It is surprising how much your position on patents reveals about your philosophical premises. We need to first understand five fundamental facts about patents.
- The wealthiest countries in the world have the strongest patent systems.
This fact should be readily apparent to anyone who has looked into this subject. There have been a number of studies on point and the correlation is at least as strong as the economic freedom index.
- Almost all new technologies are developed by the countries with the strongest patent systems.
This fact should be readily apparent to anyone who has looked into this subject. This obvious fact has been verified by studies.
- The Industrial Revolution started in the countries (Great Britain and the US) that had the first functioning patent systems.
Again this fact should apparent to anyone who has looked into this subject.
- Ayn Rand called patents (and copyrights) the most fundamental of all property rights.
- Patents are enshrined in the US Constitution, Article 1, Section 8, Clause 8.
Patents and copyrights are the only rights mentioned in the original Constitution. Note the Bill of Rights was not part of the original Constitution.
Here are some straight forward conclusions we can draw from these facts.
- When a person is against patent rights for inventors, they are not an Objectivist, they are a poser.
- When someone argues that patents inhibit economic growth, they have an almost insurmountable burden of proof to overcome.
- When someone argues that patents retard the growth of new technologies, their position is not just wrong, it shows the person is irrational.
- When a person is against patents they are not pro-Constitution (a supporter of the Constitution), they are a poser.
Many libertarians and Austrians want to act like they support the US Constitution, but attack the property rights of inventors (patents). You cannot have it both ways.
Here are some other conclusions that we can draw that are not quite as straight forward.
- People who attack patents have rejected Natural Rights.
Patents are built on Natural Rights (as is the founding of the US). Under Natural Rights theory anyone who creates something has a property right in their creation. Note that the libertarians and Austrians (economics) who argue against patents have all rejected Natural Rights and adopted Utilitarianism as their political ethics. The socialists who argue against patents have adopted Altruism as their political ethics.
- People who attack patents believe reason is limited.
The Libertarians that attack patents are all enthralled with the philosophers of the Scottish Enlightenment, like Hume, Mill, Burke, and Hayek. David Hume was an extreme skeptic that said humans could not even show we existed. Hume argued that cause and effect did not exist. He also argued induction and therefore science were nonsense. He attacked Natural Rights and argued that a rational ethics was impossible. (Hume supporters will argue he was just skeptical of these things, but the ferocity with which he attacks them shows that this was not just an interesting academic exercise on the part of Hume). All of these philosophers undermine reason. Many like Kant say they are for reason, but reason is limited. That is a contradiction, but beyond this post. Of course it is clear that the socialists also have rejected reason.
 The first patent system was Venice in the 1400s and Venice was one of the wealthiest and most technologically advanced cities in the world at the time.
 The Writ of Habeas Corpus is not a Right, it is a procedural guarantee.
 Burke is sometime considered part of the Scottish Enlightenment and sometimes not. In this case he should be included.
 Intellectually Hayek fits the Scottish Enlightenment to a tee even though he is not normally included in this group.
Libertarians and Austrians, including such organizations as the CATO Institute, Von Mises, and the Wall Street Journal, have put forth a number of arguments against patents and intellectual property. These arguments include that ideas (an invention is not just an idea, but I will let that go) are not scarce and therefore patents are not real property rights, patents are monopolies, patents inhibit the growth of technology, patents require the use of force to enforce one’s rights, patents are not natural rights and were not recognized as so by Locke and the founders, among other arguments. I have discussed most of these arguments earlier and will put the links in below. One of their favorite fall back arguments is that patents limit what I can do with my property. For instance, a patent for an airplane (Wright brothers) keeps me from using my own wood, mechanical linkages, engine, cloth, etc. and building an airplane with ailerons (and wing warping). This according to the libertarian argument is obviously absurd. After all it is my property. Here is an article Scarcity, Monopoly, and Intellectual Property on the Von Mises website where you can see almost every variation on the arguments mention above either in the article itself or in the comments.
Can I do whatever I want to with my property, or are there restrictions? Well when I buy a book, a movie, or a song, it does not give me the right to make unlimited copies of them. I have a property right in the physical book, but not the rights (copyrights) to make copies. Of course, many Libertarians think copyrights are absurd also, so let’s look at another example. Let’s assume you own your house and land outright. Does that give you the right to do whatever you want to with you land? Most likely, your land has easements for utility lines, such as water, gas, sewer, electricity. You are not allowed to do anything that interferes with those easements. You might object that I don’t own the easement, so this is a bad example. So let’s say you own a bulldozer, does that give you the right to bulldoze my apple orchard and build a house there? It is your property after all and according to the libertarian argument you are allowed to do whatever you want to with your property. You might object, that of course the libertarians did not mean that you could take advantage of my property to build on. Of course that begs the question, what is property? If a patent and copyright are property rights, then this is exactly the same situation. Another example where you are prohibited from doing something with your property, is in the case of water drainage. In particularly wet areas of the US you are prohibited from moving the earth on your land so water drains onto your neighbors property more freely – and no this is not an EPA rule, this is common law property rights. In parts of the country where water is scarce you are prohibited from damming up water on your land. If you buy land in a residential neighborhood you are prohibited from setting up a pig farm. Just because I own a gun, doesn’t give me the right to go around shooting people. The libertarian argument that patents are not real property rights because they prevent others from doing something with their property fails even the most cursory review.
One of the common themes that runs throughout all Libertarian arguments against patents is that Libertarians’ do not seem to know what property rights are, or how they arise. Here is a post on point, Property Right, Possession, and Objects; this post not only explains the proper basis of property rights, but why the Libertarian point that property requires possession is a fallacy. Libertarians have failed to provide a clear definition of what property rights are and how they arise. In fact, most anti-patent libertarians believe property rights are a useful social convention for distributing scarce resources. This is interesting, because they can become so adamant about what is their property. But nothing in this concept of property has anything to do with RIGHTS. If another, better system comes along for distributing scarce resources, then your property is gone.
Property rights do not give the owner the right to do whatever they want with their property. The source of property rights is creation, not the idea that it is a socially useful convention. Patents recognize the metaphysical fact that the inventor is the creator of his invention and are completely consistent with other property rights in prohibiting an owner of other property from using it to build his invention.
Below is a list of other Libertarian arguments against patents and why they fail.
Inventions are not scarce:
Patents are monopolies
If patents are a monopoly, as some suggest, then it should led to certain outcomes. A close examination shows that none of the supposed monopoly effects result from granting patents.
This post explains the characteristics of a monopoly and a property right and poses three questions to show the difference. Patents fit all the characteristics of a property right and none of a monopoly. Note that professional license, such as a law license has some of the characteristics of a monopoly.
This post contains a number of quotes from philosophers explaining that patents are not monopolies.
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.
This post traces the ideas of Locke and William Blackstone to show patents and copyrights are natural rights.
Patents inhibit the growth of technology:
This post shows that those countries with the strongest patent systems are the technological leaders of the world Patents: Monopoly or Property Right a Testable Hypothesis
Patents require the use of force
This is one of the more absurd arguments by libertarians. All property rights are enforced by the government’s use of force. If someone trespasses on your land or steals your car, the government threatens or uses force to get it back. The same is true for patent, which are property rights in inventions.
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.
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 https://hallingblog.com/2010/01/07/patent-quality-nonsense/ and https://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” https://hallingblog.com/2010/03/24/pat-choate-technology-theft-as-a-business-strategy/
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 https://hallingblog.com/2009/09/18/in-defense-of-patent-trolls/ For more information see Jump Starting a Secondary Market for Patents https://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 https://hallingblog.com/2010/01/19/ksr-supreme-ignorance-by-supreme-court-2/ )
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 https://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.
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