The operative terms for patent law is that Congress is empowered only to “secure[e]” to “Inventors” their “exclusive Right to their . . . Discoveries.”
In the Founding Era, the term “Inventors” was defined in the newly independent United States of America as referring only to first inventors. In Samuel Johnson’s 1785 dictionary, often relied on by the Supreme Court as an authoritative source of meaning in the
Founding Era, an “inventor” is defined as “one who produces something new; a devisor of something not known before.” Moreover, Johnson defined a “discoverer” as “one that finds anything unknown before.” Samuel Johnson, A Dictionary of the English Language (6th ed. 1785). Johnson was not alone in thinking that “Inventors” referred only to first inventors. St. George Tucker, for instance, defended the Copyright and Patent Clause against criticisms that it empowered Congress to create commercial monopolies by observing that “nothing could be more fallacious,” because this constitutional provision limited Congress to securing only an “exclusive right” in “authors and inventors.” St. George Tucker, Blackstone’s Commentaries: With Notes of Reference to the Constitution and Laws of the Federal Government of the United States and of the Commonwealth of Virginia, vol. 1, appendix (1803): p. 266.
Moreover, the First Congress, whose acts are often recognized as probative of the original meaning of constitutional terms, explicitly rejected the English practice of granting patents to importers of technology, recognizing that importers were not first and true inventors. During the drafting of the bill that became the Patent Act of 1790, the House committee decided not to follow the English practice of extending patent rights to the “first importer” of overseas inventions. Representative Thomas Fitzsimmons wrote: “The 6th Section, allowing Importers, was left out, the Constitutional power being Questionable.” See Karen E. Simon, The Patent Reform Act’s Proposed First-to-File Standard: Needed Reform or Constitutional Blunder?, 6 J. MARSHALL REV. INTELL. PROP. l. 129, 141 & n. 95 (2006-2007) (quoting congressional record).
Thus the Patent Act of 1790 authorized the grant of a patent only to a person who has “invented or discovered any useful art . . . not before known or used.” See Patent Act of 1790, § 1, 1 Stat. at 109-110. The Patent Act of 1790 further provided for termination of a patent “if it shall appear that the patentee was not the first and true inventor.” See Patent Act of 1790, § 6, 1 Stat. at 111. This uniquely American first-to-invent requirement was readopted in all patent statutes enacted by successive Congresses in 1793, 1836, 1870 and 1952.
As the famed patent law historian, Edward Walterscheid, whose work has been relied on by the Supreme Court in many patent cases, has written: “Implicit in the use of the terms ‘inventors’ and ‘discoveries’ in the intellectual property clause is the premise that before an exclusive right can be granted, the discovery to be patented must be novel. . . . Simply put, novelty is a constitutional requirement.” Edward C. Walterscheid, The Nature of the Intellectual Property Clause: A Study in Historical Perspective (Buffalo: William S. Hein & Co., 2002) at p. 310-11 (emphasis added). Walterscheid further writes that James Madison and early Congresses embraced a uniquely “narrow” conception of novelty compared to England (which permitted patents for importation), as they believed that for an invention “to be patentable in the United States a discovery had to be original to the inventor.” Id. at p. 312-13.
Supreme Court Confirms Patents Must Be Granted to Inventors
In numerous court decisions since the early American Republic, Supreme Court Justices have repeatedly recognized that the patent statutes imposed this constitutional requirement. In 1813, Chief Justice John Marshall, riding circuit, wrote that the “constitution and law, taken together, [give] to the inventor, from the moment of invention, an inchoate property therein, which is completed by suing out a patent.” Evans v. Jordan, 8 F. Cas. 872, 873 (C.C.D. Va. 1813) (No. 4,564) (emphasis added).
In the Supreme Court’s decision in Stanford v. Roche just last week, Chief Justice Roberts quotes from many of the Supreme Court’s decisions over the past 220 years to establish that “Our precedents confirm the general rule that rights in an invention belong to the inventor.” This included, for instance, the decision in United States v. Dubilier Condenser Corp., in which the Supreme Court held that U.S. patents have long secured “the result of an inventive act, the birth of an idea and its reduction to practice; the product of original thought.” 289 U.S. 178, 188 (1933) (emphasis added). Justice Joseph Story, recognized by patent scholars today as one of the founders of American patent law, wrote that “No person is entitled to a patent under the act of congress unless he has invented some new and useful art, machine, manufacture, or composition of matter, not known or used before.” Bedford v. Hunt, 3 F. Cas. 37, 37 (C.C.D. Mass. 1817) (No. 1,217) (emphasis added).
Congress May Not Define “Inventors” However It Wishes
Some supporters of the constitutionality of § 2 have stated that the meaning of the word “Inventors” in Art. I, § 8, Cl. 8 should be left to the policy discretion of Congress to interpret and apply in its patent statutes. But this cannot be a valid principle for applying constitutional provisions to Congress, because it would mean that every word in every provision of the Constitution should be left to the policy discretion of Congress as to how it should be applied to American citizens. Under this approach, Congress could freely redefine the meaning of “speech” in the First Amendment, or Congress could freely redefine the meaning of “due process” in the Fifth and Fourteenth Amendments. Certainly Congress has some discretion within the scope of its enumerated powers to enact legislation; this is why the Framers adopted the Necessary and Proper Clause. But the very idea of a Constitution that specifically enumerates limited powers in the federal government through expressly worded provisions requires that the limiting terms in these provisions not be read out of the Constitution by interpretative fiat. If “Inventors” is to have any meaning whatsoever in defining and limiting the scope of Congress’s power to enact patent statutes under the Copyright and Patent Clause, it can only mean what it has been consistently interpreted to mean for 220 years: patents may be secured only to the first inventors.
Supporters of the constitutionality of § 2 have further claimed that the instances in which patents are denied to first inventors given their post-invention activities, such as public use or abandonment, suppression and concealment of an invention, prove that the Constitution does not require that patents go to first inventors. Again, this is a nonsensical principle of constitutional interpretation. The Constitution establishes the presumption that first inventors are secured a patent, but it does not mandate that first inventors must receive patents regardless of their own actions. Thus, Congresses and courts have identified instances in which post-inventive actions by a first inventor can result in a default on the right to receive a patent. There are myriad examples—such as strategic behavior by an inventor in commercially exploiting an invention as a trade secret long before filing for a patent or an inventor’s publicly disclosing an invention and thus creating reasonable reliance interests in third parties that the invention is in the public domain—but they all entail post-invention actions that result in a substantive or procedural default by the first inventor in receiving a patent. This is no different from the constitutional practice of denying to felons the right to vote or the right to own firearms or restricting every American citizen’s due process rights through statutes of limitation, and so on.
Accommodating Foreign Laws Is No Excuse to Violate Constitution
Lastly, the supporters of the constitutionality of § 2 have alleged that Congress’s longstanding practice of accommodating foreign countries’ first-to-file rules when foreign inventors apply for patents in the U.S. somehow disproves the constitutional argument against this first-to-file provision. But such laws prove no such thing. The Constitution applies only within the jurisdictional boundaries of the United States of America, and thus it is merely an act of comity for Congress to permit foreign inventors who have created inventions in foreign countries to apply for U.S. patents; under the Constitution, Congress may permit or refuse such a patent application by discretionary fiat. This is why the United States has entered into treaties to secure international protection of patent rights. It is also why, since the early American Republic, foreign inventors working in foreign countries have always required Congress to enact special statutes to permit them to apply for U.S. patents. But the constitutional requirement for U.S. inventors is neither discretionary nor unclear: It requires that the laws “securing” patents to “Inventors” who are living and working in the United States may do so only for those “Inventors” who have created “Discoveries”—those who are first to invent, not first to file for the patent itself.
In closing, it is our belief that there is a serious question concerning the constitutionality of the first-to-file provision in H.R. 1249. But regardless of whether one agrees that a first-to-file system is unconstitutional, it is entirely appropriate that this debate occur in the deliberations concerning whether H.R. 1249 should be enacted by Congress. The constitutionality of a statute under consideration by Congress, in addition to whatever policy issues may be raised by it, is always something that should be openly and forthrightly considered by Congress, which has as much a duty to uphold the Constitution as do the Executive and Judicial branches.
Sincerely,
Daniel B. Ravicher
Lecturer in Law, Benjamin N. Cardozo School of Law
Executive Director, Public Patent Foundation
Adam Mossoff
Professor of Law
George Mason University School of Law
Lateef Mtima
Professor of Law and Director,
Institute for Intellectual Property and Social Justice
Howard University School of Law
Kali Murray
Assistant Professor of Law
Marquette University Law School
Sean Patrick Suiter Adjunct Professor of Law, Creighton University School of Law Visiting Professor of Law, Peking University School of Law
Dale L. Carson
Adjunct Professor of Law
Quinnipiac University School of Law
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.
For engineers and scientists it is easier to understand the major concepts of patent law from the perspective of natural rights, since it is consistent with their scientific training. Natural rights and science share the assumptions that the world is comprehensible and that reason plus observation can be used to understand how nature operates. A third assumption needed for this analysis is that a person owns themselves. This assumption is consistent with John Locke’s conception of natural rights.
Real Property
Property law results from the analysis that if a person owns themselves, then they own the product of their labor.[1] An example from United States history is the Homestead Act. The concept behind the Homestead Act is that land is not owned by anyone until it is improved by a person’s labor. Once the person has improved the land, then they are the owner. Similar concepts are used to define who owns a wild animal. Once a person owns property they can trade if for other property and this is the basis of a market economy.
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