State of Innovation

Patents and Innovation Economics

Adam Mossoff on the VENUE ACT

Law professor Adam Mossoff examines the latest patent deform bill, the Venue Act, in his editorial in the Washington Times entitled Weighing the Patent System.  This ACT makes it more difficult for patent owners to select the venue of their choice.  The legislation would not change the venue rules for any other class of plaintiffs or defendants, which shows the Act is arbitrary and makes patent owners second class citizens.

Aside from these concerns, the more fundamental problem is that the VENUE Act reflects ongoing bias against patent owners in the policy debates.

This bill is being pushed by a coalition of large companies.  These companies do not think they should ever have to pay to use other peoples’ intellectual property.  In other words they want to be legal thieves and they are willing to destroy the U.S. economy for their short term economic advantage.

It is widely recognized that the PTAB is incredibly biased against patents in both its procedural and substantive rules.

These new rules and procedures for challenging patents were pushed by the same coalition that is pushing the Venue Act.

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March 25, 2016 Posted by | -Law, Patents | , | Leave a comment

Adam Mossoff on Property Rights: A Must Read for Capitalists and Patent Attorneys

Why Intellectual Property Rights? A Lockean Justification, by Professor Adam Mossoff, is probably one of the most important papers written on property rights in over a century.  The point of the paper is to show Locke’s labor (physical and especially mental) theory of property rights provides the moral justification for intellectual property (copyrights and patents).

One of the strengths of the Lockean property theory is that it recognizes that IP rights are fundamentally the same as all property rights in all types of assets—from personal goods to water to land to air to inventions to books.

The paper clearly shows that Locke understood that it takes both mental and physical effort to obtain those things man needs to live.  Anything that man makes valuable through his efforts, he obtains a property right in.

Locke himself expressly justifies copyright as “property” and approvingly refers to “Inventions and arts” in his summation of his theory that property arises from value-creating, productive labor that supports the “conveniences of life” in § 44 of the Second Treatise. In 1690, the legal concept of patents (property rights in inventions) did not exist yet,[10] and so this is an explicit indication of Locke’s willingness to include what would later become the legal concept of patents within his property theory.

Locke explains that the world exists for “the use of the Industrious and Rational.”

Interestingly Locke distinguishes between copyrights (and patents by extension) and monopolies something that many modern critics of patents are unable to do.

In an essay on the statutory printing monopoly granted to the Stationers Company by Parliament, Locke condemns such monopolies as violating the “property” in creative works that “authors” rightly claim for themselves. In what might be a further surprising claim for many today who think copyright terms are too long, Locke writes in this 1695 essay that authors should have their property rights secured to them for their lifetimes or after first publication plus “50 or 70 years.”

I have argued that the term of a patent should be 35-40 years for the same reason.  As I have explained here, no property right is eternally.  Dead people do not have property rights.

Another misconception about property rights is that they are the same for every object or value created by man.  As Mossoff explains Locke did not make this mistake.

As Locke first explained, property is fundamentally justified and defined by the nature of the value created and secured to its owner … To wit, different types of property rights are defined and secured differently under the law.

This naturally leads to a final observation: Given differences in produced values in the world, such as a water well, domesticated animals, a fecund farm, the desert sand used to make silicon for computer chips, air, broadcast spectrum, corporations, stock, credit, future interests, inventions, business plans, books, paintings, songs, and the myriad others, the specific legal doctrines that protect these values will vary.

It is amazing how many people miss this point, which leads to all sorts of erroneous ideas about what property rights are.  This is perhaps the most important point in the whole article.

Property rights are highly misunderstood in today’s world by both lay people and academics.  They are even misunderstood by many supporter of capitalism, particularly libertarians and supporters of Austrian Economics, but also by Objectivists and supporters of Ayn Rand.

Libertarians and the economics profession in general have accepted the utilitarian justification for property rights, which is a misnomer and turns property “rights” into arbitrary government grants.  In addition, it fails to explain how property rights are acquired, who they belong to and why, among other problems.

Ayn Rand appears to be in basic agreement with Locke.  She states:

Any material element or resource which, in order to become of use or value to men, requires the application of human knowledge and effort, should be private property—by the right of those who apply the knowledge and effort.

Capitalism: The Unknown Ideal “The Property Status of the Airwaves,” Capitalism: The Unknown Ideal, 122

Rand also discusses property rights in the chapter Patents and Copyrights in Capitalism: The Unknown Ideal.  While she has some keen insights, she never developed a fully articulated theory of property rights.

mossoffIn my limited research into the history of property rights theory there was excellent research and work starting around Locke and the Enlightenment.  Before that property rights were derived from the King (government).  In many ways the economics profession, particularly the Austrians have gone backwards to the idea that property “rights” are whatever the government says they are.  Scholarship continued on property rights particularly in the United States at least until the first Homestead Act, which showed a clear understanding of property rights.  However, that research had died by the time the FCC was created in 1934.

Locke, the Founders, and Ayn Rand understood that property rights are the cornerstone of freedom.  Modern libertarians often think property rights can be replaced with contracts.  This is confusing cause with effect.  Contracts rely on property rights not the other way around.  Some Objectivists undermine property rights by rejecting Locke, the Founders, and Rand’s understanding that each individual has a property right in themselves (Self Ownership or Self Sovereignty).  This is also based on a misunderstanding of what property rights are and how they are derived.

Let’s hope that Adam Mossoff will continue his excellent work in this important area.

December 18, 2015 Posted by | -Philosophy, Patents, philosophy | , , , | Leave a comment

Intellectual Property, Innovation and Economic Growth

This article, Intellectual Property, Innovation and Economic Growth: Mercatus Gets it Wrong, by Mark Schultz & Adam Mossoff is a follow up to their other article Intellectual property and economic prosperity: Friends or foes?  This article is more hard hitting and the ask the questions of who has the burden of proof on whether patents promote economic growth?  Anti-patent proponents consistently fail to provide any empirical data to support their positions, although they are great at coming up with anecdotal stories.  Despite this they assume that the burden of proof is on people who support property rights in inventions.

 

The reason anti-patent advocates don’t think they have the burden of proof is that they have been taught the economic concept call pure and perfect competition as the goal of capitalism.  Some of these people even think that perfect competition is the definition of capitalism.  Perfect competition is inconsistent with the condition necessary for real per capita economic growth, is inconsistent with all property rights, has nothing to do with capitalism, is anti-mind, anti-invention, anti-patent.

PERFECT COMPETITION IS THE ECONOMIC IDEALIZATION OF SLAVERY.

 

 

August 29, 2014 Posted by | News | , , , , , | Leave a comment

Excellent Article by Adam Mossoff: Do IP Rights Promote Economic growth

Intellectual property and economic prosperity: Friends or foes?, in TechPolicyDaily.com.  The article reviews a report by the Mercatus Center, a free-market think tank that is highly critical of IP.  Here is one of my favorite quotes from the article:

“It is bewildering, for example, to find a libertarian think tank arguing that government projects are superior to private property rights as a means of directing resources to innovative activities.”

 

What is amazing is that the evidence between inventions, economic growth, and property rights for inventions is overwhelming.  Those countries with the strongest patent systems are leaders in creating new technologies and the leaders in disseminating new technologies.

August 28, 2014 Posted by | Blog | , , , | 6 Comments

Are Patents too Vague?

Adam Mossoff takes on the common claim that patent are too vague in his paper THE TRESPASS FALLACY IN PATENT LAW, by Adam Mossoff, 65 Fla. L. Rev. 1687.  The argument is often framed as patents are not like real property where you know if you are trespassing another person’s property.  This analogy is flawed, he points out, because property rights in land are not limited physical trespass.  Property rights include time (future interest), use, and physical boundaries.  The proper analogy would be with the estate or all the property rights associated with land.  Then he points out that critics of patents actually have no empirical data on litigation involving all aspects of ‘real property’.  He also points out that real property disputes often turn on the meaning of arcane terms and arise because legal drafting in not an exact science or math.

I would add that most of the commentators on patents are not legally or factually competent in reading claims.  In addition, neither are most judges.  (See Is the Supreme Court Competent to Rule on Patent Cases?)    This is not because patents are vague or purposely obscure or overly formalistic.  Drafting claims is a skill that takes several years to become proficient with.  The same is true of being able to interpret a paper on electromagnetics or quantum mechanics and these are very precise sciences.

Most of the people complaining that patents are too vague are not interested in the truth, logic, or reason.  They want to destroy all property rights or they are crony capitalists that want a patent system that favors them, particularly against individual inventors and startups.

 

THE TRESPASS FALLACY IN PATENT LAW, by Adam Mossoff, 65 Fla. L. Rev. 1687

February 19, 2014 Posted by | -Philosophy, News, Patents | , | Leave a comment

Patents Are Property Rights – Period

In order to understand why patents are property rights, we first have to understand what property rights are.  The Austrian School of Economics theory of property rights is that they are a social construct necessary to efficiently distribute scarce resources.  According to Austrians intellectual property is not scarce and therefore not property.  Since IP is not property it is a monopoly and represents the immoral aggression on the part of the state.

The Austrians position is incorrect, logically, historically, and empirically.  Property rights in the US are based on Locke’s formulation that property rights result from the act of creation.  Note this is update for modern language.  Austrians and Libertarians have purposely mischaracterized Locke to create a straw man argument as to why Locke was wrong.  Adam Mossoff has an excellent paper on point.  Locke’s ideas were incorporated into US law by Blackstone’s Commentaries on the law.  This book was even more influential on US law than England, but is incorporated into almost all common law countries.

The Austrian formulation of property rights does not explain why people come to own property rights, but Locke’s does.  In addition Locke’s formulation which is based on the idea that you own yourself or stated another way that you have property rights in yourself, explains why murder and slavery are illegal and immoral.  It also explains how you come to hold property rights.  Finally, it explains almost all of our basic criminal law and property law.  Under science and Occam’s razor the simplest theory that explains the most facts is the correct theory.  The Austrian theory of property rights fails.

The other theory of property rights is that the King, the State, or the collective is the ultimate owner of all property.  The State just allows you to have control of certain resources until they believe someone else should control the resource.  This theory has some historical basis but is not really a theory of property rights, since the most basic right of property is the right to exclude.  Clearly under this theory you do not have the right to exclude.  This theory has the same problems as the Austrian formulation of property rights and logically implies that everyone is actually a slave of the State, since they do not own themselves.

Notwithstanding the problems with the Austrian formulation of property rights is it true that inventions (IP) is not subject to scarcity?  Inventions require the time and effort of inventors, they required labs, computers, facilities, materials, etc.  So clearly the creation of inventions is subject to scare resources.  But is the distribution of inventions subject to scarcity?  VCs usually budget ten times as much to get a new invention in the market as is necessary to create it.  If it took no resources to distribute inventions and information then there would be no need for schools, universities, doctors, lawyers, engineers, marketing and sales people, etc.  So clearly it does take resources to distribute inventions.

Notwithstanding that the Austrians are wrong about the scarcity of IP, is IP a monopoly?  Here a number of posts that show definitionally, logically, legally, and empirically patents are not monopolies.

 

More on the Myth that Patents are Monopolies https://hallingblog.com/more-on-the-myth-that-patents-are-monopolies/.

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

 

Property Rights, Possession and Objects https://hallingblog.com/property-rights-possession-and-objects/

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

 

The Myth That Patents are a Monopoly https://hallingblog.com/the-myth-that-patents-are-a-monopoly/

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

 

 

November 23, 2013 Posted by | Patents | , , , , | 9 Comments

Patent Litigation Explosion BS

Adam Mossoff has an excellent post on the lies about patent litigation explosion.  He explains

Contrary to the much-hyped claim today that patent licensing companies are the primary cause of most patent lawsuits in district courts in 2012, other serious and more careful reviews of the litigation data have shown that the primary culprit is not patent licensing companies, but rather the America Invents Act of 2011(“AIA”). The AIA created numerous new administrative proceedings for invalidating patents at the Patent & Trademark Office, which created additional incentives to file lawsuits in certain contexts.  Moreover, the AIA expressly prohibited joinder of multiple defendants in single lawsuits.  Both of these significant changes to the patent system has produced the entirely logical and expected result of more lawsuits being filed after the AIA’s statutory provisions went into effect in 2011 and 2012. In basic statistics terms, the effect of these statutory provisions in any study of patent litigation rates that does not take them into account is referred to as a “confounding variable.”

For more information see The Myth of the “Patent Troll” Litigation Explosion

August 13, 2013 Posted by | News, Patents | , | Leave a comment

CATO & Reason Demonstrate Ignorance of Property Rights – Patents

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.

February 3, 2012 Posted by | -Economics, -Philosophy, Patents | , , , , , , , | 1 Comment