Against Monopoly

defending the right to innovate

IP and Economics

Monopoly corrupts. Absolute monopoly corrupts absolutely.

Copyright Notice: We don't think much of copyright, so you can do what you want with the content on this blog. Of course we are hungry for publicity, so we would be pleased if you avoided plagiarism and gave us credit for what we have written. We encourage you not to impose copyright restrictions on your "derivative" works, but we won't try to stop you. For the legally or statist minded, you can consider yourself subject to a Creative Commons Attribution License.


Medium sized Japanese firms point the way to growth

This subject will appear off-topic initially but bear with me. The Economist magazine has a long article, "Japan's technology champions," about the mid-sized highly specialized companies which dominate several manufacturing fields link here. The prime example is the world's sole maker of the huge forged pressure vessels for nuclear power plants. But there are a host of others that number among the top two or three firms in their industry. All share a characteristic attention to rigorous quality standards.

While computers, for example, have become commodities, certain components are highly technical and hard to make, like the substrate in the fabrication of chips. The article notes that for these firms, the "technology is tacit, not formal. It cannot be transmitted by writing a manual or reading a patent application. Rather it accumulates by working with colleagues over many years. This poses a barrier to entry for rivals."

Other features of these firms result, including their avoiding mergers based on the fact that the strength of the company lies in its current employees, their heavy spending on r & d, on keeping the core technology secret, on owning their supply chain, and even on manufacturing their own specialized tools.

Here again, we see that technical progress is not the result of patents or copyrights, but from the tradition of innovation that put these firms at the top of their industries. This is particularly important as economies pass from the copying and catch-up phases that we see in the emerging industrial states. The next stage is developing the innovative technical skills on which rising incomes in leading economies like the US will depend.


The key some (or many) times is found in the details. Patents essentially/typically don't give away real details of value yet are allowed to be used to block off growth in that wider scope. The system rewards broadness and vagueness over details, as being as general as possible creates the largest subsidy for the patent holder.

If a detail is good, companies keep it secret. If it is bad or stands to gain them much leverage against competitors and customers through a patent, then it is patented.

Software patents in particular are ridiculous.

Also, trade secrets don't hurt other's ability to innovate freely, but patents do since they take away the rights of millions of people; thus, for starters, patents should provide society and those whose rights have been removed with MORE not less than what trade secrets provide.

Removing the existing rights of millions, for a long time (of one's career), frequently, in exchange for virtually nothing, can likely never be argued rationally to be a way to promote the progress of science and useful arts.

However, the overhead costs of the patent system does mean that competition is limited to those able to put up with that cost; thus, the patent system serves the ends of those that want power consolidated and competition limited and controlled. The cost of doing business just gets passed on to the consumer while control is preserved.

I really wish the individual consumer were better represented in [US] Congress. Although, it is certainly possible that the average citizen may simply not realize s/he could be having more for less through a downsizing of the USPTO and of the unconstitutional patent law.

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