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Libertarian Patent Lawyer Defends Patent Law

No, not me. Michael F. Martin, a patent attorney with Drinker Biddle. The March 2010 issue of Liberty (which also features a letters exchange regarding my December 2009 Liberty article, Intellectual Property and Libertarianism) features the following guest reflection by Mr. Martin:
Sane and sound "The hallmark of sanity is to remain firmly tethered to reality," said the federal judge to the parties of a patent infringement litigation between a large Canadian computer company and a small, patent holding company (a.k.a. "patent troll") after a jury had found the computer company liable for infringement. The computer company in question? Research In Motion, makers of the Blackberry. The case finally settled for $612.5 million.

That was March 2006. In May 2006 there followed the Supreme Court's announcement of its decision in the case of eBay v. MercExchange. In eBay, the Supreme Court overturned the Federal Circuit rule that permanent injunctions should issue against patent infringers "absent exceptional circumstances." Many large companies in the software industry, which tend to be defendants, have hoped that eBay would put an end to "patent trolls" and their own patent infringement liability. Indeed, since eBay only a handful of injunctions have issued to patent owners who do not practice their invention. "But," wrote the Supreme Court in eBay, "traditional equitable principles do not permit such broad classifications." And thus, just over three years later, on Dec. 22, 2009, the Federal Circuit upheld an injunction and award of $290 million in damages for patent infringement this time to a small Canadian startup, i4i Inc. The defendant was Microsoft Corporation, maker of Microsoft Word, which had incorporated into its software an XML editor patented by the startup.

The difference between the cases? Unlike the "patent trolls" in the earlier cases against RIM and eBay, one of the inventors behind the i4i patents, Michael Vulpe, was also an entrepreneur, who had started a business to commercialize the patented concepts.

Although Vulpe's apparent victory should be an occasion for rejoicing by libertarians (most of them, anyway) and other believers in strong property rights, one wonders what reality is faced by inventors without the desire or skill to become entrepreneurs.

Some might say the law has, at least for the moment, achieved a delicate balance between the exclusivity needed to encourage investment in new technology and the access needed to spread that new technology around. Others might say that a better way to determine what "reality" is most "sane" is to rely on private negotiations based on the principle of strong property rights. The eBay decision discouraged negotiation; the recent decision may lead to more negotiation and less litigation. Michael F. Martin

Martin writes as if oblivious of the fact that libertarians are increasingly opposed to IP rights (see my Have You Changed Your Mind About Intellectual Property?; Against Intellectual Property; and other material here); as when he writes, "Vulpe's apparent victory should be an occasion for rejoicing by libertarians (most of them, anyway) and other believers in strong property rights..." Vas...? We should rejoice that i4i was able to use the state-granted patent monopoly to impose millions of dollars of cost on Microsoft? Why? This presupposes that IP rights are legitimate "property rights." (Not to excuplate Microsoft from charges of hypocrisy: see my post Microsoft Wants Galactic Patent. The recent case mentioned by Martin is i4i v. Microsoft.)

Let me go through Martin's post in a bit more detail. First, his post implies that patent trolls are problematic (a patent troll was behind the $612.5 million Blackberry settlement), while actual inventors who have "commercialized" their own patent are good guys (Vulpe, the i4i inventor in the Microsoft case) and are justified in using their state monopoly grants to (legally) extort money from others. But patent trolls are not the problem at all (see my posts Patent Trolls and Empirical Thinking; Facebook Threatened by a Non-Patent Troll). The patent system does not require the patent owner to practice the patented invention or even to make an actual working model (see my "Reducing the Cost of IP Law", where I recommend imposing working and reduction-to-practice requirements on patentees, which would reduce patent trolling; I don't see Martin recommending this). Martin implies it's good--and libertarian, supposedly--that "the recent decision may lead to more negotiation and less litigation". What is libertarian about this? If the legal system grants clear, strong rights to a patentee to allow him to (legally) extort money from his victims, of course that may lead to "more negotiation" and "less litigation." Why is this good? If the legal system makes it crystal clear that the victim will lose in court, thus reducing the need for wasted time in litigation, this is not good, if the victim's losing is unjust.

In fact, this is exactly what happened in the Blackberry (RIM) case that Martin holds out as an example of injustice. In that case (see my post Woops, sorry, Blackberry!; also The Age of Technocide: RIM Pays Out Again Over Patents), RIM coughed up $612.5 million because of the possibility an injunction issuing--even though the patents in question were being re-examined at the US Patent Office. But even though it appeared likely they might be declared invalid a few months later, the courts were then operating under pre-eBay caselaw which made an injunction easy to get. In other words, the court in the RIM case was about to issue and order shutting down the Blackberry itself, even though the underlying patents' validity was in question and being re-examined at the PTO. This would have ruined RIM. So it caved, paying a huge ransom to save the company. If there had not been a threat of injunction, RIM would certainly have just fought the case--instead of paying almost a billion dollars!--and maybe the patents would have been declared invalid, and they would have walked away $612.5 million richer. That's why eBay was a good decision--for libertarians, at least, since it made injunctions less automatic, harder to get (see Woops, sorry, Blackberry!; I also discuss the eBay case in Radical Patent Reform Is Not on the Way). And that's why in Reducing the Cost of IP Law I recommended the abolition of patent injunctions. Martin acts as if he opposes the Blackberry settlement, blaming it on patent trolls (but without advocating a working or reduction to practice requirement, which would limit trolling), while favoring the granting of injunctions which was the real cause of the outrageous injustice done to RIM. (For a discussion of the pro-patent approach of patent attorneys, see "The Silent Bar" section of Reducing the Cost of IP Law.)

I see here a libertarian patent lawyer who is taking it for granted that patents are legitimate property rights--presumably because he believes the law should grant a monopoly license to provide "the exclusivity needed to encourage investment in new technology." Patents are not legitimate property rights. They are mercantalist, monopolistic abominations. Libertarians, including libertarian patent attorneys, should oppose the patent system.

[Mises; SK]


Comments

Thanks for mentioning this Stephan. I'll pick up the March issue. I was kicked off Liberty's subscription (!) list in early 1999 by the late Bill Bradford, in a Rand-like move, even though my subscription had six months to run. So Bradford stole money from me, if not much. I've since bought it at Barnes & Noble. He kicked me off after I complained, very mildly, about his editing of my article on Clinton's fiscal demagoguery. As anyone who read the magazine during his time as editor knows, it was atrociously edited.

I sent an article on IM to Liberty in 2006, but decided that it needed more work. My hard drive then crashed and I've never picked it up, even though I did recover it after some doing. I might come back to it.

I'll admit that, at first, I was against the idea of NPEs "patent trolls" profiting from others' innovations. Certainly, harassment and abuses of the patent system should be curtailed. However, after doing some research, I've come to think that most so-called "trolls" are doing nothing worse than many other companies. Notice that it's generally the large corporations that get incensed about the trolls. Most NPEs don't seem to be any worse than day traders, for instance.

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