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Posts Tagged ‘atlas shrugged’

Supreme Court ‘Only Black Magic Patent Eligible’

The Supreme Court ruling in Mayo Collaborative Services v. Prometheus Labs., Inc. (Supreme Court 2012) was released on March 20, 2012 and they held unanimously against Prometheus and invalidated two patents under 35 USC 101.  My title may be a bit salacious, since the holding in the case does not limit patents to just black magic, it limits them to magic.  The holding on p. 4 states:

 The steps in the claimed processes (apart from the natural laws themselves) involve well-understood, routine, conventional activity previously engaged in by researchers in the field. P. 4

And adds:

 The three steps (of the claim) as an ordered combination adds nothing to the laws of nature that is not already present when the steps are considered separately.  P. 10

Logically, the Supreme Court is saying that known steps or elements in combination with a law of nature is not patent eligible.  First every invention ever made involves steps (elements) that were known individually before the invention, and laws of nature.  You cannot create something out of nothing.  Section 112 means that you have to be able to describe your invention in terms known to those skilled in the art.  Thus the Supreme Court’s holding means that any invention that satisfies 112 is unpatentable under 101.  The only inventions that will satisfy 101 are those that violate laws of nature or involve creating something out of nothing – or magic.

Get out your cauldrons-

For the lawyers in the audience this case reintroduces the point of novelty test nonsense.

I have written extensively about this case in the following posts and will not reiterate my earlier points.

Justice Breyer: Patent Ignorance 

Mayo v. Prometheus: An Update

Mayo v. Prometheus – Supreme Court Grants Cert (Again) 


But for those not familiar with the case here is a little background

The patents (6,355,623 and 6,680,302) claim methods for determining the optimal dosage of thiopurine drugs used to treat gastrointestinal and non-gastrointestinal autoimmune diseases. Thus, the questions in this case are whether determining optimal dosages of thiopurine drugs to treat autoimmune diseases exists in nature separate from man and whether this solves an objective problem? Clearly, determining optimal dosages does not exist in nature for any drug and the patent solves the objective problem of determining the optimal dosages of thiopurine drugs for autoimmune diseases.

Ayn Rand discussed this exact issue in Atlas Shrugged.  James Taggart is discussing Rearden Metal with his wife:

”…’he didn’t invent smelting and chemistry and air compression.  He couldn’t have invented HIS metal but for thousands and thousands of other people. HIS Metal! Why does he think it’s his? Why does he think it’s his invention?  Everybody uses the work of everybody else. Nobody ever invents anything.’ (Jim Taggart)  She(Jim Taggart’s Wife) said, puzzled, ‘But the iron ore and all those other things were there all the time. Why didn’t anybody else make that Metal, but Mr. Rearden did?’”  Kindle Location 5796-5802

These exact questions could be asked of the Supreme Court.  All these other steps were available to other people, but no one else discovered how to use thiopurine to safely treat Crohn’s disease.  In fact, the Supreme Court admits as much.

 . . . and it has been difficult for doctors to determine whether for a particular patient a given dose is too high, risking harmful side effects, or too low, and so likely ineffective.  p. 4

The reality is that this Supreme Court is anti-patent and anti-property rights.  The opinion states patents are monopolies in three spots and mentions rent seeking in one spot, but it does not mention that the Constitution clearly states that inventors have a RIGHT to their invention and it does not state that patents are property rights.  This case is just another example that the anti-property rights and anti-Natural Rights crowd is in control of our government.  This case will have long term negative ramifications for the US economy.  The US is losing its technological advantage because it believes that inventors should work for free.  Note that Singapore is taking another path and trying to figure out how to strengthen their patent laws (see Singapore and the US Divergent Patent Policies)

Atlas Shrugged (Ayn Rand) on Patents/Inventions

There has been a lot of confusion about Ayn Rand’s position on patents and intellectual property among her fans.  I have written about this before in Ayn Rand on Intellectual Property.  However, I thought it might be interesting to catalog every case where patents and inventions are mentioned in Atlas Shrugged for people researching this issue and to further illuminate Rand’s position on patents.  The references are to the Kindle edition of Atlas Shrugged, which unfortunately has a large number of typos.

There are three main inventions in Atlas Shrugged, Rearden metal, the static electric motor, and the sonic destruction ray (aka Project X).  The story is intimately woven around these three inventions.

Below are the quotes (bolded) and context where necessary with my commentary.

1) Location 5796-5802  ”…’he didn’t invent smelting and chemistry and air compression.  He couldn’t have invented HIS metal but for thousands and thousands of other people. HIS Metal! Why does he think it’s his? Why does he think it’s his invention?  Everybody uses the work of everybody else.  Nobody ever invents anything.’ (Jim Taggart) She (Jim Taggart’s Wife) said, puzzled, ‘But the iron ore and all those other things were there all the time.  Why didn’t anybody else make that Metal, but Mr. Rearden did?’”

Rand anticipates Open Source socialists.  This idea that no one invents anything is the standard argument of collectivists, but it does not stand up to scrutiny.  Why has inventing been concentrated in the last two centuries in relatively small populations of the U.S. and western countries?

2) James Taggart angry about Rearden’s success

location 5832-      “‘…And Dr. Pritchett, the old fool, is going around saying that he knows Rearden didn’t invent that Metal- because he was told, by an unnamed reliable source, that Rearden stole the formula from a penniless inventor whom he murdered!”

This anticipates the defense of every infringer.

3) location 5808-5810 “I’m not sure it was so great-inventing this new Metal, when so many nations are in  need of plain iron-why do you know the People’s State of China hasn’t even got enough nails to put wooden roofs over peoples’ heads?”

Fast track for green tech at the PTO – Why, except for politics, are so-called green tech inventions more important than other inventions?

4) location 5812-5822     “No sensitive person these days-when there’s so much suffering around us- would devote 10 years of his life to splashing about with a lot of trick metals.  You think it’s great?  Well, it’s not any kind of superior ability, but just a hide that you couldn’t pierce if you poured a ton of his own steel over his head!  There are many people of much greater ability in the world, but you don’t read about them in headlines and you don’t run to gape at them at grade crossings-because they can’t invent non-collapsible bridges at a time when the suffering of mankind weighs on their spirit!”

5)  location 5827 “The country gave Rearden that Metal, now we expect him to give the country something in return.”

Dr. Ferris, State Science Institute response on the Bill Directive 10-289

6) location7042-7046 ” ‘Did you hire any research men of your own?’ ‘ Yes, yes, some- but let me tell you, I didn’t have much money to spend on such things as laboratories, when I never had enough funds to give me a breathing spell.  I couldn’t even pay the bills I owed for the absolutely essential modernizing and redecorating which I had to do- that factory was disgracefully old-fashioned from the standpoint of human efficiency…’”

Lee Hunsaker, owner of 20th Century Motor Co. after a lawsuit forced Midas Mulligan to sell, and then Mulligan Galted

Our accounting rules don’t value inventions.  No accounting system shows any return for an invention.  I and other have written about how our accounting rules inhibits investment in the inventing process.  See Accounting Inhibits R&D

7) location 7111 “Our aim was not to produce gadgets, but to do good.”

Sounds like President Obama or President Bush’s 1000 points of light.

8)  location 7126 ” Don’t you know any words but ‘engineer’?”

Ivy Starnes, sister of Gerald Starnes, last owners of 20th Century Motors, on their “great plan” to change the factory that caused its failure and response to Dagny’s urgency for the names of the engineers working on the revolutionary motor

Do we value our engineers? Sales people and marketing managers are compensated more than corporate inventors/engineers.  Perhaps this is related to our dysfunctional accounting systems.

9)  location 7300-7302 “‘The secret you are trying to solve involves something greater-much greater-than the invention of a motor run by atmospheric electricity.  There is only one helpful suggestion that I can give you: By the essence and nature of existence, contradictions cannot exist.’”

Dr. Akston, professor of philosophy, speaking to Dagny about why people have Galted

10) location 196 “Anyway, this should be my lead for the character of John Galt.  He, too, is a combination of an abstract philosopher and a practical inventor; the thinker and the man of action together…”

Ayn Rand, forward to Atlas Shrugged

Iillustrating the fallacy of the “tinker-er, mad professor/inventor”

11) Location 152-154 “ [ Galt represents]…For Dagny, the ideal. The answer to her two quests: the man of genius…is expressed in the search for the inventor of the engine.”

Forward to Atlas Shrugged

12) Location 3758- 3763   “He [Rearden] had devised a new type of truss. It had never been made before and could not be made except with members that had the strength and lightness of Rearden Metal.  ‘Hank,’ she [Dagny] asked, ‘did you invent this in two days?’  ‘Hell, no. I “invented” it long before I had Rearden Metal.  I figured it out while making steel for bridges.  I wanted a metal with which one would be able to do this, among other things.’”

Dagny asking Hank about the invention of his new bridge truss

An illustration of advanced inventing: what could I do if…  I have written on this process before, see How to Build a Patent Portfolio that Dominates Your Market Place

Evolutionary vs. revolutionary technologies: how one invention opens up myriad new inventions. This passage illustrates that each invention can open up the possibility of more inventions and there is no finite number of inventions to be created.

13) Location 6377   Hank and Dagny find motor

14) Location 7777-7780  “’ A man with the genius of a great scientist, who chose to be a commercial inventor?  I find it outrageous.  He wanted a motor, and he quietly performed a major revolution in the science of energy, just as a means to an end, and he didn’t bother to publish his findings, but went right on making his motor.  He did he want to waste his mind on practical appliances?’ ‘Perhaps because he liked living on this earth,’ she [Dagny] said involuntarily.”

Dr. Stadler speaking with Dagny

France vs England at the beginning of Industrial Rev.  France was just as advanced in science, if not more so, however, their scientists didn’t work on practical applications or with practical inventors.  Only those admitted to the French Academy of Sciences were considered worthy – there was a stiff hierarchy.  In England, practical inventors interfaced with the scientific community aided by a patent law that did not care (as much) if the inventor came from the Academic Community.  For more information see The Most Powerful Idea in the World

15) Location 8968-8972 “Then is money made by the man who invents a motor at the expense of those who did not invent it?  Is money made by the intelligent at the expense of fools?…Money rests on the axiom that every man is the owner of his mind and his effort…”

Francisco d’Anconia response to Money is the root of all evil

Anticipating the absurd arguments of Von Mises economists who want to use the inventions without paying the creator

Man’s mind is the key factor in production for humankind

15) Location11722- 11724     “Point Three.  All patents and copyrights pertaining to any devices, inventions, formulas, processes and works of any nature whatsoever, shall be turned over to the nation as a patriotic emergency gift by means of gift certificates to be signed voluntarily by the owners of such patents…the Unification Board shall then license the use of such patents and copyrights to all applicants, equally and without discrimination, for the purpose of eliminating monopolistic practices…”

Directive 10-289

Rand anticipated the nonsense of considering patents a monopoly.

This anticipates the actions of the Bush administration’s response to the anthrax scare: threatening a drug company to lower their prices on the antidote, or they would compulsory allow other companies to manufacture

It also anticipates Obama proposal to reduce the length of pharma’s patents to 7 years

And anticipates Liberals demanding that the drug companies reduce their costs for elderly, poor, and 3rd world.  Most countries already have made use of these compulsory measures, which leads to higher costs in the US where the inventions originate.

This illustrates people’s lack of understanding about the importance of property rights

16) location 11729  “Point Four. No new devices, inventions, products, or goods of any nature whatsoever, not now on the market, shall be produced, invented, manufactured or sold after the date of this directive.   The Office of Patents and Copyrights is hereby suspended.”

Sounds like the failure to fully fund the PTO and

Dudas’ irrational rationing of issuances of new patents

17) Location 11765  “A man’s brain is a social product.  A sum of the influences that he’s picked up from those around him.  Nobody invents anything, he merely reflects what’s floating in the social atmosphere…”

Dr. Ferris’s view there is no such thing as genius

Of course this begs the question, why are the majority of inventors in this world concentrated in so few countries?

18) Location 11817  “ We won’t have to worry about new inventions upsetting the market”

Explains why large multi-nationals want to pass the America invents act- to stifle disruptive competition

19) 11839  “There’s been enough invented already-enough for everyone’s comfort-why should they be allowed to go on inventing?”

You are either moving forward or moving backwards.  You cannot remain static. The reason why is in post Sustainability isn’t Sustainable

20) location13028   “…the boy had cared for nothing but his studies, not for sports or parties or girls, only for the vision of the things he was going to create as an inventor.”

Young genius commits suicide on eve of passage of Directive 10-289

21) Loc 11880  “…Taking over the patents is fine.  Nobody’s going to defend industrialists.  But I’m worried about taking over the copyrights. That’s going to antagonize the intellectuals.  It’s dangerous.  It’s a spiritual issue…”

Lawson responding to Mouch on impact of Directive

See the Copyright Term extension Act vs. America Invents Act- We are constantly weakening patent rights on one hand and strengthening copyrights.

This anticipates that Congress is always concerned about artists but could care less about inventors

22)  loc 15001”… Dwight Sanders? Where was the inventor of her motor?”

23) loc 15237   “…in whose arms? ‘ why the inventor of the motor.’ She gasped, closing her eyes; this was one connection she knew she should have made.”

24) Loc 15318 “The young inventor of the 20th century motor company is the one real version of the legend, isn’t it?”

Dagny on crashing into Galt Gulch


25) Loc 15587 “…I ask less of the men to whom I trade it for the things I need.  I add an extra span of time to their lives with every gallon of my oil that they burn.  And since they’re men like me, they keep inventing faster ways ways to make the things they make- so every one of them grants me an added minute, hour, or day with the bread I buy from them, with the clothes, the lumber, the metal…”


Wyatt on living in the Galt Gulch

This is a response to the whining about paying inventors or their patents stifling competition is nonsense, unless you want something for nothing

26) Loc 15777  “she was looking at the inventor of the motor, but what she saw was the easy, casual figure of a workman in his natural setting and function…”


Dagny observing Galt at work in the Gulch


27) Loc15989 “…no more than we consume for our immediate needs-with not a penny nor an inventive thought left over to harm the world.  It is evil to succeed, since success is made by the strong at the expense of the weak?”


Galt explaining to Dagny why they are on strike


28) Loc 16896 “that sacred fire which is said to burn within musicians and poets-what do they suppose moves an industrialist to defy the whole world for the sake of his new metal, the inventors of the airplane, the builders of railroads, the discoverers of new germs or new continents have done through all the ages?”

This demonstrates the absurd argument that artists are creative but inventors and scientists aren’t creative


29) Loc 17033  “…john intended to be an inventor, which meant that he was to be a physicist…”


Dr. Akston on the three brilliant students


30) Loc 17709  “…fraudulently solemn voice magnified by the microphone inventor’s ingenuity into the sound and power of a giant…”

Mouch getting ready to announce Directive 10-289.


31) Loc17745  “…Project X would not have been possible, this great invention will henceforth be known as the Thompson Harmonizer!”


32) Loc 17785  “..who invented that ghastly thing?”

Dr. Stadler talking to Dr. Ferris about the Thompson Harmonizer (Sonic Destruction Ray aka Project X)

33) Loc 17791  “’ what is the practical purpose of this invention?  What are the ‘epoch-making possibilities’?  ‘Oh, but don’t you see?  It is an invaluable instrument of public security.  No enemy would attack the possessor of such a weapon.”


Stadler asking Ferris about Project X, realizing it was his research that led to the invention


34) Loc17819   “…voice galloping across the continent with a description of the new invention…”


Dr. Ferris on Project X


35) Loc 17828 “This great invention was the product of the genius of a man whose devotion to the cause of humanity is not to be questioned…”


Wesley Mouch discussing Project X.


36 Loc 17836 “…the new invention was an instrument of social welfare, which guaranteed general prosperity… this invention, the product of dr. Robert Stadler…”


Announcer to the world on project x


37) Loc 17852 “…if people should misunderstand the nature of the new invention, they’re liable to vent their rage on all scientists.  Scientists have never been popular with the masses.”


Dr. Ferris talking about Project X


38) Loc 17853 “…this invention is a great, new instrument of peace…”

More on Project X


39) Loc 17875  “ Dr. Stadler could not believe it at first-that the new invention was to be greeted with particular gratitude by the mothers of the country.”


More on Project X


40) Loc 17956   “…fraudulent voices talking about some sort of new invention that was to bring some undefined benefits to some undefined public’s welfare.”


Dagny overhearing the broadcast


41) Loc 18603 “…he is the man who invented the motor we found…”


Dagny telling Hank that John Galt exists


42) Loc 19113 “wondering whether some invention of his own, some device of rays and lenses, permitted him to observe her every movement…”

Dagny wondering how Galt has followed her progress the past 10 years


43) Loc 19403 “They were both performing an expected routine, a routine invented by someone and imposed upon them, performing it in mockery, in hatred, in defiling parody on its inventors.”


Taggert with Lillian Rearden


44) Loc 20698 “…while you were combing the country for the inventor of my motor…”


Galt explaining to Dagny that he was working as a lineman for Taggert Transcontinental all this time


45) Loc 21962 “that the alleged short-cut to knowledge, which is faith, is only a short-circuit destroying the mind-that the acceptance of a mystical invention is a wish for the annihilation of existence and, properly, annihilates one’s consciousness.”


Galt radio speech


46) Loc 22391 “…you would not be able to fulfill or even to conceive your wishes.  You would not be able to desire the clothes that had not been made, the automobile that had not been invented, the money that had not been devised…”

Galt radio speech


47) Loc 22396 “just as your mystics of spirit invented their heaven in the image of our earth, omitting our existence, and promised you rewards…”


Galt radio speech

48) Loc 22454 “physical objects cannot act without causes. That his organs of perception are physical and have no volition, no power to invent or to distort, that the evidence they give him is an absolute, but that his mind must learn to understand it…”


Galt radio speech


49) Loc 22495 “a student reading a book understands it through a process of-blank-out.  A scientist working on an invention is engaged in the activity of-blank-out.” [how most  teachers explain the world]

Blank-out is Rand’s way of showing that people refuse to acknowledge the process of reason, of thinking


50) Loc22577 “You who have never grasped the nature of evil, you who describe them as ‘misguided idealists’-may the God you invented forgive you!”

Galt radio speech


51) Loc 22594 “…when I worked in your world, I was an inventor.  I was one of a profession that came last in human history and will be first to vanish on the way back to the sub-human. An inventor is a man who asks ‘Why?’ of the universe and lets nothing stand between the answer and his mind.


It is interesting that Rand points out that being an “inventor” was one of the last professions in human history.  Perhaps the first person to take on the profession of a being an inventor was Galileo, who lived in Venice.  Venice passed the first modern patent laws in 1474.  The U.S. has been the preeminent producer of people who made their living as inventors.  The America Invents Act is another step along the path of ensuring that no one will make a living as an inventor in the U.S. anymore.


In fact, whenever you see great periods of prosperity, you see large numbers of new inventions.  Whenever you see a lack of inventors inventing, you can be assured we are stagnating economically


52) Loc 22621 “…whether you would be able to invent a wheel, a lever, an induction coil, a generator, an electric tube,-then decide whether men of ability are exploiters who live by the fruit of YOUR labor…”

Galt radio speech

53) Loc 22631  “…dream of enslaving the material providers who are scientists, inventors, industrialists…”

Galt radio speech

54) Loc 22644 “…and to exile from the human race the hero, the thinker, the producer, the inventor…”

Galt radio speech

55) Loc 22875 “you failed to recognize the motor I invented-and it became, in your world, a pile of dead scrap.”

Shows nations and people are wealthy because of their mind-embodied by their inventions and technology-not their natural resources, labor and land.

56) Loc 22947 “…Nor will he give ten years of unswerving devotion to the task of inventing a new product… they will seize his rewards and his invention”

Galt radio speech

57) Loc 22958 “…for the work of the inventor who created the product which you spend your time on making, for the work of the scientist who discovered the laws that went into the making of that product…”

Galt radio speech

58) Loc 22974 “in proportion to the mental energy he spent, the man who creates a new invention receives but a small percentage of his value in terms of material payment, no matter what fortune he makes, no matter what millions he earns.  But the man who works as a janitor in the factory producing the invention, receives an enormous payment in proportion to the mental effort that his job requires of him.”

Hear, Hear

59) Loc 23002 “…they deliver their science to the service of death, to the only practical purpose it can ever have for looters: to inventing weapons of coercion and destruction.”

This is not about self-defense, it is about the policies we pursue that force us to spend so much time and talent and money on defense

60) loc 24304 “I’m Robert Stadler- he had thought-it’s my property, it came from my discoveries, they said it was I who invented it…”

Stadler on seizing Project X under his control and rule the country

61) Loc 24400 “’I invented it! I created it! I made it possible!’ ‘You did?  Well, many thanks, but we don’t need you any longer.  We’ve got our own mechanics.’ ‘Have you any idea what I had to know in order to make it possible?  You couldn’t think of a single tube of it!  Not a single bolt!’…’What claim do you have to it?’ Meigs patted his holster. ‘This.’”


Did Midas Mulligan Run a Fractional Reserve Bank?

Was Midas Mulligan, the hero banker in Atlas Shrugged, running a fractional reserve bank?  There has been much criticism of the Federal Reserves’ handling of our money supply and its effect on the economy.  Much of this criticism has been led by Ron Paul and the Austrian school of economics.  Some critics, including Ron Paul and Thomas E. Woods, author of Meltdown, have further argued that fractional reserve banking should be outlawed.  Fractional reserve banking is how all modern banks (since at least 1750s) operate.  Wikipedia defines a Fractional-reserve banking as a type of banking whereby the bank does not retain all of a customer’s deposits within the bank. Funds received by the bank are generally on-loan to other customers. This means that available funds (called bank reserves) are only a fraction (called the reserve ratio) of the quantity of deposits at the bank. As most bank deposits are treated as money in their own right, fractional reserve banking increases the money supply, and banks are said to create money.

Ayn Rand clearly would have been against the Federal Reserve system, which her protégé Alan Greenspan headed for over a decade.  The Federal Reserve is a government institution that prints money at will and manipulate the money supply for the benefit of government looters and Wall Street looters.  In Atlas Shrugged, Rand rails against paper money and in Galt’s Gulch they use gold for their currency.  However, to the best of my knowledge she never addressed the issue of fractional reserve banking directly.  The history of fractional reserve banking starts with the concept of an exchange bank.  I explain in my book, The Decline and Fall of the America Entrepreneur: How Little Known Laws and Regulations are Killing Innovation:

Modern banking started in the early 1600s with the Bank of Amsterdam.  Merchants could deposit coins with the Bank of Amsterdam and use this account to pay for transactions.  Using checks, a merchant’s account was debited and another merchant’s account was credited.  This meant that coins did not have to be transported from one merchant to another with the attendant risk of theft and loss or the cost of transportation.  The Bank of Amsterdam was just an exchange bank that facilitated transactions between merchants.  Next came the Swedish Riksbank established in 1656.  The Riksbank was not only an exchange bank, it also lent money making it the first modern fractional reserve bank.  Fractional reserve banking is the banking practice in which banks keep only a fraction of their deposits in reserve (as cash and other highly liquid assets) and lend out the remainder, while maintaining the simultaneous obligation to redeem all these deposits upon demand.  Commonly, loans are made against collateral such as land or jewelry.  … Some people believe fractional reserve banking creates money out of thin air, but what really happens was the money for these loans were backed by some collateral other than coins or bullion.  The downside of other types of collateral is they are not as liquid as species (coins, bullion).  As a result, if large numbers of customers of a fractional reserve bank wanted species (currency) at the same time, the bank would not able to fulfill all its customer’s demands.  This is a classic run on a bank.  A run on a bank is a cash flow issue.  A sound bank may have plenty of collateral and performing loans, but if most of its customers demand species at the same time it will not be able to fulfill these requests.  Fractional reserve banks free up capital from low performing assets so that they can be invested in higher performing assets.  For example, if you owned a large tract of ranching land that was not highly profitable but represented a large amount of capital and you want to invest in an oil well, without fractional reserve banking you would have to sell some of the land in order to invest.  With fractional reserve banking you could convert your land into a generally accepted form of money, by pledging your land as collateral to a bank for a loan.  In the modern world, the loan to you is just a computer entry in your bank account.

It is clear from history that fractional reserve banks are not some sort of government institution, like the Federal Reserve.  Rand’s philosophy was that people are free to contract with each other for anything that does not involve fraud or the use of force.  A fractional reserve bank meets this requirement, with the one possible caveat that a bank should disclose this information to depositors so that the customer understands and assents to the use of his money this way.  Since most people do not know what a fractional reserve bank is, including many bank employees, I am not sure that this caveat is met.  I assume that when you open a new account banks provide you with information that they are a fractional reserve bank, but I have not been able to prove this.  Without fractional reserve banking it is would be very difficult to securitize (Collateralize) many assets, such as houses and land.  This would significantly impede the economic growth of a country.


Adam Mossoff Lecture: Ayn Rand on Intellectual Property

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.

Atlas Shrugged –Movie Review

I just saw the movie Atlas Shrugged, based on Ayn Rand’s book with the same title.  The movie has divided the book into three parts and this was the first of the three parts.  I thought the movie did a very good job and stayed true to the book.  I purposely did not re-read the book before I saw the movie.  Like almost any movie, the book is better than movie.  The way the characters looked in the readers’ mind are never the way they look in the movie.  My wife thought the acting was just okay, but it did not detract from value of the movie.  The theater I saw the movie in was about 75% full (mid day) and there was a hearty round of applause at the end.  As you would expect, some of the speeches and characters will immediately strike you as being based on people in today’s news.  For instance, Wesley Mouch looks like and talks like a Barney Frank.  The speeches about “shared sacrifice” sound like our communist president’s (Obama) speech on the budget, April, 14, 2011. Rand’s rational selfishness and the absurdity of altruism are as clearly delineated,  as in the book.  The movie ends with a very dramatic scene, providing a good ending point, and whetting the appetite for Part II.

One thing that struck me was how the State Science Institute’s propaganda against Rearden Metal is almost exactly like the Global Warming debate today.  While the Luddite attitude toward genetically modified food might seem like a better analogy, it does not have the same political dynamics – at least not yet.  The scientist, Dr. Robert Stadler, justifies his unscientific position (lying) because it is necessary in order for the State Science Institute to continue to receive government funding.  I remember that when I read this passage in the book 25 or so years ago, I was reluctant to accept that science could be perverted by politics.  However, the last 25 years have provided me with numerous examples where so called “science” is really propaganda- funding from the federal government to ensure that the organization continues to receive funding from their political masters.  For instance, the manipulation of data by Climate Change advocates to ignore the medieval ice age (little ice age) among numerous other lies.  This is just one of many examples where these so called scientists ignore or manipulate the data to fit their conclusions.  This is not science, it is propaganda.  Note both sides of the political spectrum behave in this moral depraved activity – see Creationism.  Not surprisingly, the religious right was no more a fan of Ayn Rand than the religious left.

If you approach this movie as a separate artistic piece from the book you will find it highly entertaining and enlightening.  I hope that people in their 20s and 30s can transcend the focus on industrial technologies opposed to  the information age.

You will love this movie if you understand the value of freedom and reason.  If you are an intellectual or economic leech, you will hate this movie.

KSR: Supreme Ignorance by Supreme Court

Under the KSR decision (KSR Int’l Co. v. Teleflex Inc., 550 U.S. 398, 416 (2007)) by the Supreme Court nothing is patentable under the sun, unless you believe in black magic.  The Supreme Court in the Bilski ( oral arguments proved that the justices do not have the competence of a first year patent law associate.  KSR shows that the justices do not understand basic physics. 

See if you can spot the errors in physics in the following statements.  “The combination of familiar elements according to known methods is likely to be obvious when it does no more than yield predictable results.” KSR Int’l Co. v. Teleflex Inc., 550 U.S. 398, 416 (2007).  “A court must ask whether the improvement is more than the predictable use of prior art elements according to their established functions.” Id. at 417.  While the Supreme Court’s writing is not the model of clarity, the Court thinks these statements are equivalent.  The Court is saying that a patent for an invention made of known elements (prior art elements, familiar elements) and connections (according to known methods) is likely to not be patentable. 

Every real invention is a combination of known elements, unless you can violate the conservation of matter and energy – black magic.  The fact that the Supreme Court does not know this basic application of the laws of physics demonstrates that it is incompetent to rule on patent matters.  Another flaw in their logic is that if an inventor filed for a patent with an element that was completely new, then the Patent Office would reject the application, appropriately, as failing to clearly and distinctly claim their invention under 35 USC 112, second paragraph.  The fact that the Supreme Court does not understand the legal contradictions of their opinion, demonstrates that they do not understand the basics of patent law. 


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