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.

For the folks in the Washington DC area: next Monday, November 10th, the Cato Institute will be hosting a presentation of the book by David K. Levine and myself, Against Intellectual Monopoly.

I will be presenting the book, and Robert D. Atkinson, Ph.D., Founder and president, Information Technology and Innovation Foundation, will debate it. To be moderated by Jim Harper, Director of Information Policy Studies, Cato Institute.

The event takes place at 12:00 p.m. and it is followed by a luncheon. Please go here to register.

Here [PDF] is a legal opinion on trademark law that is well worth reading. [E.S.S. Entertainment v. Rockstar Games, Inc.]

The opinion contains several gems such as:

"A reasonable consumer would not think a company that owns one strip club in East Los Angeles, which is not well known to the public at large, also produces a technologically sophisticated video game like [Grand Theft Auto] San Andreas."

...

"[F]ans can spend all nine innings of a baseball game at the hot dog stand; that hardly makes Dodger Stadium a butcher's shop."

While the court's opinion is, of course, correct, I am continually amazed that the legal system still allows IP attorneys to even make such frivolous claims without being sanctioned.

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.

In his helpful alert, Stephen Spear may have overstated the case "that business method and software patents are probably done for" in light of the Federal Court of Appeals decision in the Bilski case. It marks a significant step back from the brink of unhinged insanity in terms of patent policy, but it still isn't the true and thorough reformation that is needed.

However, everyone visiting this site should do themselves a favor and read Judge Mayer's sublime dissent in the Bilski case - arguing that the majority decision doesn't go nearly far enough in curtailing patent abuses.

Mayer's dissent starts on page 98 of this PDF document and continues on through page 122.

A few small tastes of an opinion that is worth posting in its entirety:

There are a host of difficulties associated with allowing patents to issue on methods of conducting business. Not only do such patents tend to impede rather than promote innovation, they are frequently of poor quality. Most fundamentally, they raise significant First Amendment concerns by imposing broad restrictions on speech and the free flow of ideas.

...

Business innovations, by their very nature, provide a competitive advantage and thus generate their own incentives.

...

It is often consumers who suffer when business methods are patented...Patented products are more expensive because licensing fees are often passed on to consumers...Further, as a general matter, "quantity and quality [of patented products] are less than they would be in a competitive market."

Patenting business methods makes American companies less competitive in the global marketplace.

Read the whole thing!

In response to requests I've made some improvements on how the blog works. You can click the title "Against Monopoly" to get back the front page and the titles of posts now have the permalink (also available as always at the bottom of the post).

For authors - there is a new feature that enables you to receive email notification when you receive comments on your posts. Just make sure that your that for each post you set the public email address to your real email address and put an asterisk after your email address. So, for example, in the email field I put

david@dklevine.com

nothing will happen, while if I put

david@dklevine.com*

then for that post I will receive email notification of any comment that is submitted to that post.

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.

Tim Lee has a post on Freedom to Tinker that may be of special interest to economists. He suggests that Wikipedia may be a public good subject to a free-riding benefit rather than cost. That is with standard public goods, we think of free-riders as people who good institutions would make into contributors. Tim suggests that for certain kinds of projects increasing the number of free-riders (the audience size) is good, because it also increases the number of contributors. Wikipedia for all its faults is interesting, because unlike say the free-software movement, it is driven entirely by volunteers. Maybe someone who knows more about Wikipedia than me can answer the question of whether these volunteers are anonymous, or whether the are working in hopes of recognition.

Big victory today at the CAFC! (Finally)

Via Slashdot, the Court of Appeals for the Federal Circuit, which reviews all patent disputes in the U.S. now, has ruled in the In Re Bilski case that the U.S. Patent Office's rule that patents must meet the "machine or transformation" test -- i.e. ideas must be embodied in an actual product (a machine) or engender an actual physical transformation (as, for example a chemical or biological process) -- in order to receive a patent.

In practice, what this means is that business method and software patents are probably done for.