Posts Tagged ‘cato institute’
In an article entitled “Could Morse Have Patented the Web? Under today’s loose standards, the telegraph inventor might own the Internet” , dated March 26, 2012, the Wall Street Journal demonstrates their incredible ignorance of patent law. The article states, “The standards for patents are so low that simply having an idea often justifies a patent.” Obtaining a patent takes at least several years to obtain and tens of thousands of dollars. It is the most expensive, time consuming, and most examined property right before you obtain title of all property rights. In addition, when Morse obtained his patent the requirement that a patent cover a non-obvious invention did not exist. This by itself makes it more difficult to obtain a patent today than in Morse’s day. The author’s ignorance of patent law embodied in the above statement is monumental.
But the ignorance does not stop with this statement, the article goes on to state that:
“The patent explosion began in the mid-1990s, when the U.S. Court of Appeals for the Federal Circuit ended the requirement that patents specifically define inventions.”
First of all the U.S. Court of Appeals for the Federal Circuit never did any such thing. The requirement for specifically defining one’s invention in a patent has not changed since at least the 1952 patent act. Second there has been no explosion in the number of issued patents in the US to US based inventors. The numbers of patent issue to US based inventors has been flat for at least a decade, see chart below
and by every objective measure (GDP/patent, R&D/Patent, Population/patent) the quality of patents is increasing – see Patent Quality Nonsense.
The article then quotes a forthcoming article from the CATO Institute that it is impossible for a software company to determine if they are infringing an existing patent.
They estimate that there are 600,000 firms producing patent-eligible software and 40,000 software patents granted each year. They say this comes to “24 billion new patent-firm pairs each year that could produce accidental infringement.
Since the total number of issued patents since 1836 is just over eight million this is complete nonsense and academic fraud. The exaggeration of the authors from the CATO Institute and Yale Law School is criminal. Both of the authors of this study should be fired and never given another academic job. But so low is the state of our academic research no one will question their outrageous assertions.
Companies do market research on competitors in the software space and clearly do not feel overwhelmed by the “24 billion” new pairs of potential products. Most software companies I know are very good at narrowing down their market research and the same applies to patents. Companies spend huge sums on market research, but complain about spending a little money to determine if they are violating someone’s property rights. In fact, most companies never do check to see if their products are likely to infringe a patent. This is like starting construction on a building without checking that you have clear title to the land. We would not tolerate or glorify the stupidity in the case of real property, so why should we do so in the case of patents?
Finally, to the point that Morse could have patented the Internet this again shows the author’s ignorance of patent law. Patents cover an invention. Anything that incorporates that invention infringes the patent. For instance, if I have a patent on a microprocessor and you incorporate a microprocessor into your cell phone you infringe my patent. I am not asserting that I invented the cell phone, I am asserting that I invented the microprocessor and you are infringing my patent by incorporating it into your cell phone. According the Supreme Court’s decision Morse did invent a system for repeating electromagnetic signals so they could be sent over long distances. Repeaters are still used to amplify electronic signals, including signals sent over the Internet. So if Morse’s patent were still valid (they expired around 150 years ago), then yes the Internet would likely have infringed his patent – according to the Supreme Court’s characterization. This would not mean that Morse was asserting he invented the Internet. Note that the inventor of the transistor, the inventors of error correction codes, the inventor of microprocessors, the inventor of electronic amplifier circuits, and many, many more would be in the same hypothetical situation – but of course this is meaningless since their patents expired years ago. All this proves is that all inventions build on earlier inventions and the author of this article’s ignorance of how patents work, knows no bounds.
Could Morse Have Patented the Web? Under today’s loose standards, the telegraph inventor might own the Internet” , dated March 26, 2012, the Wall Street Journal
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 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.
Timothy Sandefur is another Libertarian confused about intellectual property – see his article. He suggests that Adam Mossoff’s article on Natural Copyrights and Ayn Rand’s thoughts on intellectual property are incorrect. Mossoff and Rand have the better argument. First of all it is clear that intellectual property rights are consistent with Locke’s view of property rights. You own yourself and therefore you own the product of your labor mental or physical.
Portuguese Claim to Sea
The argument about the Portuguese claim to the sea is an attempt to condemn Locke by a misapplication of Natural Rights theory. The Portuguese did not improve the sea. According to the Portuguese argument when I drive over the road I own the road or if I walk over land I own the land. Using a misapplication of Natural Rights theory is a red herring argument.
Non-Exclusive Nature
Patents do not keep you from thinking about the invention and in fact it is a purpose of patent law to encourage the dissemination of knowledge associated with inventions so that other inventors can improve upon these inventions. Patents only restrict you from making a physical version (or threatening to do so – offer for sale). An infringer of a patent is no longer making a non-exclusive use of the invention when they make it. They have taken a part of the potential market for the invention. This market is neither unlimited or non-exclusive.
Your argument about two people having two separate copies of the invention ignores the property right involved in patents. The property right is not in the physical item. When you steal my invention by making an unauthorized copy, you have initiated force not the patent holder. This is similar to me stealing apples from your orchard. I have not initiated any force against you, it is only when you call the police or come out with your shotgun that force is initiated.
The exclusive nature of real property is illusionary at best. You only occupy and exclude the space you are presently in. You do not occupy your whole apple orchard all the time. If I take an apple from your orchard that you are not presently holding or eating then there is nothing “naturally” exclusive about your ownership of that apple. If you own more land than you can farm or otherwise take advantage of and I decide to plant crops on that land I have not hurt you. You have initiated force against me when you kick me off your land and you inhibit productive enterprise.
The non-exclusive nature of intellectual property is a confused argument. If you are talking about physical exclusion then you should only own real and personal property that you are presently using, which would destroy the concept of property rights generally. If you are talking about the legal right to exclude others from using your property, then you have to be consistent with your definition of the legal right involved. Intellectual property is not about physical ownership, so making a copy of another invention is a clear breach of the property right.
Simultaneous Invention
In your statement about “innocent” simultaneous inventors that, “but because you make it to the patent office first, you get the patent on that thing, and can therefore forbid the other person from making or selling his thing” is wrong. The US is a first to invent country (at least so far) not a first to file country. So just because someone beats you to the patent office does not mean they receive the patent. However, you do make a strong point for why we should not change our patent laws to a first to file system.
More generally, the definition of an inventor is the first person to discover a new invention. Only the first person adds to the store of human knowledge. The second person is just clever. If a person living in India rediscovers Calculus he is not the discoverer of Calculus because he did not add anything to the store of human knowledge. In addition, there are an infinite number of potential inventions and increases in technology are the only way to increase our standard of living. As a result, we want people to invent not to copy other people’s inventions.
Fair Use
Copyrights protect the artistic expression of an idea. They do not protect every component of a written work for example. Fair use is just a statement of this fact. So copying a small portion of work is not a violation of the owner’s copyright because you have not taken their expression of the idea. This is why one of the factors of fair use is how much of the work did you copy.
Intellectual Property and Free Markets
You state, “natural copyright is very dangerous to the free market, in that it proposes to forbid entrepreneurs from legitimate and praiseworthy uses of their liberty.” Actually, the exact opposite is true. By undermining intellectual property you are undermining the very basis of property rights and liberty. The empirical evidence also shows that whenever a government refused to protect intellectual property rights they also do not respect other property rights or the mechanisms of a free market.
Locke’s Natural Rights
Natural rights theory is not only the historical and logical basis for property rights but explains most common law crimes. The natural rights labor theory of property explains why slavery is immoral. If you own yourself, then no one else has the right to own you. It also explains why murder and manslaughter are immoral, why stealing is immoral, why assault and battery are immoral and why we have laws against all these actions. The natural rights labor theory defines how property should be allocated and how people come into possession of property morally and legally. The labor theory explains all of our basic criminal law and all of our basic property laws. What does scarcity explain? It offers no justification for why slavery, murder, manslaughter, assault and batter and theft are immoral, except that they are inefficient at allocating resources. Thus, all of these crimes would be allowed if they were efficient at allocating resources. Scarcity does not explain who has ownership in property or why they should have ownership in property. It merely explains that private property ownership is an efficient manner in allocating scarce resources.
In science, the theory that has the greatest ability to explain the widest number of facts is considered to be the correct or better theory. Here the “scarcity” theory of private property requires the additional assumption that it is preferable to have efficient allocation of resources. However, it fails to explain how the resource should be initially distributed, it does not explain how property law determines ownership and has no power to explain criminal law. Trading scarcity for the labor theory of property is like trading the theory that “what goes up must come down” for Newton’s Law of gravity. The fact of the matter is that the proponents of scarcity have confused cause with effect. A system of private property results in efficient allocation of resource, but it is not the reason for private property – it is the effect of private property.
For more information see Scarcity – Does it Prove Intellectual Property Rights are Unjustified? http://hallingblog.com/2009/06/22/scarcity-%E2%80%93-does-it-prove-intellectual-property-is-unjustified/
There seems to be a lot of confusion about Ayn Rand’s position on intellectual property both by her supporters and her detractors. For instance, the Cato Institute considers it almost a prerequisite to have read Atlas Shrugged to work there. However their position on patents and copyrights is in direct contradiction to Ayn Rand’s position. 
The following quote from Atlas Shrugged, should give you a hint at Ayn Rand’s position on intellectual property:
“Man’s mind is his basic tool of survival. Life is given to him, survival is not. His body is given to him, its sustenance is not. His mind is given to him, its content is not. To remain alive he must act and before he can act he must know the nature and purpose of his action. He cannot obtain his food without knowledge of food and of the way to obtain it. He cannot dig a ditch––or build a cyclotron––without a knowledge of his aim and the means to achieve it. To remain alive, he must think.” Rand 1992, p. 1012.
Ayn Rand devotes a whole chapter, Chapter 11, in Capitalism: The Unknown Ideal to patents and copyrights. The first sentence makes her position crystal clear. “Patents and copyrights are the legal implementation of the base of all property rights: a man’s right to the product of his mind.”[1] “What the patent and copyright laws acknowledge is the paramount role of mental effort in the production of material values: these laws protect the mind’s contribution in its purest form: the origination of an idea.”[2]
After pointing out that intellectual property is the source of all property rights, she clarifies the distinction between the idea and the physical embodiment. “What the patent or copyright protects is not the physical object as such, but the idea that embodies it. By forbidding an unauthorized reproduction of the object, the law declares, in effect, that the physical labor of copying is not the source of the object’s value, that the value is created by the originator of the idea.”[3] “Thus the law establishes the property right of the mind to that which it has brought into existence.”[4] She then points out that “patents and copyrights only pertain to the practical application of knowledge, to the creation of a specific object which did not exist in nature.”[5]
Next, she tackles the whole question of whether a patent is privilege (in the modern sense of a gift)[6] or is a right. According to Rand, the government does not grant a patent, in the sense of a gift, privilege of favor, but recognizes the originator of the idea and protects their rights in the idea.[7]
Rand has a very interesting take on the reason for limited terms of patents and copyrights. She analogies a patent or copyright to a debt owed to the inventor/author by people that copy the inventor’s invention or author’s book. Debts are not and cannot be perpetual, so this is why the term of patents and copyrights are limited according to Rand. I will note that real property rights are actually time limited also. A person only has a property right in real (personal) property during their lifetime. How can someone who is not alive own something – this would be a logical absurdity. However, real property is passed on to the person with the next best title to real property upon a person’s death. In the case of intellectual property, no one person has better title to intellectual property than anyone else so upon the expiration of its term it becomes free for all mankind to use. Or as Rand explains, real property “can be left to heirs, but it cannot remain in their effortless possession in perpetuity: the heirs can consume it or must earn its continued possession by their own productive effort.”[8] In contrast, “Intellectual property cannot be consumed. If it were held in perpetuity, it would lead to the opposite of the very principle on which it is based: it would lead, not to the earned reward of achievement, but to the unearned support of parasitism.”[9]
Rand seems to anticipate the patent thicket discussion and suggests that this is the reason for shorter terms of patents than copyrights.[10] She also suggests that it is very difficult to correctly define the limits of a patent boundary.[11] Here, she is mistaken. There is no evidence of a patent thicket ever existing on a macroeconomic level, only evidence of people who do not want to compensate an inventor for using their technology. The boundaries of patents are no more difficult to define than those of copyrights or land before GPS and title insurance. However, patents will be more useful as the equivalent of title insurance for invention is created.
I will end this post with a particularly prescient quote from Rand:
Today, patents are the special target of the collectivists’ attacks . . .[12]
[1] Rand, Ayn, Capitalism: The Unknown Ideal, Signet, New York, 1967, p. 130.
[2] Id.
[3] Id.
[4] Id.
[5] Ibid. p. 131.
[6] See Adam Mossoff’s excellent paper “Who Cares What Thomas Jefferson Thought About Patents?
Reevaluating the Patent “Privilege”, where he points out that historically a privilege is a right that can only be secured in society, essentially synonymous with what we would call a “civil right” today. http://www.pff.org/issues-pubs/ip/bulletins/bulletin2.2jeffersonprivilege.pdf
[7] Rand, Ayn, Capitalism: The Unknown Ideal, Signet, New York, 1967, p. 131.
[8] Ibid. p. 131
[9] Ibid. p. 131
[10]Ibid. p. 133
[11]Ibid. p. 133
[12]Ibid. p. 133
Recent Comments