The Myth that Patents are a Monopoly

A patent gives the holder the right to exclude others from making, using or selling the invention.  35 USC 154.  It does not give the holder the right to make, use or sell their invention.  A monopoly is an exclusive right to a market, such as an electric utility company.  An electric utility company has the exclusive right to sell electricity in a certain territory.  Since a patent does not even give the holder the right to sell their invention, let alone an exclusive right to a market, it is clearly not a monopoly.

When a person describes a patent as a monopoly to be consistent they should also state that they have a monopoly over their car or over their house.  In fact, they have more rights in their car and house than a patent gives the inventor over their invention, since you have a right to use and sell your car or house.  A patent does not give these rights to an inventor over his invention.  All invention are built upon existing elements (conservation of matter) and if the elements that the invention uses are patented, then the inventor will not have the right to sell their invention without a license.

Some economists argue that a patent is designed to give the holder monopoly power.  Those economists who are consistent also state that all property rights give some monopoly power.  The property rights are monopolies thesis shows how confused economic thought is on this subject.  The only logically consistent definition of a monopoly is an exclusive right to a market.

According to Wikipedia “In economics, a government-granted monopoly (also called a “de jure monopoly”) is a form of coercive monopoly by which a government grants exclusive privilege to a private individual or firm to be the sole provider of a good or service; potential competitors are excluded from the market by law, regulation, or other mechanisms of government enforcement.”  Since patents are clearly “government granted”, then this is the appropriate definition.  Since a patent does not even provide the holder the right to sell their invention, it clearly does not grant an exclusive privilege to a firm to be the sole provider of a good or service.

There is a lot of nonsense in the economic profession about monopolies.  Even the definition above can lead to nonsense.  For instance, according to Locke’s Natural Rights theory you own yourself so you own the product of your labor, both mental and physical.  This means anything you produce you have the exclusive right to make and sell, does this make you a monopolist?

The historical basis for monopolies is the Statute of Monopolies of 1623 in England.  The Statute of Monopolies prohibited the Crown from issuing monopolies for items that were already known or being produced.  The idea was to protect the Natural Rights of Englishmen to practice their craft, in today’s language the government in issuing a monopoly was interfering with private citizens rights to their property.  However, the Statute did not prevent an exclusive grant for inventions.  The reason for this in the words of the day was an invention did not interfere or take away anything from private citizens.  The invention did not exist before it was invented, so it does not take away anything from private citizens to provide a limited term property right to the inventor.

Modern antitrust law has turned the concept of monopolies on their head.  Instead of being a limitation on government power, like the Statute of Monopolies, it is a limitation on private action.  Instead of protecting people’s rights to their property, like the Statute of Monopolies, it limits or takes away private property.  The only logically consistent definition of a monopoly is an exclusive right to a market.  No property right, gives you an exclusive right to a market.  Market success is not an exclusive right to a market.  Only the government can create a monopoly.

People who suggest a patent is a monopoly are not being intellectually honest and perpetuating a myth to advance a political agenda.