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My old Against Monopoly Blog Posts

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Here are some of my older AgainstMonopoly.org blogposts, which were not cross-referenced here (but will be going forward):

The IP Dogs!

The post Animal Abuse mentions the state’s use of “DVD-sniffing anti-piracy dogs.”Res ipsa loquitur.

Imagining the Fate of Copyright in a Future World

There’s been much talk lately of the imminent death of copyright, due in part to the increasing digitization of information and media, the Internet, large bandwidth, and encryption. Nora Ephron, for example, recently observed, “We’re in the last days of copyright, if you want to be grim about it….” And see The Death of Copyright, Item #241, Encryption, Strong Privacy, and the Death of Copyright, The Death of Copyright, and many other such comments.Imagine a world 150, 200, 500 years from now–when virtually every work of art, every novel, ever movie, song, and recording ever produced until today–and many years after–is public domain. Now imagine you want to play muzak in your elevators, or nice background music in your dental office, or car repair waiting room, or restaurant. Or imagine you want to publish a book (or website) of great paintings. If you want to do these things today, most of the works you’d be intersted in are still covered by copyright. Sure, there are older recordings on scratchy 78 rpm LPs, and musty tomes from the time of the Civil War or earlier–but modern stuff, in color, stereo, hi-fi, with modern acting and special effects–most is still subject to copyright. So to play muzak in your elevator or pipe in nice background music to the ceiling speakers of your waiting room, you have to pay annoying royalties each month.

But even now we are starting to see, with the advent of Google Books, The Internet Archive, and Gutenberg, and so on, increasingly modern books entering the public domain. Imagine 400 years from now, and every movie, song, painting, novel published from the dawn of time, every movie made in the 20th and 21st and 22nd centuries, plus hundreds of thousands or even millions of songs, photographs, paintings, … and the last 100 years or so is still locked up. Now let’s say you want to put up a website the 10,000 great paintings; or stream a music or movie station playing great songs and films–will you pay out the nose for the rights to publish the recent stuff? Well, maybe, but if you have an almost unending cornucopia of great, free stuff to choose from–methinks this might exert a strong downward pressure on the ability of copyright holders to extort much money from you. (And this is disregarding practical problems they face, such as some kid downloading all the world’s media into his petabyte thumb drive in 17 seconds via a totally secure encrypted link.)

Kevin Carson’s Intellectual Property A Libertarian Critique

Kevin Carson has just released his Intellectual Property–A Libertarian Critique. I haven’t had a chance to read all of it yet, but from a quick skim it looks good, and with a title like this–and given that IP is turning out to be an insidious tool wielded by the state to destroy and re-route wealth–it’s worth looking into.

Lawyer Layoffs–A Silver Lining!

Thompson & Knight lays off lawyers, staff firmwide notes something we’re hearing more and more about nowadays–law firms laying off attorneys, due to Great Depression II. As the piece notes, the Dallas-based firm recently “laid off for economic reasons 17 lawyers and 25 support staff in all of its U.S. offices, including Dallas, Houston, New York, Fort Worth and Austin. … All of the lawyers are associates — only two of them are first years — who practiced in real estate or other business-related areas that require bank money to operate.”But not all is lost: “not all of the firm’s practices are doing badly by a long shot, [the managing partner] says. ‘There are areas of our firm like IP litigation that are going crazy.'”

A State-Granted Property Right in Preventing Teenage Drunk Driving

As reported on Patently-O, two “inventors” have files patent applications on two “inventions”. The first is for SoberTeen(TM) driving insurance. The application claims

a new auto insurance product where a driver receives a 10 to 30 percent discount in premium in exchange for allowing the insurance company to monitor his or her car to determine if anyone drives it while under the influence of alcohol.

I wonder what MADD would say about the patentee trying to use the courts to stop an insurance company from offering this product without paying a ransom?

The other attempts to claim a monopoly on

A method wherein the life or health risk of a person is evaluated based on information maintained in a Risk Profile Data Base (RPDB) and the result of said evaluation is used for one or both of the following purposes: to offer an insurance policy in an underwriting class determined by the said evaluation; to provide said person with a life or health expectancy report containing suggestions on how said person can improve said life or health expectancy.

Is any comment really needed?

Those Dreaded “frivolous patent challenges”

Will Proposed New Post-Grant Review Procedures Invite Abuse? that “The Innovation [sic] Alliance” is opposed to reforming the patent system to allow “post-grant review mechanisms”–that is, ways for potential victims of patent extortion to challenge the validity of issued patents. The group is worried this might permit “repeated frivolous patent challenges”! Got that–not frivolous patents, but frivolous patent challenges! This is like a plaintiffs’ lawyer who files frivolous lawsuits complaining about people defending themselves from it–they ought to just cough up the demanded money and quit finding “frivolous” defenses!Here, people who use the power of the state to unjustly acquire a monopoly that gives them the right to legally extort victims are complaining about “frivolous patent challenges”. Wow, some chutzpah.

The post also notes:

The fear is that such service provides will offer to “creat[e] uncertainty about a problem patent by tying it up in a long reexamination process and effectively nullify the problem patent” to get lower rates during license negotiations “until the uncertainty ends.”

So…. to avoid reducing the amount of extortion holders of “problem patents” can demand, we should just presume patents are valid–even if they might not be–and don’t allow any kind of challenge that could just “cause uncertainty.” Wow.

I don’t know. I prefer justice to certainty. Call me crazy.

The Other Dr. No: HIV Researcher Fighting the IP Pirates

I don’t mean the James Bond movie, or Ron Paul, Congress’s “Dr. No.” This wonderful, eye-opening piece by the heroic IP-abuse reporter Joe Mullin, The Fight of His Life (Mullin’s blog, The Prior Art) highlights the appalling ordeal of Dr. Bob Shafer, a bioinformatics expert. Yet another case of patent law victimizing innovation and innocent people.As such stories tend to be, this one is complicated, but it’s crucially important, so bear with my attempt at a concise summary. Dr. Shaffer, an associate professor of medicine and pathology at Stanford University, established the HIV Drug Resistance Database (HIVdb) (wikipedia link) in 1998. As the article reports,

Since then, the database has built a following among HIV researchers and practitioners around the world, attracting some 50,000 unique visitors a month. Those who use it generally fall into three categories: academic researchers, commercial and noncommercial laboratories, and doctors. … The database allows users to enter genetic information for viruses from individual patients or groups of patients, and to retrieve drug resistance information, which can then be used to help devise treatment regimens. Such information is critical to HIV research and drug development, as well as to treating individual patients. HIVdb is especially popular in the developing world not least because it’s freely available to anyone with an Internet connection. In some developing countries, medical practitioners have heard of Stanford University mainly through their interactions with HIVdb.

This is quite obviously a heroic, important, noble and benevolent effort. As the article notes, it’s “a highly regarded free resource that he developed, Stanford hosts, and doctors and scientists around the world rely on.”

However, in January 2007, ABL, a medical software company based in Luxembourg, claimed that the database infringed its patents. Read the article for more details, but in short: Stanford first moved to invalidate ABL’s patents by filing a declaratory judgment suit in California in October 2007; but then later settled with ABL, where ABL agreed not to sue Stanford for patent infringement and Stanford agreed to put a prominent disclaimer on the HIVdb, informing those who used it that, depending on the nature of their work, they might need a patent license from ABL. However, Shafer wasn’t required to sign the agreement with ABL and was not told him about the settlement’s terms until after it was reached.

Shafer at first refused to post the notice, and bully for him. He was afraid it would lead doctors to think they owe money to ABL, “and that the database built mostly with taxpayer-funded National Institutes of Health grants is no longer free.” Finally, under pressure, he did post a notice but he appended his own language arguing the patents are overbroad and invalid. See about halfway down on this page, where Dr. Shafer bravely challenges the validity of these patents. He also launched the site Harmful Patents, where he defiantly and courageously challenges the use of these patents to claim “a monopoly on the very concept of developing software to help physicians make treatment decisions“–absurdly, the patent gives ABL a monopoly on “the science of using computers to enhance medical treatment and decision making.” As one of Shafer’s colleagues notes, “If you read [ABL’s patents] literally, anyone who is providing therapeutic options based on the sequence of a pathogen violates their patent, and that goes on in hundreds of contexts. It’s truly a dangerous precedent.”

Although ABL already settled with Stanford, its suit against Sahfer for breach of contract and defamation is ongoing. According to Mullin’s report, Shafer has racked up more than $100,000 in legal bills and his career is in jeopardy, since he’s fighting ABL and refused to cravenly give in, as his employer, Stanford University, arguably did.

I do not know if Shafer seeks or needs or welcomes help, or how it might be done. But I am all in favor of helping this man fight these people, and fight for the principle of “free access to published data” as “an intrinsic part of science and medicine.” Good for Shafer, and for Mullin for bringing this to light.

The Libertarian View on Fine Print, Shinkwrap, Clickwrap

The Techdirt post Court Rejects Online Terms Of Service That Reserve The Right To Change At Any Time spurred me to post a comment about this, collecting some of the thoughts I’ve had about such matters for a long time.As I note there, my own theory of contract is presented in my article A Theory of Contracts: Binding Promises, Title Transfer, and Inalienability. And while I of course as a libertarian favor freedom of contract, I am leery of too formulaic or formalistic libertarian positions. Partly this stems from my growing aversion to “armchair” theorizing (see my post The Limits of Armchair Theorizing: The case of Threats). But as an example, and as I noted in the contract article, I disagree with putting so much stock in whether a communication is a “promise” or not (Rothbard, e.g., puts a bit too much emphasis on this, in my view). The question is what the parties meant by their communication–even if the word “promise” is used, this could be intended to effectuate a transfer of title. Another is, say, the over-emphasis on the notion of “incitement” by Rothbard and Block (as discussed in Causation and Aggression). They want to rule out “incitement” as a type of aggression in all cases; to my mind, it’s a more context-dependent determination. Maybe it is, maybe it isn’t.

A similar issue arises in the case of contracts. Many libertarians, often with only a crude understanding of the nature of contracts, just assume, Rand-like, some kind of mystical “power” to “bind” oneself by “a contract”. They tend also to equate contracts with a written agreement. They thus tend to think that “if it’s written in ink, it’s binding, no matter what”. To my mind, this is too formalistic. A writing is neither necessary nor sufficient to form a contract. Most contracts are not written. They may be oral. They do not even need to be verbal–I hand you a dollar, pointing to the newspaper; you take my dollar and give me the paper. A sale happens, nonverbally (no oral or written communication). And “what is written” is not necessarily dispositive. To my mind, a written agreement is only evidence of what the parties actually agreed to. But it is rebuttable. The written agreement may be very sparse: in which case in the case of disputes, there is no choice but to resort to “gap-fillers,” default rules, and the like. Or the agreement may contain ambiguities or even inconsistencies–this may require similar construction methods, or even invalidation of the agreement.

The agreement may not even be intended to be binding, such as in the case of a so-called “simulation” (a contract which, by mutual agreement, does not express the true intent of the parties; see my Civil Law to Common Law Dictionary, entry for “Simulation”; Louisiana Civil Code, arts. 2025-27).

Or there may be fraud or deception which nullifies the whole writing or requires certain provisions not to be enforced.

Given all this, in my view we should not just assume that “whatever is in writing” is part of a binding obligation or enforceable agreement. This bears on the issue of fine print, and so-called shrink-wrap and clickwrap agreements (incidentally the law of various countries on this issue is discussed in my book Online Contract Formation–which is not bedside reading, n.b.). Libertarians seem to just assume, too quickly in my view, that all such fine print should be enforceable. These assumptions seem to be made in the absence of the awareness of the nuances noted above.

So one problem with click-wrap agreements, for example, is that there is (arguably) often no “meeting of the minds” on the fine print–and the vendor is fully aware of this. If the customers routinely just click the “I have read and agree to these terms” box but never do read it, and the vendor knows this, then it’s a sort of fiction to assume both sides have actually agreed on these terms. For example supposed buried in fine print for a contract for sale of a $20 software program is the provision, “Buyer agrees to give 50% of his income to Vendor for life.” Is this enforceable? Of course not. Why not? Because there was no agreement to this. So the “hidden” terms have to be in some sense reasonable, at the least. (Here, too, “inalienability” concerns may kick in–even if the party is fully aware he is signing away his life income, or his kidney, or life, say, this may not be enforceable for inalienability concerns–see, on this, the contract article noted above, plus my article Inalienability and Punishment.)

I am not saying that clickwrap and fine print is not enforceable–I’m just saying that the libertarian view on property rights and contracts does not require that we formalistically equate “the contract” with “the writing,” and it does not require we figure all this out from our armchairs. The libertarian view can recognize that contracts about consensual, intentional transfers of title; that manifesting such consent is a matter of communication; that making determinations about the nature of a contract, or title transfer, is necessarily a fact-specific, context-bound inquiry.

Celebrate World Intellectual Property Day…

by using The Pirate Bay. Just kidding.It’s bad enough they want us to celebate “World IP Day”. But now they are focused on “promoting green innovation.” Groan. Gotta love this state-sponsored propaganda-fest.

Celebrate World Intellectual Property Day

Today [April 26, 2009] is World Intellectual Property Day and this year WIPO’s focus is on promoting green innovation as the key to a secure future.According to WIPO, most people are aware of intellectual property (IP) but many still view patents, copyrights and trademarks as business or legal concepts with little to no relevance to their own lives. To address this gap, WIPO’s Member States decided in 2000 to designate an annual World Intellectual Property Day. They chose April 26, the date on which the Convention establishing WIPO originally entered into force in 1970.

Each year, WIPO and its Member States celebrate World Intellectual Property Day with activities, events and campaigns. These are an attempt to increase public understanding of what IP really means, and to demonstrate how the IP system fosters not only music, arts and entertainments, but also all the products and technological innovations that help to shape our world.

WIPO issues a message from the Director General each year, broadcasts a short publicity spot on international television channels, and dispatches posters and other promotional materials to IP offices and organizations.

My EETimes Letter on Protecting the Patent System

In EE Times: Opinion: Engineers should stage a patent strike, I noted an op-ed by Rick Merritt in EETimes, “Opinion: Engineers should stage a patent strike.”A Mr. J. C. Cooper, of Pixel Instruments Corp., replied with a letter to the editor in defense of the patent system. My reply is reprinted below:

***

Mr. Cooper writes:

“Your articles in the April 20 edition of EE Times [“Dealing with Mad Patent Disease”] which portray the U.S. patent system as broken and worse seem terribly biased. I wonder where you are getting your information. Surely you don’t have any direct experience with patents, e.g. using a patent to protect a money making invention, or you would be able to formulate a more balanced viewpoint.”

I’d like to respectfully disagree with some of Mr. Cooper’s contentions. As a preliminary matter, I disagree that only those with a lot of experience in patenting are entitled to have an opinion, or ought to be accused of being “biased” if they dissent on the mainstream viewpoint on IP rights. that said, I am a practicing, registered patent attorney, with BSEE and MSEE degrees. I’ve represented many clients and obtained hundreds of issued patents over the last 15 or so years.

Mr. Cooper writes,

“The patent system could use some tweaking but it is far from the “mad patent disease” you describe. The U.S. needs a stronger patent system, not weaker …. The only way that innovation, and its industry, can be protected is with intellectual property, i.e. patents. To weaken the patent system at the urging and benefit of a few large multinational corporations (most of which have been found guilty in court of stealing the property of others) runs the risk of destroying that one remaining thriving U.S. industry.”

There are a few problematic assumptions and chains of reasoning here. I agree that innovation is good, but Mr. Cooper’s assumption that “The only way that innovation, and its industry, can be protected is with intellectual property, i.e. patents” is unwarranted. There are of course other ways–exclusion methods; first-to-market; trade secrets, and so on. And there are other methods discussed extensively in Boldrin and Levine’s Against Intellectual Monopoly. No one can seriously argue there would be no innovation without patents. At most, you can argue there is more innovation under a patent system.

But the patent system obviously has costs. So the argument that we need a patent system to encourage more innovation assumes that the value of the extra innovation induced by a patent system is greater than the costs of the patent system. But as I note in my article “There’s No Such Thing as a Free Patent” (links below to this and others mentioned here), no one has ever been able to show this. In fact, most studies and analyses I’m aware of conclude that if anything, the cost of the patent system is greater than the value of any extra, marginal innovation stimulated. Some analyses even conclude that there is less innovation overall under a patent sytem, than there would be without one–so that added to the undeniable cost of the patent system is the cost of the lost innovation.

If Mr. Cooper is aware of information no one else seems to have–what is the net value of the patent system (i.e., what is the value of the extra innovation induced by the patent system, minus any lost innovation, minus other costs of the patent system), I and others would love to see this data.

Mr. Cooper implies that those opposed to IP rights are biased, or not “balanced,” or are mainly “a few large multinational corporations (most of which have been found guilty in court of stealing the property of others).” But surely individuals and even companies are entitled to their viewpoint. It can easily be argued that those who can profit from the patent monopoly granted to them by the state are also biased, and are willing to argue in favor of the patent monopoly system–that they do not really care whether the system is a net benefit to the economy overall–that they are happy to have it exist so long as they benefit from it, even if this is at the expense of overall innovation and growth. Certainly, the deafening silence of advocates of IP to provide any data that supports their contention that patents indeed spur innovation worth more than the cost of the system, casts suspicion on their sincerity. (And is it really that surprising that patent attorneys are almost uniformly pro-IP rights?)

Mr. Cooper’s aside that most of the “large multinational corporations” complaining about patents “have been found guilty in court of stealing the property of others” begs the question of whether IP is, or should be, recognized as a legitimate form of property rights, by calling it “stealing” of “property”. The question is whether patterns of information are, or ought to be ownable as property. In my view, not only does the patent system cause overall economic damage in the billions of dollars, but patent and copyright are not legitimate forms of property rights–in fact, patent and copyright are contrary to, and undermine, private property rights. As I argue in my book Against Intellectual Property, a free market relies on private property rights being respected, which means scarce resources are owned by the original homesteader of the property, or that person’s descendant in title. But to grant a patent to someone who finds a new way to use their own property, is to grant that person some rights in how other people use their own property–this is redistribution from owners, to outsiders. As an example, if the state granted me the right to prevent Mr. Cooper from using his car to transport passengers–if I had this type of veto right–then I could demand he pay me a royalty for my permission to let him carry passengers. I would be a partial owner of his car–where before, he was the full owner, now he is only a part owner. This would be a type of theft of Mr. Cooper’s rights in his car, a transfer from him to me. This is what the patent system does, and it is ethically unjustified and contrary to the sanctity of private property rights.

It is understandable that technology companies take advantage of the state’s patent system; they have virtually no choice, if only for defensive reasons. And it is understandable they become used to this model, and cannot imagine how their business model would change if the state did not intervene in the market with IP law. But this does not mean IP law is justified.

For those interested in further reading on this (and for links to some of the sources mentioned above), I recommend:

1. The superb new book Against Intellectual Monopoly, by economists Boldrin and Levine.

2. Jeff Tucker’s excellent commentaries on Boldrin and Levine.

3. Some of my material, many on Mises.org. Such as: my little book, Against Intellectual Property, my article “There’s No Such Thing as a Free Patent,” and my presentation, “Rethinking IP Completely,” all available here.

4. Mike Masnick’s frequent and excellent anti-IP commentary on Techdirt.

There are many other excellent anti-IP pieces, but this is a good starting point.

earlier posts

Recommended Readings on Intellectual Property

I have been repeating the following to people in emails of late, in response to queries about the free-market opposition to intellectual property, so below I provide a concise list of links for some good material explaining the libertarian/free-market case against IP:1. The superb new book Against Intellectual Monopoly, by economists Boldrin and Levine.

2. Jeff Tucker’s excellent commentaries on Boldrin and Levine.

3. Some of my material, many on Mises.org. Such as: my little book, Against Intellectual Property, my article “There’s No Such Thing as a Free Patent,” and my presentation, “Rethinking IP Completely,” all available here.

4. Mike Masnick’s frequent and excellent anti-IP commentary on Techdirt.

There are many other excellent anti-IP pieces, but this is a good starting point.

R.I.P. Broadcom v. Qualcomm, 2005-09

Looks like Great Depression II has helped forced the parties to a gargantuan, long-standing patent battle to the negotiating table. From The American Lawyer: Litigation Daily:

Looking back, we knew this day would come. For the last four years, Broadcom and Qualcomm have been litigating against each other with the chess-match strategic intensity of Cold War rivals, as we learned when we spent a few months in the fall of 2007 reporting and writing an American Lawyer cover story on the epic litigation. Trust us, these companies don’t like each other. But we knew they couldn’t sustain the pace and expense of litigation that literally spanned the globe. Qualcomm, which seemed to get beat up in case after case by Broadcom, simply could not justify paying hundreds of millions of dollars to the likes of Cooley Godward Kronish, DLA Piper, and Cravath, Swaine & Moore.

And so, on Sunday night, the two announced they had reached peace, agreeing to drop all litigation against each other. That’s going to leave a gaping hole in the dockets of the International Trade Commission, the federal district court in Santa Ana, Calif., the European Commission, and the Korea Fair Trade Commission. The deal includes a multiyear patent agreement and requires Qualcomm to pay Broadcom $891 million over a four-year period. … Qualcomm insists that nothing in the Broadcom settlement agreement will affect its highly profitable business model of licensing its technology. “We will be able to continue to operate as in the past,” Qualcomm’s general counsel, Don Rosenberg, told The San Diego Tribune. “But we’re not standing around here thumping our chests.”

Rosenberg said cutting legal costs was “clearly a factor” driving settlement talks. According to one estimate, Qualcomm was spending $100 million annually in its fight with Broadcom. … “It’s not unusual in a case like this, as you get near settlement, for there to be negotiated reductions in legal expenses,” French said. “It’s a natural course. If a company does not get its optimum desired result, needless to say, it is looking for how to minimize its total financial exposure.”

Hundreds of millions of dollars down the rathole, and hundreds of millions more to be paid in the future–what a productive use of resources the patent system “stimulates”. And to think–some pro-patent types want to foist this system on China — one patent hawk raves: “The quality of patents issued in China is also improving. Revisions to the patent law that take effect in October strengthen the requirement for a patent’s novelty, bringing it up to global standards. Stronger patents are easier to enforce, opening the door to more lawsuits.” And that’s a good thing? China, do not listen to Americans! on Tax policy, antitrust, or IP!

What’s Next–Trademarking Language? Don’t be *Ridiculous*!

From zenhabits: Feel the Fear and Do It Anyway (or, the Privatization of the English Language)Post written by Leo Babauta.

Today I received an email from the lawyers of author Susan Jeffers, PhD., notifying me that I’d infringed on her trademark by inadvertently using the phrase “feel the fear and do it anyway” in my post last week, A Guide to Beating the Fears That Hold You Back.

The phrase, apparently, is the title of one of her books … a book I’d never heard of. I wasn’t referring to her book. I’m not using the phrase as a title of a book or product or to sell anything. I was just referring to something a friend said on Twitter.

Her lawyers asked me to insert the (R) symbol after the phrase, in my post, and add this sentence: “This is the registered trademark of Susan Jeffers, Ph.D. and is used with her permission.”

Yeah. I’m not gonna do that.

I find it unbelievable that a common phrase (that was used way before it was the title of any book) can be trademarked. We’re not talking about the names of products … we’re talking about the English language. You know, the words many of us use for such things as … talking, and writing, and general communication? Perhaps I’m a little behind the times, but is it really possible to claim whole chunks of the language, and force people to get permission to use the language, just in everyday speech?

What if this were taken to an extreme? What if some billionaire (say, Bill Gates) decided to start trademarking thousands and thousands of phrases, so that he could charge us for each use, or so that we’d have to link back to the Microsoft homepage with each reference? The language, in this scenario, could be entirely privatized if we allow this sort of thing.

So, while this post is probably ill-advised (and yes, I realize that I’m actually giving publicity to Ms. Jeffers), I have to object. I think we have a duty, as writers and bloggers and speakers of the English language, to defend our rights to … words. Free speech is a bit of an important concept, I think.

As an aside, I think the idea of jealously protecting copyright and trademarks, in this digital age, is outdated and ignorant. You want your ideas to spread, and you should encourage people to spread your ideas, not put up all kinds of boundaries and restrictions and obstacles to that being done. This blog, for example, is Uncopyrighted, and will always be free, because I want people to spread my posts and ideas. I think it’s actually good for me as a writer, and it’s (not insignificantly) better for the writing community in general if we can share each others’ work freely. I’m hoping that with posts like this, and the good work of thousands of other like-minded people, the old mindset of fencing off ideas and language will slowly change.

So, no, I will not be adding a Registered Trademark symbol to the previous post. And no, I won’t be adding a phrase of legalese to the post. And no, I won’t even attribute the phrase or link to her book, as I wasn’t referring to the book. And no, I won’t remove the phrase.

I’d rather be sued.

Oh, and I’m not going to change the title of this post either. You’ll have to remove it from my cold, dead iMac.

On a side note: You may feel free to use the title of my book, The Power of Less, in any of your blog posts, on Twitter or even (gasp) everyday conversation.

[Cross-posted at Mises blog]

“Secret intellectual property treaty could profoundly change life on the Internet”

So argues David Bollier in the post Et tu, Obama? Open Government Suffers Another Blow. An excerpt:

A government cannot be held accountable if there is a cloak of secrecy around its core deliberations and citizens are excluded from the process. … So what gives with the Obama administration’s refusal to share the most basic documents about a pending intellectual property treaty that are widely available among corporate lobbyists in Europe, Japan and the United States?

The Anti-Counterfeiting Trade Agreement, or ACTA, may sound arcane, and certainly its corporate champions must wish to make it seem boring and obscure. But in fact, the misleadingly named treaty could dramatically alter the Internet by allowing the film, music, publishing and other industries to aggressively enforce their IP rights, as they broadly construe them, at the expense of citizens, consumers and creators. All this would be achieved through secret deliberations an international version of the smoke-filled room: another brazen disenfranchisement of citizens and trampling of democratic norms.

No official version of the proposed treaty has been released, but it is known that it seeks to set forth standards for enforcing cases of alleged copyright and patent infringement. The treaty also seeks to provide legal authority for the surveillance of Internet file transfers and searches of personal property. Read more about ACTA here and here.

[Cross-posted at Mises blog]

8,000 Year Copyright Term Extension

Ancient Books Go Online reports:”The BBC is reporting that the United Nations’ World Digital Library has gone online with an initial offering of 1,200 ancient manuscripts, parchments and documents. To no great surprise, Europe comes in first with 380 items. South America comes in second with 320, with a very distant third place being given to the Middle East at a paltry 157 texts. This is only the initial round, so the leader board can be expected to change. There are, for example, a lot of Sumerian and Babylonian tablets, many of which are already online elsewhere. Astonishingly, the collection is covered by numerous copyright laws, according to the legal page. Use of material from a given country is subject to whatever restrictions that country places, in addition to any local and international copyright laws. With some of the contributions being over 8,000 years old, this has to be the longest copyright extension ever offered. There is nothing on whether the original artists get royalties, however.”

Why Copyright Will Delay Online Movie Rentals for Another Twenty Years

This excellent Slate piece, My Mythical Online Rental Service for Movies: Why Hollywood is so slow to catch up on offering all of its movies and shows online, provides a good explanation of why it’s going to be AT LEAST 10 YEARS before we have decent online movies on demand–and why bittorrent and movie pirating will only continue in popularity.The article explains that, due to the incredibly confusing, complex, and slow-to-change contractual system that locks up and segments movie rights, “Reed Hastings, Netflix’s founder, told the Hollywood Reporter last month that it’ll be 10 years before we see a streaming service that offers any movie at any time.”

This is all due to a byzantine web of contracts, build up on the foundation of copyright. It’s truly stunning. I would not be surprised if it’s 20 years, or more.

Update: See also Mike Masnick’s excellent post, Would You Rather Renegotiate Your Contracts… Or See Your Business Collapse?

[Cross-posted on Mises Blog.]

EE Times: Opinion: Engineers should stage a patent strike

Opinion: Engineers should stage a patent strikeRick Merritt (04/20/2009 12:00 AM EDT)

It’s time for engineers to stage an intellectual property strike.

Stop filing patents. Refuse to sign employment contracts that give your employer sole title to your inventions. Don’t participate in any due diligence efforts on patent portfolios.

Engineers need to organize if this IP strike is to be effective. That will require creating a new organization.

Existing lobby groups on patent issues in the electronics industry represent the views of specific sets of companies, not engineers. Even the IEEE is so diversified in its base that it admits it has not been able to form a crisp consensus on issues like patent reform.

Don’t get me wrong. I am not saying engineers should stop work in the midst of a recession of historic proportions. I stand with those who say we design ourselves out of downturns by creating compelling products. What I’m saying is, hands off anything to do with patents.

I admit this is an extreme position and one engineers are unlikely to take up, but that doesn’t mean a patent strike is the wrong thing to do. In fact, it could be very right.

The patent system is broken, and someone needs to call attention to that fact to spark real change. As the creators of the technology, engineers have the power to command that attention, if they choose to use it.

This is a historic moment to send a message that the patent system needs fixing, because influential leaders are listening. Patent reform is front and center in Congress, and an administration that ran on change is poised to appoint a new director for the U.S. Patent and Trademark Office.

Patents are supposed to capture innovations in ways that compel engineers to read them. They are meant to spur designers to creative action, inspiring them to develop novel work-arounds or to license ideas that are too good to pass up.

Sadly, the reality today is just the opposite. Bad policies and practices have coalesced around patents. In this week’s cover story, we call it mad patent disease [].

Corporate legal departments tell engineers which patents they can and can’t read. Sometimes engineers are told not to read patents at all, lest they be accused of deliberately infringing someone’s IP.

Meanwhile, businesspeople of all stripes pressure engineers to file patent applications for every idea. That has spawned a business of litigation and licensing that charges for portfolios by the pound. Companies now wield patents strategically to charge others for the freedom to innovate. In this sick world, patents don’t spark innovation, they inhibit it.

Quantity has replaced quality, and that has created a mess. Legal departments settle infringement cases in part because they can’t afford to pay anyone to provide informed opinions about all the patents asserted against them. Thus, portfolios that contain a lot of junk can still command a premium.

As the premiums rise, more people file more patents to defend against the madness or to get their share of the IP bucks. The result is a patent office up to its ears in a backlog approaching a million applications, sitting in a pile three years deep.

Patents should have a reasonable value for their owners and users. They should be available to all on a timely basis so they can encourage innovation, not stifle it.

Engineers need to speak up in a loud and clear voice about what’s wrong. If they don’t, I suspect the lawyers and corporate managers who have gotten us into today’s mess will continue to build on the upside-down bubble market for patents they have created.

David Gordon Reviews Boldrin-Levine

Great review of Against Intellectual Monopoly by the powerhouse libertarian reviewer, David Gordon, in the recent issue of Mises Review.

Free Talk Live–on Patent Alternatives in Medicine

The March 30, 2009 episode of Free Talk Live discusses this topic (around 00:11:00).Hat tip to Manuel Lora.

IP Vices and Crimes

Fantastic post by Jeff Tucker at Mises Blog:***

IP Vices and Crimes

March 18, 2009 8:51 AM

The 18 or so articles I’ve written about “intellectual property”–elaborating on a book I consider to be a seminal work of our epoch, Against Intellectual Monopoly–generated floods of email like I’ve never seen on any topic. The thing that gets people going is the conclusion: in a free market, there should be no legal grants of patent or copyright.

What many people do–and this is rather depressing from the point of view of a writer–is seize on the conclusion, ignore the reasoning and arguments, and then attempt an instantaneous, arm-chair refutation.

It always goes something like this: “Oh, you are telling me that I could just steal this article that you wrote, even put my name on it, sell it and take the money, and there would be nothing wrong with doing that?”

Some go even further to actually do this: put their names on it, post it somewhere, and send me the link.

I think precisely what you are thinking: “What a jerk!”

I’m not sure what other kind of response they expect from me. They must really think I will say: “Oh, this is so shocking! I had not considered that someone might actually do this to me if we got rid of the U.S. Copyright Office! My goodness, this kind of thing cannot be tolerated. I was completely wrong in everything I said. I too am grateful to the state for all it does to protect my intellectual creations and my good name.”

Sorry to say, this is not my response. My detailed response actually goes as follows: “If you do that in a free society, you will not be arrested by the police or experience physical coercion blessed by official mandate. However, everyone is free to regard you as a poseur, a wretch, a menace to society, and wholly lacking in credibility. If having a good reputation counts to you, it’s probably not a good idea to pretend to have written something that you have not in fact written.”

The difference here comes down to a wonderful distinction that was made by Lysander Spooner in the 19th century. He was careful to explain the difference between a vice and a crime. A crime involves aggressive force or threat of aggressive force against another person or privately owned property. A vice, however, is a much larger category of behaviors that don’t involve invasion of person or property.

Vices can involve lying, being nasty to others, eating like a pig in public, abusing oneself with drugs or liquor, failing to shower and thereby stinking to high heaven, swearing in public, betraying benefactors, rumor mongering, displaying ingratitude, not keeping commitments, being a shopaholic, being a greedy miser, failing to do what you say you are going to do, making up stories about other people, taking credit for things you didn’t do, failing to give credit where it is due, and other things along these lines.

In a free society, vice is control through decentralized social enforcement of social, ethical, and religious norms. The great problem of statism is that it turns vices into crimes, and then when the law is repealed, people forget that there are, after all, certain social norms that nonetheless need to be upheld and will be upheld once society is managing itself rather than being managed by the state.

Consider the case of classroom plagiarism, for example. A teacher wrote to me with a concern that the repeal of intellectual property law would make it more difficult to punish students for turning in work that claimed to original but was actually copied from elsewhere. I pointed out that the police and courts are not involved in the enforcement of classroom rules now, so why would a change in federal legislation be any different? Plagiarism is still plagiarism.

IP law has really had the effect of distorting our society’s sense of all of these matters. It has made everyone too unwilling to admit our dependence on imitation and emulation as institutions that permit and encourage progress. It has made people too shy to copy the success of others and admit to doing so. Writers, artists, entrepreneurs all live with this weird burden of expectation that everything they do must be completely original and they must never draw from others sources. It’s preposterous!

On the other hand, we are too quick to credit the state for preventing the mass outbreak of old-fashioned vice. Even without copyright and patent, some kinds of behaviors and practices will remain shoddy, unseemly, ungracious, conniving, and social unacceptable. What, for example, would you say about a local author who claim to write a new play that turned out to be written by Shakespeare? Doing this is perfectly legal right now. But the person would be regarded as a lout and a fool for the rest of his life.

Hence, the repeal of “intellectual property” law does not mean some sort of crazed free-for-all chaos in which no one can be entirely sure of anyone’s identity, creations, who wrote what, what company did what, where credit is due, what one’s commitments are, and the like. What we will gain is a great sense of our moral obligations to each other.

And in the absence of the state’s grant of monopoly privilege, we will become ever more vigilant in giving credit where it is due. You still have to be a nice person who acts with a sense of fairness, equanimity, and justice, as conventionally understood. If you don’t, the state will not crack your skull, but you will lose something profoundly important.

In other words, in absence of IP, we gain a greater sense of the distinction between what is vice and what is crime, and a better means for dealing with both.

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Study: Free Markets Superior to Patent Monopolies

An ars technica post, Study: free markets superior to patent monopolies, reports:

Our economic system is based on the expectation that markets can provide optimal solutions more efficiently than monopolies, with one glaring exception: patents, which are structured in a “winner takes all” manner. A study appearing in today’s edition of Science suggests that markets might work here, too.

Now, I know, there are many problems with even evaluating an IP system on utilitarian grounds; but the purported innovation-spurring effects of an IP system are what its advocates usually claim in support of having it. So it’s natural to ask: well, where’s the proof? Never is it provided. Study after study concludes that an IP system’s costs are about equal to, or greater than, any benefits it provides. (See my There’s No Such Thing as a Free Patent; What are the Costs of the Patent System?.) So it’s no wonder yet another study concludes this.

[Cross-posted at Mises Blog.]

IP and Google Books on the iPhone

Google Books On The iPhone and G1 Is Almost Kindle-Like (And Real Mobile Kindle May Be Coming Soon) rightly raves about about the mobile version of Google Books. It works great on an iPhone (and it turns out the rumors about Kindle coming to the iPhone were right; see also my LRC post Kindle v. Netbook v. ePub, Bookworm and Stanza).However, it turns out that you can only see “free” google books in mobile site. For example, on my iPhone I cannot see the 1907 Edith Nesbit book The Enchanted Castle in the mobile-optimized version of Google Books. (Try it even from a regular browser, from that mobile site, you’ll see what I mean.) However, if you go to the regular Google Books site, you can find and read the whole thingeven on an iPhone. You just can’t use the mobile-optimized version of Google Books to view it–even on a computer. So you can read the book on an iPhone, but not in a mobile-optimized format.

I suspect that Google did this because of copyright concerns, as part of their deal with publishers–perhaps it made them carve out something for mobile phones or platforms. It’s amazing how much copyright law distorts our entire economy.

[Cross-posted at Mises Blog.]

Monsanto v. Google on Patent Reform

In this post, Monsanto’s General Counsel disagrees with Google’s Head of Patents and General Counsel, who had complained about the risks companies like Google face from huge damage awards in patent lawsuits.I am so tired of patent lawyers and companies with vested interests making the tired old argument that we should not “weaken” patent protection because it’s needed to promote and protect innovation–without ever once even alluding to the fact that these purported benefits have an accompanying cost, much less demonstrating that the cost is worth the benefit received. (See my There’s No Such Thing as a Free Patent; What are the Costs of the Patent System?)

I’d much prefer simple, honest calls for protectionism: Monsanto wants patent protection to remain strong, because they think it benefits their own company–regardless of the overall effects or costs on other companies or the economy as a whole. Fine, an honest plea for redistribution of wealth.

Note how Monsant just brushes off Google’s costs and fears:

“I respectfully disagree with the recent blog post by Google’s Head of Patents and General Counsel, commenting on the perceived risks from damage awards in patent cases. Monsanto has faced billion dollar damage claims as a wrongly sued patent defendant and also knows the true benefits from avoiding the encouragement of willful infringement based on a smaller party’s calculated gain in the face of limited risk of a meaningful award of damages if infringement is established. With full knowledge of all these issues and our substantial alignment with Google and the information technology industry over the legitimate need to curtail patent trolls and a myriad of other concerns – we encourage thoughtful reform.”

Amazing that he just says he “disagrees” with Google’s perception of risks from high damage awards in patent cases–even as it admits Monsanto has faced billion dollar damage claims in wrongful patent suits. Does it occur to this gentleman that perhaps not every company is comfortable facing the risk of wrongful billion dollar patent claims?

[Cross-posted at Mises Blog]

Driving Innovation

Patent Baristas has a Book Review of the new book Driving Innovation. It’s interesting to me that patent lawyers seem to be beginning to begrudgingly acknowledge that the patent system has costs:

“The duality of intellectual property is that it is a source of wealth and a source of an equal and opposite cost. That is, IP brings wealth only through a hidden tax whether on competitors or consumers. So it is with IP rights, they inherently set up a tension between the pharmaceutical company enforcing rights and the patients wanting greater (read: less costly) access to medicine. A technology company wants to build and market a product but is forced to pay licensing fees to a patent holder.”

What is bizarre here is the blithe assumption that the costs of IP are “equal and opposite” to its benefits. First, they can never be equal, due to the subjective, ordinal, and interpersonally incomparable nature of value. Second, even if they can be compared, there’s no reason to think that they are equal–one is likely to be greater than the other. Third, even if you assume they are equal–then why have an IP system? I mean why even bother, if it all balances out? (See my There’s No Such Thing as a Free Patent; What are the Costs of the Patent System?)

But even though they acknowledge the system has costs that might offset or even exceed the purported benefits, do they want to probe into whether IP is legitimate or should exist? No, explicitly not: “This book is not about what the IP should be or how it could be changed but is about how to survive in a global system when IP rights have developed.”

Ah well, baby steps.

[Cross-posted at Mises Blog.]

Ludwig von Mises on Intellectual Property

Some here might be interested in the remarks on IP by the greatest economist of all time (though Boldrin and Levine will no doubt disagree with this characterization!), Mises:In this comment on a post here, I was accused of hiding or avoiding mention of one of Mises’s comments about copyrights and patents. I suppose the commentor was unaware of my extensive quotes of Mises in this comment on another thread, which quoted a large deal of Mises’s remarks on IP, including the one in question. So much for suppression. Since this extensive comment is buried on a thread, I reprint it below as a standalone post.

As I noted in Against Intellectual Property (n. 38), “Mises expressed no opinion on the issue, merely drawing the economic implications from the presence or absence of such laws.”

Here are Mises’s words:

The External Economies of Intellectual Creation

The extreme case of external economies is shown in the “production” of the intellectual groundwork of every kind of processing and constructing. The characteristic mark of formulas, i.e., the mental devices directing the technological procedures, is the inexhaustibility of the services they render. These services are consequently not scarce, and there is no need to economize their employment. Those considerations that resulted in the establishment of the institution of private ownership of economic goods did not refer to them. They remained outside the sphere of private property not because they are immaterial, intangible, and impalpable, but because their serviceableness cannot be exhausted.

People began to realize only later that this state of affairs has its drawbacks too. It places the producers of such formulas–especially the inventors of technological procedures and authors and composers–in a peculiar position. They are burdened with the cost of production, while the services of the product they have created can be gratuitously enjoyed by everybody. What they produce is for them entirely or almost entirely external economies.

If there are neither copyrights nor patents, the inventors and authors are in the position of an entrepreneur. They have a temporary advantage as against other people. As they start sooner in utilizing their invention or their manuscript themselves or in making it available for use to other people (manufacturers or publishers), they have the chance to earn profits in the time interval until everybody can likewise utilize it. As soon as the invention or the content of the book are publicly known, they become “free goods” and the inventor or author has only his glory.

The problem involved has nothing to do with the activities of the creative genius. These pioneers and originators of things unheard of do not produce and work in the sense in which these terms are employed in dealing with the affairs of other people. They do not let themselves be influenced by the response their work meets on the part of their contemporaries. They do not wait for encouragement.[13]

It is different with the broad class of professional intellectuals whose services society cannot do without. We may disregard the problem of second-rate authors of poems, fiction, and plays and second-rate composers and need not inquire whether it would be a serious disadvantage for mankind to lack the products of their efforts. But it is obvious that handing down knowledge to the rising generation and [p. 662] familiarizing the acting individuals with the amount of knowledge they need for the realization of their plans require textbooks, manuals, handbooks, and other nonfiction works. It is unlikely that people would undertake the laborious task of writing such publications if everyone were free to reproduce them. This is still more manifest in the field of technological invention and discovery. The extensive experimentation necessary for such achievements is often very expensive. It is very probable that technological progress would be seriously retarded if, for the inventor and for those who defray the expenses incurred by his experimentation, the results obtained were nothing but external economies.

Patents and copyrights are results of the legal evolution of the last centuries. Their place in the traditional body of property rights is still controversial. People look askance at them and deem them irregular. They are considered privileges, a vestige of the rudimentary period of their evolution when legal protection was accorded to authors and investors only by virtue of an exceptional privilege granted by the authorities. They are suspect, as they are lucrative only if they make it possible to sell at monopoly prices. [14]. Moreover, the fairness of patent laws is contested on the ground that they reward only those who put the finishing touch leading to practical utilization of achievements of many predecessors. these precursors go empty-handed although their main contribution to the final result was often much more weighty than that of the patentee.

It is beyond the scope of catallactics to enter into an examination of the arguments brought forward for and against the institution of copyrights and patents. It has merely to stress the point that this is a problem of delimitation of property rights and that with the abolition of patents and copyrights authors and inventors would for the most part be producers of external economies.

and here:

The Creative Genius

Far above the millions that come and pass away tower the pioneers, the men whose deeds and ideas cut out new paths for mankind. For the pioneering genius [12] to create is the essence of life. To live means for him to create.

The activities of these prodigious men cannot be fully subsumed under the praxeological concept of labor. They are not labor because they are for the genius not means, but ends in themselves. He lives in creating and inventing. For him there is not leisure, only intermissions of temporary sterility and frustration. His incentive is not the desire to bring about a result, but the act of producing it. The accomplishment gratifies him neither mediately nor immediately. It does not gratify him mediately because his fellow men at best are unconcerned about it, more often even greet it with taunts, sneers, and persecution. Many a genius could have used his gifts to render his life agreeable and joyful; he did not even consider such a possibility and chose the thorny path without hesitation. The genius wants to accomplish what he considers his mission, even if he knows that he moves toward his own disaster.

Neither does the genius derive immediate gratification from his creative activities. Creating is for him agony and torment, a ceaseless excruciating struggle against internal and external obstacles; it consumes and crushes him. The Austrian poet Grillparzer has depicted this in a touching poem “Farewell to Gastein.” [13] We may assume that in writing it he thought not only of his own sorrows and tribulations but also of the greater sufferings of a much greater man, of Beethoven, whose fate resembled his own and whom he understood, through devoted affection and sympathetic appreciation, better than any other of his contemporaries. Nietzsche compared himself to the flame that insatiably consumes and destroys itself.[14] Such agonies are phenomena which have nothing in common with the connotations generally attached to the notions of work and labor, production and success, breadwinning and enjoyment of life.

The achievements of the creative innovator, his thoughts and theories, his poems, paintings, and compositions, cannot be classified praxeologically as products of labor. They are not the outcome of [p. 140] the employment of labor which could have been devoted to the production of other amenities for the “production” of a masterpiece of philosophy, art, or literature. Thinkers, poets, and artists are sometimes unfit to accomplish any other work. At any rate, the time and toil which they devote to creative activities are not withheld from employment for other purposes. Conditions may sometimes doom to sterility a man who would have had the power to bring forth things unheard of; they may leave him no alternative other than to die from starvation or to use all his forces in the struggle for mere physical survival. But if the genius succeeds in achieving his goals, nobody but himself pays the “costs” incurred. Goethe was perhaps in some respects hampered by his functions at the court of Weimar. But certainly he would not have accomplished more in his official duties as minister of state, theater manager, and administrator of mines if he had not written his plays, poems, and novels.

and here:

The special conditions and circumstances required for the emergence of monopoly prices and their catallactic features are: … 11. The monopolized good by whose partial withholding from the market the monopoly prices are made to prevail can be either a good of the lowest order or a good of a higher order, a factor of production. It may consist in the control of the technological knowledge required for production, the “recipe.” Such recipes are as a rule free goods as their ability to produce definite effects is unlimited. They can become economic goods only if they are monopolized and their use is restricted. Any price paid for the services rendered by a recipe is always a monopoly price. It is immaterial whether the restriction of a recipe’s use is made possible by institutional conditions–such as patents and copyright laws–or by the fact that a formula is kept secret and other people fail to guess it.

The complementary factor of production the monopolization of which can result in the establishment of monopoly prices may also consist in a man’s opportunity to make his cooperation in the production of a good known to consumers who attribute to this cooperation a special significance. This opportunity may be given either by the nature of the commodities or services in question or by institutional provisions such as protection of trademarks. The reasons why the consumers value the contribution of a man or a firm so highly are manifold. They may be: special confidence placed on the individual or firm concerned on account of previous experience[15]; merely baseless prejudice or error; snobbishness; magic or metaphysical prepossessions whose groundlessness is ridiculed by more reasonable people. A drug marked by a trademark may not differ in its chemical structure and its physiological efficacy from other compounds not marked with the same label. However, if the buyers attach a special significance to this label and are ready to pay higher prices for the [p. 365] product marked with it, the seller can, provided the configuration of demand is propitious, reap monopoly prices.

The monopoly which enables the monopolist to restrict the amount offered without counteraction on the part of other people can consist in the greater productivity of a factor which he has at his disposal as against the lower productivity of the corresponding factor at the disposal of his potential competitors. If the margin between the higher productivity of his supply of the monopolized factor and that of his potential competitors is broad enough for the emergence of a monopoly price, a situation results which we may call margin monopoly[16].

… In the long run such a national cartel cannot preserve its monopolistic position if entrance into its branch of production is free to newcomers. The monopolized factor the services of which the cartel restricts (as far as the domestic market is concerned) for the sake of monopoly prices is a geographical condition which can easily be duplicated by every new investor who establishes a new plant within the borders of Atlantis. Under modern industrial conditions, the characteristic feature of which is steady technological progress, the latest plant will as a rule be more efficient than the older plants and produce at lower average costs. The incentive to prospective newcomers is therefore twofold. It consists not only in the monopoly gain of the cartel members, but also in the possibility of outstripping them by lower costs of production.

Here again institutions come to the aid of the old firms that form the cartel. The patents give them a legal monopoly which nobody may infringe. Of course, only some of their production processes may be protected by patents. But a competitor who is prevented from resorting to these processes and to the production of the articles concerned may be handicapped in such a serious way that he cannot consider entrance into the field of the cartelized industry.

The owner of a patent enjoys a legal monopoly which, other conditions being propitious, can be used for the attainment of monopoly prices. Beyond the field covered by the patent itself a patent may render auxiliary services in the establishment and preservation of margin monopoly where the primary institutional conditions for the emergence of such a monopoly prevail.

and here:

Another popular fallacy refers to the alleged suppression of useful patents. A patent is a legal monopoly granted for a limited number of years to the inventor of a new contrivance. At this point we are not concerned with the question whether or not it is a good policy to grant such exclusive privileges to inventors.[14] We have to deal only with the assertion that “big business” misuses the patent system to withhold from the public benefits it could derive from technological improvement.

In granting a patent to an inventor the authorities do not investigate the invention’s economic significance. They are concerned merely with the priority of the idea and limit their examination to technological problems. They deal with the same impartial scrupulousness with an invention which revolutionizes a whole industry and with some trifling gadget, the uselessness of which is obvious. Thus patent protection is provided to a vast number of quite worthless inventions. Their authors are ready to overrate the importance of their contribution to the progress of technological knowledge and build exaggerated hopes upon the material gain it could bring them. Disappointed, they grumble about the absurdity of an economic system that deprives the people of the benefit of technological progress.

and here:

The convincing power of the productivity argument is in fact so irresistible that the advocates of socialism were forced to abandon their old tactics and to resort to new methods. They are eager to divert attention from the productivity issue by throwing into relief the monopoly problem. All contemporary socialist manifestoes expatiate on monopoly power. Statesmen and professors try to outdo one another in depicting the evils of monopoly. Our age is called the age of monopoly capitalism. The foremost argument advanced today in favor of socialism is the reference to monopoly.

Now, it is true that the emergence of monopoly prices (not of monopoly as such without monopoly prices) creates a discrepancy between the interests of the monopolist and those of the consumers. The monopolist does not employ the monopolized good according to the wishes of the consumers. As far as there are monopoly prices, the interests of the monopolists take precedence over those of the public and the democracy of the market is restricted. with regard to monopoly prices there is not harmony, but conflict of interests.

It is possible to contest these statements with regard to the monopoly prices received in the sale of articles under patents and copyrights. One may argue that in the absence of patent and copyright legislation these books, compositions, and technological innovations would never have come into existence. The public pays monopoly prices for things it would not have enjoyed at all under competitive prices. However, we may fairly disregard this issue. It has little to do with the great monopoly controversy of our day. When people deal with the evils of monopoly, they imply that there prevails within the unhampered [p. 681] market economy a general and inevitable tendency toward the substitution of monopoly prices for competitive prices. This is, they say, a characteristic mark of “mature” or “late” capitalism. Whatever conditions may have been in the earlier stages of capitalist evolution and whatever one may think about the validity of the classical economists’ statements concerning the harmony of the rightly understood interests, today there is no longer any question of such a harmony.

Copyrighting Dance Steps–A Note from A Choreographer

Note from a reader (see also my post Copyrights and Dancing):Dear Mr. Kinsella,

I have yet to read your book or the Boldrin and Levine book, but just reading your blog posts [e.g. There are No Good Arguments for Intellectual Property; What’s Wrong with Theft?] and the discussions they generate has convinced me of your position. It seems to me that the only question worth considering is Are ideas property? If an IP proponent could give a good answer to this question, we could have a good debate. But the replies to your argument seem desperate and incoherent. I’m an amateur choreographer so I know that IP is not necessary for creation. Dancers take movement where ever we can find it. The first person to get a copyright on walking would own the dance community and the world, in fact. The first routine I put together used movement from several other performers. If IP were to apply to dance, all dance communities would die the next day. The dance community is experiencing the wrath of IP regarding music, however. We have had problems with the music that we use. Promoters who videotape our performances are reluctant to sell the DVDs because the artists might sue the promoters if their music is used. YouTube is censoring videos in which it can recognize the music in the background. I find this ridiculous. If I have already paid my $0.99 for your song and created a visual expression of the music, from whence do you get the right to now “own” my expression of your song? I think that my dance experience instilled in me a skepticism about IP, but still I find your intellectual arguments indisputable.

Yours,

[C.E.]

[cross-posted on Mises Blog]

There Are No Good Arguments for Intellectual Property (and “Interaction Rights”!)

There are some decent arguments out there that argue in favor of a state, welfare rights, war, democracy, drug laws, and so on. They are all flawed, since libertarianism is right, but there are coherent, honest arguments that we libertarians have to grapple with.But it is striking that there are no decent arguments for IP–as Manuel Lora remarked to me, “You know, I haven’t seen a good pro IP article ever.” This is true. One sees the same incoherent or insincere claims made over and over, such as:

  1. It’s in the constitution (argument from authority; legal positivism)
  2. Intellectual property is called property! (argument by definition?)
  3. No movies would be made and kids would die without medicine (artworks and medicine have been produced for ages without IP law; and where’s the evidence?)
  4. If you “create” something you own it (despite all the exceptions, and despite the fact that creation is neither necessary nor sufficient for ownership; despite the fact that you either limit these rights in scope or time arbitrarily, or you extent them to infinity, choking off rights in real things and forcing life and commerce to a screeching halt)
  5. It generates net wealth–more value than its cost (no evidence, ever, for this contention–just assumptions; not to mention the problem of utilitarian summing of values)
  6. IP infringement is “theft” (even though the owner still has his property and ideas, and even though IP infringement is just learning and emulating)
  7. People “could” create variants of IP via private contracts… therefore artifical patent granting bureaucracies legislated by a criminal state are … justified?)

There are other arguments, I suppose, but they are so incoherent as to defy description. They often involve crankish initial caps, like Property and Rights, the Internet equivalent of crayons.

I have truly never seen a coherent, good argument for IP. The advocates are either utilitarian, with all the problems that accompany that (not to mention they never have any evidence for their claims); or the advocate a more “principled”, rights-based type of IP that, if taken seriously, would completely undermine all real property rights and make life on earth impossible, so they retreat from this and impose arbitrary, senseless limits on it. What a kluge.

In a recent discussion, What’s Wrong With Theft?, one of the IP advocates, when pushed into a corner, ended up arguing that rights to own property include the right to control all “access to” and “interactions with” one’s property–and that “interactions” include observing or knowing about or learning facts about the things owned by someone, and that when you use this knowledge you are “interacting with” the property, and thus “stealing” it (even though the owner still has it). So here we have it: IP means “interaction rights.” Wow. This is how kooky all IP arguments ultimately are.

What’s Wrong with Theft?

As I noted in Copypats, many non-specialists and proponents of IP erroneously believe that copying is an element of patent infringement–they conceive of the typical patent infringer as some bad guy who knocked off, or “stole,” the patentee-inventor’s idea. They are usually unaware that proving copying is neither necessary nor sufficient to prove patent infringement. It’s not necessary because even an independent inventor can be guilty of patent infringement. It’s not sufficient because the patent may be invalid, or the copier may make changes to “design around” the patented invention (which is encouraged by patent policy–that’s one reason the patent is published).But it is common to charge the patent infringer, especially the idea copier, with theft–he stole the idea, it is said. But if we think about standard cases of theft that we all agree are criticizeable, what is it about them that we object to? Is it that the thief now has a bicycle? Or is it that the owner now doesn’t have his bicycle?

Of course it is the latter. If you have a bike, or car, or log cabin, or corn crop, and I could gaze at it from afar, blink my eyes, and conjur up a similar bike, car, cabin, or crop for myself, I do not steal your things. But if I take your bike or car from you, or oust you from home and farm, you no longer have the things you formerly possessed and owned. That is the damage done to you by theft. This corresponds nicely to the very nature and function of property rights: the need for them arises when people need to use scarce resources as means to act in the world, and appropriate unowned ones. The scarce nature of these things is such that use by one person excludes that by another; the goods are rivalrous. (More on this in How We Come to Own Ourselves; Defending Argumentation Ethics; Owning Thoughts and Labor.)

But copying or emulating someone else’s idea is not “taking” it from them; it is not theft. The originator of a given pattern still has his idea, and is free to use it in guiding his action and using or transforming his own property. This is why all arguments in favor of IP (and reputation rights) ultimately end up falling prey to the notion that there are property rights in the value of property, rather than in its physical integrity. But this view is fallacious, as shown by Hoppe and others.

Another Reason to Diss Lincoln

Lincoln the Patentee.

Newton and IP

I’m reading a great book, Einstein’s Mistakes (google version), by Hans Ohanian. Extremely intelligent physicist and fun writer–very opinionated and spins great narratives of Galileo and Newton as a prelude to discussing Einstein. The book is about all the mistakes Einstein made in his discoveries and papers, how he made his great insights sometimes despite the mistakes, and even sometimes because of them.Ohanian acknowledges Isaac Newton as “the greatest physicist of all times” and “the greatest genius the world has ever known”, albeit a “mad scientist” and “the most awesome and the most aful physicist of all times.” I was struck by this fascinating account of Newton’s views on credit for scientific discoveries (pp. 62-63):

Newton held the odd notion that whenever he discovered some new result in physics or mathematics, it became his personal property, which he was entitled to keep as a secret for as long as he chose, without any need to publish it to establish his priority. If another scientists later made the same discovery independently and published it first, Newton regarded this as trespass and as theft, and he would indignantly refuse to allow such a scientist any share of the credit. … In Newton’s days, the criterion for credit for a discovery was not yet rigidly established. Claims for unpublished discoveries were sometimes accepted, especially if the scientist had the vociferous support of influential friends and patrons–sometimes the early bird got the worm, and sometimes the squeaky wheel got the grease.

Newton’s secretiveness about his discoveries led him into many silly but savage disputes with other scientists about what they knew and when they knew it. Driven by his intense paranoia about his scientific accomplishments, he accused Robert Hooke, Gottfried Leibniz, and other scientists and mathematicians of stealing ideas from him. In his treatment of these scientists he was vicious and vindictive. Hooke was a talented scientist, best known for his investigations with microscopes, but he was a dwarfish man, with a stooped back. When Hooke asked for an acknowledgment that he had anticipated some of Newton’s investigations of the colors in sunlight, Newton wrote a sarcastic refusal, in which he made an oblique reference to Hooke’s diminutive size: “If I have seen farther, it is by standing on the shoulders of Giants.”

The German mathematician and philosopher Leibniz discovered the calculus independently, and, in contrast to Newton, he published his discoveries–by the modern criterion, Leibniz would have had full credit for the calculus and Newton none. But when Leibniz asked a committee of the Royal Society to prepare an impartial report judging his share in the invention of the calculus, Newton not only packed the committee with his cronies, but he also wrote the report himself, and then wrote a favorable anonymous review of the report. In his private journal he gleefully recorded that he had bested Leibniz and “broke his heart.”

As can be seen from these remarks, Ohanian is delightfully opinionated. For other examples, see his snarky coments on Aristotle (pp. 39-40), where he says that Aristotle was popular because middle ages scholars confused quantity with quality–he ridicules Aristotle’s misconceptions about the animal kingdom, and his assertions about the speed of falling bodies being proportional to their weight, without ever simply dropping two different weight objects from his hands to test out this theory. On p. xii, he acerbically criticizes botched translations of Einstein’s German writings; on p. xi, he refers to the mistakes “misguided souls imagine they perceive in [Einstein’s] theories of special and general relativity”; on p. 9 and elsewhere he skewers Creationists as adherents of “delusional pseudoscientific theories”; and on p. 59 he refers offhandedly to “the usual eccentricities of Englishmen.”

And I love this comment about Galileo: according to Ohanian, “Galileo had a talent for making enemies–as Koestler said, he provoked ‘the cold, unrelenting hostility which genius plus arrogance minus humility creates among mediocrities.'” (p. 40)

Trademark versus Copyright and Patent, or: Is All IP Evil?

I think we can all now agree that copyright and patent are evil and should be abolished (hey, if they can say we are all Keynsians now…).But what about other forms of IP, such as trademark? One problem is that IP is not really property at all, and is just an umbrella term linking distinct, mostly artificial, positive rights created by the legislature out of thin air–“legally recognized rights arising from some type of intellectual creativity, or that are otherwise related to ideas.” (Against Intellectual Property, p. 9.)

Thus patent gives a monopoly to a way of using, or configuration of, practical, useful devices (inventions); while copyright gives a monopoly to certain uses of original creative patterns of information (works of authorship like novels or paintings). While trademark protects a set of rights clustered around one’s reputation (but then, so do defamation laws); and trade secret is more like a type of contractual right to keep people from revealing secret information.

Bad Connections

From what I’ve seen, it is clear to most activist-opponents of IP that copyright and patent are terrible. But it is not so clear what is wrong with other types of IP, such as trade secret and trademark. What about these, and other rights, such as various other trademark-related rights (rights against “trademark dilution,” certain forms of cybersquatting, and various “unfair competition” claims); mask work protection available for semiconductor integrated circuit (IC) designs, boat hull designs, and (proposed) rights in databases, or collections of information? (See Against Intellectual Property, p. 13, summarizing various types of IP.)

The “intellectual” part of IP improperly lumps together conceptually distinct types of laws; and “propery” improperly begs the question. So these must be treated in turn. Mask work, boat hull, and database rights are very similar to copyright at least in what is problematic about them; so they, too, like patent and copyright, are obviously unjust.

As for trade secret–I deal with this in a short section (pp. 56-57) of Against Intellectual Property, as the bulk of the article deals with copyright and patent, and trade secret law is not nearly as problematic.

Trademark

So we come to trademark. I deal with this on pp. 58-59 of Against Intellectual Property, and also in some detail in Reply to Van Dun: Non-Aggression and Title Transfer (esp. pp. 59-63). In my view, the new-fangled extensions of trademark law–rights against “trademark dilution” and cybersquatting, etc.–are obviously invalid. Further, federal trademark law is problematic since it is not authorized in the Constitution (copyright and patent are, but not trademark; trademark relies on the Interstate Commerce Clause, and thus the federal trademark law only covers trademark connected to interstate commerce, and does not preempt state law, so that state trademark law still governs many intra-state situations).

But even if federal trademark law were abolished, as well as modern extensions such as rights against trademark dilution, even common law trademark is problematic, for three primary reasons. First, it is enforced by the state, which gets everything wrong. Second (see First), the test of “consumer confusion” is usually applied ridiculously, treating consumers like indiscriminating idiots. Third, and worst of all, the right at issue is the right of the defrauded consumer, not the competitor. Trademark law ought to be reformed by abolishing the right of trademark “owners” to sue “infringers” (except perhaps as proxy for customers, when consent can be presumed or proved), and treating this as a case of the customer’s right to sue a vendor who defrauds him as to the nature of the good purchased. Some might argue that this is only a minor change, but it is not: such a change would make it clear that “knockoffs” are usually not a violation of anyone’s rights: the buyer of a $10 “Rolex” is almost never defrauded–he knows what he’s getting. Yet by giving an enforceable trademark right to the user of a mark, he can sue knockoff companies even though their customers are not defrauded and in fact are perfectly happy to buy the knockoff products.

By the way, examples of trademark abuse are legion. It’s not only copyright and patent that give rise to outrageous examples of injustice. See, e.g., Chip Wood, A Bully-Boy Beer Brewer; Justin Levine, 9th Circuit Appeals Court Says Its Ok To Criticize Trademarks After All, Against Monopoly (09/26/2007); Kinsella, Trademarks and Free Speech, Mises Blog (Aug. 8, 2007); Kinsella, Beemer must be next… (BMW, Trademarks, and the letter “M”), Mises Blog (Mar. 20, 2007); Kinsella, Hypocritical Apple (Trademark), Mises Blog (Jan. 11, 2007); ECJ: “Parmesian” Infringes PDO for “Parmigiano Reggiano”, I/P Updates (Feb. 27, 2008); Engadget Mobile Threatened For Using T-Mobile’s Trademarked Magenta, Techdirt (Mar. 31, 2008).

Now IP proponents often assume trademark law is unproblematic, and then try to lump types of IP together, so that they stand or fall together. For example it could be argued that if you are for reputation, then you must be for trademark; and if you are for trademark, you must be for “intellectual property”; and thus, you cannot be opposed to IP in principle, so you cannot oppose copyright and patent. (See, e.g., the comments here, making this argument.)

Now one fallacy of this argument is that it relies on the positive law conceptual grouping of different areas of artificial, legislated law to make its point. But there is no reason one has to favor the validity of copyright or patent law, even if one supported trademark law, say. Each has different defects and a different nature.

The other fallacy is the view at work here that there is no such thing as reputation, or even identity, absent trademark law. But this is incorrect. Of course people and firms can have reputations even if trademark law is nonexistent. All that is required is that people be able to identify other people and firms, and communicate. Pro-trademark arguments often implicitly assume that this is not possible, absent state-enforced trademark law, which is ridiculous. For example, how can there be fraud (as in my theory), if the vendor is free to call himself whatever he wants? What if Joe Schmoe sets up a knockoff McDonald’s restaurant? Well, it is McDonald’s–that’s what it calls itself, and the “real” McDonald’s can’t stop it without trademark rights–so why is it fraud? Well, because the consumer is (per assumption) deceived as to the nature of the goods he is buying. As I argued in Reply to Van Dun (pp. 62-63),

“this response would be easy to overcome. It need only be possible for the customer to adequately identify what the condition is. Language is not infinitely malleable, and communication is (undeniably) possible. If pressed, the customer could specify that the purchase is conditioned on the current store he is in being owned by the same [McDonald’s] company first started at such and such date and address, and so on. There is no reason it would be impossible to identify a given vendor without traditional trademark law, just as it is not impossible to identify fellow humans, despite the fact that we do not usually have trademarks on our names (in fact often have identical names, e.g. John Smith).

The other thing to realize is that consumers are not stupid. They can spot a knockoff easily. And the trademark frauds are usually going to be marginal low-life types, who could never compete with a legitimate business anyway–the kind of company that makes knockoff Rolexes, which doesn’t fool its customers.

Consider. You have a successful burger joint, let’s call it “Tommy’s.” Now, suppose they have no trademark, and other Tommy’s pop up. So if you want the original Tommy’s, where do you go? You go to the original Tommy’s. Which just calls itself The Original Tommy’s. (A similar phenomenon is in Twitter, where some well-known people and celebrities’ names are taken, like dvorak–so John Dvorak just goes by “THErealDVORAK“. End of problem. No anti-Twittersquatting law needed.)

If some other Tommy’s tries to deceive customers into thinking it’s owned by the same guy that owns the original Tommy’s, then they are eventually going to get sued. Or have only marginal customers as people figure out this new place is run by seedy liars.

The truth is that any legitimate businessman wants to use a unique name. Just like people manage to distinguish their identities, even when they have the same names.

Copypats

In Patent defendants aren’t copycats. So who’s the real inventor here?, a great post by IP Reporter Joe Mullin, Mullin describes a new study that shows that most defendants in patent cases are never even accused of copying the plaintiff’s patent.I replied:

Joe,

Great post. A few comments.

First, you’re right that the public thinks it’s about copying; and they are wrong. Likewise, most proponents of IP (outside the self-serving patent bar) seem to have no idea about the details of patent law, yet support it anyway.

Second, the reason copying is not alleged is that, as you note, it’s irrelevant. And it does not demonstrate willfulness, nor does willfulness require copying. Willfulness means you made a product that infringed on a patent, even after you knew about the patent. But this could happen even if you independently invented your product yourself, then find out about the patent (say, you get a C&D letter), adn you keep selling your product anyway–you’re willfully infringing from that point on (so that means damages can be trebled for sales made while willfully infringing). So, copying is not necessary to show willful infringement.

It’s also not sufficient. You might have heard about pinch-gestures on a touchscreen and you put that feature in your product, thus infringing apple’s patents, albeit unwillfully, since you didn’t know about the patents.

So, I don’t think you can conclude that most patent suits don’t involve copying just b/c copying is not alleged or proven at trial. There might be copying in 25% of the cases, but it’s only alleged 2% o the time, say. This is b/c when you sue someone for infringement you have to show (a) you have a patent; (b) they are selling a product that contains all of the describd elements in one of the patent’s claims. Copying is irrelevant.

(Still, I agree that copying is probably present in only a small minority of all patent infringement cases.)

Third: your article makes it clear that it’s unjust that there is no independent inventor exception. Your piece does not mention, I think, the fact that the worst injustice of all is that not only is there not an exception for someone (A) who later independently invents the same thing that B invented first and patented first–there is not an exception even if A FIRST invented it. (It’s true that if A invents first and B invents second, and if B files for a patent, then A later files for one, then A wins, in an interference battle or litigation; but if A never files but sells his product using a secret process, say, then after a year he is barred from filing a patent; but B is not.) So if A has a chemical plant using a trade secreted nozzle or mixing method to make some chemical for 50 years, and finally B independently invents the same technique and patents it, he can shut down A even though A invented it first. A general “prior use” defense is what is needed in these cases.

But the prior user defense and independent inventor defense are of limited value for a few reasons. 1. It’s hard to prove, esp. for later invention, that you invented it independently, without being influenced by B’s patent (which is public, and presumed to be “constructively known” by all); which is why some companies employ the “clean room” approach, but this is expensive and not usually feasible.

2. Once you know about B’s patent, you are now unable to invent it on your own, even if you “would have” in the absence of B’s patent. I.e., the independent inventor exception largely evaporates soon after a successful product (such as the iPhone’s multi-touch) because by then everyone is “contaminated” by it (no cleanroom possible any more).

3. If B invents and patents something, and if A also invents it (earlier or later than B), then this by itself ought to show that the invention was probably obvious (an idea whose time had come) and B’s patent should be invalid in general, not just a defense for A.

On Print Runs and Pulping Books

I just came across an interesting thing I had not known about the effect of state meddling on publishing. See Wikipedia here and here, noting:

Thor Power Tool Company v. Commissioner, 439 U.S. 522 (1979) was a United States Supreme Court ruling which changed the way companies are allowed to depreciate their unsold inventory. Thor’s inventory was overestimated, and was written down to scrap, but it did not immediately scrap the items or sell them at reduced prices. Thor treated the write-down of excess inventory as an adjustment to closing inventory increasing the costs of goods sold and reducing tax due. Reducing tax liability may not have been the drive behind Thor management’s incentive to reduce inventory, but a welcome by-product; new management may have wanted to reduce the previous year’s profits so as to seemingly increase their performance in the following year.An unforeseen side effect of this decision was that it became less profitable for publishers to keep slowly but regularly selling books in print (their backlist). Some argue that this has made it harder for midlist authors to make a living because books tend to be remaindered or pulped and go out of print more quickly.

In other words, a de facto change in the tax laws concerning inventories made it profitable to pulp unsold books earlier and this has had an adverse effect on authors who have slow but steady sales. As Levine noted to me, this ties into the whole issue of digital technology. On the one hand, digital technology makes copyright de facto obsolete, and it can make it harder for creators to recoup their investment because the market may be flooded with cheap copies quickly. This is what the pro-copyright forces argue (so therefore we need draconian copyright laws to overcome all this). The basic facts are true, but there are many facts that go the other direction. This is one of them–by selling electronic or print-on-demand copies directly to buyers authors don’t face “early liquidation” by publishers.

“Stealth Libertarianism” to Blame for Patent Law Flaws?

In The Reach of Patent Law and Institutional Competence, one Richard Gold makes an odd argument that “stealth libertarianism” is to blame for some of the problems in patent law. He believes there has been a “clandestine shift in patent law’s normative base from a utilitarian justificatory rationale to a libertarian one; a trend the author refers to as ‘stealth libertarianism.'”Under the “libertarian” (sic) approach, it is assumed “that the social good is always attained by expanding patent rights in all domains,” but courts dress this “libertarian analysis in the commonly accepted language of utilitarianism. This surreptitious adoption of libertarian analysis is particularly disconcerting because it enables courts to avoid addressing the ethical and distributional effects of patent determinations.”

As far as I can tell from a quick read, Gold maintains that a utilitarian basis should be employed, instead of a “libertarian” one; that courts are incompetent to make these utilitarian determinations; and that if utilitarianism is correctly applied, patent law scope would not be expanded as much as it has been by courts applying a “stealth libertarian” rationale.

I can’t figure out if this guy is an ally or not.

iEvil

In Apple May Use ‘Nuclear Arsenal’ to Delay Palm’s IPhone Rival, Bloombert reports: “Apple Inc., usually on the defensive when it comes to intellectual-property lawsuits, is threatening to use its hoard of patents to quash iPhone competitors.”For shame, Apple, for shame. They appear to be suffering from the delusion pointed out by Boldrin & Levine, as noted by Tucker in Seen and Unseen Costs of Patents:

It is the most common thing in the world for a businessperson who use every market-oriented skill to get a product to market: a good product at a good price that becomes the market leader. At this point, and for some odd reason, the businessperson gets confused. He thinks that it his IP that is the key to his success and ends up fighting for it with all his might, even at his own expense.

Here is the statement by Boldrine and Levine: ” “Being a monopolist” is, apparently, akin to going on drugs or joining some strange religious sect. It seems to lead to a complete loss of any sense of what profitable opportunities are and of how free markets function. Monopolists, apparently, can conceive of only one way of making money, that is bullying consumers and competitors to put up or shut up. Furthermore, it also appears to mean that past mistakes have to be repeated at a larger, and ever more egregious, scale.”

(Cross-posted at Mises Blog.)

FreeTalkLive on Tucker, IP, and Boldrin & Levine

On tonight’s FreeTalkLive (from about 1:06:55 to 1:38:22, again from 1:51:52 and following) the hosts discuss and read Jeff Tucker’s entire article Does Innovation Require Property in Ideas? on the air (Tucker’s article discusses Boldrin & Levine’s Against Intellectual Monopoly). A very lively discussion ensues including–surprise!–a patent lawyer who calls in to meekly support patent law (and also some kind of limits on how much money doctors can spend on marketing… hunh?). (HT to Manuel Lora.)(Cross-posted on Mises Blog.)

Newton’s Fig

Interesting blog musings on IP by Vincent McAffrey, in “Newton’s Fig.”I cannot tell whether he is anti-IP or not, but he seems to be leaning that way.

PATENTING = INNOVATING

In Patent Law: Global Economic Slowdown Edition, one patent practitioner comments:

“International patent filings under WIPO’s Patent Cooperation Treaty (PCT) grew by 2.4% in 2008, to nearly 164,000 1 applications. While the rate of growth was modest, as compared to an average 9.3% rate of growth in the previous three years, the total number of applications for 2008 represents the highest number of applications received under the PCT in a single year. Continued use of the PCT, a cornerstone of the international patent system, indicates that companies recognize the importance of sustained investment in research, development and innovation to remain competitive even within challenging economic conditions.”

Interesting patent-lawyer spin, in the bolded words–i.e., PATENTING = INNOVATING.

Dissecting Boldrin and Levine: An Alternate View of Intellectual Property

On Strike The Root one “John deLaubenfels” criticizes us IP critics.I’ll comment on one argument here:

Copies of an author’s work can be made virtually for free; therefore they aren’t “scarce”; therefore they have no value that anybody need respect. This line is not heavily stressed by B&L, but it is popular among anti-IP’ers and was apparently originally conceived by their darling, Stephan Kinsella. Nonsense! The actual worth of a work can be calculated as the sum of what each person on earth would willingly pay for a copy, if it could be obtained in no other way. This figure may fairly be said to represent the potential value the author has brought to the world. Subtract the cost of making copies for all purchasers, and we arrive at a return the author may hope to approach in a just society, assuming he’s able to reach all potential buyers and is able to guess how much they’re willing to pay. Note that this second number goes UP, not down, as the cost of making copies decreases. An interesting question for anyone who buys into the Kinsella argument would be: consider a product which requires physical raw materials to produce. Would it be “not stealing” to break into a store, take one, and leave in exchange only the cost of the raw materials and labor needed to produce it? The idea is as absurd as Kinsella’s is for intellectual works.

First, I have stressed repeatedly that property rights are rights in the physical integrity of a resource, not in its value. Libertarianism does not mandate that people “respect the value” of property. Only that they do not invade its borders–use it without the owner’s permission. So it is irrelevant whether a work, or copies of it, “have” a “value”. The question is: are patterns and information ownable things? Are they the type of things that can be, that ought to be, property? The answer to this question does not turn on whether people value the pattern or information or copies or not.

As for the question: consider a product which requires physical raw materials to produce. Would it be “not stealing” to break into a store, take one, and leave in exchange only the cost of the raw materials and labor needed to produce it?”

Property rights are rights to the physical integrity of owned scarce resources. So it’s stealing to take my product without my permission, since I own it. This is true whether or not the object “has value” or not; and it’s true whether or not the thief leaves me partial (or even complete) restitution.

This entire line of reasoning is confused.

(Cross-posted on Mises Blog.)

Masnick on Innovation

A great comment by Techdirt’s Mike Masnick that deserves to be highlighted on its own–Masnick just keeps getting better and better on IP issues:***

“Resources are allocated by prices that form in the market after exchanges of private property. If there is no private property, there are no exchanges.”

Shame that someone who claims to understand economics is so woefully wrong.

First off, yes, private property is a key element of a marketplace, but you have to first understand the purpose of private property. This is rather important, and often gets lost in the shuffle. The purpose is to allow for the efficient allocation of resources.

However, when a good is infinitely available, there is no question of the efficient allocation of that resource, because efficiency is easy: anyone who wants a *copy* can get it. This is not socialism, as you imply. It’s pure free market capitalism. Your mistake is confusing the “copy” with the original good. It’s a common mistake.

Thus, it makes little sense at all to apply property rights to infinitely available goods. In that case, all you are actually doing is making allocation INEFFICIENT by putting artificial and unnecessary limitations on things, and actually diminishing transactions, because the infinitely available works cannot be built upon to create new and valuable works.

So you have put the cart way before the horse here in focusing on the marketplace, rather than the efficient allocation of resources. We like markets for scarce goods because they make allocation efficient.

We can have a market for infinite goods, but since the supply is infinite, the price will get set at zero (this is just basic economics).

Now, the real reason given for IP rights is not about allocation of resources, but incentives to create (you seem to confuse these things in your comment). So, your question about “the calculation problem” is actually about incentives to create, which is separate from the issue you later brought up (the market for efficient allocation).

But, once again, here you seem to have a lack of understanding of the facts. There is tremendous evidence nearly across the board that there are significant and workable models to create plenty of new works (or new inventions) in the absence of IP protections. In fact, much of the evidence suggests that the end result would, in fact, be MORE works created, because so many creative and inventive works are actually built off of earlier works.

In other words, both creative and inventive works are an ongoing process of creation, and placing an unnecessary, inefficient and market limiting tollbooth at each stage of the process drastically slows down the incentives for creation.

So, let’s try starting again from scratch. Look at the difference between the allocation problem from the creation problem — and then look at alternative models and the research concerning how those alternative models do. Then, perhaps, you might want to tone down your false statements concerning “socialism” and maybe, just maybe, apologize to those you insulted with your own statements.

Copyright Debate Goes Mainstream: Lessig/Colbert “Remix” Interview

Funny interview with Stephen Colbert an Lawrence Lessig, discussing copyright policy and Lessig’s new book Remix.

Lessig is not a perfect libertarian but is for reform at least. I suspect many of Colbert’s mainstream-ish arguments in defense of copyright are partly mocking the standard Republicanoid view on IP. See also the funny video The Colbert Report ::: Remix feat Lawrence Lessig (Eclectic Method Mix)–a “remix” made in “violation” of Colbert’s tongue-in-cheek warning not to (i.e., his invitation).

Letter on Patents from an Engineer in the Trenches

GREAT post on patents and innovation posted on Mises blog in the comments:

I just finished reading your article A Book that Changes Everything…. Great stuff! I wanted to send along my thoughts on the subject.First, I should confess that I work for a company that has received more patents than any other – for every single year – the last 15 years. Second confession: I co-own several of those IP patents (well, the company is the real owner – I’m just the “inventor” on some of them. I’m a software engineer.).

I’m going to avoid mentioning the company I work for (more corporate regulations), but given the clues you can figure it out fairly easily.

We are slightly different than some of the corporations you mention: “It is impossible to develop software without running into IP problems, and the largest players are living off IP and not innovation”

We do make great money off our patents (I’ll explain what I think is the real benefit though). However, we do innovate, and we make the vast majority of our revenue off of our products – because our product is superior. (Ok, I may be slight biased – but our customers tell us this too)

Anyway, I believe that the real benefit of patents for the company I work for, and other large software firms, is that we trade them – sort of like kids with baseball cards. That is, we’ll allow firms to use certain patents in exchange for the rights to some of theirs. As you can probably figure out, this is not a real option for start ups that do not have the IP portfolio to make this attractive.

We have a huge team of IP lawyers, a bonus structure that makes it attractive to try to patent any possible new inventions, and a management that uses your personal patent portfolio as a factor in determining who to promote. We’ve been told that they’ll patent anything new we come up with – even if it is unrelated to the business (i.e. I’ve seen them patent an exercise device).

We’ll often write papers on items that the business decides not to patent – just to show prior discovery should we be challenged by other corporations. We also get a bonus for this – just not as much.

From an employee standpoint, this is attractive. Hey – it’s a lot of extra money to us, and we are helping out our company. As an employee who happens to be a libertarian, I honestly have no issue with my company taking advantage of the silly IP laws.

That brings me back to the main issue at hand though: should we have IP laws?

Speaking from my own experience, corporations (such as the one I work for) spend a lot of money to innovate. However, I would “press that button” and get rid of IP law immediately, given the chance. I agree completely with the arguements made in the article – as such, I’ll just bring up a few other issues:

I think IP law is incredibly damaging to innovation and competition. In the case of software patents, moreso in that they take resources (primarily money which gets redirected to legal teams) from firms who are forced to research existing patens, and also defend themselves against IP lawsuits.

Many software patents are particularly silly. Many of these are issued for algorithms – the vast majority of the time, these algorithms are only available outside the company via patent! That is, when they are shipped externally, it is in a form that is not readable (object code). Sure – this can be reverse engineered. But for a particularly complex program or operating system, this in itself would be a colossal endeavor. Yet, a patent is issued for it – and the patent describes exactly what the algorithm does!

Another firm could look at the patent and use the invention. In most cases, it would be impossible to tell that they’ve “stolen” anything. Here they are counterproductive.

I should also mention the obvious – the corporation which holds the patent already has a huge advantage! They will ship a product with these innovations before any other corporation can ship its’ product. Quite frankly it will generally be a significant period of time before another product can be shipped which contains these innovations – even if the innovation was immediately obvious and known. This will not generally be the case.

Then you have the patents for user interface – these are just silly. I’ve seen patents issued (granted, this was a long time ago) for using a particular color on a “dummy” terminal.

Anyway, I hope I do not sound like a hypocrit (because I hold IP patents). As I said, it is a part of my job. I also cannot fault my company for taking advantage of whatever silly laws are created. I simply view this as another case of the state interfering with the market, and the market adjusting to exploit the foolishness of the laws.

Hayek on Patents and Copyrights

From Mises Blog, good quote from Hayek:

From Individualism and Economic Order (ironically under copyright), Chicago, 1948, pp. 113-14.

Where the law of property is concerned, it is not difficult to see that the simple rules which are adequate to ordinary mobile “things” or “chattel” are not suitable for indefinite extension We need only turn to the problems which arise in connection with land, particularly with regard to urban land in modern large towns, in order to realize that a conception of property which is based on the assumption that the use of a particular item of property affects only the interests of its owner breaks down There can be no doubt that a good many, at least, of the problems with which the modern town planner is concerned are genuine problems with which governments or local authorities are bound to concern themselves. Unless we can provide some guidance in fields like this about what are legitimate or necessary government activities and what are its limits, we must not complain if our views are not taken seriously when we oppose other kinds of less justified “planning.”

The problem of the prevention of monopoly and the preservation of competition is raised much more acutely in certain other fields to which the concept of property has been extended only in recent times. I am thinking here of the extension of the concept of property to such rights and privileges as patents for inventions, copyright, trade-marks, and the like. It seems to me beyond doubt that in these fields a slavish application of the concept of property as it has been developed for material things has done a great deal to foster the growth of monopoly and that here drastic reforms may be required if competition is to be made to work. In the field of industrial patents in particular we shall have seriously to examine whether the award of a monopoly privilege is really the most appropriate and effective form of reward for the kind of risk-bearing which investment in scientific research involves.

Patents, in particular, are specially interesting from our point of view because they provide so clear an illustration of how it is necessary in all such instances not to apply a ready-made formula but to go back to the rationale of the market system and to decide for each class what the precise rights are to be which the government ought to protect. This is a task at least as much for economists as for lawyers. Perhaps it is not a waste of your time if I illustrate which have in mind by quoting a rather well-known decision in which an American judge argued that “as to the suggestion that competitors were excluded from the use of the patent we answer that such exclusion may be said to have been the very essence of the right conferred by the patent” and adds “as it is the privilege of any owner of property to use it or not to use it without any question of motive.” (Continental Bag Co. v. Eastetn Bag Co., 210 U.S. 405 (1909). It is this last statement which seems to me to be significant for the way in which a mechanical extension of the property concept by lawyers has done so much to create undesirable and harmful privilege.

James Watt: Monopolist

From Mises Blog, an excerpt from Boldrin/Levine’s blockbuster book:

Was James Watt’s patent of the steam engine a crucial incentive needed to trigger his inventive genius, as the traditional history suggests? Or did his use of the legal system to inhibit competition set back the Industrial Revolution by a decade or two? Here is a case study–by the authors of a wonderful new work on patents and copyrights–in how “intellectual property rights” do grave damage to the market economy. FULL ARTICLE

Mutualist Comments on IP

In Easing the Transition to an Alternative Economy, posted at the Citizen’s Briefing Book at Change.gov by “Mutualist” Kevin Carson (mentioned here at Center for a Stateless Society, and here on Carson’s blog), Carson has a good critique of the damaging and distorting effects of IP. Now, he does mix it in with ideas I find questionable (see 1, 2, 3), such as the leftist hostility to “bigness” and the corporate form of business, the penchant for “localism,” the notion that “road subsidies” somehow favor large companies (which basically, as many “vandarchists” seem to believe, makes them fair game for vandalism and worker appropriation since they do not “really” own their property), and the idea that we should “liminat[e] differential tax exemptions that favor firms engaged in centralized, large-scale, capital-intensive production” (this would just amount to raising taxes–now he does advocate making up for this by lowering overall taxes, but only enough to be “revenue neutral,” which, by my math, does not prevent net taxes from being raised on some companies; a good libertarian opposes all tax increases)–so I bold the parts below that I reall like:

If we want to replace the present centralized economy of waste production and planned obsolescence, it’s an inescapable fact that a great deal of excess manufacturing capacity cannot be saved. In my opinion it’s a mistake to try to prop it up through expedients like the Detroit bailout.Corporate capitalism has been plagued from its late-19th century beginnings with chronic crises of overaccumulation and overproduction, which would probably have destroyed it in the Great Depression (despite the New Deal) had WWII not postponed the crisis for a generation by helpfully blowing up most of the plant and equipment in the world outside the U.S. and creating a permanent war economy for absorbing surplus output. But Europe and Japan rebuilt their industrial capital by 1970, and since then the chronic crises have been back with a vengeance. Before the current downturn, America’s overbuilt industry couldn’t dispose of its full output running at capacity, even with everybody tapping into home equity and maxing out their credit cards to replace everything they owned every five years. And we’ll never see those levels again. So there’s no escaping the fact that much of our plant and equipment, in a few years, will be rust.

The goal should be a shift from the present system of overaccumulated, centralized, oligopoly industry, and its business model of planned obsolescence and “push” distribution, to a decentralized economy of small-scale manufacturing for local markets. This means, among other things, a switch from capital-intensive production methods based on product-specific machinery, to production with small-scale, general purpose machinery. It means, in place of the old Sloanist production model, something like the present-day economy of Italy’s Emilia-Romagna region: networked small manufacturers producing for the local market, with a high degree of cooperative ownership. Such an economy, based on a “pull” distribution model with production geared to demand on a just-in-time basis, will be insulated from the boom-bust cycles of the old national “push” economies. And we need a new model of user-friendly, modular product design aimed at cheap and easy repairability and recycling.

Your main focus, in my opinion, should be to ease the transition by eliminating present policies (market-distorting subsidies, privileges, and cartelizing regulations) that impede it and protect the old economy from the new one.

This means, for one thing, eliminating differential tax exemptions that favor firms engaged in centralized, large-scale, capital-intensive production: e.g., the depreciation allowance, the R&D credit, the deductability of interest on corporate debt, and the exemption of stock transactions involved in mergers and acquisitions from capital gains tax). Then lower the corporate income tax enough to be revenue-neutral.

It means, especially, eliminating the biggest subsidy to economic centralization, and to artificially large market area and firm size: i.e., subsidies to long-distance transportation. The Interstate should be funded entirely by weight-based user fees on trucking, which causes virtually all of the roadbed damage. All subsidies to new airports or to expanding old ones should be eliminated, including all federal guarantees of local bond issues.

Perhaps most important of all, it requires radically scaling back the present strong “intellectual property” regime. IP (through patent pooling and exchange, monopolies on current production technologies, etc.) is probably the single most powerful cartelizing force, which enables each industry to be concentrated in the hands of a few players. It impedes the transfer of skills and new technology from the old manufacturing dinosaurs to the kinds of small, local producers we need. It also serves as a powerful bulwark to planned obsolescence, imposing legal restrictions on the manufacture of cheap generic replacement parts.

Scaling back IP law (a good start would be repealing the DMCA, the WIPO Copyright Treaty, and the Uruguay Round’s TRIPS accord) would eliminate the barriers to the diffusion of skill and technology that currently prop up the old corporate dinosaurs of the software and entertainment industries, and facilitate their replacement by networked production on an open source model. Please cut loose the MPAA, RIAA, and Bill Gates, and do so yesterday!

Finally, we need to eliminate all subsidies to large-scale agribusiness. The result will be a flourishing sector of community-supported agriculture, replacing the old agribusiness dinosaurs as fast as new ground can be cultivated.

Copyright is very sticky!

Often we opponents of socialistic, legislatively-created, utilitarian-based, property-redistributing, artificial, arbitrary, inconsistent, irrational, innovation-hampering, monopolistic, anti-competitive, and wealth-destroying intellectual property laws are accused of hypocrisy when we “copyright” our articles and books.I’ve pointed out to such people innumerable times, to little avail, that copyright is a noun, not a verb–that you don’t “copyright” something–you have a copyright in your original works of authorship as soon as you write them, automatically, courtesy of federal law. No copyright notice is required. No copyright registration is required. You have the right, whether you like it or not.

Well, then, why don’t you just “make it public domain,” some then, a bit unreflectively, retort. The problem is, there is no clear and good way to do this.

If you use a Creative Commons license, you are actually employing the copyright the state grants you–you are putting conditions or limitations on what others may do with your works. Even if you use the least restrictive type, “Attribution,” you are requiring others to do something to avoid being liable for copyright infringement.

Now, some have tried to find ways to let you abandon your copyright, or “dedicate” it to “the public.” Creative Commons has a proposed “Public Domain Dedication“, but: (a) it doesn’t seem easy, at least for the typical user; and (b) there appear to be doubts as to whether it would work–and until it’s clear that it does, it’s worse than a CC license, since publishers would be afraid to rely on it. It is possible that a type of estoppel would apply, preventing the “dedicator” from complaining if someone else relied on his “dedication” to his detriment; but there is “a quirk of U.S. copyright law which grants the author of a work the right to cancel ‘the exclusive or nonexclusive grant of a transfer or license of copyright or of any right under a copyright” thirty-five years later, unless the work was originally a work for hire.'” So sayeth Wikipedia; and it outlines other deficiencies of the “public domain dedication.”

Creative Commons seems to recognize the potential problems with their attempt to set up a “public domain dedication”– first, they say, “Please note that the Public Domain Dedication may not be valid outside of the United States.” Well, that’s no good. We do live in a global, um, world. Last time I checked, the Internet was available even outside America! Second, I had to google their site to even find it–it’s not even listed in their Licenses page, or in their FAQ. They provide this method with disclaimers and no guarantees, and they bury it on their site. Hmm, tells you something.

So, what’s a libertarian to do? I tend to think the CC 3.0 Attribution license is the most libertarian–it only requires you to say who wrote it–but most people would do this anyway, so that’s not a huge imposition. The “non-commercial” ones prevent people from using it “for profit”–this is still a use of copyright to force people not to publish. And the “Attribution Share Alike” seeks to use one’s copyright threat to force others to use this license too.

(For example, suppose you have a deal with a publisher, and you want to use a CC share-alike licensed work in your book. But the publisher you are using refuses to grant a “share alike” license. So now, you can’t use the CC licensed work. I.e., if you publish your paper with a CC attribution license, the other guy can use it in his book. But if you do a share alike one, he can’t. He’s prevented by your copyright assertion threat.)

The d*mned government imposes this right on us and does not even provide an easy way to opt out of it or get rid of it. Ridiculous.

***

Update: In my comments to Roderick Long’s post Steal This Journal!, I noted:

Roderick, If I’m not mistaken, “copyleft” is similar to the Creative Commons “share alike” license. Libertarian Papers, however, uses the Creative Commons Attribution 3.0 License. After thinking about this, it seems to me that the “Attribution” license is more libertarian than “Share-Alike” (or copyleft).

Now the new “CCO“, or “No Rights Reserved,” attempt to make one’s work “public domain” seems the most libertarian of all, but its efficacy looks doubtful to me, and it’s still embryonic as far as I can tell.

In response to Charles Johnson’s (Rad Geek) suggestion that Attribution-Share-Alike (a “viral” type of copyright license, a.k.a. “copyleft”) might be preferable or acceptable from a libertarian perspective, I replied:

Rad, I see the argument, but I think the best policy is just to free it up. It’s a bit too paternalistic, rude, untrusting, to force others to do it like you do, to assume they’ll “abuse” their power. And, it might stop the work from being re-published. We want our libertarian ideas spread far and wide. I want an editor of a book considering reprinting one of our pieces to see no obstacles. A “viral share-alike” provision could be. Let ideas be free.

(Cross-posted at Mises Blog.)

Government Accountants Give Patent Office Award!

The Association of Government Accountants (formerly the “Federal Government Accountants Association”) has awarded the US Patent and Trademark Office its “Fiscal Year 2007 Performance and Accountability Report Award” (which looks oddly similar to the USPTO’s own “red ribbon” patent grant) one of 17 federal agencies to get this award that year.Not only does the USPTO prepare “a well structured, logically organized and easy-to-navigate report” it’s very “productive” too. As it boasts on its website,

Highlights of USPTO accomplishments for the past year include … Increased patent production by an additional 14 percent over 2007 by examining 448,003 applications the highest number in our history. Production has increased by 38.6 percent over the past four years, compared to a 21.3 percent increase in application filings during the same period.

It’s sobering to think how much worse off the US would be in this recession without all this productivity.

For some more interesting patent statistics, see the World Patent Report: A Statistical Review (2008) for example, as of about 2006, there were about two million patent applications filed per years worldwide; about 750,000 patents issued (granted) every year; and about 6.1 million patents in force around the world.

(cross-posted at Mises.org)

Why People Don’t Believe In Paying For Music. Hint: Its All About Deflation.

Interest post on Squawking Tech–proposes that because of natural (price) deflation,

“With the exception of land and human time, in all areas of society we have been conditioned to expect more for less over time. Yet until just a few years ago, the music industry was increasingly charging more, for the same product. And they were able to do this because copyright law gives them the ability to set prices like a legal monopoly. … When people in aggregate are asked to pay far more than what they think something should cost, they start looking for alternatives. In this case, the alternative comes in the form of P2P technology.”

Intriguing argument: that the failure of music to fall in price along with other technology-related goods is evidence of the pernicious effect of copyright.

Copyright in Hitler’s Globe

Barsamian with Hitler's GlobeTom Cruise May Face Legal Action Over Hitler Globe reports that the collector who bought the famous “Hitler’s globe” may sue for use of a likeness of the globe in Cruise’s recent film Valkyrie, “the thriller about a real-life plot to assassinate Hitler.” The article reports that in “2007, Pritikin paid $100,000 for the globe and had its likeness copyrighted to keep it from being used in propaganda by sick neo-Nazi groups.” Whew, what a relief!(Cross-posted at LewRockwell.com.)

The Limits of Utilitarian Reasoning–The Case of Patents

It can of course be useful to point out harmful consequences of various policies, if only to engage advocates of same on their own turf. Thus in There’s No Such Thing as a Free Patent I point out that those who claim the benefits of patents outweigh the costs never seem to tally up these figures and give us the net. And indeed, whenever anyone ties to do this, they usually conclude that the patent system does more harm than good. For example, Boldrin and Levine’s Against Monopoly, Bessen & Muerer’s work, Julio Cole’s Patents and Copyrights: Do the Benefits Exceed the Costs?, and so on (see my post, What Are the Costs of the Patent System?).And yet, there are severe drawbacks to relying exclusively on the utilitarian approach, as I explained in my Against Intellectual Property. We need to have principled, moral reasons that can cut through the fog of inconclusive utilitarian back-and-forth. Case in point is Rosemarie Ziedonis’s reply to Bessen & Muerer’s On the Apparent Failure of Patents. In her civil and reasonable reply, she argues that Bessen & Muerer provide

little basis for concluding (as the authors assert) that public firms outside the chemical and pharmaceutical industries would be “better off” if patents did not exist. Public firms benefit from the patent system in numerous ways that are not captured by Bessen and Meurer’s “net benefits” calculations, including through information revealed during the patenting process and through growth opportunities provided by startups. More generally, the authors are unable to observe the innovative productivity or financial performance of public firms in an alternative, nonpatent regime.”

What can a utilitarian say when a critic simply replies, “but there are other benefits you are not capturing”? The strongest counter, it seems to me, is to note that the burden of proof is on the proponent of a utilitarian argument favoring a state regulation, but how do utilitarians ever know if they’ve taken all costs, and all benefits, into account? That’s why a principled, property-rights argument is crucial.

A more complete excerpt of Ziedonis’s comments follows:

A second problem with Bessen and Meurer’s “better off” assertion is its implicit assumption that the private value firms reap from owning patents is equivalent to the private value those firms derive from the patent system. Here, it is important to understand what was (and was not) included in Bessen and Meurer’s statistics. While the authors’ “net benefits” calculations allowed public firms to be harmed by patents owned by outsiders through encounters of infringement lawsuits, they did not allow firms to reap benefits from the activities of others. Recall that only the value captured from a firm’s own portfolio was captured in the authors’ calculations. There are several ways in which public firms reap indirect benefits from the patent system. One is through information revealed during the patenting process (i.e., “spillovers”). In addition to enticing investment through the lure of future profits (the “reward theory” of focal attention in Bessen and Meurer’s article), the patent system also aims to foster innovation through the disclosure of information about new inventions (in detailed drawings and descriptions contained in published patent documents) that otherwise might be held secret or be more difficult for outsiders to unravel. …

Although the evidence generated from Bessen and Meurer’s analysis is alarming, it provides little basis for concluding (as the authors assert) that public firms outside the chemical and pharmaceutical industries would be “better off” if patents did not exist. Public firms benefit from the patent system in numerous ways that are not captured by Bessen and Meurer’s “net benefits” calculations, including through information revealed during the patenting process and through growth opportunities provided by startups. More generally, the authors are unable to observe the innovative productivity or financial performance of public firms in an alternative, nonpatent regime. Would opportunities to “outsource” R&D to more efficient performers or to profit from entrepreneurial-firm acquisitions be deleteriously affected? It is highly unlikely, of course, that the U.S. patent system will be abolished. Nonetheless, when assessing the current system’s performance, these indirect effects of patents are important to consider.

Patent Attorneys Asserting Their Own Patents

Sometimes against their own former clients.As a followup to “Patent Hawk” Sues Microsoft, Former Client, for Patent Infringement (Against Monopoly cross-post), see the insightful Law.com article by the tenacious Joe Mullin, Some IP Attorneys Look to Make Their Mark as Patent-Holders, as well as his blog posts “Patent Hawk” lawsuit was an inside job, says Microsoft and Zilka & Kotab, a.k.a. Aloft Media, file patent lawsuit against Google’s Chrome browser; the latest of many.

Cross-posted at Mises Blog.

Patent Attorneys Asserting Their Own Patents

Sometimes against their own former clients.As a followup to “Patent Hawk” Sues Microsoft, Former Client, for Patent Infringement (Against Monopoly cross-post), see the insightful Law.com article by the tenacious Joe Mullin, Some IP Attorneys Look to Make Their Mark as Patent-Holders, as well as his blog posts “Patent Hawk” lawsuit was an inside job, says Microsoft and Zilka & Kotab, a.k.a. Aloft Media, file patent lawsuit against Google’s Chrome browser; the latest of many.

Cross-posted at Mises Blog.

$30 Billion Taxfunded Innovation Contracts: The “Progressive-Libertarian” Solution

I’ve noted before (2) the disturbing trend of intellectuals–some even libertarian or free marketeers–advocating taxpayer-funded “medical innovation prizes” to supplement or replace the current patent system–e.g., Alex Tabarrok’s support of an $80 billion/year “medical innovation prize fund”, and similar proposals by others, including Joseph Stiglitz and Forbes.com.Now, on Cato Unbound, one “Dean Baker” has his own proposal:

I do not support a prize system …. A prize system would preserve what I see as some of the worst problems of the patent system, most importantly encouraging secrecy in research. … My ideal system would be a system in which the government allocates a pot of money (@$30 billion a year approximately equal to private R&D in the pharmaceutical sector) that would be awarded in long-term contracts to a relatively small number of master contractors. For example, there can be 10 master contractors getting grants of roughly $30 billion each spread over 10 years.

Of course this is not a perfect system and there may well be better alternatives, but the point is to get the discussion started. … Perhaps a progressive-libertarian alliance can force economists/policy makers to take this issue seriously.

I think you’ve got the conversation started, buddy. Congratulations! Now, can you leave us the hell aloneUpdate: Will Wilkinson, in Dean Baker on Libertarians and the Fight Against Corporatism, discussing the interchange between Dean Baker and Tim Lee, gushes, “the extent of overall agreement really is pretty impressive, and promising.” Dissent!

Update2: Cato’s Tim Lee writes: “I can’t agree with Baker that all copyright and patent monopolies are illegitimate. Copyright and patent protections have existed since the beginning of the republic, and if properly calibrated they can (as the founders put it) promote the progress of science and the useful arts. Like any government intervention in the economy, they need to be carefully constrained. But if they are so limited, they can be a positive force in the American economy.”

Ah, yes, that’s our job as market liberals–to help the state “properly calibrate” its grants of pattern privilege!

Update3: On HuffPo, Baker ridicules DC intellectuals who favor the bailout, in How Do You Make a DC Intellectual Look Less Articulate Than Sarah Palin Being Interviewed by Katie Couric? Not a bad piece, but his anti-bailout credibility is undermined a bit by advocating $30B of state funding to promote innovation!

The Lexra Story

The Lexra Story–“An example of how Patent law hurts innovation”, according to my friend Max Chiz.

Objectivists on the PRO-IP Act

Also note the same old error creeping in of thinking that creation is an independent source of property rights (for more, see Libertarian Creationism, Inventors … are like unto … GODS…., Rethinking IP Completely, and Objectivist Law Prof Mossoff on Copyright; or, the Misuse of Labor, Value, and Creation Metaphors).Notes Johnson, “the creator of a piece of intellectual property owns the product of his work.” His argument? “If a baker bakes a loaf of bread, he therefore owns it.” And likewise, for “music, movies, software.” But note the mistake here Johson makes: “If a baker bakes a loaf of bread, he therefore owns it.” The “therefore” is the giveaway: he says this because he thinks of the creation of the loaf as the act that gives rise to ownership. Then this leads to the analogy with other created things, like music. But creation of the loaf is not the reason why the baker owns it. He owns the loaf because he owned the dough that he baked. He already owned the dough, before any act of “creation”–before he transformed it with his labor. If he owned the dough, then he owns whatever he transforms his property into; the act of creation is an act of transformation that does not generate any new property rights. So creation is not necessary for him to own the resulting baked bread. Likewise, if he used someone else’s dough–say, his employer’s–then he does not own the loaf, but the owner of the dough does. So creation is not sufficient for ownership.

The rest of the argument is confused as well. Johnson argues that there are property rights in creations, and glorifies the (utilitarian) Constitution that enshrines them–why, then, ought they last only for a finite time, instead of forever, like other types of property rights do? And take this argument:

The pirate deprives the creator not only of the relatively small amount of money to be paid for the product. He deprives the creator of his very means of living, his ability to control, trade and profit from the work of his mind. That is a crime legally, morally, and on the deepest philosophical level, metaphysically. It is a matter of the creator’s ability to maintain his own existence.

But this implies that property owners have a right not only in the physical integrity of their property but in the value of their property; they do not: value lies in the way others esteem your property. (See Rethinking IP Completely, and Objectivist Law Prof Mossoff on Copyright; or, the Misuse of Labor, Value, and Creation Metaphors for further comment on this.)

Finally, when he notes, “The PRO-IP Act … is a welcome law and a welcome message,” he accepts the idea that law can be or ought to be made by legislation. Of course, this is wrong, for several reasons–see my post Regret: The Glory of State Law for elaboration.

Update: see the vigorous debate in the comments section of the parallel post at Mises.org.

Crowdsourcing to Improve Patent Quality?

In Global Online Effort To Ascertain Validity of Patents, Eric Sinrod notes the effort of startup Article One Partners to improve the quality of issued patents. (See also Online startup aims to improve patent quality.) The company seeks to do this by offering substantial payments to people who submit relevant prior art that helps to determine whether a given patent is valid or not. The resulting prior art can help to show a patent is invalid–or enhance the validity of others. Now I’m suspicious of the idea of trying to “legitimize the validity of patents”–but this is probably just PR. I suspect that on balance more patents will be sunk than strengthened by this type of crowdsourcing. Sunshine makes a good disinfectant!

Oxford IP Books

Just because current IP law needs reform–to say the least–does not diminish the need to understand existing IP law so as to be aware of it and navigate around it. With this in mind, I’d like to mention four excellent new IP law books I’ve acquired. Each of these was published in 2008 by Oxford University Press (my publisher as well) as part of its expansion of its IP offerings.The first two are useful for patent practitioners and companies: Intellectual Property Culture: Strategies to Foster Successful Patent and Trade Secret Practices in Everyday Business, by Eric M Dobrusin and Ronald A Krasnow (reviewed here); and The Business of Intellectual Property, by Christopher M. Arena & Eduardo M. Carreras.

Patent Appeals: The Elements of Effective Advocacy in the Federal Circuit, by Mark Simon Davies, will be most useful for patent litigators, and Publishing Forms and Contracts, by Roy Kaufman, will be of interest to media, entertainment, and copyright attorneys as well as media companies. All four of these books are handsome and nicely done, and, although I have not read all of them in detail yet, they all look to be very well-done and useful to their respective audiences.

Obama Transition Team Member on “Optimizing” the Patent System

As noted here here, one of Obama’s transition “team members is Reed Hundt, who was Bill Clinton’s FCC Chair from 1993 through 1997. Hundt is slated to work on the agency review team in charge of international trade and economics agencies.” In a 2006 Forbes op-ed, Hundt had various suggestions for patent reform. They are not all terrible, but they continue to miss the point by struggling to find some way to make the system work better. Part of his proposal is to reduce the number of patents granted, increase fees, and increase funding of the USPTO. Writes Hundt: “First, we should slash the number of patents granted each year by 90%. In 2004 the U.S. Patent &Trademark Office issued 165,000 patents. Sixteen thousand is more like an optimal number.” He proposes a $500k fee companies can pay for a “fast-track” one-year patent application review.Typical bureaucratic hubris to think he knows the “optimal” number of patents–though technically he is right that 16,000 is “more like” an optimal number than is 165,000, since the optimal number is zero. This is not dissimilar to another recent proposal to improve patent quality and reduce the number of patents granted by radically increasing filing fees from the $1000 level to about $50,000. As Manuel Lora noted to me, this is like the Laffer Curve of Patents (see Rothbard’s evisceration of the Laffer Curve). Such high fees would of course reduce the number of patents, but would also tend to benefit large corporations.

These guys ought to give up trying to fine-tune an inherently unjust system and just admit it ought to be scrapped. Hundt writes, “We have a horribly expensive system, with huge backlogs and a daunting litigation risk. No wonder the Chinese don’t want to adopt it. Let’s get rid of it and start from scratch.” Well, he’s half-right.

***

A few more responses to selected comments by Hundt:

Second, we need to spend more money on the system. The budget of the U.S. Patent & Trademark Office is $1.5 billion. That ought to be tripled to $4.5 billion . . .

Who do you mean, “we,” kemosabe? Not if it requires taxpayer funding.

We don’t want grossly overworked professionals trying to figure out whether specific algorithms used to refresh the pixels on a computer monitor screen ought to be patented.

No, we want bright young Clintonite master bureaucrats!

Fourth, all patent case awards should be forward looking and linked to lost sales. In other words, plaintiffs who win patent-infringement challenges should be able to enjoin only future competition.

I thought he was onto something with his first sentence, but then he shys away from radical reform by not urging the abolution of all patent injunctions.

The Hypocrisy of State Collusion

Recent headlines speak volumes about the hypocrisy of the state. On the one hand, we have state persecution of private firms for collusion, price-fixing, monopolization, etc., e.g. LG, Sharp plead guilty to LCD price-fixing, take $585m fine; antitrust actions against Microsoft, both in the US and Europe (EU hits Microsoft with record 899 million euro antitrust fine); and as I noted in The Schizo Feds: Patent Monopolies and the FTC, the state grants patent monopolies and then uses antitrust law to attack the beneficiaries of those monopolies.

fiveheads_jeju_2008nov05.jpg

And on the other hand, we have state monopoly-granting patent office collusion: Blueprint Laid Out for Work-Sharing Among Five Intellectual Property Offices, reporting that “The United States Patent and Trademark Office (USPTO) announced the development of a blueprint for work sharing among five major intellectual property offices (IP5) to address the common challenges they are currently facing. The heads of the IP5 met at Jeju, Korea, on October 27 and 28, 2008, to discuss a shared vision for work sharing and collaboration.”

And we have the G20 nations colluding (“US President George W. Bush said Thursday that world leaders will ‘lay the foundation for reforms’ at global economic crisis talks this week….”), not to mention “coordination” by the world’s central banks (Fed, European Banks Coordinate Interest Rate Cut; Central Banks Coordinate Global Cut in Interest Rates; EU Leaders Vow to Coordinate Response to Finance Crisis).

Utter hypocrisy–and, as usual, exactly backwards: the state outlaws private “collusion” while engaging in global collusion itself, when, as Rothbard shows, only states are able to form genuine monopolies in the first place. (See Man, Economy, and State, ch. 10; also Hoppe, A Theory of Socialism and Capitalism, ch. 9.)

Method Patents Must be “Useful, Concrete, Tangible”–Oh, I don’t know!

The November 2008 Intellectual Property Colloquium discusses the recent In re Bilski patent decision by the CAFC. In that case, the court abandoned State Street‘s “useful, concrete and tangible result” test for the patentability of methods, and reaffirmed the “machine-or-transformation” test. Under this test, a method or process claim in a patent is patentable subject matter only if (a) it is tied to a particular machine or apparatus, or (b) it transforms a particular article into a different state or thing. (For further details, see Appeals Court Smacks Down Software And Business Method Patents without Apparatus or Transformative Powers, Patent Baristas; In re Bilski: Patentable Process Must Either (1) be Tied to a particular machine or (2) Transform a Particular Article, Patently-O.)Now this is mostly gobbledygook, of course, as you’d expect when a court attempts to find an objective or just rule when interpreting an unjust, non-objective, legislated scheme (on the problems with use of legislation to “make” law, see my Legislation and the Discovery of Law in a Free Society). A nice illustration of this can be found in the interchange between one of the lawyers and the CAFC judges during oral argument, which is excerpted in the podcast. See, e.g., 2:33 to 6:15 or so.

The attorney argues that “useful, concrete and tangible result” The judge asks the attorney what is the basis for this tripartite test, and what “concrete” and “tangible” mean, exactly. The attorney struggles to define these terms objectively–he says “concrete” means “reduced to a practical,” “useful” “result”; and that “tangible” means “being in the real world, doing something physical, active”. The judge notes that this is redundant with the “useful” part; so you really have “concrete” and “tangible”–he asks the lawyer, “and what does ‘concrete’ add”? “I don’t know,” replies the lawyer, exasperated, to much laughter in the courtroom. “I don’t either!” says the judge (around 6:00-6:15).

So much for objective law. Legislators introduce squishy terms with no objective meaning, no mooring in objective property boundaries and genuine justice, as the result of political compromise. Of course there is no way for courts to eke out just and objective rules that are based on such legal abominations.

Update on Patent Troll Tracker

In Troll Tracker Lands Job Fighting Patent Trolls!, I noted the defamation suits filed against “Troll Tracker,” aka Rick Frenkel, by two Texas lawyers, in the aftermath of Frenkel’s identity being revealed, after bounties put up by one of the subjects of his criticism, patent attorney Ray Niro. (Whew! It’s convoluted, but all you need to know is that Frenkel is the good guy here.)An update on the status of those two (to my mind, ridiculous) cases can be found in Troll Tracker defamation update: Cisco wants to see tax returns, evidence of ‘mental anguish’. Reading through all this–it’s hard to see how anyone can believe (a) patent law is grounded in justice; or (b) a state-run “justice” system can ever be, well, just.

Copyright Alliance Begs Supreme Court To Make Remote DVRs Illegal

Copyright Alliance Begs Supreme Court To Make Remote DVRs Illegal— great post by Mike Masnick at TechDirt. He notes there that

“back in August there was an extremely important Appeals Court ruling that noted that Cablevision’s remote DVR setup did not infringe on copyrights. The ruling pointed out the rather obvious troubles that would occur if we interpreted copyright laws the way copyright holders wanted to. It’s clear that DVRs, like TiVo, are perfectly legal in the home. Time shifting shows has been found, quite clearly, to be legal. Cablevision’s remote DVR is effectively the same exact thing. The only difference is that the DVR is stored at Cablevision data center, rather than at someone’s home. The ruling, quite clearly, demonstrated how twisted copyright law has become, as it is patched up each time some new technology comes along.”The importance of this ruling cannot be understated, however, as it will enable many important online services that will be tremendously useful. Needless to say, copyright maximalists in the entertainment industry don’t like that.”

… The district court found Cablevision analogous to a copy shop that makes course packs for college professors. In the leading case involving such a shop, for example, “[t]he professor [gave] the copyshop the materials of which the coursepack [was] to be made up, and the copyshop [did] the rest.” … There did not appear to be any serious dispute in that case that the shop itself was directly liable for reproducing copyrighted works. The district court here found that Cablevision, like this copy shop, would be “doing” the copying, albeit “at the customer’s behest.”

“But because volitional conduct is an important element of direct liability, the district court’s analogy is flawed. In determining who actually “makes” a copy, a significant difference exists between making a request to a human employee, who then volitionally operates the copying system to make the copy, and issuing a command directly to a system, which automatically obeys commands and engages in no volitional conduct.

Now analysis of causation is important–I’ve written on this before in my article Causation and Aggression. In this piece, my co-author Pat Tinsley and I note the importance of the Austrian concept of “praxeology”–the science of human action–to provide a framework to properly classify actions, to determine whether an action is aggression (and what type and degree), who is responsible for actions, etc. For example, this view of action helps to clear up the confusion among libertarians about whether, and why, Presidents and mob bosses are indeed responsible for the actions of their underlings.

Now, in my blogposts Causation, Spam, and Worms, Spam, Spyware, Spiders and Trespass, Spas as a Nuuisance, and Spammers face “mail fraud” charges and 20 years in the federal pen!, I apply this basic understanding of causation to argue that “spam and related activities can in principle be a crime–a type of trespass–since it is a means by which the spammer uninvitedly uses another’s property”. This reasoning is similar to that employed by the court in the DVR case, since they are saying the customer is the one actually “controlling” (via electronic signals etc.) the equipment of Cablevision (albeit with Cablevision’s consent, unlike in the spam case).

That said, the decision in the DVR case reveals how irrational copyright law is. You could analogize Cablevision to the photocopy shop; or to the use of one’s own personal DVR/VCR.

The problem is that over time technology will stretch these analogies to the breaking point. The court, for example, emphasizes that the customer can instruct the RS-DVR system to record a TV show, and if he does, then the transitory data in the buffer is “move[d] from the primary buffer into a secondary buffer, and then onto a portion of one of the hard disks allocated to that customer.” Thus, if no customer requests a given show be recorded, the information in the “primary ingest buffer” is lost–it is overwritten every 01 seconds (per channel). For this reason, “A customer cannot, however, record the earlier portion of a program once it has begun.”

Thus, the system is set up so that it mimics the operation of a DVR. Presumably if 25,000 customers all want to record “Lost,” then 25,000 separate copies of Lost are made on Cablevision’s “Arroyo” server–one for each customer. And presumably there is a limit on the number of channels one can record simultaneously, and the total amount of hours of recorded material that can be maintained–similar to the way a personal DVR works–one’s own DVR has only 20 or so hours of space, and can only record two channels at a time. But in theory a DVR could have 100 tuners, and terabytes of space. So in theory, Cablevision could adjust the RS-DVR system to permit users to simply give a blanket instruction on day 1: “Please record all channels [or the following 50 channels] at all times, and maintain them for a trailing 1 year period.” Thus, the buffers for the various channels are always recording for each user basically everything that is transmitted. It’s like an always-on DVR, with all (or dozens of) channels. And why does Cablevision need to waste space by making 50,000 copies of Lost? Why not just keep one copy around, so long as at least one user still “has” “a copy” of it in “his” RS-DVR “space,” and serve up from that one copy? What’s the difference, really? The difference is that at this point the RS-DVR would not look as much like a DVR, and the courts would have a harder time analogizing to one (unless, in the future, DVRs in the home get petabytes of capacity and dozens of tuners, which is technically feasible). So in the meantime, expect Cablevision to employ artificial limits and inefficiently use its equipment just to get around the arbitrary contours of copyright law.

A Short History of Mises Institute Publishing

I’ve posted before on the phenomenon of publishers offering free, online versions of works in addition to printed versions. In A Short History of Mises Institute Publishing (available in audio too), Jeff Tucker provides an absolutely fascinating, riveting account of the monumental work for liberty and sound economics done by the Mises Institute. They have become a publishing phenomenon: putting literally thousands of books, speeches and articles free online–7 terabytes so far, and many more added daily! As Tucker notes:

With 300 books in our catalog, the overwhelming majority of which have been internally published; with an online store that is second to none in the world of pro-liberty publishing;with a website delivering nearly 7 terabytes of data out the door every month to one million unique visitors per month; with nearly the entire corpus of Mises, Rothbard, Hazlitt, Röpke, Hayek, Hutt, Spadaro, Chodorov, Nock, Garrett, Ron Paul, John T. Flynn, Böhm-Bawerk, Menger, Bastiat, Hahn, Say, and Wicksell, among many others, in print and available for free download or purchase in hardcopy; with the complete run of seven journals online, many of which would have otherwise sunk without a trace; and with 30,000 rare books in this physical library begging to be scanned; it is fair to say that the Mises Institute has achieved a level of productivity and effectiveness that none of us imagined possible in the past.By the way, people wonder what 7 terabytes means. To get an idea of how much that is, this is nearly equivalent to the entire printed collection of the Library of Congress. Another measure: it is 335,000 trees made into paper and printed. This is a volume of information in the material world that would have been inconceivable even a decade ago.

This is why I consider Lew Rockwell and the Mises Institute (and all its wonderful, enthusiastic, sincere, liberty-loving people, including Jeff Tucker) to be, without exaggeration, the most important force for liberty in the world today.

Bessen & Meurer: Patents Do Not Increase Innovation

In Bessen & Meurer latest patent study (“Do patents perform like property?,” Academy of Management Perspectives, pp. 8-20 (August 2008)), the authors conclude: “intellectual property rights have at best only a weak and indirect effect on economic growth” and “The direct comparison of estimated net incentives suggests that for public firms in most industries today, patents may actually discourage investment in innovation.”The entire conclusion is below. See also Keith Sawyer’s post, Do Patents Increase Innovation?, who note: “In 1999, for example, the total profits from patents in all U.S. public firms (excluding pharma) was about $3 billion, but their litigation costs associated with those patents were a whopping $12 billion!

The historical evidence, the cross-country evidence, the evidence from economic experiments and estimates of the net benefits of patents all point to a marked difference between the economic importance of general property rights and the economic importance of patents or intellectual property rights more generally. With the cross-country studies in particular, the quality of general property rights institutions has a substantial direct effect on economic growth. Using the *same* methodology and in the *same* studies, intellectual property rights have at best only a weak and indirect effect on economic growth.

The research also suggests a reason why patents differ from general property rights in motivating economic growth overall: the positive effects of patents appear to be highly contingent. Differences in technology and industry seem to matter a lot for twentieth century R&D managers and also for the innovative performance of nineteenth century world’s fair exhibitors. Some results from the cross-country studies suggest that less developed countries have a harder time realizing benefits from patents or that countries that participate actively in international trade may benefit more.

Some of these differences arise because of differences in the relative costs and effectiveness of alternatives to patents. Patents may contribute more to economic growth in the pharmaceutical industry than they contribute in electronics industries because the latter can more effectively earn returns on innovation through lead time advantage, sales of complementary products and services, etc. Other differences may arise because of subtle differences in patent institutions. During the nineteenth century, the US patent institutions performed differently (and perhaps better) than their British counterparts. Patents are likely to work better in the pharmaceutical industry because patents on chemical entities have much sharper boundaries than, for example, patents on software.

Of course, the economic effectiveness of all forms of property depends on details of the supporting institutions this is evident from the disparate growth paths of Soviet Bloc economies. But the economic effectiveness of patents may be much more sensitive to the details of the relevant institutions than are general property rights. Perhaps this is because patent law may be much more specialized, complex and sophisticated than, say, real property law and, so, effective institutions may be more difficult to develop and maintain.

In any case, the empirical economic evidence strongly rejects simplistic arguments that patents universally spur innovation and economic growth. The direct comparison of estimated net incentives suggests that for public firms in most industries today, patents may actually discourage investment in innovation.

The Tao of IP

When I saw the title of this Cato podcast–“Intellectual Property Versus Reason” (October 20, 2008)–I was hopeful and interested. Then I noticed it’s an interview with the Nobel-winning, er, physicist Robert B. Laughlin, author of the new book, The Crime of Reason and the Closing of the Scientific Mind. Physicists and engineers are notoriously scientistic (see Yet More on Galambos; also Galambos and Other Nuts, Libertarian Activism–comments and C.P. Snow’s “The Two Cultures” and Misesian Dualism). But, still, the title implied Laughlin thinks IP is, well, unreasonable (Cato scholars’ IP positions seem to be mixed and largely utilitarian).As I listened to the 16-minute podcast, I had a succession of impressions. For the first 6 or so minutes, I could not tell whether Laughlin was pro- or anti-IP. I know a bit about IP but I was not even sure what he was talking about much of the time. Oh, Laughlin is articulate enough–he speaks slowly, ponderously, and often pauses dramatically, as if struggling to pick just the right Deep Thoughts in response to Serious Questions–and even pronounces a French word or two properly. But soon it becomes obvious that his views on IP are just a mess, and he is, indeed, infected by the scientistic virus that physicists are susceptible to.

It soon become clear that Laughlin believes there is a tension between economic prosperity (which requires IP) and “human rights” (in particular the “right to learn,” which IP impinges on). At first he seems to be very concerned that human rights will “give way” to IP and economic prosperity–even pessimistic about this–even while he himself seems to grant that we ought to be concerned about prosperity–and, thus, IP. So he’s pessimistic that IP is infringing the human right to learn, yet he not only thinks nothing can or will be done to stop this–after all, we’ve now entered the information age, where IP rights are even more important to economic prosperity–he even seems to think that we should not abolish IP. We need to “supply the data” to “the legislature” (Congress), and achieve the right “balance”, even though he admits he doesn’t know what the right solution even is–it’s “above my pay grade.” Naturally, then, he doesn’t blame the Congresscritters for how they have voted to date on IP issues, whether pro or con; their efforts are sincere and based on the best data possible. One wonders why he is depressed, or why he even wrote a book. I guess Nobel laureates can sell just about anything they slap their name on, which is reason enough.

I can’t bring myself to read his book now, but from this interview it seems apparent that he holds a number of erroneous views: that both the state and the democratic process are legitimate, and that legislation is the right way to make law; that IP is pro-property rights; that IP is necessary for and promotes prosperity; that there is a conflict between human rights and economic rights; not to mention his implicit scientism. In his confused attempt to weigh in on legal and economic and policy issues he reminded me a bit of physicist Fritjof Capra’s New Agey The Tao of Physics (hence the title of this post).

A few other things to note: from the Cato description of his book:

“Though we may feel inundated with information today, Nobel laureate Robert Laughlin argues that intellectual property laws and government security demands are increasingly restricting access to the most useful information. Government rules and businesses’ legal pressures to sequester information threaten the development of new knowledge, he says. The rights of free people to investigate their world are threatened. Laughlin’s fresh perspective and light, sometimes whimsical, bent do not mask the central warning of his readable book: that we risk bequeathing our heirs a world where knowledge is criminalized and our intellectual tradition of unfettered inquiry is lost.”

So he sees IP as “criminalizing” knowledge … yet is not completely opposed to it. So we need only a reasonable degree of criminalization of knowledge. I guess Laughlin chooses IP over reason… sometimes.

Publishers Weekly (from the Amazon.com listing) identifies some of the weaknesses in Laughlin’s book:

“The provocative premise of this short book is that even as we appear to be awash in information, governments and industry are restricting access to knowledge by broadening the concept of intellectual property to include things as diverse as gene sequences and sales techniques. According to Laughlin, the right to learn is now aggressively opposed by intellectual property advocates, who want ideas elevated to the status of land, cars, and other physical assets so the their unauthorized acquisition can be prosecuted as theft. With examples drawn from nuclear physics, biotechnology and patent law, Laughlin, a Nobel laureate in physics, paints a troubling picture of a society in which the only information that is truly valuable in dollars and cents is controlled by a small number of individuals. But while Laughlin poses urgent questions, he provides neither in-depth analysis nor potential solutions. Many intriguing arguments–for example, that electronic technologies such as the Internet, which inundate us with useless information, are not instruments of knowledge dissemination at all but agencies of knowledge destruction–are offered but none are usefully explored.

So Laughlin views IP as “restricting access to knowledge”–if he instead viewed IP as an infringement of property rights, he would have a harder time making the mistake of thinking IP is on the side of economic prosperity and property rights. The “right to learn,” whatever that is, is not any primary kind of right, and would seem to be jeopardized by government education and propaganda more than by patent and copyright. Again, IP undercuts and infringes property rights, and harms innovation (see here, here, here, here)–if he realized this, he would not set up the false alternative of prosperity versus human rights. And the idea that IP is more important in the information age is also flawed.

Scribd Version of Against Intellectual Property

I love Scribd–what a cool new service for online books.

Does the Piracy Paradox apply for Patents?

From Patently-O:Does the Piracy Paradox apply for Patents?

“A 2006 paper by Kal Raustiala (UCLA) and Chris Sprigman (UVA) titled the Piracy Paradox discusses intellectual property and the fashion industry. The authors conclude that the legal ability of manufacturers to create knock-off versions of fashion designs actually promotes innovation and investment in that industry. Similar phenomena have been explained in other industries. In music, for instance, some studies have shown that peer-to-peer file sharing of copyrighted work actually increases sales because of the increased popularity of the artist. Since the dawn of radio, record companies have paid stations to broadcast their music – even though the broadcast would be considered infringement.

“My question is whether there are patent specific examples of this process going on? Are there times when ‘piracy’ of a technology actually encourages further R&D?”

Shaping “Nuanced” Patent Injunctions

See the Patently-O post Shaping Nuanced Patent Injunctions: Broadcom v. Qualcomm, discussing a case in which the Federal Circuit “affirmed a permanent injunction against Qualcomm – finding that the district court acted within its equitable discretion and properly followed the injunctive relief guidelines set forth by the Supreme Court in eBay v. MercExchange (2006).”The post notes: “This decision is insightful in how it moves the proper focus from whether an injunction should issue to the more nuanced issues of how to shape the injunction in a way that best serves the public interest while still protecting property rights.”

Hmm, public interest “versus” property rights? How anyone can think patent law is compatible with property rights is beyond me.

Re My Objections to IP: Nevermind

Since IP causes only about $40 billion or so a year damage to the economy, I hereby withdraw my objections. That amount is obviously trivial, in view of trillion-dollar bailouts, trillion-dollar wars, scores of trillions of dollars of debt. And as for the $80 billion tax-funded innovation prize fund–chicken feed. Let ‘er rip!

An Austrian Bailout Plan

Now here‘s a sensible approach!

An Austrian Bailout Planby Mark Thornton

Austrian Bailout Package–Part A

1. Suspend Basil II regulations (to at least 4/2/09)
2. Cancel FDIC insurance on all demand deposits after 1/1/09.
3. Increase FDIC premiums on short term time deposits of less than one year.
4. Make interest earned (starting 1/1/09) on bank time deposits and non-governmental, non-agency, and non-authority bonds tax free (not demand deposits and MMMF).
5. Convert Fannie Mae and Freddie Mac’s status from conservatorship into receivership.
6. Convert AIG’s status from government owned to receivership.
7. Cancel the Primary Dealer Credit Facility (PDCF) and the Term Securities Lending Facility (TSLF) at the end of the announced program (January 30, 2009).
8. Announce that the Federal Funds rate will be allowed to “float” at market rates starting January 30, 2009.
9. Announce that the Federal budget will be prorated beginning with the fiscal year starting 10/1/08 including all defense spending and transfer payments.
10. Restore constitutional monetary status to gold and silver to act as an alternative medium of exchange (no capital gains taxes).

Hatch’s

So America is not content to be the World’s supercop in military matters. It’s bad enough we extend our anti-trust and tax and drug laws extraterritorially. Senate Moves To Protect U.S. IP Overseas reports:

Senate Finance Committee Chairman Max Baucus (D-MT) and Sen. Orrin Hatch (R-Utah) introduced the International Intellectual Property Protection and Enforcement Act of 2008, legislation meant to crack down on the theft of U.S. intellectual property around the world.The bill would compel the U.S. Trade Representative to develop action plans for countries on the piracy “Priority Watch List,” and empower the president with enforcement tools if corrective actions are not taken. It would also ensure the placement of officials at foreign embassies tasked with enforcing American IP rights.

(See also my post IP Imperialism (Russia, Intellectual Property , and the WTO))Uh-oh: I guess poor Australia–which is considering overhauling its patent laws to reduce the harm on innovation–is about to be in the US Government’s crosshairs!

Federal Circuit Affirms that Lucent’s $1.5B Patent Victory is Gone

Oh well, no harm, no foul. All’s well that ends well, and all that.

Patent Crisis and The Age of Open Source Ideas

Interesting post by Alex Iskold, Patent Crisis and The Age of Open Source Ideas.

The Death of Patents

No, unfortunately, the patent system is not dying. The title refers to deaths caused by the patent system. According to the BBC News science report, Patent system ‘stifling science’, findings by the Canada-based Innovation Partnership indicate that “Life-saving scientific research is being stifled by a ‘broken’ patent system”. “‘Blocking patents’ are delaying advances in cancer medicine and food crops,” according to the report.While “[t]he traditional view is that strong patent protection stimulates innovation, reassuring companies that it is safe to invest in research without fear of being stung by rivals,” this strategy “deters grass roots research in universities.” As an example, “Work on the BRCA1 and BRCA2 genes that can cause breast cancer has been held up by legal disputes over patents held on the genes by Myriad Genetics, a biotech firm based in Utah, US. … Meanwhile, patients in European countries were denied access to the cancer screening kits, because national health services were unwilling to meet the cost.”

Flash of Genius

The new movie, Flash of Genius, from its previews, looks awful–glorifying intermittent windshield wiper inventor Robert Kearns‘s use of the patent system to shake down the auto industry for $30M.After all, it was already well known that existing windshield wipers were problematic–for example, “the blades often scraped across a windshield that was nearly dry. The resultant friction made an annoying sound and tore up the blades’ edges.” The solution was also obvious: “A solution that occurred to a number of inventors was an intermittent system one that would wipe, pause for a few seconds, then wipe again.”

In 1963, Kearns came up with one way to do this, patented it, and eventually sued Ford and Chrysler for using a similar design. “Ford’s legal team argued that Kearns’s patents were overly broad and therefore invalid. As Ted Daykin, a former Ford engineer, told The New Yorker in a 1993 article, ‘An electronic timing device was an obvious thing to try next. How can you patent something that is in the natural evolution of technology?’ The intermittent wiper, according to Daykin, was really the work of dozens of anonymous engineers at Ford, Trico, and other firms.” Kearns won anyway–“$10.2 million from Ford in 1990 and $18.7 million from Chrysler in 1995, though both juries determined that the companies had not intentionally infringed on his patents.”

This movie is sure to annoy. It’s no wonder Hollywood likes it: it’s pro-IP and anti-capitalism. But Randians have a dilemma–it pits one hero (innovator, patent holder) against another (industry)!

Update: GREAT comment on this at TechDirt.

Shostak on Why The Bailout Won’t Work

Great piece by Frank Shostak, chief economist of M.F. Global and one of the best Austrian economists around: Can the Rescue Plan Fix the US Economy?, on LewRockwell.com.

Kinsella Interview on Lew Rockwell Show podcast: Intellectual

A fifteen-minute interview by Lew Rockwell: Podcast #32; MP3 file (8.2MB). As Lew’s site describes it, “Stephan Kinsella podcast on phony rights vs. real ones.” We discussed mainly the moral, libertarian, propertarian, and state-related aspects of patent and copyright, and why there has been confusion about IP among libertarians.More detailed discussion of these issues can be found on my libertarian publications page; see also my monograph Against Intellectual Property; and my speech and presentation, The Intellectual Property Quagmire, or, The Perils of Libertarian Creationism.

Cory Doctorow on Giving Away Free E-Books and the Morality of

Insightful and interesting comments by Cory Doctorow (and surprisingly sound, given that Doctorow unfortunately favors socialized medicine (see this Free Talk Live interview):

Why do you give away your books?Giving away ebooks gives me artistic, moral and commercial satisfaction. The commercial question is the one that comes up most often: how can you give away free ebooks and still make money?For me for pretty much every writer the big problem isn’t piracy, it’s obscurity (thanks to Tim O’Reilly for this great aphorism). Of all the people who failed to buy this book today, the majority did so because they never heard of it, not because someone gave them a free copy. Mega-hit best-sellers in science fiction sell half a million copies in a world where 175,000 attend the San Diego Comic Con alone, you’ve got to figure that most of the people who “like science fiction” (and related geeky stuff like comics, games, Linux, and so on) just don’t really buy books. I’m more interested in getting more of that wider audience into the tent than making sure that everyone who’s in the tent bought a ticket to be there.

Ebooks are verbs, not nouns. You copy them, it’s in their nature. And many of those copies have a destination, a person they’re intended for, a hand-wrought transfer from one person to another, embodying a personal recommendation between two people who trust each other enough to share bits. That’s the kind of thing that authors (should) dream of, the proverbial sealing of the deal. By making my books available for free pass-along, I make it easy for people who love them to help other people love them.

What’s more, I don’t see ebooks as substitute for paper books for most people. It’s not that the screens aren’t good enough, either: if you’re anything like me, you already spend every hour you can get in front of the screen, reading text. But the more computer-literate you are, the less likely you are to be reading long-form works on those screens that’s because computer-literate people do more things with their computers. We run IM and email and we use the browser in a million diverse ways. We have games running in the background, and endless opportunities to tinker with our music libraries. The more you do with your computer, the more likely it is that you’ll be interrupted after five to seven minutes to do something else. That makes the computer extremely poorly suited to reading long-form works off of, unless you have the iron self-discipline of a monk.

The good news (for writers) is that this means that ebooks on computers are more likely to be an enticement to buy the printed book (which is, after all, cheap, easily had, and easy to use) than a substitute for it. You can probably read just enough of the book off the screen to realize you want to be reading it on paper.

So ebooks sell print books. Every writer I’ve heard of who’s tried giving away ebooks to promote paper books has come back to do it again. That’s the commercial case for doing free ebooks.

Now, onto the artistic case. It’s the twenty-first century. Copying stuff is never, ever going to get any harder than it is today (or if it does, it’ll be because civilization has collapsed, at which point we’ll have other problems). Hard drives aren’t going to get bulkier, more expensive, or less capacious. Networks won’t get slower or harder to access. If you’re not making art with the intention of having it copied, you’re not really making art for the twenty-first century. There’s something charming about making work you don’t want to be copied, in the same way that it’s nice to go to a Pioneer Village and see the olde-timey blacksmith shoeing a horse at his traditional forge. But it’s hardly, you know, contemporary. I’m a science fiction writer. It’s my job to write about the future (on a good day) or at least the present. Art that’s not supposed to be copied is from the past.

Finally, let’s look at the moral case. Copying stuff is natural. It’s how we learn (copying our parents and the people around us). My first story, written when I was six, was an excited re-telling of Star Wars, which I’d just seen in the theater. Now that the Internet the world’s most efficient copying machine is pretty much everywhere, our copying instinct is just going to play out more and more. There’s no way I can stop my readers, and if I tried, I’d be a hypocrite: when I was 17, I was making mix-tapes, photocopying stories, and generally copying in every way I could imagine. If the Internet had been around then, I’d have been using it to copy as much as I possibly could.

There’s no way to stop it, and the people who try end up doing more harm than piracy ever did. The record industry’s ridiculous holy war against file-sharers (more than 20,000 music fans sued and counting!) exemplifies the absurdity of trying to get the food-coloring out of the swimming pool. If the choice is between allowing copying or being a frothing bully lashing out at anything he can reach, I choose the former.

IP Attorneys Increasingly Getting Their Own Patents And Suing

Great post on TechDirt:

IP Attorneys Increasingly Getting Their Own Patents And Suing

from the joining-in-the-party dept

A year ago, the story of patent attorney Scott Harris started making headlines. While being an IP attorney at a prestigious law firm, on the side, Harris had been getting his own patents, and then using a shell organization to sue companies for infringing. Some of the companies sued were represented by the firm that Harris worked for. Talk about a conflict of interest, right? Well, reporter Joe Mullin has discovered that these sorts of things are increasingly common. Various IP attorneys involved in patent hoarding lawsuits are seeing how lucrative it can be to just get a patent and sue — and so they’re eagerly jumping into the game themselves. Mullin dug up a bunch of cases of IP lawyers getting their own patents, and then suing over those patents, outside of their day job. Not surprisingly, many of the patents seem highly questionable (a patent on a car entertainment system that has a radio in front with DVD video in back.)

However, the bigger question is the conflict of interest. First, with lawyers getting their own patents, there are always going to be questions about whether any of the patents are really the work of clients rather than the lawyer themselves. In fact, in the case of the car entertainment system above, one of the companies that’s been sued over the patent points out that “two diagrams and several columns of text” appear to be directly plagiarized from another company’s patents — who just so happened to be a client of law firm the lawyer worked for. Oops.

The second potential conflict of interest is, as with Harris, about suing companies that are represented by the law firm the lawyer in question works for. In some cases, the lawyers dance around this. For example, in one of the cases Mullin discusses, the lawyer sued three of the four companies who own CareerBuilder. The lawyer did not sue the fourth owner, the Tribune Company. Why? While there’s no official explanation, it’s not hard to figure it out. The Tribune Company is a client of the law firm the guy works for. The other three owners are not. So, basically, the Tribune Company got lucky that the guy with the patent just happens to work for a law firm it uses. Perhaps the law firm sees this as a way of “locking in” clients: leave us, and one of our lawyers will sue you for patent infringement.

Either way, the article is a pretty depressing look at the state of patent law and patent lawyers these days.

IP Converts — Authors and Google

On the Sept. 3, 2008 show of Free Talk Live, the excellent libertarian radio program, there was an interesting discussion with a caller who is an author and has changed his mind about IP–he realized that by giving online versions of his book away on Amazon, he can sell more copies of it.The recorded show is here; the IP discussion starts at the beginning, with the first caller, and lasts for a few minutes.

In other news, Google’s new Chrome browser “is based on the open-source WebKit architecture, and Google claims that its code will be open source, so it’s unlikely that the company is trying to corner the market on browser functionality, since innovations are eminently copyable.” I.e., Google’s not trying to lock Chrome’s code down with copyright. It’s not afraid of competition.

Copyright and Cambridge U. Press

I noted previously that my Against Intellectual Property and Boldrin & Levine’s Against Intellectual Monopoly are both selling just fine, even though both books are available for free online. Now it’s no surprise the Mises Institute publishes works in free, online versions whenever possible; it doesn’t hurt sales and anyway, their mission is to spread the freedom philosophy and sound economics.But I was a bit surprised that Boldrin & Levine’s publisher, Cambridge University Press, would allow them to put a free version of the book online; my experience with Oxford University Press (1, 2, 3, 4) would have led me to suspect publishers would be reluctant to permit this.

But as explained in the commments here, although they were not able to prevent the work from being protected by traditional copyright, the authors were able to persuade Cambridge to permit a free online version. Heroic! (The carping of some that they were “hypocritical” because the book has a copyright is ridiculous.)

When I inquired of Levine how they were able to manage this feat, he told me they simply bargained for it. The clause they got is as follows: Clause 3(a) grants to Cambridge “sole and exclusive right and license to produce and publish and itself further to license…” with some exceptions. Clause 3(b) reads: “(b) Notwithstanding clause 3(a) above, on first publication of the Work, the Author shall have the non-exclusive right to post the files of the published Work on his/her own and/or his/her institutional website subject to the inclusion of the copyright notice, full acknowledgement to Cambridge University Press and an appropriate hyperlink to the Cambridge catalogue.

In response to my surprise they were able to negotiate this, Levine told me that “academic journals give that as a matter of course – maybe for an academic publisher it isn’t such a big deal? They didn’t fuss about it, and it didn’t sound like it was the first time they did it.”

Could it be that some publishers are starting to get it?

Demopublicans United on IP

Replying to IP practitioner Russ Krajek’s post McCain vs Obama on IP Issues: There is No Contest:

Russ,A few comments.

You write: “All the participants agreed on the same underlying principle: intellectual property rights are important and should be protected. In general, both sides agreed on the general goal of more rigorous patent examination that would, in theory, result in stronger patents. … the general recognition of the importance in IP protection and its role in the economy was emphasized. … The ‘problem’ is that patents being issued today do not generate the confidence and respect in the public that, as a matter of public policy, one would expect.”

Why would one “expect” this from the government? The state can’t do anything well except destroy and damage. Why would anyone expect it to do anything constructive well?

“The bad press and attacks on patents in general have eroded confidence in all patents.”

Why is this a bad thing? If patents are a net harm on society, why shouldn’t people be skeptical of them? Why isn’t it better that patents are weak?

“An inventor who obtains a patent cannot enjoy as much of the benefits of the patent as public policy would dictate.”

Perhaps true; but why would anyone think the level of benefits that public policy “would dictate” are justifiable?

“Patents should be issued for inventions which are new, useful, and fully disclosed. Inventions that do not meet all three requirements should not be issued. Seems pretty simple, but the execution of the solution is down and dirty and decidedly not glamorous.”

It doesn’t seem simple to me. These requirements are purely arbitrary, unscientific, non-objective, legislated criteria, administered by a federal bureaucracy and federal courts–i.e., by a bunch of government employees. Why would anyone think this could ever be simple or just?

“I was glad to know that advisors to both candidates had a firm grasp of the issues and fundamentally agreed that strong Intellectual Property rights would be good for the country as a matter of policy.”

Why do you assume that strong IP rights are “good for the country”? I mean, how do you know this? Why do IP practitioners always assume this–just because it is in their interest for the patent system to stay in place does not mean it is good for the country. No one can deny that the patent system imposes costs on the economy. How do its proponents know that the benefits are greater than the costs? Russ, what are the net benefits, in dollar terms? What are its benefits? Its costs? If you don’t know, how do you know the net is positive?

It’s the Pattern Privilege, Stupid

As noted in Patent Reform Touches DNC in Denver,

Rep. Zoe Lofgren, D-Calif., told a crowd in Denver on Tuesday that it is crucial for Congress to pass legislation to update the U.S. patent system next year … A proposal that would curb judicial “venue-shopping” for favorable courts is critical as is language to address patent abuses, she said. “How do you legally set a framework that prevents abuses and allows for a vigorous system that protects intellectual property?” Lofgren asked aloud. “It’s not easy to come up with solutions.”

Right. Call me crazy, but it almost seems like it’s impossible to avoid “abuse” if one sets up a state-granted innovation-monopoly system! Hmm, I wonder how we could avoid that abuse… I wonder….

Aharonian on Patent Trolls — The Invalid Presumption of Patent Legitimacy

My comment posted on this Patently-O blog post: Greg Aharonian Discussed the WSJ’s “Idiotic Article on Patent Tr-lls”Aharonian writes: “Worse, this paragraph completely betrays free markets (something the Journal is glad to do when it is in the interests of its big company buddies), because it forgets the fact that a patent is an asset created by the government in exchange for an inventor’s public disclosure of a new and useful invention. When the asset is so created, there is absolutely nothing freakin wrong with people doing with patents what they do with all other financial assets – buying, selling and exploiting them. To attack this practice is to attack free market economics.”

In a sense, I agree with Aharonian: IF patents are a legitimate property right, then there is nothing wrong with using them. And Aharonian is right that there is nothing any worse about “trolls” than any normal patent holder. I have noted as much elsewhere: Patent Trolls and Empirical Thinking (“patent law simply does not require inventors to make or produce their inventions. And to attack “patent trolls” as somehow worse than those who do is confused”); The Coming Software Patent Apocalypse (“given a patent system, there’s nothing wrong with patent trolls. It’s a natural outcome and use of the system. Those who favor the system should stop whining about its predictable results”); Patent Law: Baby Steps (“One of their concerns [of the “Coalition for Patent Fairness” members] is “patent trolls – companies that exist primarily to make money from patents through litigation instead of commercialization”–but as I’ve noted, the hostility against patent trolls is misplaced. They are no different than any other patentee who takes advantage of the corrrupt and unjust patent system.”).

But in another sense, I disagree with Aharonian, because it is not true that patents are a legitimate property right. In fact, they are at odds with genuine property rightss. (See my Against Intellectual Property; and Intellectual Property and the Support of the State). To expect the welfare-warfare state–which taxes, regulates, murders, invades, bombs, hampers, lies, steals, and jails, which impoverishes us and hampers the economy, which penalizes innocent behavior and wastes trillions of dollars–to expect this agency to “create” legitimate property rights or to add “wealth” to the economy–and by setting up a government bureaucracy to grant monopolies to applicants, under the oversight of the federal courts–is naive and confused beyond belief.

Anti-IP Book Sales Prove Their Own Thesis

As noted previously, both my and Boldrin & Levine’s recent anti-IP books are selling well on Amazon–despite being offered for free online.Jeff Tucker makes a similar observation on the Mises blog:

Kinsella VindicatedYou will note that Kinsella’s book Against Intellectual Property is the #2 bestseller in the store. This is despite its having been online for six years and remains so, in two formats. What a way to demonstrate a thesis. If you have something that is valuable to others, people might be willing to pay for it.

Troll Tracker Lands Job Fighting Patent Trolls!

In previous posts (Troll Tracker’s Identity Revealed 🙁 and Troll Tracker [Why People Hate Lawyers]), I discussed threats and bounties put up by patent attorney Ray Niro against the then-anonymous Troll Tracker (who repeatedly highlighted various patent lawsuits Niro was filing), which finally resulted in Troll Tracker being exposed as an in-house patent attorney at Cisco, Rick Frenkel. Frenkel was then sued for defamation by two lawyers in Texas, based on comments he had made about them on his blog.Good news: as reported in Troll Tracker blogger Rick Frenkel moves to Wilson Sonsini, he has “left Cisco Systems and moved to Wilson Sonsini Goodrich & Rosati, a top Silicon Valley law firm, where he is of counsel. ‘We were impressed with his breadth and depth of experience,’ said Michael Barclay, an IP litigation partner at Wilson Sonsini and a PTT reader, natch. ‘Rick has developed a lot of knowledge and insights about patent trolls that will be helpful to our clients who have to deal with them.'”

Good! Go get ’em, Rick!

See also Cisco Blogger Decamps to Wilson Sonsini. Regarding the related Scott Harris matter, see Scott Harris v. Fish & Richardson litigation is settled (discussed in my Troll Tracker [Why People Hate Lawyers] and A Tangled Web of Patent Rights).

Re the defamation suit: see East Texas lawyer subpoenas Google for more info about PTT and Patently-O blogs.

“Patent Hawk” Sues Microsoft, Former Client, for Patent Infringement

As reported on The Patent Prospector blog,

Inventor Gary Odom, founder of Patent Hawk, has asserted 7,363,592 against Microsoft. ‘592 claims a feature of the tool groups used in the Office 2007 tool ribbon.

Now, as noted on the Patent Prospector blog, “Microsoft was a Patent Hawk client for years. They had every opportunity for friendly [sic] discussion. The words ‘patent tax’ were used, and Microsoft chose a path consistent with their corporate culture.”

A few observations. First, it is striking that Odom is suing is former client. Second, Patent Prospector whines that Odom just wanted a “friendly” discussion, and big ole’ mean Microsoft wouldn’t play ball. Hint: it’s not “friendly” when you threaten to sic the state thugs on someone if they don’t pony up. If the thugs in power didn’t make it legal, it would be called “extortion.”

Third, Patent Prospector implies that there’s something wrong with viewing such a threat as a “tax”. There’s not. That’s exactly what it is. Odom threatens his former client with severe financial damage by the state’s thugs, and they call it a “tax.” Hey, unfair! They are supposed to just pay their former attorney! Patent Prospector whines that Microsoft’s “corporate culture” is a problem here, in viewing such demands as a tax. Would that more companies would openly call these extortortionate demands what they are.

But maybe we’re a bit unfair to just take Patent Prospector’s word for what really happened between Patent Hawk/Odom and Microsoft. Oh, wait–Patent Prospector is also apparently run by Patent Hawk/Odom.

Correction: In the original post, I referred to Odom as a patent attorney. My assumption was wrong. After someone suggested to me Odom was not a patent attorney, but was a patent agent instead, I checked on the PTO attorney/agent roster and could not find him. On his Patent Prospector site, he describes his fellow blogger as a patent agent, but not himself. And on the site for Platinum Patents, his “patent prosecution boutique,” he describes his colleague as a patent agent, and himself as “a pro se prosecutor of his own inventions”. So Odom is apparently a “technical consultant” who advises on a variety of patent-related matters.

I think I just may start asking patent attorneys my company hires to include a little clause in the retainer agreement: “and we promise not to sue you, our client, for patent infringement in the future.”

Incidentally, Odom and I had a disagreement previously about the patent system, in the comments to this post. Odom takes the typpical pro-patent position. Unsurprising given that he is “a former professional economist who drove his interest in technology into a career in computers, electronics, and software development, areas he made his profession for 17 years. Gary is a long-standing member of IEEE and ACM.”

Regarding the typical approach of engineers to policy and their tendency toward scientistm, see my posts Engineers’ Syndrome and Galambos and Other Nuts.

Update: See Techdirt’s post by Mike Masnick, Microsoft Sued Over User Editable Toolbar Patent, in particular the comments on the “obviousness” of the claims of the Odom patent. Masnick notes there that Patent Hawk (Odom) has “been known to comment here on occasion, employing the style seen all-too-often among patent system apologists commenting on Techdirt posts: insult repeatedly and broadly, offer no actual points, refuse to actually counter anything we say, provide absolutely no evidence and (for good measure) insult again.”

For example, as in this previous post about the poor quality of patent applications, where Odom posted: “This little op-ed piece is ignorant tripe, none of it having any factual basis. Nothing but fantasy based on rumor and imagination. Pathetic, really.

Masnick’s reply:

Hi Patent Hawk. Here in the real world, when we disagree with something, we actually make an “argument.” It’s called explaining why something is incorrect and presenting counter evidence.I’ve noticed a pattern when I talk about patents. Most (though, certainly not all) of the folks who disagree with me simply stop by and toss insults and never present a shred of evidence to support their position.

It suggests to me that I’m clearly on the right track.

Indeed! See also Odom’s similar style of engagement–or lack thereof–with me on the comments to this post.

See also my comment on that thread:

Note one of the derisive comments on Hawk’s blog, which concerns this patent’s parent patent:

How about the PARENT patent? #7,036,087 that issued on 04/25/2006.Why didn’t you try to assert this one against micro$oft or others? Or did you? Or was it already invalidated? 🙂

For the record, here are the issued claims from the parent patent #7,036,087.

1. Software from at least one computer-readable medium automatically rearranging at least one tool based upon relative usage frequency of tools within a toolbar group.

2. Software according to claim 1 preventing at least one tool from being rearranged.

3. Software from at least one computer-readable medium automatically rearranging at least one group of a tools on a toolbar based upon aggregate usage frequency of tools within a tool group compared to another group.

4. Software according to claim 3 preventing at least one group from being rearranged.

(Cross-posted at Mises blog.)

Against Intellectual Monopoly against Against Intellectual Property

Right now on Amazon, in the “Intellectual Property” legal books subcategory, my Against Intellectual Property (Amazon link) is ranked #22, and Boldrin and Levine’s Against Intellectual Monopoly (Amazon link) is #48. Eat my dust, suckas! :)Interestingly, both books are available for free online, yet the print editions are still selling well.

Patent Reform: More Derision

A patent attorney friend had this idea:”Perhaps the Supreme Court and CAFC ought to simply make its opinions re UN-patentability more derisive. That might really go a long way. Maybe have Scalia write things like: ‘Really, a new gas pedal, REALLLY??? Give me a break even I could have ‘invented’ that. Don’t bring me that weak s@#t, meat*.'”

*Bull Durham paraphrase

Declaratory Judgments and Patents: A Proposal

Under the Declaratory Judgment Act, if you are threatened with a patent infringement suit, you can file a “Declaratory Judgment” action to get the court to declare the rights and settle the matter. The MedImmune decision made it easier for licensees to challenge the validity of patents they had previously licensed with a DJ action.See The Scream, for a recent example: in this case, a potential infringer failed in its attempt to to institute a declaratory judgment action:

“Prasco got so paranoid about infringing patents from competitors Medicis Pharmaceutical and Imaginative Research Associates that it filed a declaratory judgment motion. The problem for Pasco was that Prasco wasn’t even on the defendants’ radar screens. The district court pitched the case, and the appeals court concurred.”

So here’s my proposal. I welcome any comments:

The Declaratory Judgment Act should be expanded to make it easier for potential infringers to bring an action against a patentee if there is any doubt by the potential infringer. For example, if A is worried about violating B’s patent, A could request B to provide a written exoneration statement that it does not intend to sue A or request a license, for a given product. If B does this, B is estopped from ever suing A for patent infringement with respect to that product–B waives his right. If B refuses to provide the statement within 30 days (say), then A has a right to seek a DJ. Better yet A provides B a description of its product and demands an exoneration statement; if B does not provide one, it releases its right to sue A. This would give B 30 days to decide whether to admit to A that it intends to sue. If it makes this admission, this triggers A’s right to seek a DJ.

One person I ran this by asked why the patentee can’t just always reply with a ridiculously high license offer. The answer is: because that opens the patentee to a DJ action. The patentee would have a dilemma: say no, and give up the right; or say yes, and be (maybe) sued. To my mind, this puts them in the same position as potential infringers: potential infringer never knows when the patentee might simply decide to sue him… or not. If he does, the accused infringer could face millions in legal fees. So he has to sit there, hoping not to get sued.

In my proposed system, the potential infringer can turn the tables: give the patentee, who after all is sitting on a legal right to intimidate–give him a choice, make him decide whether he will use it or not. At least say “maybe”, and give the infringer the right to sue for DJ. So the patentee is not ready for such a suit? He can’t handle it? Aww, poor patentee, sitting there at the mercy of potential infringers. Just like they are at his mercy!

A patent attorney friend comments:

“Interesting idea – allow the potential infringer to create the “case or controversy” with its request for exoneration rather require some act by the patent holder. Wouldn’t this effectively allow Federal Courts to give advisory opinions on patent infringement? I guess you could argue that there is still a “case or controversy” under Article III. I think the potential infringers could abuse such a procedure by burying the patent holders with requests for multiple products or variations of products and by referring to multiple patents. Then again, patent holders can (and do) abuse our current system by threatening and asserting multiple patents against potential infringers.”

Tabarrok Review of Against Intellectual Monopoly

On Marginal Revolution, Alex Tabarrok reviews Boldrin & Levine’s Against Intellectual Monopoly. According to Tabarrok, the book “is a relentless, pounding, take no prisoners attack on patent and copyright law.  It joins Lessig’s Free Culture and Heller’s The Gridlock Economy as an instant classic and a must-read on these issues. “I don’t know much about Tabarrok but as he has published in the libertarian journal Reason Papers, in The Free Market, and has writen some libertarian-ish sounding books published by the libertarian Independent Institute (and positively reviewed in the QJAE). So I assumed he was a libertarian. But here, though he seems to recognize some (practical) problems with patent and copyright, he doesn’t want to abolish the state IP system altogether.

You see, “there is a Laffer curve for innovation – more appropriability increases innovation at first but innovation declines when appropriability extends too far.” So though he agrees “with Boldrin and Levine that rent-seeking has put us on the wrong side of the Laffer curve for innovation,” we should not abolish IP either. We need to try to “optimize” it, I suppose. Alas, “there is no invisible hand theorem which moves us automatically to the top of the curve”.

So, though it’s apparently politically impossible ever to “optimize” IP protection, to ensure that we are not “on the wrong side of the Laffer curve for innovation”, and economically impossible to know we had reached this point anyway–nonetheless, wealth-maximizers like Tabarrok soldier on, advocating keeping a state-run IP system. So what should we do? “We need to reduce intellectual monopoly with patent reform, less copyright protection, and a greater use of patent substitutes like prizes.” In the linked post, Tabarrok writes that he “might actually sign on to” The Medical Innovation Prize Fund Act of 2007, introduced by socialist Senator Bernie Sanders … a bill which would not even abolish patents, but which would augment the patent system with a taxpayer-funded “medical innovation prize fund”–starting at “$80 billion per year, and increas[ing] with the growth in GDP“… ! Damn, $80 billion down the drain–puts my own little estimate that the patent system imposes around $28 billion in costs to shame!

Advocating state-funded “prizes” is about as unlibertarian as proposal as you’ll see. And you don’t need to do “marginal analysis” to figure that one out.

***

Update: Tabarrok here advocates using taxpayer funds to pay patentees to give up the patent rights that the federal government grants them. Why not just … refrain from giving them the patent right in the first place? Because that would cause an “underproduction” of “innovation”, by reducing “appropriability.” Whatever. So he has to find a way to keep “appopriability high,” and thus cannot give up a patent monopoly, or a tax-funded “subsitute” for it.

Anyway, note that the annual $80 billion taxpayer-subsidized fund–well, probably at least $82 billion by now, if we account for GDP growth since 2007, as Sanders and Tabarrok want to — is for medical innovation only. This covers only a small slice of all patent innovation–in fact the “prize fund” also covers “non-patented products”–because, due to the patent system, “innovations without property rights are underfunded”. So consider what this means. If we subsidize medical innovation to the tune of $82B a year, there is no reason not to subsidize other patentable–and even non-patentable–inventive areas. Hell, why stop there? Inventions are not the only types of innovation that should be rewarded. What about the copyright fields, like novels, painting, website design? And other areas of innovation, like boat hull designs and databases? And semiconductor maskworks, and trade secrets? And what about more fundamental research in the basic sciences? Let’s see, I think the $82B for medical innovation is at most, say, 10% of all technical innovation. So we need another $820B for other technical fields. And surely the value of the artistic, boat hull design, semiconductor maskwork, and database works are at least on the same order of magnitude as the technicall innovations. So let’s say it’s another $ trillion, for $2 trillion. A year. To start. Now, what about basic science–physics, math, astronomy? Who can put a value on that? Well, I guess we have to–say, another cool $300B. And what about trademarks? My heavens, they are worth at least as much as patent and copyright, so let’s add another trillion. So now we are up to $3.3 trillion. This is in addition to our current $2.5 trillion federal budget. So now the federal budget is, say, $6 trillion, out of about $14 trillion GDP. I’m sure our good marginal economists will assure us that this expenditure will increase appropriability–which will increase innovation, which will have a measurable value–and that this extra value will far exceed the $10 trillion or so that would need to be generated to just break even (assuming 35% of the extra wealth is taxed to replenish the $3.5T annual prize fund). Wow, what a great way to reach a $24 trillion GDP–just increase taxes by $3.5 trillion!! Genius! This never occurred to me. No wonder I’m not an economist.

Update 2:

And get this: according to the text of socialist Sanders’s draft bill, the $80 billion+ taxpayer-funded “Fund for Medical Innovation Prizes” will be administed by a “Board of Trustees for the Fund for Medical Innovation Prizes,” composed of 13 members serving 4-year terms. The 13 members of the Board are:

(1) the Administrator of the Centers for Medicare & Medicaid Services; (2) the Commissioner of Food and Drugs; (3) the Director of the National Institutes of Health; (4) the Director of the Centers for Disease Control and Prevention; and (5) nine individuals to be appointed by the President, with the advice and consent of the Senate, of which: (A) three representatives of the business sector; (B) three representatives of the private medical research and development sector, including at least one representative of the non-profit private medical research and development sector; and (C) three representatives of consumer and patient interests, including at least one representative of patients suffering from orphan diseases.

Each Board member will be paid at the equivalent of an annual salary of about $140k for daily service. They’ll of course have expenses paid, and a staff, and budget to hire experts and consultants.And every year, the Fund gets public funding equal to “0.6 percent of the gross 6 domestic product of the United States for the preceding fiscal year.”

Jesus, this is pure evil.

(Cross-posted at Mises Blog)

Inventors … are like unto … GODS….

Recently, re-listening to the 1991 lecture “Ayn Rand, Intellectual Property Rights, and Human Liberty,” by Objectivist attorney Murray Franck, I was struck by one of quotes given in defense of IP. During his lecture, Franck reads (most of) the following quote approvingly:

“When we come to weigh the rights of the several sorts of property which can be held by man, and in this judgment take into consideration only the absolute question of justice, leaving out the limitations of expediency and prejudice, it will be clearly seen that intellectual property is after all the only absolute possession in the world. The man who brings out of the nothingness the child of his thoughts has rights therein which cannot belong to any other sort of property. Land or chattels are pre-existing in some form, and the rights therein are limited in many ways, and are held in the great service of the world, but the inventor of a book or other contrivance of thought holds his property, as a god holds it, by right of creation; with his silence or inaction the sustenance and advance of millions yet to be may vanish into the great darkness again. His brain has brought the seed out of the infinite, planted it in good soil, tended it with the care that only the sower can feel. Surely the world should not deny him a share of the increase he has brought about, and if he, giving the reversion of his property for all time to his race, is granted the product of his creation for half a score of years, he should surely be secured against being plundered by the law as well as by the lawless.”

Franck says the quote is from one “Forvold Solberg” [sp?], “a former register of copyrights”, but my google-fu indicates that the author is one Nathan Shaler, Professor of paleontology and geology at Harvard from 1869-1906, in his Thoughts on the Nature of Intellectual Property, and Its Importance to the State (1878). It’s perhaps a bit ironic that the author quoted approvingly by an Objectivist in support of IP was a racist, one-time Creationist, and author of a book about some idea’s “importance to the state”!In any event, the latter part of the quote is extremely utilitarian: “the world” should give the innovator or creator “a share” of the wealth he contributes… by giving him a monopoly on it for about ten (“half a score”) years.

The first part–about how inventors are “like gods” calls to mind Rand’s embarrassing justification for smoking–that it’s symbolic of fire “tamed” at man’s fingertips.

The quote also emphasizes very explicitly that Randians and other IP advocates believe “creation” is an independent source of rights: you hold your intellectual creation like a god, “by right of creation.”

I note also that Franck says in the lecture that copyrights should survive in perpetuity.

Incidentally, I graduated from law school in 1991, the year of this lecture, and listened to it soon after, about the time I was beginning to practice IP law (1993 or so). I had recently morphed from an initial flirtation with Objectivism to Rothbardian anarcho-libertarianism. I was very interested in this lecture, since I had long struggled with Rand’s weak justification of intellectual property–which was especially troubling since she claimed thatpatents are the heart and core of property rights.” The lecture failed to convince me; I kept searching for better justifications of IP than I’d seen from Randians. After shooting blanks for a few years, I finally came to the realization that I was unable to find a justification for IP … because it’s unjustifiable and contrary to individual rights. By 1995 I had reached my current views on IP, as can be seen in this exchange between me, Franck, and David Kelley, in the IOS Journal: Murray I. Franck, “Intellectual Property Rights: Are Intangibles True Property,” IOS Journal 5, no. 1 (April 1995); Kinsella, Letter on Intellectual Property Rights, IOS Journal 5, no. 2 (June 1995), pp. 12-13; David Kelley, “Response to Kinsella,” IOS Journal 5, no. 2 (June 1995), p. 13; and Murray I. Franck, “Intellectual and Personality Property,” IOS Journal 5, no. 3 September 1995), p. 7 (all of these except the first are here; I find only this bad link to Franck’s first piece).

Intellectual Property and the Support of the State

An Open Letter to Leftist Opponents of Intellectual Property: On IP and the Support of the StateWe libertarian opponents of IP sometimes perplex IP advocates and leftists. There’s an analogy here to the way libertarians, and especially anarcho-libertarians, are treated by mainstreamers. The press does not know what to do with libertarians, for example. They typically use “libertarian” to denote civil-libertarian ACLU types; while libertarian thinkers and institutions are often described as “conservative.” And “anarchy” is usually associated with chaos, bomb-throwing, or leftist anarchists–rather than with anarcho-libertarianism, which is the only genuine form of anarchism. (See my What It Means To Be an Anarcho-Capitalist.)

There is a common assumption in society that “intellectual property” is a legitimate type of private property right. Thus socialists and leftists oppose IP because of their hostility to private property rights, capitalism, corporatism, and industrialism. Thus, many IP opponents are leftist, anti-capitalist types (for example, Richard Stallman and Eben Moglen are, IIRC, at least somewhat leftist [if I am mistaken in this, I stand corrected; in any event I would welcome email providing backup of this, or examples of other leftist anti-IP arguments).

Likewise, many libertarians accept the fallacious notion that IP is a type of property, and thus support IP because they support property (and because many well-known libertarians, such as Ayn Rand, were strong advocates of IP).

Conversely, those who innately or independently oppose IP, are often classified as leftists, or even believe themselves to be leftists (I believe a similar phenomenon explains why the press tend to be left; they naturally tend to be pro-freedom of speech and freedom of press, but accept the mainstream dichotomy that if you are for personal liberties, you are against economic liberties, and vice-versa; they do not understand that economic and personal liberties are essential and complement each other).

The truth is that the only principled case against IP is the libertarian one, as I’ve argued in my Against Intellectual Property. The problem with IP is that it undermines and infringes on private property rights: it lets some person gain rights of control over the property already owned and acquired by others (for example, a patent or copyright gives the holder a veto right over certain uses others might put their own property (their bodies, paper, raw materials) to). To oppose IP is to uphold private property rights–libertarian rights. To oppose IP while also supporting socialism is a confusion.

And more than this. IP is not possible without legislation; legislation is not possible without the state. And conversely: with a state, you always get legislation; and legislation always leads to a proliferation of bad laws (see my Legislation and the Discovery of Law in a Free Society).

What this means is that not only is your case against IP weakened if you do not adopt libertarian principles and reasoning to undergird it. But if you support the state at all–if you are not an anarcho-libertarian–then you do not really oppose IP. If the state exists, it will legislate, and it will probably enact IP laws, along with plenty of other bad laws. So, if you support the state, you really can’t complain about IP laws. As Ludwig von Mises pointed out, “No socialist author ever gave a thought to the possibility that the abstract entity which he wants to vest with unlimited power—whether it is called humanity, society, nation, state, or government—could act in a way of which he himself disapproves.

IP opponents must not oppose only the “worst excesses” of IP. They must oppose all IP, root and branch, on principled, pro-private property, grounds; and more than this: they must oppose the state itself, and legislation as a means of making law.

So shape up, non-libertarian IP opponents. If you want to make a real case against IP, you must ground it in sound political principles. For some suggested reading, see:

(Cross-posted at Mises Blog)

Digitizing Hansard–House of Commons, 1803-2005

As reported by copyright lawyer William Patry in a comment on his blog:

“… I would like to … point[] to an amazing new UK historical resource. … the project in the UK House of Commons to digitize (or as they say digitise) Hansard, the official record of the House of Commons, for the period 1803 to 2005. I have already used it and found great discussions of copyright issues, including the term of protection, as early as 1803.

P2P Foundation — Against the artificial scarcity of IP law

In Against the artificial scarcity of IP law, Michel Bauwens has a nice summary of some of my own arguments against IP.

Kinsella’s “Against Intellectual Property” monograph, related speeches and articles

Against Intellectual Property My 2001 article is now out in book form: Against Intellectual Property (Mises Institute, 2008). Of course, the Mises Institute offers a free PDF version online as well. And there is also a Scribd version.Those interested in this might also find my article “There’s No Such Thing as a Free Patent” of interest, plus my Austrian Scholars Conference 2008 Rothbard Memorial Lecture, “The Intellectual Property Quagmire, or, The Perils of Libertarian Creationism” (originally titled “Rethinking IP Completely”), which is online. Here’s the audio, the video, and the accompanying Powerpoint presentation (PPT, 32 MB; PDF version, 51 MB). The Google Video version is now available; embedded version below.These and other material are available on my website.

Regret: The Glory of State Law

Techdirt notes in CAFC Judge Regrets Decisions That Resulted In Software Patents that one of the federal judges on the Court of Appeals for the Federal Circuit admits that he was “troubled by the unintended consequences” of the earlier decisions that resulted in the proliferation of software and business model patents. Well at least he regrets it!Now libertarian proponents of state legal systems are for some reason optimistic about the ability of state legislature and courts to promulgate just laws. Objectivist attorney Murray Franck , for example, wrote:

Just as the common law evolved to recognize “trespass by barbecue smoke,” it would have evolved to recognize property in the airwaves and in intellectual creations. But even if it could be established somehow that the common law would never have recognized intellectual property rights, this would not be an argument against such rights. The common law often requires legislation to correct it (for example, in recognizing the rights of women). Indeed it is a myth that the common law evolves to reflect, and that legislation always is in conflict with, the requirements of human nature. The same minds that employ induction and deduction to decide a particular case, making common law, can employ those methods to legislate universal laws.

Hayek also believed that case-law might need occasional “correction” by the legislature (see my Legislation and the Discovery of Law in a Free Society, p. 171). Both Franck and Hayek here express confidence that it is possible for the state–via its courts and legislatures–to issue “just” law. Well, I don’t know about that. Here we have a “bad” judicial interpretation of a “bad” legislated statute. Oh, well, I guess they can at least “regret” it.

(Cross-posted at Mises blog.)

Global Patent Warming!

Senior EPO official warns of tougher patentability standards and higher fees

The latest issue of IAM has now gone to press and will be published at the end of this week. There are a number of highlights, but for the cover story this time around I have gone for a piece written by Ciáran McGinley – the Controller of the EPO and so one of the office’s most senior staff members – on the subject of “global patent warming“. In the article, Ciáran goes into some detail about what the phrase means and what is causing it. “Incoming volumes are increasing per patent office due to globalisation driven by patent propensity and trade,” he writes. “Pendency volumes are also increasing, pretty much independently of what has been happening to pendency times in the different offices. Finally, woolly boundaries are widespread, not just between granted patents but especially among pending applications. It is becoming too much, the system is gradually becoming much warmer. It may not be warm everywhere (yet). It may not be warm in all industrial sectors (yet). But it is definitely temperate.”

I guess anyone daft enough to believe in “global warming” nonsense might also be alarmed at the patent system having problems.

IP Discussion on Free Talk Live

On the July 24, 2008 show of Free Talk Live, the excellent libertarian radio program, there was a lively and interesting IP discussion between host Ian and three callers, on the anti-IP side, and host Mark, on the mildly pro-IP side. It’s interesting to see the sincere but confused and fumbling host Mark utterly unable to articulate a coherent defense, or even definition, of IP, especially in response to intelligent criticism by his callers. Anyway, the show is good and Mark and Ian are both great.The recorded show (28M MP3) is about 2 hours long; the IP discussion starts at the 1:21:14 (or so) mark.

Trademark Ain’t So Hot Either…

David–sure, it is understandable why you are “much more favorably inclined towards trademarks than other forms of intellectual property.” As you say, “It seems to me a good thing that it is possible to tell who you are doing business with, and no downside monopoly”. As I noted here, the primary justification for trademark rights is based on the notion of fraud–that the “infringer” is defrauding his customers by misrepresenting his identity and the source of the goods being sold (see pp. 43-44 of my Against Intellectual Property, pp. 59-63 of Reply to Van Dun: Non-Aggression and Title Transfer, p. 34 of A Theory of Contracts: Binding Promises, Title Transfer, and Inalienability).But this analysis would give a cause of action to customers, however, not to the holder of the mark, who is not defrauded. Moreover, it would protect the customer only when there is fraud. For example, neither the customer (nor Rolex) should be able to sue Rolex knock-off companies, because people who buy fake Rolexes for $10 are not being defrauded. They know they are buying a cheap knock-off. But trademark law does give trademark holders–not customers–the right to sue infringers, regardless of whether there is really fraud to the consumer.

So while we can condemn fraudulent sales to customers, this is not what modern trademark law prevents. Modern state-run trademark law is almost as bad as cpoyright and patent, even if it has a less-objectionable core or origin. The fundamental problem with trademark law is that it is state law–it is created and administed by the state, which is a criminal organization. To expect justice from the state is like expecting a cat to bark.

Thus we have trademark rights granted to trademark holders, instead of to customers, the real victims of fraud. Thus we have a statutory scheme establishing an arbitrary, artificial legal system and an inept bureaucracy to construe and enforce it. Thus we have ridiculous extensions of trademark to cover “anti-dilution” rights, much as the term and scope of copyright and patent are gradually increased over time. And thus we have the government’s courts used like trademark’s more infamous cousins, copyright and patent, to stifle competition and squelch free speech. See, e.g., A Bully-Boy Beer Brewer, Straight Talk; 9th Circuit Appeals Court Says Its Ok To Criticize Trademarks After All; Trademarks and Free Speech; Beemer must be next… (BMW, Trademarks, and the letter “M”); Hypocritical Apple (Trademark); ECJ: “Parmesian” Infringes PDO for “Parmigiano Reggiano”; Engadget Mobile Threatened For Using T-Mobile‘s Trademarked Magenta.

Clearly, this is just another example highlighting why the state is worse than useless; it is a harmful criminal organization.

And in fact, US trademark law is unconstitutional. While the US Constitution, to the extent it is legitimate and not just the de facto result of a successful coup d’etat, unwisely authorizes Congress to enact copyright and patent law, no provision is made for trademark law. Instead, trademark law is based on an unconstitutionally expanded reading of the Interstate Commerce clause. As James J. Kilpatrick noted in The Sovereign States: Notes of a Citizen of Virginia, in describing the Supreme Court’s illegitimate expansion of power under the guise of the Constitution’s interstate commerce clause:

It was an insidious process, conducted with the care of the cat that stalks her prey – now creeping forward, now pausing to sniff the air; now advancing, now lying still as the bird takes alarm; then edging forward again, and so, step by inexorable step, moving to the ultimate seizure.

But it started at the very beginning of the United States. Tom Dilorenzo, in The Founding Father of Constitutional Subversion, explains:

“Hamilton was also likely to be the first to twist the meaning of the Commerce Clause of the Constitution, which gave the central government the ability to regulate interstate commerce, supposedly to promote free trade between the states. Hamilton argued that the Clause was really a license for the government to regulate all commerce, intrastate as well as interstate. For “What regulation of [interstate] commerce does not extend to the internal commerce of every State?” he asked. His political compatriots were all too happy to carry this argument forward in order to give themselves the ability to regulate all commerce in America.”

So don’t stop with copyright and patent: abolish the unconstitutional Lanham Act, and its unjustifiable grant of trademark rights to trademark holders instead of defrauded customers, and maintain the link to fraud (knockoffs are fine; no anti-dilution law).

PTO: Protecting Innovation–And Patent Lawyers’ Jobs!

You scratch our back, we’ll scratch yours. As reported on Patently-O:

Outsourcing of Patent Preparation: PTO Says BewareIn a recent notice, the PTO has indicated that it may be illegal to outsource invention information to a foreign county for the purposes preparing a US patent application.

1. A foreign filing license from the USPTO does not authorize the exporting of subject matter abroad for the preparation of patent applications to be filed in the United States.

2. Applicants who are considering exporting subject matter abroad for the preparation of patent applications to be filed in the United States should contact the Bureau of Industry and Security (BIS) at the Department of Commerce for the appropriate clearances.

Can you just picture thousands of U.S. patent lawyers pumping their fists and collectively hissing Yes!–as the spectre of unscrupulous Indians writing $12,000 patent applications for $1000 recedes… No wonder so many patent lawyers are pro-patent system! The “patent bargain” conventionally refers to the government giving inventors a monopoly in return for their publicly disclosing how the invention works. But I think it has a second meaning. (Cross-posted at Mises Blog.)Update: See Patent Baristas, Hold Up There On That Outsourcing of Patent Work. The patent bar is loving this!

Gun Rights and Copyright

Interesting post by Mike Masnick of Techdirt, Supreme Court Decision On Guns May Cut Promoting Progress Out Of The Constitution, where he worries that the reasoning in the Second Amendment case Heller–where the prefatory clause “A well regulated Militia, being necessary to the security of a free State” was not held to modify the operative clause, “the right of the people to keep and bear Arms, shall not be infringed”–on the grounds that with similar reasoning, the IP clause might be de-linked from its initial cause “To promote the Progress of Science and useful Arts…” I.e., if the first clause merely states the purpose of the power, but can be ignored, as in Heller, then Congress can still establish copyright and patent even if we can show that they do NOT promote the progress of science and the useful arts.Well, as I wrote there, Masnick has a reasonable concern, but I think, ultimately, these clauses are different. As this post above notes, in the case of the Second Amendment, the prefatory clause does not limit the operative clause. The limit on federal power is in the operative clause.

In the case of the copyright clause, first, this is a grant of power, not a limit on power. Second, as the poster notes, the power is the power “to promote the progress of science and useful arts” by a certain means, that is, by copyright and patent grants. But the power is clearly linked to “promoting progress.” So I think you could probably argue that if IP does not promote the state goals, it’s ultra vires. However, I’m afraid the necessary and proper clause would be used to give the feds a lot of leeway.

Is That The Best Cato Can Do In Defense Of Copyright?

Techdirt: Is That The Best Cato Can Do In Defense Of Copyright?. By the heroic Michael Masnick. ‘Nuff said.

When Antitrust and Patents Collide (Rambus v. FTC)

As I noted in The Schizo Feds: Patent Monopolies and the FTC, the state grants patent monopolies and then uses antitrust law to attack the beneficiaries of those monopolies. As one commentator noted in a related thread, “It is amusing, watching one agency of government applying a system whose entire purpose is the creation of monopolies, and then another agency tasked with preventing monopolies turning up and trying to do something about it.” A case in point is the flack about the Cipro drug where the state whines about the prices charged for Cipro during the anthrax scare a few years back and threatened to choke back on the patent monopoly it had granted for it. The state is schizo in many other ways too, of course–it foisted MTBE (a gasoline additive) on the country and then, years later, after fears of groundwater contamination, mandated that MTBE be phased out (I’m sure that the lobbying of ADM for ethanol to be used instead had nothing to do with that).I previously noted the Rambus v. FTC case. Rambus was part of a standards-setting organization “working on standardization of DRAM chips.” As a court later summarized this,

After lengthy proceedings, the Federal Trade Commission determined that Rambus, while participating in the standard-setting process, deceptively failed to disclose to the [standards-setting organization] SSO the patent interests it held in four technologies that were standardized. Those interests ranged from issued patents, to pending patent applications, to plans to amend those patent applications to add new claims…. Finding this conduct monopolistic and in violation of § 2 of the Sherman Act, … the Commission went on to hold that Rambus had engaged in an unfair method of competition and unfair or deceptive acts or practices prohibited by § 5(a) of the Federal Trade Commission Act.

The FTC then sought to compel Rambus to license its patents at “reasonable royalty rates.” Rambus appealed to the U.S. Court of Appeals for the DC Circuit and, in April, won its appeal, clearing the way for Rambus to try to extract maximum royalties from its former partners.The FTC has filed a petition for rehearing. Skip Oliva has filed an amicus brief opposing the FTC’s petition. Now I agree with Oliva that it’s troubling when the state formulates new theories of antitrust liability. But from the libertarian view, the patent system and the FTC are all just internal parts of the state. So under the result favored by the FTC, what we really have is the state granting a slightly more limited patent monopoly to Rambus (that is, a patent for which only state-approved “reasonable royalty” rates may be charged) than is normally granted. I don’t see what all the hubbub is about. What the state giveth, the state taketh away.

My view is that anything that chokes back the state-granted patent monopoly is, ceteris paribus, to be favored. And I agree with the general idea that it is detestable for a company to secretly seek patents on the technology of the SSO the company is part of, and that these patents should not be enforceable. The default contractual rule should be that if you work with others to adopt a technological standard, you implicitly agree not to use state-granted patent monopolies on that technology to block or extract royalties from use of that standard. I would say that derogation from this default rule should be explicitly spelled out. Imagine what response you would get from other SSO members if you try to add a clause saying that you may secretly apply for patents and enforce them against other members or companies using the standard.

[cross-posted at Mises blog]

Internet Archive vs. the FBI (and free books!)

There was a fascinating discussion on TWIT 144 with Brewster Kahle of the Internet Archive and the Wayback Machine. Kahle is great–he put up a heroic fight against the FBI after it served the Internet Archive in 2007 with a “national security letter” seeking the identity and behavior of an Internet Archive user. The letter circumvented the FISA court and put Kahle and his attorneys under a gag order under penalty of incarceration. Kahle’s discussion of his Kafka-esque battle–except that he won–is inspiring and fascinating. Apparently the FBI served 200,000 such letters in four years. The Internet Archive and Kahle was limited in how it could respond to the suit, so it ended up just suing the goverment (Internet Archive v. Mukasey) with help of the heroic ACLU and the Electronic Frontier Foundation. In response to a victim who was not willing to just roll over, the FBI instantly wanted to settle, but the Internet Archive would not agree to this until the settlement permitted all this to be public, so that other victims of such “national security letters” might have an idea of how to fight back.In any event, I was aware of the Internet Archive’s Wayback Machine but hadn’t realized that Archive.org is trying to be a sort of open library storing books, films, etc., nor that Microsoft had teamed up with Archive.org (see this Dvorak column). Microsoft helped start the project but has backed out; but at least it removed contractual restrictions on the books it had scanned. You can find hundreds of thousands of free books now on the Internet Archive; take, for example, this gorgeous scan of a classic 18th century nursery book Goody Two Shoes.

(Cross-posted at Mises.org)

Copyright and Intellectuals

While IP may not stimulate true innovation and creativity, Hayek suggests that copyright might stimulate something more pernicious: the intellectual class. In The Intellectuals and Socialism, he writes:

In the sense in which we are using the term, the intellectuals are in fact a fairly new phenomenon of history. Though nobody will regret that education has ceased to be a privilege of the propertied classes, the fact that the propertied classes are no longer the best educated and the fact that the large number of people who owe their position solely to the their general education do not possess that experience of the working of the economic system which the administration of property gives, are important for understanding the role of the intellectual. Professor Schumpeter, who has devoted an illuminating chapter of his Capitalism, Socialism, and Democracy to some aspects of our problem, has not unfairly stressed that it is the absence of direct responsibility for practical affairs and the consequent absence of first hand knowledge of them which distinguishes the typical intellectual from other people who also wield the power of the spoken and written word. It would lead too far, however, to examine here further the development of this class and the curious claim which has recently been advanced by one of its theorists that it was the only one whose views were not decidedly influenced by its own economic interests. One of the important points that would have to be examined in such a discussion would be how far the growth of this class has been artificially stimulated by the law of copyright.

Yet another strike against copyright!

Ideas Are Easy… Execution Is Difficult

Excellent post by Mike Masnick on Techdirt:

It’s an ongoing theme around here, but ideas are everywhere. The real trick to making something great often has extremely little to do with the idea, and much more to do with the execution. That’s where the real innovation occurs — in taking an idea and trying to figure out how to make it useful. It’s that process that’s important, much more than the original idea. As nearly anyone who has brought a product from conception to market will tell you, what eventually succeeds in the market is almost always radically different than the original “idea.” That’s part of the reason why patents are so often harmful to innovation. The patent is for that core idea, which is rarely the key in making something successful. But by limiting who can innovate off of the idea (or just by making it much more expensive) you’re limiting that process of innovation. … [A]s the founder of [failed company] Cambrian House admitted in explaining the company’s changing plans, it wasn’t difficult to get people to come up with all sorts of interesting and exciting ideas — but where the company failed was in getting anyone to actually execute on any of those ideas. Ideas are a starting point — but it’s high time that we stopped worshipping the idea, and started recognizing how much more important execution is in driving innovation.

Jeff Tucker makes a similar point in his article Is Intellectual Property the Key to Success?:

A clue to the copyright fallacy should be obvious from wandering through a typical bookstore chain. You will see racks and racks of classic books, presented with beautiful covers, fancy bindings, and in a variety of sizes and shapes. The texts therein are “public domain,” which isn’t a legal category as such: it only means the absence of copyright protection. … But they sell. They sell well. … The much-predicted disaster of an anti-IP world is nowhere in evidence: there are still profits, gains from trade, and credit is given where credit is due. Why is this? Quite simply, the bookstore has gone to the trouble of bringing the book to market. It paid the producer for the book and made an entrepreneurial decision to take a risk that people will buy it. Sure, anyone could have done it, but the fact is that not everyone has….

As Tucker observed to me–this whole issue speaks directly to the Kirznerian vs. Hülsmannian view of entrepreneurship, and also the Hayekian vs. Salernoian view of calculation.

Or, as my “little buddy”* Gil Guillory wrote me,

This is a key point in VC partner, multiple entrepreneur, and author Rob Adam’s A Good Hard Kick in the Ass: Basic Training for Entrepreneurs. The very first chapter is “good ideas are a dime a dozen”, with lots of good anecdotes and rules of thumb. One of them: at his VC company, if someone asks them to sign an NDA, they see it as a red flag. What’s most important, he says, is having a good execution team. A good execution team is what they fund, even if the idea is not that hot. They’ll find a winning idea with a good team. And this is also what Napoleon Hill wrote. And Carnegie. And Martha Stewart. And Jim Collins.”

*My 4 year old referred to him and Tom Woods that way after a Boston Legalesque sleepover.

Rethinking IP Completely

My Austrian Scholars Conference 2008 Rothbard Memorial Lecture, “The Intellectual Property Quagmire, or, The Perils of Libertarian Creationism” (originally titled “Rethinking IP Completely”), is now online. Here’s the audio, the video, and the accompanying Powerpoint presentation (PPT, 32 MB; PDF version, 51 MB). Update: the Google Video version is now available; embedded version below.

Stiglitz on “Medical Prize Funds”

In Nobel Prize Winning Economist Explains How IP Rights Are Part Of The Globalization Problem, techdirt‘s Mike Masnick (who is heroically great on IP) notes the “fascinating speech by Nobel Prize-winning economist Joseph Stiglitz on Making Globalization Work. We’ve written about Stiglitz in the past, for his explanation of how patents often do more harm than good economically.”But not so fast. Is Stiglitz really that good on IP? As I noted in Patents and Utilitarian Thinking Redux: Stiglitz on using Prizes to Stimulate Innovation, Stiglitz has advocated replacing the patent system with a system for “awarding prizes”–presumably taxpayer funded–for innovations and inventions. In Scrooge and intellectual property rights, Stiglitz endorses a “medical prize fund” that “would give large rewards for cures or vaccines for diseases,” which “prizes could be funded by governments in advanced industrial countries.” Two cheers for capitalism! Or is that the other one?

Blue Jeans Slays Monster

Kurt Denke is my new hero. He’s the former lawyer who is President of Blue Jeans Cable, a competitor of Monster Cable. When he received a cease and desist letter from Monster, who alleged some of Blue Jeans’ “Tartan” cable products were too similar to Monster’s, Denke sent back a devastating and heroic reply. This is one of the best letters I’ve ever read. It’s heroic and ballsy, and strategically brilliant. Further, I think this letter can help illustrate the unavoidable practical difficulties that will necessarily plague any attempt to have an IP–that is, pattern privilege–system. It helps to highlight why such a system cannot be but unjust. These kind of expensive and intractable problems, inherent vagueness and bullying tactics, will always accompany a patter privilege system. Any layman who is in favor of patent should read this letter, and think about the consequences of the system they advocate.(Cross-posted at Mises blog)

“Pattern Privileges”: Renaming IP

In a recent Mises blog post, Renaming Intellectual Property, I noted that in If Intellectual Property Is Neither Intellectual, Nor Property, What Is It?, Techdirt writer Mike Masnick (who continually has excellent comments on IP policy) discusses various proposd replacements for the misleading term “intellectual property.” Contenders include “intellectual monopoly,” “intellectual privilege,” “imaginary property,” and “None of the Above.” There are problems with each of these. Masnick concludes: “In general, because of common usage, I don’t think it’s bad to use the phrase “intellectual property” just so that people know what you’re talking about — but we should be careful to not use it in a way that reinforces the concept that it’s property just like other kinds of property.”I tend to agree. What IP law does it give legal (positive) rights to people to try to protect or stimulate innovation or creation. It gives them rights in innovations, creations, recipes, or patterns. If one keeps in mind the distinction between natural and positive rights, then it’s easy to see that laws do create legal rights, and of course all rights are, in the end, types of property rights. So IP laws do create (positive, or legal) (property) rights. And they do have to do with products of the mind, or intellect. So “intellectual property” rights seems fine to me, if one realizes that there is a difference between positive right (positive law) and natural rights (natural law).

Still, some ideas came to me (and I own them, I suppose). It would be nice to take the word “property” out, and just refer to the rights conveyed. Copyright gives authors of original works certain (legal) rights to their “works” or creations. Books, songs, paintings are regarded as “original works of authorship”. There is an element of “creativity” to these things. Patents give certain (legal) rights to inventors of practical inventions–methods or processes for doing things (recipes) or arrangements of matter (designs). What do inventions and “works of authorship” have in common? One is practical, aimed at some gizmo or method that produces a practical result (a machine or process). Another is aimed at “creative” things–paintings, novels, songs. J. Neil Schulman, in his neo-Randian/Galambosian [I don’t know if he would accept this label] IP theory groups them all under the term “logorights,” where the “logo” refers to a “pattern”. I think this is a pretty good description: a recipe is a type of pattern; as is the design for a practical machine or device. Likewise, original works like paintings, music, etc., are obviously representable digitally, as patterns. Copyright and patent law clearly grant rights … to whom? To creators–inventors and authors–of “logos”–patterns, such as machine designs, process steps, or the patterns that represent the song, painting, etc.

So, as much as I disagree with Schulman’s justification for “logorights,” the term is a pretty good one–except that it is so arcane. A variation on it using more standard terms might be better: pattern rights, or perhaps innovation rights. Or, to make the label a bit less “neutral,” replace “rights” with “monopolies” or “privileges,” since that is what is being granted by the state. So we have “pattern monopolies” or “pattern privileges,” “innovation rights” or “innovation privileges.”

As I noted in my Austrian Scholars Conference 2008 talk, I think I like the term “pattern privileges” best.

Microsoft Asks Supreme Court to Reduce “Clear and Convincing” Standard for Challenging Patent Validity

As reported on Patently-O, after Microsoft was ordered by a jury (where else: the Eastern District of Texas) to pay over $100M in damages for patent infringement, and after losing on appeal to in the CAFC, Microsoft is asking the Supreme Court to overturn the CAFC’s requirement that “clear and convincing evidence” be presented to invalidate a patent even when a defendant presents evidence of invalidity that was not considered by the PTO. Microsoft is right. Why there should be any presumption of validity at all for any issued patent, given the PTO’s bureaucratic incompetence, is not clear (or convincing).

Creation as a source of rights?

I’ve noted many times that one fallacious line of reasoning in support of intellectual property is the idea that creation is an independent source of rights. In libertarian circles, I have begun to refer to this as “libertarian creationism.” I critique this notion, inherent in a recent paper by libertarian philosopher Tibor Machan, in the comments here.

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