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Against Monopoly

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Monopoly corrupts. Absolute monopoly corrupts absolutely.





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Common Misconceptions about Plagiarism and Patents: A Call for an Independent Inventor Defense

Defenders of patents commonly say they are against innovators' ideas being "stolen" or "plagiarized." This implies that patents simply permit an innovator to sue those who copy his idea. This position betrays either disingenuity or ignorance about patent law. Let me explain.

Under copyright law, someone who independently creates an original work similar to another author's original work is not liable for copyright infringement, since the independent creation is not a reproduction of the other author's work. Thus, for example, a copyright defendant can try to show he never had access to the other's work, as a defense. The reason for this is that the fundamental copyright is, well, a right to copy one's original creative work. By the nature of creative works that are subject to copyright, it is very unlikely someone would independently create the same novel, say, or painting, as another author. (And if copyright only protected literal copying, it would be much less a problem; but unfortunately it protects a bundle of rights including also the right to make "derivative works".) But, in the rare case where author 2 independently creates a work very similar to that of author 1, it is not an infringement of author 1's copyright, since author 2 did not copy anything.

Patent law is different. Very different. Most defenders of IP do not seem to be aware of this difference--one reason they should not be opining in favor of legal regimes they know little about. When patent defenders say that patent abolitionists are in favor of plagiarism and idea theft, they imply that patent law is like copyright law--that it simply prevents people from copying others' ideas.

Not so. To prove copyright infringement you have to show an actual copying of the work. But to prove patent infringement, the patentee need only prove that the accused infringer makes, uses, sells, or offers to sell, or imports the patented invention--that is, a device or method that is described in at least one of the "claims" of the patent. It doesn't matter if the infringer invented it independently. It doesn't even matter if the infringer invented it before the patentee. Got that? Someone who previously invented the same thing and is using the idea in secret can actually be liable for infringing the patent granted to the second inventor. If a later person independently invents the same idea that was previously patented by another, this is also no defense. Prior use or independent invention are not a defense.

Obviously, it should be. The Intellectual Property and Communications Omnibus Reform Act of 1999 did add a limited first inventor (prior user) defense for prior commercial users of "business methods"--see 35 U.S.C. 273--but not a general one. Justice obviously requires that, at the very least, a general independent inventor defense be added to the patent system. To blunt its sharp, unjust edges. In particular, a defense should be provided for those who are prior users of, or who independently invent, an invention patented by someone else. This would greatly reduce the cost of the patent system since one difficulty faced by companies is that they do not know what patents they might infringe. If someone learns of an invention from another's patent, at least they are aware of the risk and can possibly approach the patentee for a license. But quite often a company independently comes up with various designs and processes while developing a product, which designs and processes had been previously patented by someone else. If the goal of patent law is to reward invention, it should be sufficient to permit patentees to sue people who actually learned of the idea from the patent just as copyright infringement exists when someone reproduced another's work but not when it is independently created. A broad prior user right defense should be established, as well as an independent inventor defense that even a later inventor could use. (Pending patent reform legislation originally proposed to broaden the existing prior user defense by eliminating the business method patent limitation so that users of all types of inventions would have been able to use the defense, but this was removed from later versions of the bill. The Council on Foreign Relations study, "Reforming the U.S. Patent System: Getting the Incentives Right," recommends a prior-user right be adopted; James Bessen & Michael J. Meurer, Patent Failure: How Judges, Bureaucrats, and Lawyers Put Innovators at Risk (Princeton University Press, 2008), recommend an independent inventor defense--see the Introduction.)

Even pro-IP libertarians usually reluctantly agree that independent invention should be a defense, once you dispel their ignorance about the system they for some reason support (well, the reason is not that hard to see--it's lingering state-indoctrination, or some form of statism such as minarchism, or some unprincipled, incoherent grounds like utilitarianism). This is one of the aspects of arguing IP policy that infuriates me. Whenever you point one of these things out to a libertarian defender of IP, he will usually say, "well, I don't support that." So you say, "well, what do you support?" The answer is basically, "Hey, I'm not a patent lawyer; that's just a detail." I.e., they are in favor of some ideal patent system; not the current, statist one (though they oppose abolishing it or weaking it!), but a "libertarian" one (as if one could imagine a patent system concocted by decentralized courts without legislative power! [on this see my Legislation and the Discovery of Law in a Free Society]). In other words, they don't know what in the heck they are even talking about. They can't describe the system they favor, and are not willing to abandon a statist system they admit is unjust.

And they seem blithely unaware that removing the obvious, "problematic" features of patent law would largely gut it, resulting in an emaciated, weak patent system--a change that would be attacked by mainstream IP advocates as "harming innovation," in the same way that these libertarian patenteers criticize us patent abolitionists. Libertarian IP advocates are schizophrenic. They shy away from the obvious injustices of patent law, and would favor reforms that most normal IP proponents would recoil in horror from; while they try to maintain the facade that they support IP because they support innovation and inventors' "rights", even though they cannot tell you what their ideal libertarian patent system even looks like.

Don't believe me that providing an (obviously just) "independent inventor" defense would gut the patent system? I've been practicing patent law since 1993. I have lost count of the number of times I've been called upon by a client to analyze a patent that has come to the client's attention, that concerns it. What typically happens is this. Company A is producing or developing a product. They hear a rumour from a customer "Hey, I think that Company B has a patent on something similar to this." Or, they get a letter from Company B saying, "Hi, we attach a copy of our latest patent for your interest! If you want to discuss licensing, give us a call! declaratory judgment action against us, please! We wouldn't want to give you cause to sue us first, robbing us of the chance to choose the venue! Love, Company B". So Company A calls me, says, "can you take a look at this patent? Are we in trouble? Are we infringing? Is the patent valid? If so, can we change our design to get around it? We'll be happy to pay your $30k fee for an analysis and opinion." Such a productive use of precious capital!

Now, what I want to emphasize here is that: in all the umpteen times I've done this over the last 15 or so years, I have never, ever, even once, seen a case where the client's engineers copied the patented invention. In every case that I can recall, the company designed its product on its own--using available technology, to meet the market demands--and then only later were made aware of some patent buried among millions in the bowels of the patent office. Then they panic, worrying that they might be shut down by an injunction by a competitor, or sued into the ground (for examples see my Radical Patent Reform Is Not on the Way).

No doubt in some cases there is copying. An entrepreneur espies a popular product, and makes a similar one; lo and behold, it turns out there were some patents, and so he is sued. Still unjust--what is wrong with emulation, competition, and learning?!--but still, sure, in some cases, there is copying. But there can be no doubt that millions and millions of dollars are lost on attorneys' fees alone, not to mention the cost of changing designs to avoid infringement, or foregoing development in a field crowded with patents or rife with uncertainty, in cases where the victim was not copying or even learning anything from the company that just happens to hold a red-ribbon adorned manilla certificate issued by a technocratic bureaucracy of the criminal central state. Add an independent inventor defense, and a lot of the work done by lawyers like me would dry up--meaning a more efficient economy, lower priced goods, more competition and innovation, more innovative freedom, more breathing room.

This is a type of reform that most libertarian patent advocates, in my experience, begrudgingly agree to. And it would gut the patent system. The caterwauling of the patent bar, deprived of half their federal law-sponsored teats, would reach a deafening crescendo. Large companies that rely on the inchoate threat of patent lawsuits to squelch competition and keep small innovators down, would increase their bribes to DC, fearful of barriers to entry falling.

So why not come all the way with us, my fellow libertarians? You see the injustices of the patent system, and usually agree with our concrete criticisms of them. You are not sure of what a good patent system would even look like. The current one is undeniably a mess. And it's just an arbitrary fake-law scheme enacted by an obviously incompetent, evil, illegitimate, and criminal state. Why in the world would a libertarian support this? Besides, by advocating such reforms you are going to be lumped in with us "enemies of innovation" by the vested IP interests. So if you are doing the time, you might as well do the crime.

Update: See Mike Masnick's excellent posts, Calling For An Independent Invention Defense In Patents and If Patents Are Supposed To Support The Independent Inventor, Why Isn't There An Independent Invention Defense?, the latter of which mentions a great post by Joe Mullin, Patent defendants aren't copycats. So who's the real inventor here?

[Mises blog cross-post; SK cross-post]


Comments

You mean "Let's cut the crap, realise that half-measures are half-baked, and abolish patents entirely."?

And isn't 'libertarian patent advocate' an oxymoron?

My point being that there's nothing libertarian about unnatural, state granted monopolies, whereas there is about the natural monopolies of an individual's private/physical possession of material and intellectual works (natural intellectual property).

I just heard an item on BBC radio 4 about the difficulties comedians are facing in both avoiding the use of each others' works at the same time as confronting far greater sharing (theft!) of their published works. They'd like to copyright their jokes, but seem to appreciate that it would be difficult. They'd also like people who do steal their jokes to credit their sources. They don't seem to realise that while copyright exists no-one will credit them - because copyright disincentivises credit!

I think the majority of advocates of state granted monopolies have confused the natural monopoly of authorship* with the unnatural reproduction monopolies sought by printers and other mass producers. They also confuse natural rights with the state granted privileges abusively conflated with them (aka legal 'rights').

* Authorship as in 'Which individual(s) penned me' as opposed to 'From whom did the ideas underlying this originate'.

Trademark is supposedly an attempt to protect the natural monopoly of authorship, though it has taken an excursion into the realms of state granted privilege.

Crosbie,

There's no such thing as a natural monopoly "of an individual's private/physical possession of material and intellectual works (natural intellectual property)."

It would imply the existence of a monopoly price for an individual's works, and this doesn't exist absent a state granted intellectual monopoly, such as a patent or copyright.

There is no such thing as a nautural monopoly of authorship. Every author competes in the market for published works, which is far from a monopoly. A monopoly exists only where the government has granted the monopoly holder a legal right to be the sole supplier of the thing monopolized, which means would-be competitors can't compete.

Bill,

If we discount monopolies arising from state granted privilege, we are left with natural monopolies:

2 : exclusive possession or control 3 : a commodity controlled by one party

So, sorry, but there are such things as natural monopolies.

There is a monopoly price for an individual author's works, and this exists absent a state granted privilege.

If you want me to author you an original limerick, then I can put a monopoly price on this work. You will not be able to obtain it from anyone else.

Authorship is thus a natural monopoly.

Don't worry Bill, I remain an abolitionist of all unnatural monopolies and other unethical state granted privileges, copyright and patent included.

However, if nature imbues us with a monopoly then it would be unethical to have the state confiscate it from us. I appreciate there are those who would remove even natural monopolies, denying a person even the monopoly of their private and exclusive possession (see AGPL/Affero). I am not against ALL monopolies, only unnatural ones. I am thus not against intellectual property, only against the unnatural privileges granted to its authors, registrants, or assigns.

Crosbie,

I am aware of your opposition to state-granted monopolies. However, you claim there are two forms of natural monopoly: "exclusive possession or control," and "a commodity controlled by one party."

To take the latter one first, can you name a commodity that is controlled by one party? Corn? That would be news to corn farmers in Iowa, and they account for only a small part of the supply of corn. As for exclusive possession or control, I am in exclusive possession of my blood, but I certainly don't have a monopoly of the blood market or even my own type of blood. Anyone else with my type of blood can donate it (or sell it in a free market) to other recipients who can receive my type.

If you write a limerick and sell it, you can earn monopoly rents on it only if you have a copyright. Otherwise, the price you charge for it is a free market price, not a monopoly price.

Mere physical possession of a good on a free market doesn't by itself give the possessor a monopoly price, even in the case of an original work he authors or of an invention he produces.

I'm sorry but this is problematic, where you wrote:

"I have never, ever, even once, seen a case where the client's engineers copied the patented invention. In every case that I can recall, the company designed its product on its own..."

It is just that your clients have a convenient memory problem.

Jim West http://harpub.co.cc

Bill, I was referring to a definition of 'monopoly', that though includes the state granted variant does not exclude the natural variety.

I naturally have a monopoly, sole control, over the supply of 'works authored by me' to the marketplace and can therefore place whatever price I like on them. Natural law prevents anyone else supplying such works.

I also have sole control over the supply of 'handkerchiefs autographed by me' and 'toilet paper used by me'. Despite having a monopoly on these products, and the ability to put a monopoly price on them I doubt I'll get rich.

The unnatural law of copyright means that not only can I put monopoly prices on my authored works, but I can also put monopoly prices on copies thereof (given the state has granted me the privilege of excluding others from making/supplying them). However, monopoly pricing isn't magic. Whether natural or unnatural, a monopoly price is still limited to that which the market will bear (unless there's no hurry for sales).

Come on Bill. Snap out of it! You don't need me to explain monopolies to you. :)

Crosbie,

The defn. of monoply you link to is a typical dictionary defn., uninformed by economics. I suggest reading chap. 10 of Nurray N. Rothbard's book _Man, Economy, and State_, on "Competition and Monopoly." It contains a far better discussion of these issues.

You can charge whatever price you want for a work you write, but that price will be determined by supply and demand, not merely by whatever you choose to charge. If you price your limerick for, say, one million pounds, I doubt you'll have any takers.

Natural law certainly prevents anyone else from supplying a first copy, which is yours alone (unless you give or sell it to someone else), but if you put it on the market, anyone else has a natural right to obtain it legally, then produce and sell copies for whatever price the market will bear.

You don't have a monopoly on handerchiefs you autograph, or toilet paper you use.

Bill, we are not adversaries. There's no shame in agreeing with me.

Please let me know who apart from myself is supplying handkerchiefs autographed by me, or toiler paper used by me. I'll put their customers straight as to a bonafide source!

@jim west

In response to: "I have never, ever, even once, seen a case where the client's engineers copied the patented invention. In every case that I can recall, the company designed its product on its own..."

You replied: "It is just that your clients have a convenient memory problem. "

-------------------- You must have had to rationalize attacking innovative companies at some point to conclude this. I'm an engineer who has sat through too many brain storming sessions to count. I can tell you that we NEVER ONCE look to Google patent search as inspiration. :)

Jim West, I think you are overlooking the "convenient memory problem" of those writing up the patent applications in the first place.

What is good for the goose....

I can't believe anyone actually thinks that taking away the rights from everyone on the planet for 20 years in order to give it to the first to file an extremely general (broad) patent claim description somehow promotes the progress of science and useful arts. As if humans don't have a natural desire (and right) to create. As if the fruits of sharing, leading to greater intellectual products, wasn't sufficient of an incentive for a great many dedicated inventors/creators. As if the Internet and inexpensive computing hadn't given world-wide collaboration a shot in the arm [with "proof of concept" being the loads of available no charge, quality, open-source software (eg, Linux is run by 90% of the world's supercomputers), wikipedia, the world wide web and email, etc]. As if any man was an island.

Ideas originate from society and start impacting us since we are born, setting up for that fateful moment where we scream EUREKA! Despite this onslaught of countless of unpatented set up stones from others, some decide to collude with the USPTO to steal broad rights from everyone else.

Also: http://opendotdotdot.blogspot.com/2009/11/modest-proposal-how-to-fix-capitalism.html

The relevant economic entity is not "the work" but "a copy of the work." As soon as I sell a copy to someone that starts producing copies of his own, I am no longer the sole supplier of copies. That means I cannot charge monopoly prices. That doesn't mean that I cannot make a profit. If supplying copies is a profitable business, the people intending to supply copies and anticipating a profit, will bid the price of copies up while copies are still scare. Let me explain that a bit further.

It is true that eventually, even very popular works that are read by millions of people will be available dirt cheap. There is however a period of relative scarceness, during which a copy can command a very high price. It is a valuable privilege to be part of the business during this early period of scarcity. The more copies spread, the lower the price a copy can command. And, in turn, the less valuable possessing a copy becomes.

Suppose a publisher would have made $5 million with the help of a monopoly. Instead of a monopoly, however, assume that the publisher has to compete with its own customers as soon as it starts selling. Some of the original $5 million in profit will go to those customers instead of to the original publisher. We can still assume, however, that the original publisher will make the most money. The initial publisher is around when copies are the most scare and the most valuable, and any late-comers will be at a disadvantage.

Suppose that we, the original publisher, set a relatively low price (say $5) to start with and never change it, and only a single customer (another publishing company) sees fit to compete with us. Instead of making $5M in profit, we make $3M and our competitor makes $2M. Our competitor has bought a copy for $5 and made a gigantic profit!

If having a copy at this early stage is worth $2M, we shouldn't be so generous. If we charge $1.8M for the first copy, and $5 for each copy thereafter, our competitor would buy the first copy, making a profit of $200k. We'd make a profit of $4.8M. Still most of the profit goes to us as the original publishers. We see that we don't need monopoly after all. We should simply charge for a copy what it's worth.

This business model is easily adapted for a larger amount of competitors. If there are three publishing houses that would compete with us, then maybe if we start out at $5, we'd make $2M, the next would make $1.5M, and two more would make 3/4M each. We could do much better than $2M. We charge $2.1M for the first copy, and $0.7M for our second. The first buyer sells a copy for $0.7M to our second competitor, and makes a profit of $100k. The last competitor buys from us for $0.7M and makes a profit of $50k. We've made a profit of $4.8M. Still most of the profit goes to us.

If I think I can sell 120 copies for $1, then buying a copy for $100 gives me a good profit. The person I'm buying from at $100, might have sold 120 others like me a copy for $100, after buying a copy for $10k. A book that is distributed to two million people for $1 would net a profit for the author of $1M. Being early is so valuable you can charge a hefty price for it. The author is the earliest of all and still recovers most of the profits from the production of his work.

Sure the whole process is a lot easier and a lot more profitable if the original publisher would get a monopoly. "Things would be easier" is a considerably less powerful argument than "authors and inventors couldn't make a profit and recover production costs." The difficulties of dealing with competitors are faced in many industries - generally the harmful effects of monopoly far outweigh any beneficial effects.

Kid,

One thing you didn't detail is that you can induce the competitors to come forward and negotiate with you early in the game by setting up a distribution channel and releasing the copies all at once in large volume and at $5 per copy to retailers or to end users who have agreed ahead of time to pay the $5 per copy (or some fixed price X for unlimited copies).

If you need help setting this up ahead of time, you can show portions of the work to partners under NDA.

For works that can be copied at near $0 (eg, electronically), you may find a competitor that can make a lot of money and will buy exclusive access for a limited time (ie, "for the first 6 months, sell a copy only to me"). They might make money because they have a large network of customers that pay fixed monthly fees for access to a selection of works.

There is also the fact that greater works might be realizable through collaboration (which will happen to a greater degree when there are fewer costs to sharing). The participants can make money through related businesses (eg, performance, customizations, brand exploitation, etc).

Anyway, copyright monopolies are less damaging than patent monopolies because they have much more narrow scope (if we take a very limited view of "derivative work" or, alternatively, augment "fair use" sufficiently to compensate).

So, your discussion argues that fairness to "inventors" is achievable without monopolies. The problem with patents (and things like software might be hit with both the copyright monopolies and with the patent monopolies) is that the "inventor" of record is not the only inventor or at least not the inventor of the many detailed, probably complex, and independent inventions which would (under current law) likely infringe the patents.

Thus, for patents, we should not be worrying so much about fairness to the inventor of record but be worrying much more about the serious unfairness to the many inventors not of record.

Crosbie is yet again spouting his complete nonsense about "natural monopoly" in ideas.

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