Patent Nonsense

New at Reason: Ron Bailey on pharmaceutical patents and property rights.

Comments

[Mark A.]

I can almost hear the electrons buzzing as Carson readies his anti-intellectual property, anti-WTO, anti-"Big Pharma" screed!

[Anonymous]

Patent Nonsense is the correct label for this post. The article linked to is neither Ronald Bailey, nor on on pharmaceutical patents and property rights. It is new however.

[Mudflap]

This is an excellent article. Not only is it entirely accurate and to the point, but it explains the resoning and results of the patent system. Before Kevin can get his rant rolling I will remind him that the keyboard, computer and monitor he is using would not exist without this system. If you can't see that Kevin, I can't help you. I've got work to do so ill leave it at that and go see if I can invent something worth patenting. Have a good weekend all.

Mudflap

[Patriot]

The argument against patent and copyright laws is one I'll never understand.

I was actually taken aback when I heard many libretarians are against such laws. I've heard the argument about "government enduced monopoly" before, but the more accurate analogy is simply protecting intellectual property the way we protect real property.

[joe]

From the article.

>>Without worldwide patent protection, a company in South Africa could manufacture a product based on a Brazilian patent and then ship the product back to Brazil, undercutting the Brazilian patentholder.

This is incorrect. Each national patent system prevents the importation and sale of a product covered by a patent in that country. The Brazilian patentholder can sue the South African manufaturer in Brazil based on the Brazillian patent and prevent the importation and sale.

More generally, each country should be able to determine its own patent system. Trade agreements should not be used to dictate national patent systems as long as each patent system is neutral as to the patent applicant's national origin. In the nineties, high innovation countries used WTO agreements to force countries with weak patent systems to strengthen them. This results in a transfer from low inovation to high inovation countries. Many countries with low levels of inovation are better off with weak patent systems. The consumers in these countries benefit from lower prices and some countries, like India, can develop industries to copy products to sell in other weak IP countries. Countries with strong IP systems can still prevent copies from being imported.

Weak IP protection in low inovation countries will not greatly affect innovation because the strong IP protection given in high innovation countries is a sufficient incentive.

[PLC]

The distinction between "intellectual" property and "real" property is cosmetic at best. Property is just anything that one entity controls. We can either have the owner-entity police the use of that item, or we can employ the state to police ownership. If you allow self-policing, what you will have is the strong and unscruppled taking possession of everything, and the inventory/creator/worker class will produce nothing, since it will just be immediately taken.

Why would I invest in the upkeep of my home or grow crops in my fields if I could not count on my property rights to ensure that the value of my labor accrues to me? Likewise, why would I write a new piece of software or invent a new windproof, wrinkle-free fabric if I could not sell it at a profit?

[PJ]

You can always count on PLC to utterly fail to understand the other side's arguments. Well done.

[PLC]

Thanks, PJ - I take it as a compliment that I can understand utter nonsense.

[PLC]

That should be "can NOT".

[Warren]

Joe,
Well said.

PLC,
"The distinction between "intellectual" property and "real" property is cosmetic at best."

Now that shows a truly addled mind at work. IP in now way resembles physical property, like your car for instance. This is so obvious it pains me to spell it out. If I stole your care you would not be able to drive to work, but if I steal your song, it in no way prevents you from singing it.

"why would I write a new piece of software or invent a new windproof, wrinkle-free fabric if I could not sell it at a profit"

Uh gee, so I guess nothing was ever invented until we has IP laws to protect the profits of the inventors then.

Talk about utter nonsense.

[thoreau]

Mr. Bailey's explanation of patents on naturally occuring genes makes me a lot more comfortable with the notion (assuming there isn't more to the story): It isn't the gene that's patented, it's the taking of the gene from its natural point of origin (one species) and usefully transferring it to another species.

If one species is high-yield but fungus-prone, and another is low-yield but fungus-resistant, combining genes from each produces a new product.

Of course, if one opposes patents in the first place then this is really moot, because patents are already a bad thing in the eyes of some (not me, but others). But at least Mr. Bailey points out that gene patents aren't all that different from other patents (neither better nor worse).

[anarchismo]

Eugene Volkh has some interesting things to say in defense of intellectual property:

http://volokh.com/2003_09_07_volokh_archive.html#106337644830524885

[JDM]

Warren,

Actually, if his job is writing songs, you have prevented him from driving to it, since he can no longer work as a songwriter, or inventor of breathable outdoor fabrics, or whatever.

[thoreau]

Something else just occurred to me about the general question of whether or not patents should even exist. I think they should, but the thing that just occurred to me weakens the argument in favor of patents to some extent (although I still favor patents, but I doubt I'll persuade anybody here who opposes them):

Even without patents, a company can keep its methods proprietary. For instance, Coca Cola was invented over 100 years ago, and while the formula has undergone some changes over the years, there were long stretches between modifications that lasted much longer than 20 years (or so I heard from one of my professors). The formula is proprietary, however, and the company only reveals it to employees, and the employees signed non-disclosure agreements.

So even without patents there would still be some protection for intellectual property rights. Please don't flame me as anti-patent, but I do think it's worth pointing out that it isn't quite as simple as a dichotomy between zero intellectual property rights or our patent laws as currently written.

[Mudflap]

Uh gee, so I guess nothing was ever invented until we has IP laws to protect the profits of the inventors then.

Yes Warren stuff was invented prior to 1790. Shit like clubs and hand crank drills, different styles of shovels etc. Since then we have invented the rocket motor, electric motor, the computer. Point being, if it is going to take substantial cost to develop something, there is little incentive to do said activity if it can just be turned into a commodity. If you have to compete head to head with someone who didn't have to make the investment you are a fool to make the investment to begin with. Consequently we never develop the backhoe and are still using on of several different hand shovels that have been invented.

Your car/song analogy doesn't work either. IP is directed at "right to practice" Its more like if you went outside and the whole street was singing your song. What would be the point.

People don't invent just for fun. It's business. Take the profit and you loose the motive. No motive, No innovation, and we are stuck with a couple of styles of shovels which we should wack warren in the head with till he gets it.

Mudflap

[Mark A.]

thoreau,

While I agree with your post, I think the people who most benefit from intellectual property rights are not the big corporations like Coca Cola, but the 'little guys' -- the small time inventors. These folks may not have the resources to protect their proprietary knowledge until they can use it to turn a profit without a little help from the law. It also makes it a lot easier to procure startup funds from lenders and investors if you have a patent. Upshot is, patents are supposed to make that hill a little less steep.

This says nothing, of course, about patents being assigned for really stupid ideas or the perversion of the system by big corporations......

[Mudflap]

Thoreau-

Many times companies will keep things as trade secrets instead of patenting them. When it is something like a key process step where it would be very hard to show infringement it is common to just keep quiet. To patent it would require that it be fully disclosed. When it is the kind of thing that would be done as part of the production and would be transparent in the finished product it will generally be kept as a trade secret to keep others from practicing in secret.

Such good analytical methods exist these days that it is really hard to keep things like chemical compositions secret these days. If it can be reverse engineered, patent it. If not, stay quiet.

Mudflap

[PJ]

Everyone knows that patents provide an incentive to invent. Everyone who's paid any attention to the issue also knows that if you award too many patents you're providing a disincentive, because of the legal wrangling that then erupts over piggybacked inventions. So if you're going to offer incentives via IP laws -- by no means the only possible way to encourage innovation -- you have to strike some sort of balance between rewarding creators and not giving them a stranglehold. Just spouting homilies about the importance of economic incentives isn't going to cut it, and neither is making obviously faulty equations between physical and intellectual property.

[Citizen]

I think it's simply untrue that people will always buy the least expensive version of any good that's available. People are brand loyal. Many people, most people, value brand more than bottom line price. You trust General Mills cereals over Safeway Select's generic version. It's true in food stuffs, in clothing, in electronics, in household medical supplies, in automobiles, etc. In any commodity, dare I say?

[Mark A.]

Citizen,

I'm never so loyal to a brand that I won't try a less expensive one. Ever.

[Russ]

Even in the absence of patents, there is a very good motivation for indivuals to devote their time and effort to innovation. They will develop some new, labour-saving device or process if they will benefit from its proprietary use. The baker will try to design a better oven, not because he's planning on selling it, but because it will save him time and resources by improving his efficiency. These gains are more easily forseen and are a more likely incentive than the speculative prospect of revenue from the sale of the new ovens.

That's why things were invented prior to 1790. Patent rights just facilitated more of Adam Smith's division of labour, by allowing the inventors to spend their time inventing while the bakers were busy baking.

[xray]

mudflap: yup, up until 1790 everyone was living in caves thinking, "I have all these great ideas to make my own life better but I just don't feel very motivated to develop them". Along came patent law and boom... next thing you know, al gore gave us the internet. Fact is inventions, since the wheel, (or maybe it was the poking stick) build on each other. all that primitive unpatented crap led to my ipod, just as much as patent law.

[R.C. Dean]

Has anyone else noticed the great leap forward in knowledge and inventions since patents began to be issued on a formal basis in 1790? Do you suppose that is just a coincidence? I'm not willing to bet that it is.

As it happens, the rise of the industrial revolution made the issuance of patents even more necessary. When production is essentially all done by hand, the proliferation of competing products based on your design is going to be slower because they all have to be made by hand. With industrial production, someone using you design can flood the market with competing products in a very short time, in the absence of patent protection.

[Patriot]

Russ:

You're only speaking about process innovation. What about the creation of an entirely new product? Say a drug. Pfizer isn't inventing a drug to improve the process of producing pills. They're doing so to sell that invention.

And who's to say the baker wouldn't want to start selling this new oven to people and make a lot more money than baking cakes.

[PLC]

It may not take an addled mind, but it certainly does take a simple one to be unable to grasp the essential concept of property.

As "property" there is no essential difference between the IP rights to a piece of software and 36 acres of Iowa farmland. They are both useful items which the property holder can make use of to produce economic gains. The property holder is also counting on the State to enforce their property rights and to protect them from infringement. Without property right protection from the State, neither property is worth anything.

The value of the property lies ENTIRELY in property right protection granted by the State. States chose to grant property rights in order to incentize productive behavior and to induce stability.

[Kevin Carson]

I wasn't planning to weigh in here, but I don't want to disappoint Mark A. and Mudflap.

The argument that patents are necessary to provide an incentive for invention are spurious.

First of all, even without patents, the first firm to develop a process will derive quasi-rents from being the first on the market, until the competitors have time to retool and get a good production run going.

Second, most inventions (something over 80%) would have come about even without patents, according to an industry survey by F.M. Scherer. The desire to remain competitive by providing superior consumer products, or by using cheaper and more efficient production processes, is sufficient incentive to innovate.

Third, patents reduce the incentive to develop patented technologies further, as Rothbard argued. A firm with a patent on a new technology also has a veto over further technological development based on that patented technology. So the rest of the industry is frozen out of the competitive race to develop that field of technology, and the firm with the patent can rest on its laurels without any threat of competition.

R.C. Dean argues that the industrial revolution made patents especially necessary. This is ironic, considering the fact that America industrialized by ignoring British patents in industrial processes; or that the American chemical industry emerged from third-rate status only when the U.S. government seized German patent rights during WWI and distributed them among American firms.

These arguments apply only to the pragmatic issues of patents, not to the more basic question of the moral nature of intellectual "property." So while I'm at it:

To develop a distinction used in Ron's article, the community's cooperative efforts to defend tangible property rights are a direct outgrowth of the owner's power to physically defend his tangible property and ask for help in its defense. And his ability to do the latter are a necessary result of the finite nature of a piece of tangible property and its status as something physically possessed by an owner. Such ownership and defense can be carried out without invading the property of others. Intellectual "property," on the other hand, is by its very nature not finite, not subject to physical possession, and defensible ONLY by collective action. And unlike defense of tangible property, intellectual property can ONLY be defended by invading the property of others to prevent them from using their own possessions in a particular way, by arranging material possessions in a particular pattern or arranging information in a certain configuration. In other words, it requires exactly the same kind of invasion of the competition's property rights as ANY OTHER MONOPOLY. If you can't see this, Mudflap, I can't help you.

And BTW, it's pretty obvious that IP rights can't be property in the same natural law sense as tangible property, if it's only been enforced since the 1780s, or if it only lasts for an arbitrary period of 20 years. And if patents as a "property" are based entirely in convention rather than natural right, as Blackstone acknowledged, why are they entitled to any more moral recognition than any other monopoly conferred by the State's thugs? At least Spooner and Galambos were intellectually consistent.

Finally, since I invoked the specter of Rothbard, I should in fairness mention that he opposed patents, but favored copyrights. He believed that new inventions could be protected by the latter as a matter of contract between buyer and seller. The copyright system would have the advantage of preventing only direct copies, and not punishing those who developed similar technologies independently. Of course, a purely contractual basis for copyright in inventions or works of art would be extremely vulnerable to violation by third parties.

[Stmack]

Russ & Patriot

Your missing another equally valid argument for the baker's intellectual property. If the baker invents a better oven that malkes him more efficient and able to produce better quality product, it makes no difference if he wants to sell the oven design. If he has no ownership of his invention there is nothing to stop the baker from down the street from taking the design for his own use.

I work for a consumer products company. We make disposable plastic commodity items. In many markets we are the low price producer. We go to great lenghts to protect our intellectual property.

[Russ]

Stmack,

I wasn't talking about what happens after the baker designs a new oven... only whether he has an incentive to design it in the first place. I fully agree that he would have more incentive with patent protection guaranteeing him a temporary monopoly, but don't overlook the fact that there is still an incentive (albeit smaller and more localized) to innovate even without patent protection.

As long as there is an unfilled need, there will be an incentive to fill it. Don't believe that without patents, nothing would ever be invented again. It would diminish the flame of innovation, but not extinguish it altogether.

[Kevin Carson]

Russ,

And as the case with other "public goods," when interventionists argue that the market won't supply "enough" of something without intervention, the proper response is, people freely spending their own money decide how much is enough, not the State. Patents artificially increase some kinds of innovation at the expense of others, and even the innovation they promote comes from a tax on consumers (much like the tariff).

Come to think of it, the "nobody would invent" argument sounds an awful lot like the infant industries argument for tariffs. And I'm surprised that previously protected domestic producers haven't argued that they made investment decisions on the assumption that tariffs would continue, and therefore they have a "property right" in the monopoly prices they charge domestic consumers.

[thoreau]

I keep hearing that patents didn't exist until 1790 or so. According to Hecht, Optics, 3rd edition, Addison-Wesley, 1998, pg. 221-222,

(in reference to the question of who invented the telescope)

"The earliest indisputable evidence, however, dates to October 2, 1608, when Hans Lippershey petitioned the States-General of Holland for a patent on a device for seeing at a distance (which is whatteleskoposmeans in Greek). As you might have guessed, its military possibilities were immediately recognized. His patent was therefore not granted; instead the government purchased the rights to the instrument, and he received a commission to continue research."

Now, I'm not suggesting that the telescope wouldn't have been invented without the incentive of a patent. But this is documented evidence that citizens of a major economic power were applying for patents before 1790. That's all. I don't claim that this has any bearing on the normative aspects of patents, just that it suggests patents were around in a major economic power before 1790.

(I just included the information on his military contract because I thought it was amusing.)

[dragoon]

As an aside, I really hate the term "intellectual property" because it throws together patents, copyright and trademarks, when the three are drastically different. What I discuss below is specific to patents.

Physical property is scarce - if I use your car, you can't.

Ideas are not scarce - if I use your idea, you can still use it.

Anyone who sees "property" in patents is a fool - they're government-granted monopolies on a specific process. If I independently come up with the same process, I still can't use it you filed a patent first. Who's property is being stolen there?

This isn't to say that limited duration government protection of patents isn't a helpful thing, as it provides incentives to create new inventions and give the details out for later use. This government function is unlike most, in that it is specifically embedded in the Constitution, and I doubt an amendment will come anytime soon changing that.

What PLC fails to see is that because patents are inherently governmentally granted, they are vulnerable to rent-seeking. Unlike trademarks, I can patent something, wait while other inventions are created which use the patent, and then later swoop in and demand payment for things that I never had a part in making. This is called a "submarine patent", and it goes against general American legal principles.

Worse, the scope of patents has widely increased at a time when the patent office is unable to do proper research on the validity of patents. Should Amazon be able to patent the very idea of one-click purchasing? Should companies be able to demand money for technologies developed long before simply because they pay lawyers to file a patent? Why do you think governmental enforcement of patents isn't liable to the same distortions and mistakes that effect every other government effort?

[Mudflap]

The argument that patents are necessary to provide an incentive for invention are spurious.

I would agree, however any type of development that requires significant capital outlay will not get funded. Period, end of story. While the baker will build a rack to increase productivity inside his oven, nobody will do the work to develop an artificial heart if Johnson and Johnson can simply copy it. J&J gets a 10 mil a year business while the developer gets a 10 mil a year business but has incurred 100 mil in development costs for a product with a 10 year life. It's a simple concept here and it is very clear that it is addressed in practice out in the real world. People care, If you don't have IP protection investors won't invest. Kevin, explain to me how the reality of investors spending half of their due diligence efforts on IP fit with your view that IP is unimportant.

First of all, even without patents, the first firm to develop a process will derive quasi-rents from being the first on the market, until the competitors have time to retool and get a good production run going.
It takes something like 12 years to get a drug to market. Clinical trials can hit 250 million dollars. Drugs can be reverse engineered in twelve weeks Kevin. So help me understand why your above statement isn't just pathetic rhetoric used to support flawed ideology.

Second, most inventions (something over 80%) would have come about even without patents, according to an industry survey by F.M. Scherer.
And just how in the hell does he come to this conclusion. I'm not familiar with the work. But I can say based on experience, as it relates to my industry this would be pure bullshit.
The desire to remain competitive by providing superior consumer products, or by using cheaper and more efficient production processes, is sufficient incentive to innovate.
As I pointed out before lots of process related stuff is kept as trade secrets. Yes the superior consumer products argument is valid, when it's a fucking bar stool that raises and lowers, but not when it's a new type of solar panel or a novel hydraulic pump.
Third, patents reduce the incentive to develop patented technologies further, as Rothbard argued. A firm with a patent on a new technology also has a veto over further technological development based on that patented technology. So the rest of the industry is frozen out of the competitive race to develop that field of technology, and the firm with the patent can rest on its laurels without any threat of competition.
Or they can figure out another way that doesn't infringe. If there is a market people will be figuring a way around patents. This increases the body of technology in the field.
Kevin

I invent a pencil. You invent putting an eraser on it. You can't sell pencils with or without erasers on them. I can't sell pencils with erasers on them. Lets talk, working together we can supply a product, that will put a sizable dent in the big rectangular pink eraser crowds market. At the end of it the consumer gets pencils with erasers and we both get monetarily rewarded. The only ones that loose are the big pink rectangular guys. However they deserve to loose cause they didn't do anything.

Full disclosure I know I've pulled some "I reality" arguments here so I'll do a full disclosure of the "in reality". Often Big companies stomp the shit out of smaller upstart companies with patent litigation. Even in cases where the suit has little to no merit, a large corporation can use a vigorously perused a lawsuit ($$$$$$$) to obliterate a small competitor.

In my mind this is the real down side of IP

Mudflap

[Mudflap]

Thoreau

1790 was when Washington signed legislation to create the PTO it was a while later that US patents began to issue. Other countries had IP protection prior as you pointed out.

Sorry about the prior post. Lost some of the formatting (spacing) while copying from word. ( I can't spell, so I need spell check if I'm not to embarrass myself to badly)

[N]

Ronald Bailey managed to write an informative and convincing article while at the same time overlooking an essential issue that he himself touched upon whilst doing so, evincing his status as a master of rhetoric. Providing transnational pharmaceutical companies with an incentive for researching and designing drugs meant to eliminate the blight of the AIDS epidemic affecting an impoverished African population is something we, as members of an exceptionaly wealthy occidental democracy, must do; it is a moral imperative. Attacking the foolish cavils of ignorant anti-globalization and patent zealots doesn't further the cause of indigent and emaciated African AIDS patients, and it certainly didn't help us find a solution to what is the only *real* problem those on the other side of the debate have even raised.

Mind you, I don't have a solution, either; I just find it a little amusing that we can be so easily fooled by a cleverly written piece of tripe.

[Kevin Carson]

Mudflap,

Naturally, investors care about IP. They are part of the existing picture, so they enter into investment decisions. And since they are a cash-cow, the additional profits they generate will attract investors. So will any other form of state intervention in the economy that creates artificially high returns. The bees go where the honey is. If patents weren't part of the picture, competition would still exist, and improving productive efficiency would be part of that competition.

And businesses will invest even in expensive improvements in the production process if the future increase in efficiency will pay for the cost outlay. Again, according to a survey of manufacturers, most innovations would have been developed even without patents for the sake of remaining competitive.

twistedmerkin,

No, I'd say that precisely BECAUSE the rights of self-determination, self-ownership, and ownership of tangible property are natural rights, they not only existed but were defensible without any special grant of privilege from the State. But if the idea of possession or property had suddenly appeared in the seventeenth or eighteenth century, and the ownership of each piece of property depended on a special license from the State, that expired after 20 years, I'd doubt its natural status.

What you're describing with ideas being free to all is the free rider problem. And the argument that the State should intervene coercively to make sure you get paid for what you do because it benefits someone else, sounds a lot like Henry George's justification for taxing economic rent. But a great deal of what you do benefits others as a side-effect, without your being able to exclude them from benefits or enforce payments. By the same logic, if you expend labor to landscape your property, the government should be able to either keep your neighbor from looking at it or force him to pay a fee. The free market principle should be that you do what you consider most to your own benefit, without coercion. If it's not worth it to you, don't do it. But if it is worth it to you, and somebody else also benefits without you being in a position to charge for it, T.S.

[RSR]

Kevin,

Basing your belief system on the results of a survey isn't a wise policy. The manufacturers are responding to questions which have canned, theoretical answers they were trained to give by their economics professors in university. Besides, asking established business owners and operators how they would behave in a theoretical marketplace completely ignores another issue of greater importance: what about independent inventors and small corporations that haven't yet established themselves? Companies with brand recognition and plenty of spare change could purloin the recipes and manufacturing schematics of the incipient businesses that developed them and in so doing preclude entrance into the marketplace of the very companies whose research they stole.

Switching now would foster complacency and deter the establishment of new businesses. Big thumbs down.

[Mudflap]

Kevin

We seem to be talking about different things here. You keep talking about process improvements, the lowest form of patents while I am referring to configurational and functional patent law, ie disclosure of a device for treating abdominal aortic aneurysms. The two are different and are treated differently. Keep in mind a lot of patents are filed so individuals can say "I've got a patent"

If patents weren't part of the picture, competition would still exist.

Again I'll say, if your talking about shovels fine, but if your talking about something like Pharmaceuticals the argument doesn't work. The product wouldn't exist. Your the CEO of Ely Lilly, do you spend 250 million on a drug that will get you net a profit of 2 cents a pill without patent protection ? If you can answer with anything other than no, your just plain stoopid.

Mudflap

[RS]

there seems to be one of those unutterable thoughts in the air - we fork over our tax dollars to certain countries and they turn around and steal, or build on, one of our inventions, concepts, blueprints,,,,and are able to develop, exploit it with..our money and sell it back to us. Now you can say that we can and do compete in step two (stealing ideas)so it's a fair competition, but w'ere still left with step one - objectively and subjectively.

[Mark A.]

Kevin,

1) I still don't see how the defensibility of a thing defines it as a property. If you stole my IP, I could hypothetically track you down and beat the snot out of you -- or worse. The threat of this would serve as a deterrent and thus as a form of defense. Your whole argument seems to rest on property having extension and tangibility, and deriving from an abstract principal which you call 'natural law'. Your position looks a lot like a belief system -- not that there's anything wrong with that -- but we needn't all adhere to your beliefs.

2) As far as I know, natural law is a law of nature (tautological, I know), like the laws of thermodynamics or Newton's laws of motion. What do human social constructs like "property" and "rights" have to do with natural laws?

3) At LEAST 80% of all patentable innovations are "evolutionary" in nature, i.e., they are improvements on existing processes/ techniques/ technologies (this number is probably low, and the real number is likely to be well into the >90% range). Those poll results are therefore unsurprising. The innovations that really need protecting are the "revolutionary" ones -- those that represent (god I hate this term) a 'quantum leap' over the baseline process/ technique/ technology, or which do something that has never really been done before.

Points raised in this thread concerning the abuse of the patent system and the proliferation of dubious patents ("Scientific American" runs a regular column on this -- this month's feature is -- I kid you not -- an ass-kicking machine) are certainly valid and point to some sort of reform for a breaking (broken?) system.

[Anonymous]

http://www.firstmonday.dk/issues/issue4_8/moglen/

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We need to begin by considering the technical essence of the familiar devices that surround us in the era of "cultural software." A CD player is a good example. Its primary input is a bitstream read from an optical storage disk. The bitstream describes music in terms of measurements, taken 44,000 times per second, of frequency and amplitude in each of two audio channels. The player's primary output is analog audio signals [7]. Like everything else in the digital world, music as seen by a CD player is mere numeric information; a particular recording of Beethoven's Ninth Symphony recorded by Arturo Toscanini and the NBC Symphony Orchestra and Chorale is (to drop a few insignificant digits) 1276749873424, while Glenn Gould's peculiarly perverse last recording of the Goldberg Variations is (similarly rather truncated) 767459083268.

Oddly enough, these two numbers are "copyrighted." This means, supposedly, that you can't possess another copy of these numbers, once fixed in any physical form, unless you have licensed them. And you can't turn 767459083268 into 2347895697 for your friends (thus correcting Gould's ridiculous judgment about tempi) without making a "derivative work," for which a license is necessary.

At the same time, a similar optical storage disk contains another number, let us call it 7537489532. This one is an algorithm for linear programming of large systems with multiple constraints, useful for example if you want to make optimal use of your rolling stock in running a freight railroad. This number (in the U.S.) is "patented," which means you cannot derive 7537489532 for yourself, or otherwise "practice the art" of the patent with respect to solving linear programming problems no matter how you came by the idea, including finding it out for yourself, unless you have a license from the number's owner.

[Anonymous]

http://econ161.berkeley.edu/OpEd/virtual/technet/spmicro.html

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The main argument for a free competitive market system is the dual role played by prices. On the one hand, prices serve to ration demand: anyone unwilling to pay the market price because he or she would rather do other things with his or her (not unlimited) money does not get the good (or service). On the other hand, price serves to elicit production: any organization that can make a good (or provide a service) for less than its market price has a powerful financial incentive to do so. Thus what is produced goes to those who value it the most. What is produced is made by the organizations that can make it the cheapest. And what is produced is whatever the ultimate users value the most.

You can criticize the market system because it undermines the values of community and solidarity. You can criticize the market system because it is unfair--for it gives good things to those who have control over whatever resources turn out to be most scarce as society solves its production allocation problem, not to those who have any moral right to good things. But--at least under the conditions economists have for two and a quarter centuries first implicitly and more recently explicitly assumed--you cannot criticize the market system for being unproductive.

Adam Smith's case for the invisible hand so briefly summarized above will be familiar to almost all readers: it is one of the foundation-stones of our civilization's social thought. Our purpose in this chapter is to shake these foundations--or at least to make readers aware that the changes in technology now going on as a result of the revolutions in data processing and data communications may shake these foundations. Unexpressed but implicit in Adam Smith's argument for the efficiency of the market system are assumptions about the nature of goods and services and the process of exchange--assumptions that fit reality less well today than they did back in Adam Smith's day.

[Anonymous]

http://econ161.berkeley.edu/Econ_Articles/Summers_New_Economy_2001.html

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Complicating the issues still further, the most important innovations that we see today are built on progress in basic science, everything from group theory to quantum theory. If one asked what research had made the most important contribution to the navigation of ships since the 1600s, a good case could be made that it was pure mathematics. Pure mathematics built the tools used by James Clerk Maxwell to construct his equations describing the behavior of electromagnetic fields. Without Maxwell's equations, we would not have radios. We know from long experience that basic science is best diffused broadly, so production must be supported from the outside. That is why a crucial component of public policy at this time must be strong support for basic research.

Moreover, basic research must be widely disseminated because basic research and applied research are cumulative enterprises. There is a good chance that heavy restrictions on the dissemination of intellectual property will do less to create incentives for research and development and more to destroy the web of scientific and technical communication that make research and development effective (see Gallini and Scotchmer (2001)). Isaac Newton said that the only reason he was able to see farther than others was that he stood on the shoulders of giants. Whenever we consider the importance of property rights over ideas in giving companies incentives to fund research and development, we need to also consider the importance of free information exchange and use in giving researchers the power to do their jobs effectively. Traditional discussions within economics have focused on the length of patents. Yet it may well be that the depth and breadth of patents are at least as important determinants of economic progress.

New institutions and new kinds of institutions--perhaps even some that have been tried before, like the French government's purchase and placing in the public domain of the first photographic patents in the early nineteenth century (see Kremer (1998))--may well be necessary to achieve the fourfold objectives of (a) price equal to marginal cost, (b) entrepreneurial energy, (c) accelerating the cumulative process of research, and (d) providing appropriate financial incentives for research and development. The work of Harvard economist Michael Kremer (1998, 2000), both with respect to the possibility of public purchase of patents at auction and of shifting some public research and development funding from effort-oriented to result-oriented processes (that is, holding contests for private companies to develop vaccines instead of funding research directly), is especially intriguing in its attempts to develop institutions that have all the advantages of market competition, natural monopoly, and public provision.

[Robert Hutchinson]

What do human social constructs like "property" and "rights" have to do with natural laws?

What do property and rights have to do with human social constructs?

[Kevin Carson]

Mudflap,

Re the drug thing, the fact that something like half of R&D funding is taxpayer-funded probably alters the picture a little; not to mention the fact that some of the biggest cash cows were developed entirely at taxpayer expense, and the patents then given away. And the cost of development is probably a lot higher because of the FDA's one-size-fits-all testing regime than it would be in a free market, with the amount of testing prescribed entirely by underwriters.

But the argument that something wouldn't have been developed without patents, even stipulating it's true in many cases, deserves the same response as arguments that x good wouldn't have happened without y form of statist intervention: so what? If some goods won't be developed without granting the developer a license from the state to charge whatever monopoly price the market will bear, then it shouldn't be developed. If certain "infant industries" wouldn't have come into existence without tariffs enabling them to charge monopoly prices, so much the worse for them. Anything that can't be developed without statism and privilege, shouldn't be developed.

Mark A.,

The difference that the defensibility of tangible property is a direct extension of my physical possession of it. And because, as anon pointed out above, tangible property is a rival good, my possession is incompatible with your possession at the same time. Stopping you from duplicating an invention or work of art is not at all like invading your property to get back a tangible good that you stole. In the case of intellectual property, the "theft" can occur without ever invading my space or removing anything from my possession. Therefore, invading your property is the ONLY way to prevent "theft" of it.

Right enough, any notion of property rights involves a belief system and relies to some extent on a social consensus for its enforcement. But a Lockean standard of appropriation (or an Ingalls/Warren/Tucker occupancy standard of appropriation, for that matter) comes quite naturally: "There is a finite amount of land, and I am occupying and using this. My occupancy and use excludes your simultaneous occupancy and use. Since I have mixed my labor with it, it is a physical extension of my personality in the same sense as my body, and I have a prior claim to ownership. If you attempt to invade it, I will repel you."

Try making that argument with ones and zeros, or with the blueprint for a machine.

[tim]

Thanks, anonymous, for pointing out the faulty link. Thanks, everybody else for routing around my dyslexia and engaging in a spirited discusssion. The link is fixed, and you can find the story here.

[twistedmerkin]

Kevin,

There is zero amount of invention X available. If I do not invent it, no one can use it. If I invent it and prevent you from using it without a fee, I'm not preventing you from doing anything that you could do before I invented it. But you will have the option of paying the fee and using the item. My creation and economic use excludes your simultaneous copying and economic use. Since I have mixed my mental labor with it, it is a physical extension of my personality in the same sense as my body, and I have a prior claim to ownership. If you attempt to copy it, I will repel you.

You say invading your property is the ONLY way to prevent theft of intellectual property. But I've never heard of a patent violation being discovered in someone's home. Certainly most of them are discovered in the market. This brings up a point I'd like to make. In my defense of patents and IP in principle I don't want to imply that I think the current system should not be improved. One improvement I'd like to see is some type of "fair use" available for patents. That is, I think you should be free to copy anything and have personal use. The violation should be when the copy is sold. If my invention can be so readily copied by everyone that no one feels the need to pay me for it, then it shouldn't have been patented. I'm worried about some corporation copying it and making a buck off it. So Kevin, if you want to make a copy of the ass-kicking machine and use it on yourself in the privacy of your own home, go right ahead. Just kidding!

[twistedmerkin]

I'll also state that this occupancy standard of appropriation is a good argument for property rights. But it is not enough. For, according to this argument, it would be acceptable for me to occupy your home while you're on vacation or drive your car while you're at work.

[bobby]

"The bourgeoisie cannot exist without constantly revolutionizing the instruments of production, and thereby the relations of production, and with them the whole relations of society. Conservation of the old modes of production in unaltered form, was, on the contrary, the first condition of existence for all earlier industrial classes. Constant revolutionizing of production, uninterrupted disturbance of all social conditions, everlasting uncertainty and agitation distinguish the bourgeois epoch from all earlier ones. All fixed, fast frozen relations, with their train of ancient and venerable prejudices and opinions, are swept away, all new-formed ones become antiquated before they can ossify. All that is solid melts into air, all that is holy is profaned, and man is at last compelled to face with sober senses his real condition of life and his relations with his kind."

been trying to frame use vs. exchange (economic) value in relation to intellectual property and borrowed an analogy from karl marx & frederick engels, "All that is solid melts into air," which also happens to be a nice book on modernity by marshall berman 🙂

so the use value for air is very high, without air we would not be able to breathe. but air's economic value is low, because no one as yet has figured out a way to ration air to individuals. because of its commodity status air is freely shared despite its clear value.

however, in an environment where air is scarce, such as underwater or outer space, the control of air is much easier to regulate. those who own the compressors, tanks and regulators (infrastructure) to deliver air to paying customers are able to derive economic value from what nominally is a ubiquitous and free resource.

the same reasoning behind use and economic value can be applied to IP. control of IP in the past was relatively straightforward given the use value of IP was limited in scope to those who had the necessary infrastructure in place to utilise it. in the music industry, recording and selling songs were a function of owning the distribution rights and the facilities to mint IP onto vinyl, tape, CD or whatever media format desired.

high capital costs were a deterrent for widespread multiplication of IP and hence supply was relatively easy to regulate, copyrights enforced and economic value maintained. but with widespread and low cost availability of equipment to record and exhibit all sorts of media, even marginal consumers are now able to gain access to IP (and even produce it :), rendering those types of IP essentially free.

the important thing to recognize is how amenable IP is to commodification. given use value for a specified market, if the IP represents a complicated process that only companies with large resources are able to replicate, then its economic value is easily defended. but if fixed and marginal costs to replication are low, the ability to defend IP declines, whether through legal enforcement or otherwise. it becomes like air.

"He who can destroy a thing, controls a thing" - paul muad'dib, dune by frank herbert

[Anonymous]

http://www.dankohn.com/archives/000276.html

---
Put simply, in a world where there are essentially no costs to replicate content and it is effectively impossible to stop anyone from doing so at will, the current economic model underpinning content creation will be dead. Despite the protestations of lawyers, (certain) rock bands, and legislatures (all on the same losing side, oddly enough), we are entering that brave new world.

If, as this hard technology determinist viewpoint suggests, content is destined to be free ? i.e., the content creators and publishers will not be directly compensated the way they are today when you make a purchase from your local CD store ? then the real question is what system could replace the content compensation system that has worked quite well for the last 300 years. However, implementing revenue models for infinitely redistributable goods is not an entirely novel question, and there are several economic models that can support the creation of content. What there may not be is enough revenue to support the publishers of that content in addition to the authors, which helps explain why the RIAA is so eager to thwart digital distribution. When an ecosystem undergoes severe environmental changes, certain organisms that were previously essential ? like the cyanobacteria that originally converted carbon dioxide to oxygen, or the record companies? A&R men ? may recede to minor ecological niches.

Economists have a term for what digital goods have become. Items are ?nonrival? when we can all make use of them without anyone having to give them up. If I copy your CD, you?re none the worse for it (nonrival), but if I steal your car, you will probably be upset (rival). Goods are ?nonexcludable? when it becomes impractical to stop everyone from making use of the item, once one person can. It is infeasible, for instance, to stop additional viewers of broadcast television (nonexcludable), while it is very feasible to stop additional moviegoers from entering a theater (excludable). Economists call nonrival, nonexcludable items ?pure public goods,? although the name does not imply that public goods can be provided only by the government.

[thoreau]

I think we should distinguish between copyrights and patents, especially in the digital age. I've seen a few posts that blur the distinction.

Copyrights are long-lived things. I don't recall the precise number of years, but apparently the song "Happy Birthday" is still copyrighted (hence when you celebrate a birthday at a restaurant the waiters usually sing some other song that sounds vaguely like "Happy Birthday").

Patents are comparatively shorter-lived. They live for something on the order of 15-20 years. I don't recall the precise number, but it isn't crucial. Patents will expire at some point, so that future innovators can freely build on an earlier innovation after the original innovator has (rightly or wrongly, for better or worse) earned monopoly profits off of the innovation.

Copyrights, in the digital age, now apply to materials that anybody can cheaply and easily duplicate and distribute with (in principle) no degradation of quality (unlike analog media, for which reproductions are never as good as the original). Even if one adamantly believes that, as a matter of principle, one should not have the right to copy digital media with impunity, the measures needed to enforce intellectual property rights for digital media will only become more onerous over time. Kind of like the measures needed to stop people from growing small amounts of pot in their basements.

Patents still, by and large, usually apply to things that cannot be replicated as easily as coprighted digital media (with all due respect for any and all exceptions). A larger investment of capital and time is necessary to reproduce most patented materials, especially if one wishes to do so on a commercial scale that could substantially hurt the patent owner's profit margin. (I realize that, in principle, if one believes patents should be protected as property rights, then ANY unauthorized production deprives the patent owner of at least one sale and hence eats away at his profits and infringes his property rights. But for now let's stick to cases of practical concern and let others worry about how many patents can dance on the head of a pin.)

In the digital age, one could make a pretty good argument that copyrights should either go out the window or at least be substantially modified in regard to digital media. Now, some would make an argument that in ANY age coprights should either go out the window or at least be substantially modified. Fine. But even those who refuse to accept that principle (e.g. me) might agree that copyrights aren't worth enforcing when we reach the desperate juncture where Orin Hatch wants to remotely destroy your computer if you download a song, and Fritz Hollings wants to order the computer industry to substantially modify hardware to inhibit copying. If the only way to protect one person's innovation (e.g. Metallica's latest release) is to severely regulate innovations in completely different fields (e.g. order computer makers to go to great lengths to modify their designs), well, it's time to rethink matters.

But patents don't share all (perhaps some, but not all) of the problems facing copyrights in the digital age.

So, while I might share some people's skepticism of copyright law, that skepticism need not automatically translate into skepticism of patents. Whatever the problems or benefits of patents, they must be addressed separately from copyrights.

[Kevin Carson]

"There is zero amount of invention X available. If I do not invent it, no one can use it."

You're getting dangerously close to conceptual realism here, twisted merkin. An invention is not a thing; it is a pattern, or a procedure, for making things. The actual things are nearly infinitely reproducible, unless they're cast out of pure plutonium or something.

And if you patent a process or idea that someone else arrives at independently, your patent is indeed stopping them from doing something they otherwise could.

A good many inventions are developed nearly simultaneously by two or people, because the prerequisite scientific understanding and basic technologies exist and more than one person draws the not-quite obvious conclusion from them. That's why you have things like the parallel contributions of Edison and Tesla, etc.

[Amir Noonekhansiymi]

"If I invent it and prevent you from using it without a fee, I'm not preventing you from doing anything that you could do before I invented it."

You mean, 'if I invent it and [the government] prevents...' So you're talking about more government intrusion into our lives. Meh.

Besides, it only works in the US, if there's another (or a lack of an) intellectual property regime somewhere else, then it may not be enforceable anyway. In which case, the regulatory environment becomes a factor in locating production... and where have we heard that before? Oh, that's right, environmental law.

Well, now we know the reason why industries are leaving the US in droves. First, workplace safety and OSHA rules, then environmental regulation and now onerous IP legislation. Good luck with WIPO. That'll be about effective as the UN. Next up, fatties can't be discriminated against when hiring?

"So you want to be a fitness trainer and weight-loss instructor?"

"Ayep."

"No, you're too fat."

"But you see, the government here sez..."

"Ah Phuket, I'm moving to Thailand."

[Anonymous]

http://www.economist.com/business/displayStory.cfm?story_id=2054746

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Other countries are funding open-source software initiatives outright. China has been working on a local version of Linux for years, on the grounds of national self-sufficiency, security and to avoid being too dependent on a single foreign supplier. Politicians in India have called on its vast army of programmers to develop open-source products for the same reasons. This month, Japan said it would collaborate with China and South Korea to develop open-source alternatives to Microsoft's software. Japan has already allocated ?1 billion ($9m) to the project.

Why all the fuss? Modern governments generate a vast number of digital files. From birth certificates and tax returns to criminal DNA records, the documents must be retrievable in perpetuity. So governments are reluctant to store official records in the proprietary formats of commercial-software vendors. This concern will only increase as e-government services, such as filing a tax return or applying for a driving licence online, gain momentum. In Microsoft's case, security flaws in its software, such as those exploited by the recent Blaster and SoBig viruses, are also a cause of increasing concern.

Government purchases of software totalled almost $17 billion globally in 2002, and the figure is expected to grow by about 9% a year for the next five years, according to IDC, a market-research firm (see chart). Microsoft controls a relatively small part of this market, with sales to governments estimated at around $2.8 billion. But it is a crucial market, because when a government opts for a particular technology, the citizens and businesses that deal with it often have to fall into line. (In one notable example, America's defence department adopted the internet protocol as its networking standard, forcing contractors to use it, which in turn created a large market for internet-compliant products.) No wonder Microsoft feels threatened?the marriage of open-source software and government could be its Achilles heel.

[Douglas Fletcher]

"You trust General Mills cereals over Safeway Select's generic version. "

Wrong. Never.

[Jason Ligon]

Kevin,

I agree with the majority of what you are saying. Intellectual property is a misnomer. The rights of actual property can't be used to define IP for the reasons you outlined. Patents create monopolies. Enforcement of patent requires government application of force.

That said, why in the heck would anyone spend 500 million dollars in R&D for anything if we don't have the limited monopoly? It is an unpleasant business that happens to prevent us from living in thatched huts and dying at age 45.

[Anonymous]

"why in the heck would anyone spend 500 million dollars in R&D for anything if we don't have the limited monopoly? "

What was the 500 million spent on? If most of it was spent on "government compliance", then you have to take that out of the equation; that government compliance is a tax paid before you're allowed to market (in the case of pharmaceuticals). At this point, it's hard to argue against the monopoly, if only because it's the only way to recoup the taxation. It's still a chicken-egg argument.

How much would it have cost to invent the artificial heart if the government (and therefore lawyers) didn't have anything to do regarding its testing? Not only would it have cost less, but the inventors probably would have given them away and made their money on the maintenance checkups. Rival inventors may have pooled their resources sooner rather than hold off for the sake of the protected monopoly.

No one can say for sure what would and would not have been invented if there were no government protected monolplies. But no one argues that whatever was invented would cost a hell of alot less.

Incidentally, we've been having trouble with some Microsoft software at our company. Apparently, we are doing something no one has tried before, and we're having trouble getting it up and running. In order to diagnose the problem, Microsoft's support staff told us to download another company's shareware utility to monitor and trace the situation. Seems like Microsoft can't invent their own IP-protected products without using another company's non-protected products.

[Gershbein Reid]

EMAIL: [e-mail]
IP: 62.213.67.122
URL: http://www.effective-penis-enlargement.net/
DATE: 12/09/2003 10:07:07
Unusual ideas can make enemies.

[Barrett Bill]

EMAIL: [e-mail]
IP: 62.213.67.122
URL: http://www.PENIS-ENLARGEMENT-ADVICE.NEt

DATE: 12/10/2003 01:02:33
Assassination is the extreme form of censorship.

[Mendelson Joel]

EMAIL: [e-mail]
IP: 62.213.67.122
URL: http://penis.nonstopsex.org
DATE: 12/20/2003 04:56:57
Don't give up, you are close.

[Vander Sande Dayle]

EMAIL: [e-mail]
IP: 62.213.67.122
URL: http://hardcore.sexmuch.com
DATE: 01/09/2004 03:29:48
Newness is relative.

[Denis JudeLaure]

EMAIL: [e-mail]
IP: 210.18.158.254
URL: http://preteen-sex.info
DATE: 05/19/2004 11:46:49
Assassination is the extreme form of censorship.

[Menyhart Russell]

EMAIL: [e-mail]
IP: 212.253.2.204
URL: http://preteen-sex.info
DATE: 05/20/2004 01:54:48
Churches are hospitals for sinners, rather than hotels for saints.