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Patents and Innovation Economics

Procedural Versus Substantive Law: The Constitution

Substantive law can be derived from first principles, while most procedural law cannot.  Procedural law exists to support and protect substantive law.  This means that substantive law is primary and procedural law is secondary.  This is important to understand in debates on laws and the Constitution.  An example of substantive law is the law against murder or property rights.  An example of procedural law is that you are tried in criminal court by a jury of twelve peers or requiring a warrant for police to undertake a search.

Procedural laws are somewhat arbitrary and under common law are often based on historical incidents.  For instance the idea of a trial by a jury of your peers comes from the Magna Carta.  The Magna Carta (1215 CE) was created in reaction to King John’s tyrannical rule.  The idea of being tried by your peers was in reaction to the King or his administration issuing arbitrary rulings.  The ultimate goal was to obtain fair trials where substantive law is correctly applied.  However, we are all aware of jury trials with unjust outcomes. 

Not surprisingly modern statists (both socialists and conservatives) have purposely confused the difference between substantive and procedural law.  One example of this is the idea of “procedural justice”, which in its broadest form is the idea that whether a legal proceeding is “just” is defined by whether the correct procedures were followed.  Under procedural justice, if King John followed the correct procedures then his actions were just.  “Criminal trials at the time took the form of ‘ordeals’ by fire or by water; supervised by the local priest. God was the judge, and he would ensure that the innocent survived — thus, suspects dunked in ponds were declared guilty if they drowned.”[1]  This is the sort of nonsense that procedural justice leads to.

Libertarians have a specific strain of procedural justice, which boils down to the non-aggression principle (NAP).  This concept is associated with Robert Nozick, Murray Rothbard, and Stefan Molyneux.[2]  The non-aggression principle is an attempt to short cut the hard philosophical work of defining rights and laws to protect them.  Here are a couple of examples of the nonsense the NAP leads to.

1) A nomad picks an apple from a tree.  The orchard owner points a gun at the nomad and demands he return the apple.  Who is the aggressor?  I can assure you that the nomad thinks the farmer is the aggressor.  The nomad does not recognize or understand the idea that you have a property right in something you grow.  To him property rights are defined by the first person to acquire something.  Of course, the farmer believes that the nomad is the aggressor.  It is impossible to determine who is the aggressor in the case without a proper definition of property rights, something libertarians have failed to do.  In fact, libertarians and Austrian Economics do not think property Rights exist, just a utilitarian legal clam to things, which they call property.

  1. An environmentalist blows up a libertarian’s SUV. Who is the aggressor?  The environmentalist argues the libertarian is the aggressor because he is putting greenhouse gases into the atmosphere and killing the planet and the environmentalist with it.  The libertarian points to his car and says the environmentalist is the aggressor.  Without reason and science it is impossible to decide who is the aggressor here.  A proper understanding of property rights is also necessary.

The non-aggression principle at best is derived from reason that also properly defines property rights and a rational ethics.  However, the NAP pushers think they can side step this hard work.  Without this foundation the NAP leads to nonsense.

Substantive laws protect people’s natural rights, which are the rights that can be derived from the fact you own yourself using reason (evidence and logic).  Procedural laws are rules that are designed to ensure your natural rights are protected by the government by requiring certain processes.  People often confuse procedural guarantees for rights.  Unfortunately, even the founders’ in the Bill of Rights made this mistake.  The sixth amendment is an example of this, but not the only example.

In all criminal prosecutions, the accused shall enjoy the right to a speedy and public trial, by an impartial jury of the state and district wherein the crime shall have been committed, which district shall have been previously ascertained by law, and to be informed of the nature and cause of the accusation; to be confronted with the witnesses against him; to have compulsory process for obtaining witnesses in his favor, and to have the assistance of counsel for his defense.

You do not have a natural right to a trial, that the trial be public or speedy or by a jury.  You cannot create a formal logical argument that requires a speedy, public, jury, trial because you are the owner of your life and yourself.  We all know that speedy trials are not necessarily more accurate or just than slow trails.  The USSR held public trials.  This did not mean that they were not show trials.  In the United States today people are convicted of all sorts of crimes that meet the sixth amendment standards, but are not just because they are based on unjust laws.  For instance, people are convicted of unconstitutional securities laws, or drug laws, or environmental laws.  These trials are not just.

Confusing procedural guarantees with Natural Rights confuses the discussion and undermines our rights.  A procedural guarantee in almost all cases is a government created rule that is not based in strict logic.  If we call these procedural guarantees rights, then we logically open the door to the argument that “Rights” are created by governments.  One procedural (and evidentiary) rule that might be based in reason and Natural Rights is the maxim “innocent until proven guilty”.  However, this maxim is still not a right.  A right defines a moral (and legal) claim to take action without anyone’s consent.  The innocent until proven guilty maxim is not a right to take action.

The United States Constitution is mainly a document about procedural rules, not about protecting our rights.  As a result, we often put too much importance on the Constitution.  I have shown in my post, Property Rights: The Foundation of Freedom, that property rights/laws are much more important in protecting our rights than the Constitution.

When we examine the original Constitution (the Bill of Rights were added three years after the Constitution was ratified) we find it is composed of a preamble and seven Articles.  The first three Articles are directed to setting up the legislative, executive, and judicial branches of the federal government.  Article 4 is about the relationship between the States and the federal government.  It is important to remember that the Constitution did not and was not intended to setup the only or even the supreme government in the United States.  The Constitution setup a federal government to deal with problems that the states could not solve individually or that would cause chaos if each State government took their own different positions, for example foreign relations and war.

Article 5 is about the procedure of adding amendments to the Constitution.  Article 6 is about Prior Debts, National Supremacy, and Oaths of Office.  It is basically a hodgepodge of items that did not fit in the other articles.  Article 7 defines the procedure for ratifying the Constitution.

The high level structure of the Constitution is about procedures not rights.  The first three Articles define the structure of the federal government.  This structure is modeled after the government of the Roman Republic and the English monarchy.  Sorry Christians the United States Constitution is not a Christian document any more than geometry is Greek math.  The Constitution is devoid of any reference to God or the creator or any other reference to religion.  Article 6 does state this however “but no religious Test shall ever be required as a Qualification to any Office or public Trust under the United States.”

Article 1 of the Constitution sets up the legislature and divides it between a Senate and a House.  The Senate is made up of two people from each state picked by the state legislature.  The terms of office are set out for Senators and Representatives, minimum ages, and other procedural rules.  You cannot logically prove that the best government is made of three branches.  Or that the legislature should be divided into two houses, or that requiring a certain age to serve is necessary.  All of these are procedural rules and cannot be derived from our natural rights.  Despite this, it is important to point out when government officials do not follow the Constitution, because those are the rules they are supposed to be bound by.  However, not following many of the rules in the Constitution does not result in a violation of anyone’s Natural Rights.  The goal of government is to protect our individual rights and all this procedural stuff is just to help ensure that.  As the Declaration of Independence states:

All men are created equal, [that] they are endowed by their Creator with certain unalienable Rights, that among these are Life, Liberty and the pursuit of Happiness.–That to secure these rights, Governments are instituted among Men

There is only one right (Natural Right) mentioned in the United States Constitution and it is in Article 1, Section 8, Clause 8:

To promote the Progress of Science and useful Arts, by securing for limited Times to Authors and Inventors the exclusive Right to their respective Writings and Discoveries

There is a lot of nonsense about the Patent and Copyright clause, including that the preamble (To promote the Progress of Science and useful Arts) is limiting on this RIGHT.  This is the same nonsense used against the 2nd amendment.  Preambles in law are not limiting, they are merely descriptive.  It makes no sense to say you have a right that is limited by some utilitarian criteria.  Article 1, Section 8 also starts with the phrase “The Congress shall have Power to”, which some people have interpreted as making patents and copyrights optional.  Protecting Rights cannot be optional.  The purpose of government is to secure peoples’ right.  The reason the patent and copyright clause is placed in this part of the Constitution is to direct the Congress to pass laws to implement them and to eliminate the States’ patent and copyright laws.  This is clear from the structure of the Constitution and its History and the fact that President Washington was upset with Congress for not passing a patent law sooner.[3]

People claim that other rights are mentioned in the original Constitution, however they are always confusing procedural guarantees with rights.  For instance, some people suggest that the Writ of Habeas Corpus is a right.  Even in the Constitution it is clearly stated that it is a privilege, which is also not quite right it is a procedural guarantee.  The Writ of Habeas Corpus is recourse under the law to determine if a person is being unlawfully detained.

The United States Constitution is mainly concerned with the structure of a federal government and the procedures it operates under.  It is not a guarantor of our individual rights, with the exception of the rights of inventors and authors.

 

Conclusion

Substantive law is based on our Natural Rights, which are derived using reason from the idea that we own ourselves and our life (which clearly includes the right to our own life).  Procedural law is designed to ensure the government protects our Natural Rights.  Procedural law generally cannot be derived from pure logical deduction and is often based in historical experiences.  When procedural law is treated as primary (procedural justice) it leads to all sorts of nonsense.  The United States Constitution is primarily about the structure and procedure of the federal government and is not the main legal protection of our rights.

 

 

[1] Geoffrey Robertson, Magna Carta and jury trial,  https://www.bl.uk/magna-carta/articles/magna-carta-and-jury-trial, accessed July 31, 2017.

[2] Matt Bruenig, The three big conservative philosophical frameworks, http://mattbruenig.com/2011/12/20/the-three-big-conservative-philosophical-frameworks/, accessed July 31, 2017

[3] Randolph J. May  and Seth L. Cooper, Constitutional Foundations of Copyright and Patent in the First Congress,  http://www.freestatefoundation.org/images/Constitutional_Foundations_of_Copyright_and_Patent_in_the_First_Congress_050714.pdf

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July 30, 2017 Posted by | Legal Philosophy | , , , | Leave a comment

Ayn Rand’s Ethics: Natural Rights and Self-Ownership

There seems to be a lot of confusion on the issues of whether Rand’s ethics is (or is consistent with) a natural right ethics and the idea of self-ownership.  These issues seem to bring up a lot of hidden assumptions and emotions.

 

Natural Rights:  Any logical analysis of whether Objectivist ethics can be classified as a natural rights ethical system has to start with some definitions.  The word “rights” here means that this term is only concerned with the ethical interaction between people.  Usually, this is even further limited to the ethical basis of governments or political systems.  Objectivist ethics covers more than just natural rights.

Natural means that the ethical system is based on nature or reality.  Logically, a “rights” system is either natural or unnatural there are no other choices.  That is basic logic and is called the law of the excluded middle.  (If you comment that there is some third choice, expect a harsh reply explaining that you do not understand basic logic.  If you double down on this irrationality, expect an even harsher reply).

The question then boils down to whether Objectivist ethics is based in nature (reality) or whether it has a non-natural basis and the only non-natural basis would have to be a supra-natural or completely arbitrary basis.

It is clear to anyone who has studied Rand’s ethics that it is based in nature, specifically the nature of man.  I have written on this extensively, see here.  It is clear that Rand’s ethics is in the broad category of Natural Rights.

If you want to argue that Rand’s formulation of rights is different than the Founding Fathers or Locke’s or other natural rights philosophies, that is fine, but that is not the question.  Do not comment that Harry Binswanger or Leonard Peikoff or someone else disagrees.  Objectivism is about reason, not about ordained leaders.  Arguing from authority, without providing a rational argument, is dishonorable to Objectism, Rand, and turns aynrandstampObjectivism into a religion.

 

Self-Ownership:  Once again we start with a definition.  Self-ownership is defined as having ethical and legal control over one’s body and mind.  If you disagree with this definition then you need to provide you own and you need to explain why you are not using the standard definition, which has been around for hundreds of years.

Based on the definition above it is clear that Rand’s ethical system is consistent with self-ownership.  If you argue it is not, then you do know what a definition is or alternatively what Rand said on the subject (expect harsh replies if you argue this irrational position).

Now you might argue that “self-ownership” is not axiomatic (or a fundamental observation) of Rand’s ethics and you would be correct.  Technically, it is not an axiom in Locke’s formulation of natural rights either.

January 6, 2017 Posted by | philosophy | , , , | 4 Comments

Natural Rights: Objective, Subjective and Volition

I often have people say Natural Rights do not exist.  Then they point to something like the Earth and state the Earth is a sphere – that is real, the mass of the Earth is real and can be measured, but the Right to Property or the Right of self ownership are not real, they don’t exist in nature and there is nothing natural about them.  A similar complaint is that Natural Rights are subjective, while the mass of the Earth is objective.

This sort of argument represents an extreme empiricism point of view and confuses objective with subjective with volitional.  Here are the definitions of these words from web based dictionaries.

Objective: (of a person or their judgment) not influenced by personal feelings or opinions in considering and representing facts.

Subjective: based on or influenced by personal feelings, tastes, or opinions.

Volition: 1) the act of willing, choosing, or resolving; exercise of willing: She left of her own volition. 2. a choice or decision made by the will.

Note that a choice can be objective or subjective but both are exercising one’s will.  One can choose to not believe the world is a sphere (technically a spheroid and not a perfect spheroid).  One can choose to ignore the objective facts and contend the Earth is flat.  This does not make the decision to understand the Earth is a spheroid subjective.  Note the Catholic Church choose to believe the Sun rotated around the Earth, despite the objective facts.  Global warming (AGW) prophets ignore the facts every day.  It is clear that just because something is volitional does not make it subjective.

But what about Natural Rights or ethics, there are no objective facts involved according to these people.  As we established above, just because something is volitional (i.e., a choice) does not make it subjective.  Euclidean Geometry (EG) is not based on any objective facts.  It is a purely logical system and devoid of any empirical facts, does that mean it is subjective?  There have never been any two perfectly parallel lines that go on forever and finding or not finding such lines is irrelevant to EG.  Does this mean that Euclidean Geometry is subjective?  Does it mean it is not real?  Well the answer to any problem in EG is not based on personal feelings or opinions, it is based on facts, but not empirical facts.  But is EG real?  Well certainly the mathematical system of Euclidean geometry exists.  You might object that EG is not based on empirical facts, but it is influenced by them.  Two perfectly straight parallel lines might not exist in nature, but close representations of them do exist and are used in construction and numerous other area’s every day.

The extreme empiricist wants to deny any higher order concepts exist.  So to the extreme empiricist the number four does not exist.  Four oranges exist and four nails exist, but four does not exist.  This sort of thinking, would deny the existence of gravity.  Things fall to the Earth and the Earth rotates around the Sun, but gravity is not an empirical fact; it is a scientific theory.  A scientific theory is a model of nature that explains and predicts many different empirical facts.

Locke explained Natural Rights in terms of a “state of nature.”  He stated that when man lived by himself, he necessarily owned himself and the products of his labor.  Locke’s theory of Natural Rights explains why slavery is illegal, where property rights come from, why theft, murder, and assault, are illegal.  Almost all of our common law is based on Natural Rights.  It is an extremely powerful theory, much like Newtonian gravity and motion, or evolution.  The Marxists attacked Locke based on the idea that people lived in groups.  This is an intellectually dishonest sleight of hand.  Locke was not making an empirical argument, he was making a logical argument.  It is the same as Euclidean Geometry starting with the idea that two parallel lines never intersect.  The power of Locke’s ideas is undeniable.  The results were the creation of the industrial revolution, unparallel reduction in human suffering, the elimination of slavery and the elimination of force as an accepted method of settling disagreements.

Ayn Rand explained that values are only possible to living things, because life faces the metaphysical choice of life or death.  Ethics is the selection of those rules consistent with life.  The ethics of a human being are different than the ethics of a tree.  Man is the only species that does not have a built in ethical system or instinct.  Man is volitional, so he can choose an ethics of death.  However, such an ethical system is a contradiction in terms, since only something that is alive can have values.  Ethics is based on the fact of life and the only logically consistent ethical system is one that chooses life.  Humans are rational animals and therefore must have an ethical system consistent with their nature.  Since reason is a personal attribute (not collectivist), ethics is about a set of rules that allow individuals to exercise their attribute that is necessary for survival.  Thus any ethical system that limits or undermines man’s reason is inherently an ethics of death, which is a contradiction in terms.  This means that man must own himself, because the ability to think without the ability to act is meaningless.  Now we are back to Locke.

Natural Rights and ethics are based on objective reality.  You can choose to ignore these facts, just as you can choose to ignore gravity, but you cannot escape the reality that to do so is to choose death in both cases.

April 14, 2014 Posted by | -Philosophy | , , , , | 2 Comments

Patents are Natural Rights

I have often pointed out that patents are a natural right under Locke’s theory of property rights.  Locke stated, in modern language, that you own yourself so you have the right to those things you create.  Many detractors have suggested that this absurd.  According to Locke the three chief natural rights are life, liberty, and property.  Locke states that protecting property rights is the main reason for forming governments.

Sec. 124. The great and chief end, therefore, of men’s uniting into commonwealths, and putting themselves under government, is the preservation of their property.[1]

Inventions are the result the inventor’s labor and therefore property under Locke.  Property is a natural right, so patents are natural rights.  Despite this logical connection, many people have continued to deny that patents (property rights in inventions) are a natural right.

Locke’s ideas were incorporated in the law of the United States by William Blackstone’s Commentaries on the Laws of England.  This treatise became the basis of common law in the US.  Here is what Blackstone said about patents and copyrights (intellectual property).  Note that he cites Locke’s ideas on property rights for his explanation for why intellectual property is Property.

There is still another species of property, which (if it subsists by the common law) being grounded on labour and invention is more properly reducible to the head of occupancy than any other; since the right of occupancy itself is supposed by Mr. Locke, and many others, to be founded on the personal labour of the occupant. And this is the right, which an author may be supposed to have in his own original literary compositions; so that no other person without his leave may publish or make profit of the copies. When a man by the exertion of his rational powers has produced an original work, he seems to have clearly a right to dispose of that identical work as he pleases, and any attempt to vary the disposition he has made of it, appears to be an invasion of that right.

Now the identity of a literary composition consists entirely in the sentiment and the language: the same conceptions, clothed in the same words, must necessarily be the same composition: and whatever method be taken of exhibiting that composition to the ear or the eye of another, by recital, by writing, or by printing, in any number of copies, or at any period of time, it is always the identical work of the author which is so exhibited; and no other man (it hath been thought) can have a right to exhibit it, especially for profit, without the author’s consent.

This consent may perhaps be tacitly given to all mankind, when, an author suffers his work to be published by another hand, without any claim or reserve of right, and without stamping on it any marks of ownership; it being then a present to the public, like building a church or bridge, or laying out a new highway: but, in case the author sells a single book, or totally grants the copyright, it hath been supposed, in the one case, that the buyer hath no more right to multiply copies of that book for sale, than he hath to imitate for the like purpose the ticket which is bought for admission to an opera or a concert, and that, in the other, the whole property, with all it’s exclusive rights, is perpetually transferred to the grantee.

On the other hand it is urged, that though the exclusive property of the manuscript, and all which it contains, undoubtedly belongs to the author, before it is printed or published; yet from the instant of publication, the exclusive right of an author or his assigns to the sole communication of his ideas immediately vanishes and evaporates; as being a right of too subtile and unsubstantial a nature to become the subject of property at the common law, and only capable of being guarded by positive statutes and special provisions of the magistrate.

The Roman law adjudged, that if one man wrote any thing on the paper or parchment of another, the writing should belong to the owner of the blank materials meaning thereby the mechanical operation of writing, for which it directed the scribe to receive a satisfaction; for in works of genius and invention, as in painting on another man’s canvas, the same law gave the canvas to the painter. As to any other property in the works of the understanding, the law is silent; though the sale of literary copies, for the purposes of recital or multiplication, is certainly as antient as the times of Terence, Martial, and Statius. Neither with us in England hath there been (till very lately) any final determination upon the right of authors at the common law.

But whatever inherent copyright might have been supposed to subsist by the common law, the statute 8 Ann. c. 19 hath now declared that the author and his assigns shall have the sole liberty of printing and reprinting his works for the term of fourteen years, and no longer; and hath also protected that property by additional penalties and forfeitures: directing farther, that if, at the end of that term, the author himself be living, the right shall then return to him for another term of the same duration: and a similar privilege is extended to the inventors of prints and engravings, for the term of eight and twenty years, by the statute 8 Geo. II. c. 13, and 7 Geo. III. c. 38, besides an action for damages, with double costs, by statute 17 Geo. III. c. 57. All which parliamentary protections appear to have been suggested by the exception in the statute of monopolies, 21 Jac., I. c. 3, which allows a royal patent of privilege to be granted for fourteen years to any inventor of a new manufacture, for the sole working or making of the same; by virtue whereof it is held, that a temporary property therein becomes vested in the king’s patentee. (emphasis added)

 

The idea that patents are a natural right is incorporated in early American law as the quote below shows.

“we protect intellectual property, the labors of the mind, productions and interests as much a man’s own, and as much the fruit of his honest industry, as the wheat he cultivates, or the flocks he rears.” (Davoll v. Brown, 7 F. Cas. 197, 199 [C.C.D. Mass. 1845].)

It is just obstinance or disingenuousness to suggest that patents are not part of natural rights.

 


[1] The Second Treatise of Civil Government; 1690; John Locke; CHAP. IX., Of the Ends of Political Society and Government.

December 9, 2013 Posted by | -History, -Law, -Legal, -Philosophy, Patents | , , , , | 1 Comment

Patents: Property Rights or Regulation

There appears to be a lot of confusion on whether patents and patent laws are property rights and property laws or regulations.  For instance, Steve Forbes in an article entitled, America’s patent system is all wrong for today’s high-tech world  starts that article by complaining that the Obama Administration is always looking for a way to “regulate and interfere in the free market.”  Mr. Forbes goes on to complain about Non-Practicing Entities (NPEs) asserting patent rights and ends the article by complaining that “don’t we have enough regulatory hurdles to jump in the first place?”  I have seen this same theme that patents (all IP) are regulations in a number of blogs.  These people do not seem to understand property rights.  Part of the confusion may be that we do not have clear definitions of what property rights are and what regulations are.  For instance, I looked up a number of definitions of property rights and the definition from Black’s Law Dictionary is representative.

 

What is PROPERTY?

The ownership of a thing is the right of one or more persons to possess and use it to the exclusion of others.

 

This definition is incomplete at best.  For instance, is a taxi medallion a property right?  Is a license to a part of the electromagnetic spectrum from the FCC a property right?  Is a government monopoly to provide electrical power within a certain geographic region a property right?  All of these are exclusive legal rights.

Personally, I would consider a taxi medallion or a FCC license a regulation.  So I looked up a number of definitions of regulation, and the one below from Free Online Dictionary is representative.

1. The act of regulating or the state of being regulated.

2. A principle, rule, or law designed to control or govern conduct.

This definition is so broad as to encompass any law.  For instance, is the right to free speech a regulation?  Is the right to your house a regulation?  Are the laws against murder a regulation? Is the Homestead Act a regulation?  All of these control or govern conduct.  When we are talking about regulations most people mean something like building codes or OHSA rules or the FTCs requirement that all bicycles are required to have retroreflectors on the pedals.  We generally do not think of the laws against murder, burglary, or even the rules on recording title to land and houses as regulations.  But if you look at these two definitions, property rights and property laws are a subset of regulations.  This is clearly nonsense.

Most histories of the modern regulatory state in the US place its origin around 1900 and refer to agencies such as the Interstate Commerce Commission (whose original function was to regulate railroads), the Federal Trade Commission, the Securities and Exchange Commission, etc.  This provides a clue to the correct definition of regulation and shows that we do not mean common law property rules or common law crimes when we are speaking of regulation.

According to Steve Forbes and most people when we think of a regulations we think laws and rules that interfere with the free market.  Unfortunately, people use very loose definitions of ‘free market’.  For instance, some people think a free market is one that has “perfect competition”, which suggests that anti-trust laws are part of the free market as might be the FTC.  A better starting place to find out what is a regulation and what is a property right is the logical foundation on which this country was created – Natural Rights.  Natural Rights define property rights based on the idea that if you own yourself you own the product of your labor.  Thus you own land because you spent the effort to improve it, e.g., the Homestead Act.  (Today most of us trade our labor for currency that we then use to purchase ownership in our house or land based on our Natural Right to contract.  But the principle still applies.)  Inventions are the creation of the inventor and therefore the inventor has a property right in their creation.  I have created a three part test to determine whether something is 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?

 

If the answer is yes to all three questions, it is a property right.  A patent fits all three as does ownership in land.  Note that taxi medallions, electrical power monopolies, and FCC licenses all have at least one no to the above definition.  Thus a regulation is something that interferes with a person’s property rights, such as EPA wetland rules or the right to use your property to start a business.  Other regulations, such as minimum wage laws interfere with a person’s right to contract.

A regulation is a government rule that interferes with a person’s Natural Right to property or right to contract. 

Patents and NPEs do not fit that definitionThis definition clearly defines that property rights are not regulations and limits regulations to true meddling in ‘free markets’.

 

July 23, 2013 Posted by | -Philosophy, Patents | , , , , | 18 Comments

Book Review: It Is Dangerous to Be Right When the Government Is Wrong: The Case for Personal Freedom

It Is Dangerous to Be Right When the Government Is Wrong: The Case for Personal Freedom, by Andrew P. Napolitano

Judge Napolitano has written an excellent book on Natural Law from the perspective of an attorney.  He attacks legal Positivists, who believe the law is whatever the government says it is.  He points out the moral bankruptcy of Positivists by pointing out that they have no logical basis to be against Hitler’s final solution of wiping out all Jews – since it was a validly passed law.  He also rejects the non-sense of “majority rule” or Democracy.

He explains that Natural Law is like science.  He states:

Only man-made theories for what those rules are and how the operate may change.

However, without an explanation or understanding, those rules remain just as “true”: Penicillin will combat certain infections, and gravity will always pull things toward the center of the Earth, regardless of whether or not we understand how.

He also states something that will not sit well with conservatives:

Truisms reject moral relativism, and American Exceptionalism.  They compel and understanding of the laws of nature that animate and regulate all human beings at all times, in all places, and under all circumstances.  And truisms equal freedom.

The book starts off with the Declaration of Independents.  It moves onto eminent domain issues where the judge has a number of illuminating points.  I particularly liked the freedom of association chapter.  Napolitano I think is one of the few people to write about this issue.  I also found the right to petition chapter illuminating.  I believe that only someone with Judge Napolitano’s legal background could have done this chapter justice.  His chapter on the growth of the Defense Industry was illuminating.  While I did not agree with all his points, he makes it clear that the Defense Industry has grown completely out of control.  According to the Judge the US military is in over 130 countries.  The quote from Fredrick the Great comes to mind “in trying to defend everything he defended nothing.”  The US military has become just another welfare/crony capitalism project.  The military will complain that defense spending as a percentage of GDP is less than it was during the Korean War.  However, we did not have the Department of Homeland Security, the Department of Energy, the Border Patrol, etc, which are all really part of our defense spending at the time of the Korean War.

Unfortunately, the book is marred by two problems.  I am in complete agreement with the Judge’s emphasis on Natural Law, but he defines it in terms of “essential yearnings.”  Someone might have an essential yearning to torture people or kill them.  That does not make it a natural right.  It is enough to state that people have ownership of their body.  The rest of Natural Law and Natural Rights flows from this simple concept.  Once I own myself, I clearly own the product of my labor which leads to all of property law, including patents.  Criminal law comes from violating my rights in my body or in my property.  The “essential yearnings” adds nothing to the concept of Natural Law and Natural Rights.

The second problem with the book is Judge Napolitano’s analysis of fractional reserve banking.  The Judge and some Austrian economists incorrectly state that fractional reserve banking allows banks to create money out of nothing.  A fractional reserve bank is a bank that lends out part of its depositors money.  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.

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.  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.  Logically if you are against fractional reserve banking you should be against a stock market.  Both are just a way of securitizing assets.  The stock of paper money act as a claim against various assets and/or future earnings.

 

January 14, 2012 Posted by | -Economics, -History, -Legal | , , , , | Leave a comment

House Debate on Constitutionality of H.R. 1249 – America Invents (NOT) Act

The House had their first ever debate last night (6/22/11) on the Constitutionality of a piece of legislation under the new rules requiring the House specifically address the Constitutionality of legislation.  The major supporter for the Constitutionality of America Invents Act was Lamar Smith, Republican fromTexasand the major Congresswoman challenging the Constitutionality was Marcy Kaptur, Democrat fromOhio.  Kaptur pointed out that the first right ever mentioned in the Constitution, even before the Bill of Rights, was the exclusive right of inventors and authors to their writings and discoveries – Article 1, Section 8, clause 8.  Representative Kaptur pointed out that the Constitution protects the rights of inventors, not the first person to file for a patent.  The proponents of the Bill have pushed the nonsensical idea that the Bill awards patents to the “first inventor to file.”  There is no such thing as the “first inventor to file.”  Only one person or group can be an inventor, the other people are just clever engineers.  For instance, if I recreated calculus without any apparent training in calculus, that would not make me the discover of calculus, it would just make me clever at math.  Kaptur points out that the inventor has an inchoate right to a patent upon reducing an invention to practice.  The first person to file, even if they recreate the invention, does not have an inchoate right.

Congresswoman Kaptur correctly pointed out that the Bill will institutionalize intellectual property theft.  She explained that this Bill is about Europeanizing our patent laws.  She predicted that if this legislation passes it will be tied up in the courts for years, because of its unconstitutionality.  This uncertainty will hurt inventors and the American economy.

Congressman James Sensebrenner of Wisconsinpointed out that a vote for this Bill is a clear violation of every Congressman’s oath to uphold and defend the Constitution.  He points out that patents are a property right and H.R. 1249 is a clear violation of the 5th Amendment.  The relevant part of the 5th Amendment states “or shall private property be taken for public use, without just compensation.”  The Bill will take the private property of inventors without compensating them and give it to the first person who files a patent application.  Congressman Sensebrenner and many of the opponents of the legislation pointed to the recent Supreme Court case Stanford v. Roche, which clearly stated that a foundation ofU.S. patent law is that the first true inventor is entitled to a patent.  Sensebrenner made the point that inventor means the first person to create an invention, not the person who files first or the second or later person to recreate the invention.

Congressman Lee Terry of Nebraska also brought up the difference between inventors and filers and pointed to the Stanford v. Roche case.

Congressman Scott Garrett of New Jerseypointed out that the purpose of Government is to secure our Natural Rights – See the Declaration of Independence.  He pointed out that only the first true inventor is the creator of the invention and creation is the source of all property rights.  This is a straightforward application of Natural Rights.

Congressman Dana Rohrabacher ofCaliforniapointed out that the clear purpose of this legislation is to weaken our patent rights.  TheUnited Stateshas had the strongest patent rights for INVENTORS since the Constitution was passed.  This is why theU.S.became the economic and technological leader of the world is less than sixty years.  He also pointed out that this legislation is designed to HARMonize our patent laws with other countries to the detriment of the United States.

Proponents of the Bill spoke about patents being monopolies and talked about the supposed problem of run away litigation.  Patent are property rights not monopolies.  People who label patents monopolies are people who do not understand property rights and are pushing a statist agenda.  Judge Michel, former head of the Court of Appeals for the Federal Circuit, the court that hears all patent appeals in the country, has definitely demolished the myth of rampant patent litigation.  He has pointed out that only about 100 patent cases go to trial each year.  In a $14 trillion economy built on new technology this is trivial.  A familiar theme among the proponents was their support for the Wall Street give away of not having to pay for stealing other peoples’ technology.  For more information see Patent Reform a Sham: Data Treasury Story Exposes True Motives.

If this Bill passes theUnited Statesstandard of living will decline precipitously in the next decade.  I predict that our standard of living will be on par withGreeceandPortugalby 2020.

June 22, 2011 Posted by | -Law, Patents | , , , , , , , , , , , , | 3 Comments

Could Congress Abolish Patents and Copyrights?

Some people are suggesting that Congress has the power to abolish patents and copyrights in the United States.  The argument is that Article 1, Section 8, Clause 8 of the Constitution states “The Congress shall have Power To promote the Progress of Science and useful Arts, by securing for limited Times to Authors and Inventors the exclusive Right to their respective Writing and Discoveries” and whether they exercise this power is optional.

This interpretation relies on the idea that when Congress is granted a Power it is unlimited.  The United States was founded on the idea that Government power is not unlimited like the Devine Right of Kings.  The United States was founded on the idea that powers of government are limited and come with duties, while Rights of citizens are unlimited and do not come with duties.  I know this will come as a shock to those people raised on the modern liberal interpretation, which wants unlimited powers for government and sees the Bill of Rights as a list of negative rights – see Barack Obama.  Congress, under Article 1, Section 8 also has the power to set “an uniform Rule of Naturalization, and uniform Laws on the subject of Bankruptcies throughout the United States.”  This is not optional on the part of Congress, with the power comes the duty to establish these rules.

The interpretation of the Constitution that suggests Congress has the option to establish systems to protect inventors’ and authors’ rights is totally inconsistent with the history of the Constitution.  The purpose of the Constitution was to set out the powers of the federal government.  Article 1, Section 8 lists the powers but also the responsibilities of Congress.  For instance, even the power to declare war comes with the responsibility to do so when the U.S. is under attack from foreign powers.

How do we know that Congress has the duty to protect the “Rights” of inventors and authors?  Because the Declaration of Independence say so:

We hold these truths to be self-evident, that all men are created equal, that they are endowed by their Creator with certain unalienable Rights, that among these are Life, Liberty and the pursuit of Happiness. — That to secure these rights, Governments are instituted among Men,

It is well known that the unalienable Rights of the Declaration of Independence are the Natural Rights of Locke – Life, Liberty, and Property.  Many people believe that Jefferson changed property to the pursuit of happiness because he was worried it would be interpreted as endorsing slavery.  When the Founders used the word “right” they meant natural rights.  The purpose of government is to secure these rights.  When the Constitution states that inventors and authors have “Rights” in their creations, they mean natural rights and they understood that the purpose of governments was to secure these rights.  This means that Congress has a duty to secure the rights of inventors and authors under Article 1, Section 8, Clause 8.  If the words patent and copyright are meant as rights in inventions and writing, then it is clear Congress does not have the option of eliminating them.  It is also clear that patents and copyrights are not limited by the preamble.  Natural rights are not utilitarian, but are endowed on men by their Creator.

September 11, 2010 Posted by | -Law, -Philosophy | , , , , , , , | 11 Comments