Against Monopoly

defending the right to innovate

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.

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The Hidden History of the Telephone...

...or The Case of the Plagiarized Patent.

School children are dutifully taught that Alexander Graham Bell invented the telephone and historians and biographers have defended his claim. But now science and technology journalist Seth Shulman has written an icon busting book The Telephone Gambit: Chasing Alexander Graham Bell's Secret, which reveals the real history behind one of the greatest inventions. Don't miss the first of the comments appended to the first review at the Amazon page.

John Steele Gordon has a fine review in the Wall Street Journal today "False Claim, Future Fortune". He rightly rates Shulman's book "solid history," and notes that it reads like an Agatha Chritie whodunit. The story has enough human interest and twists and turns that it could be turned into a movie. It even has a romantic angle Hollywood would like.

You can order from Amazon or other online vendors. Strand Bookstore had six copies at half price today, and they ship anywhere. (New York, NY 828 Broadway at 12th Street, 212-473-1452, www.strandbooks.com.)

Is a Patent a Monopoly?

Rereading N. Stephan Kinsella's paper "Against Intellectual Property", it occurs to me that strictly speaking a patent is not a monopoly, but instead is an exclusionary device that legally prohibits anyone, even an independent inventor, from copying a patented invention, method, or process. It gives the inventor, in cahoots with the State of course, the right to exclude others from inventing the patented object. A patent does not give an inventor the right to produce his own invention, although he can do so as a consequence of the natural right he has in his property, which includes his body (self-ownership) and his legally owned materials he would use to produce it. Of course, the effect is the same as a monopoly, because he is the only person who can legally produce the ideal object that is the subject of the patent.


For an example of the contradiction of this law, see Kinsella, pp. 4-5, n. 12. Then call your Congressman/MP, etc. and tell him/her that "I'm mad as hell and I'm not going to take it anymore."

Peter Finch, the only actor ever to win a posthumous Oscar award for Best Actor, would be proud.

"Supreme Court to Hear Case on Patent Licenses"

Today's Wall Street Journal has an interesting article about an upcoming case on patent licenses (p. B3A). Unfortunately, they seem to have omitted this page from the online edition, as various p. Bs are listed, but not B3A. The search engine failed to retrieve it, so apologies for not providing a link.

The suit is between Quanta Computer Inc. (allied with other Taiwanese computer manufacturers) and a South Korean firm LG Electronics Inc. LG licensed some patents to Intel in 2000, requiring that it tell its customers not to combine Intel chips with non-Intel components, which it did. Some of Intel's customers ignored the restriction, however, so LG sued them for infringement.

LG lost in district court (hooray!), which said that, since LG had granted Intel an unrestricted license to sell its technology, its patents were therefore "exhausted," and apparently (I haven't read the decision) had no further claims on Intel's customers. Unfortunately, the Federal Circuit Court of Appeals reversed the decision (boo!), claiming that the patents weren't exhausted because of the notification Intel had to send its customers.

As is usually the case in these matters, a slew of amicus briefs have been filed, and interested parties are lining up on both sides. (But who speaks for liberty and free markets, the unspoken third corner in this trianglar tussle? Well, this blog for one.)

On one side are the major patent monopolists and patent licensors Qualcomm Inc. and Wi-LAN Inc., which argue that an expansive interpretation of exhaustion could thwart their patent "rights" and restrict their ability to profit from their patents. On the other side are what I'll call minor patent monopolists, Hewlett-Packard Co., Dell Inc. and Cisco Systems Inc.--which are representing the interests of patent licensees in this case. They argue that a narrow interpretation of exhaustion could result in conditional license agreements that enable patentees to obtain royalties up and down the value chain--upstream and downstream from a patentee's customer(s). (That cheer you hear in the background is from the IP lawyers' bar. "You won the case? We win! You lost the case? We win!")

Jim Skippen, the CEO of Wi-LAN, a Canadian wireless patent troll, er licensor, says a broad view of the matter might induce patentees to foist high royalty demands on downstream licensees to compensate for not being able to license upstream firms, such as semiconductor and component manufacturers. Since upstream firms generally indemnify downstream firms against infringement liability, this could lead to conflict between the two groups.

Mr. Skippen is quoted saying: "What will happen is you won't be able to license down the chain so you'll go after the highest-value guy, and guess what, the component guys have all given indemnities."

But Mr. Skippen, what is the ultimate cause of the conflict, or to put it another way, who exactly are you trying to kid, kiddo? Who has the dirty hands here? Forget where the customers' yachts are, where are the customers' rights?

The article notes that "[t]he doctrine of patent exhaustion, also known as first-sale doctrine, is triggered when the first authorized, and unrestricted sale of a patented article takes place." Dell, HP, Cisco, and eBay Inc. jointly filed a brief arguing that it should be incumbent upon a patent holder to assess the economic value of its invention, and that its "first purchaser" should pay full royalty, and pass along the cost of a license to its customers.

A lawyer for IBM hopes the SCOTUS takes a "balanced" view of exhaustion. He says, "We don't think anyone [should] be able to sell, or license someone to sell, a product and then go out and tell the [licensee's] innocent customers who buy that product, "Gee, we got some more news for you, you need a patent license in order to do anything with that product."

The case will be heard Jan. 16.

Here is an interesting take on patent exhaustion with some basic history: The Patent Prospector.

Here is the Intellectual Property Law Blog on the case.

Here is the Wikipedia article on First Sale Doctrine.

Here is an article on pill splitting from Howrey LLP.

This stuff is giving me a headache already. Does anyone have an aspirin? Just don't split it--I don't want you to get sued by some IP legal hotshot for violating a patent, even though it's your property and your idea.

Pimps and Ferrets: Copyright and Culture in the United States, 1831-1891

History is supposedly written by the victors, so there has been very little written on the cultural (as opposed to the legal) history of copyright in the U.S. during the 19th century. Now Eric Anderson has gone a long way toward redressing this imbalance with his superb PhD dissertaion, available online, Pimps and Ferrets: Copyright and Culture in the United States, 1831-1891 , which can be found at questioncopyright.org .

Here is the 1.83 MB Pdf file .

This study fills a yawning gap in copyright history, and offers a radically different focus on the development of this institution from the dominant legal perspective. The bookends are the Copyright Act of 1831, and the International Copyright Act of 1891, but there is a good summary of early American copyright history and its British background.

The controversies, schools of thought, and heroes and villains are well portrayed in this thoroughly researched work. The growing scope, duration, and, especially, complexity of copyright law are highlighted. (No prize for guessing which profession hit the jackpot.) Important legal cases and legislative battles are discussed.

But the most interesting part of the book might be the absorbing discussion of the magazine and newspaper debates over copyright, ranging from the Southern Literary Messenger (which he notes is now online) to the Chicago Daily Tribune (which published dozens of articles opposing international copyright) to Benjamin R. Tucker's magazine Liberty (alas mentioned only in a footnote, which surely undervalues the influence of its decade-long debate--and Lysander Spooner is not mentioned at all, but the obscure John Blair Dabney is, rightly, considering the strength of his argument). If you've ever wondered why the American Copyright Club had such little influence, the answer is here. Like most historians of this subject, he discusses Charles Dickens' American campaign for international copyright, but neglects to mention that Dickens was actually paid royalties by three American publishers, if not by the ones that printed unauthorized editions.

Although he doesn't focus on the economics of copyright, he does discuss the economic impact of protection, the effect of rent-seeking, and the prices of copyrighted and uncopyrighted books in both England and America. "Cheap books" was the battle cry in America and rightly so.

In an illuminating passage, he notes "that many academic approaches ... miss how copyright is -- in practice and in ideology -- a mechanism for regulating the market." He points out that this leads to a misunderstanding of the development of copyright and overemphasizes "romanticized authorial propaganda for causal agents of change." This is only one of several historiographical myths he punctures.

The bibliography is excellent, although articles by libertarian writers N. Stephan Kinsella, Roderick Long, and Tom G. Palmer are listed even though they are not cited or discussed in the text or footnotes. Why this is so I have no idea. Maybe someone who knows the ins and outs of academic publishing better than I do can explain this.

As for the meaning of "Pimps and Ferrets," you'll have to read it to find out. I haven't read anything as interesting in a while.

Sonny Bono Was a Piker

One of the main arguments put forth by the copyright reformist camp is that the term of copyright has gradually been lengthened until now it's as long as life of the author plus 70 years. Incentives all the way to the grave and beyond, if you will; but this doesn't bode well for innovation and is increasingly problematic with more legal wrangling and wasteful rent seeking.

IP advocates like to analogize IP to physical property insofar as they can, while noting obvious differences too. See, for example, Frank Easterbrook's essay "Intellectual Property Is Still Property." (No link available, but it's reprinted in Adam D. Moore, ed., Information Ethics .)

Physical property, as everyone grants, has no term limit, unlike IP. Physical property also never enters the public domain, although it can be abandoned, and then re-homesteaded by a new owner. IP does enter the public domain though, after the expiration of a copyright (or patent).

Lysander Spooner , a 19th-century opponent of slavery and, eventually, of the U.S. Constitution, thought this was bizarre. In his uncompleted 1855 tract The Law of Intellectual Property , he argued for a perpetual right of property in ideas, and stated that it: "is intrinsically the same as, and stands on identically the same grounds with, his right of property in material things; that no distinction, of principle , exists between the two cases" (p. 30). (Spooner's italics.)

So here's my challenge to lawyers such as Frank Easterbrook, Lawrence Lessig, and William Patry: if you really believe that IP is property and that IP holders' rights should be protected just as their rights in their material property are, why not overturn Sonny Bono and extend copyrights (and patents) indefinitely, as long as the underlying IP has not been abandoned by its owner(s)? So why stop a mere 70 years after an author's demise? Presumably this would also put an end to rent seeking and endless lawsuits.

Failure to do so strikes me as prima facie evidence (to quote my old monetary theory prof. in another context) that IP is not property, and in fact is just an old fashioned monopoly. In other words it's the monopoly formerly known as intellectual property. And where there's a monopoly, there's bound to be a gaggle of lawyers chasing from behind.

Chinese Computer Scientist Jailed for Copyright Infringement

Chen Shoufu, an innovative Chinese computer scientist, was jailed August 16 in Beijing for violating the copyright of China's leading instant-messenging service, Tencent Holdings Ltd., owner of the popular QQ program. Mr. Chen's program Coral QQ made QQ more user friendly by blocking ads, resolving internet addresses, and identifying the computer from which a message is sent at no charge. (Tencent charges for the ID service.) He had previously paid a 100,000 yuan fine, about $13,600. Here is the article in the Wall Street Journal.

He has become a hero in China, the second largest internet market. One blogger decried Tencent for "bullying Chinese users by monopolizing the market."

This is yet another chilling example in a long list of violations of the liberty of people to use their property in non-invasive and very often innovative ways that ironically could improve the lives of their prosecutors, as well as countless other people.

Historians and analysts of the monopoly formerly known as intellectual property, who are critical of patent and copyright, usually emphasize the drag on innovation caused by these monopolies. Here is another reminder that the assault on liberty and property, rightly understood, is every bit as detrimental to the progress of society.

It's vitally important that critics of intellectual monopoly make this case in their briefs and remonstrations.

Here's One Small Reason Why Government Should Not Have a Monopoly of the Courts

As reported in the New York Times, a judge in the Niagara Falls, New York, city court, more or less went beserk when a cell phone rang in his court. After threatening to jail everyone in his presence (except of course the court emloyees) unless the owner of the phone 'fessed up, he impertinently inquired of the defendant in front of him, Reginald Jones, if he knew who owned the phone. When the perplexed Mr. Jones answered that he did not, the judge scuppered his plan to release him, set his bail at $1,500, and ordered him into custody.

Here is the story.

The judge is going to be removed, so there is some semblance of justice here.

In a free market court system (see David Friedman, The Machinery of Freedom; William Woolridge, Uncle Sam the Monopoly Man; and Murray N. Rothbard, For a New Liberty), the judge would be fired and good luck to him obtaining work as a judge again. And it wouldn't require a government commission to do it--at taxpayer expense, thank you.

"Kindergarten Kopyright": Indoctrinating School Children and Boy Scouts

School children and the Los Angeles-area Boy Scouts are now being indoctrinated (or maybe brainwashed is a better term) in the ABCs of copyright law.

Here is the article, which appears in the Nov. 26 issue of Forbes. Wendy Seltzer, a law professor, charges that they are being taught an overly broad system of copyright. Well, would you expect anything else?

Of course, it might be moot if they don't learn to read and write, which is a real possibility in this day and age.

The Patent Teflon Dons (Part 2)

David K. Levine points out in his comment to "Intellectual Ventures Patent Globaloney" below that non-producing patent trolls such as Intellectual Ventures are free to sue infringers of their patents, but aren't subject to countersuit.

There is another class of patent holders that can't be sued, as the Wall Street Journal points out today in "Critics Take Aim at California's Patent Shield" .

These are state entities that hold patents, such as the University of California. They are protected by the doctrine of sovereign immunity, which protects them from legal liability. They can sue but can't be sued. As the Church Lady used to say, "Isn't that special?"

In a case brought by Biomedical Patent Management against the state of California for non payment of royalties on a patented invention, the trial court judge criticized the fact that the U. of C. can reap the benefits of the patent system without the possibility of liability for infringement. Private universities don't have this advantage.

A representative of a software industry association says that these state entitites are competitors against private firms.

Unfortunately, the discussion has degenerated into parsing the 11th amendment and the question of whether states can be sued.

The judge in the biomedical case could have struck a blow for freedom by pointing out that Biomedical's patent violated the liberty of competing inventors, while potentially raising prices to consumers.

In the meantime the U. of C. and other state entities will go on hiding behind the doctrine of sovereign immunity. As Mel Brooks put it, "It's good to be the King." Or at least to hide behind his throne.

Intellectual Ventures' Patent Globaloney

Nathan Myhrvold's firm Intellectual Ventures is trying to raise up to $1 billion to buy patents and to help inventors develop inventions. Although IV hasn't sued anyone yet, Mr. Myhrvold won't abjure such an action.

The Wall Street Journal reports here .

One of its goals is to deepen--and no doubt to widen--the "market" for the monopoly formerly known as intellectual property. And that's the rub. So called "IP" is a government-granted monopoly, and therefore is the antithesis of property, as that term is understood under natural law.

Making the market for "IP" more liquid is like making the market for slaves more liquid.

Ron Lurie, an executive at Inflexion Point Strategies LLC, chillingly points out that IV could send letters about its "800 patents that cover your business."

"[N]obody can risk going to court, and they're just going to write you a check."

How would you like to have that letter on your desk?

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Most Recent Comments

Questions and Challenges For Defenders of the Current Copyright Regime It is one of the finest websites I have stumbled upon. It is not only well developed, but has good

Killing people with patents I'm not really commenting the post, but rather asking if this blog is going to make a comeback

The right to rub smooth using a hardened steel tool with ridges Finally got around to looking at the comments, sorry for delay... Replying to Stephan: I'm sorry

Let's See: Pallas, Pan, Patents, Persephone, Perses, Poseidon, Prometheus... Seems like a kinda bizarre proposal to me. We just need to abolish the patent system, not replace

The right to rub smooth using a hardened steel tool with ridges I'm a bit confused by this--even if "hired to invent" went away, that would just change the default

Do we need a law? @ Alexander Baker: So basically, if I copy parts of 'Titus Andronicus' to a webpage without

Do we need a law? The issue is whether the crime is punished not who punishes it. If somebody robs our house we do

Do we need a law? 1. Plagiarism most certainly is illegal, it is called "copyright infringement". One very famous

Yet another proof of the inutility of copyright. The 9/11 Commission report cost $15,000,000 to produce, not counting the salaries of the authors.

WKRP In Cincinnati - Requiem For A Masterpiece P.S. The link to Amazon's WKRP product page:

WKRP In Cincinnati - Requiem For A Masterpiece Hopefully some very good news. Shout! Factory is releasing the entire series of WKRP in Cincinnati,

What's copywritable? Go fish in court. @ Anonymous: You misunderstood my intent. I was actually trying to point out a huge but basic

Rights Violations Aren't the Only Bads I hear that nonsense from pro-IP people all the

Intellectual Property Fosters Corporate Concentration Yeah, I see the discouragement of working on a patented device all the time. Great examples

Music without copyright Hundreds of businessmen are looking for premium quality article distribution services that can be

Les patent trolls ne sont pas toujours des officines

Les patent trolls ne sont pas toujours des officines

Patent Lawyers Who Don't Toe the Line Should Be Punished! Moreover "the single most destructive force to innovation is patents". We'd like to unite with you

Bonfire of the Missalettes!

Does the decline in total factor productivity explain the drop in innovation? So, if our patent system was "broken," TFP of durable goods should have dropped. Conversely, since