Against Monopoly

defending the right to innovate

Monopoly corrupts. Absolute monopoly corrupts absolutely.

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The Patent, Copyright, Trademark, and Trade Secret Horror Files

As noted here, "Ayn Rand's newsletters used to end with a "Horror File" of monstrous but true quotations."

Along those lines, it's time to collect some choice trademark horror stories in one place. The main post will be here, on the Mises Blog, but I'll cross-post the initial post here too. But look there for updates (or to add suggestions in the comments). (Update: I have modified this post to also include outrageous examples from patent, copyright, and trade secret law. See below.)


As noted in Trademark versus Copyright and Patent, or: Is All IP Evil?, it's not only patent and copyright that are unlibertarian and unjust. Modern trademark law is as well. I deal with tradmark rights on pp. 58-59 of Against Intellectual Property, and also in some detail in Reply to Van Dun: Non-Aggression and Title Transfer (esp. pp. 59-63). In my view, extensions of trademark law--rights against "trademark dilution" and cybersquatting, etc.--are obviously invalid. Further, federal trademark law is problematic since it is not authorized in the Constitution.

But even if federal trademark law were abolished, as well as modern extensions such as rights against trademark dilution, even common law trademark is problematic, for three primary reasons. First, it is enforced by the state, which gets everything wrong. Second (see First), the test of "consumer confusion" is usually applied ridiculously, treating consumers like indiscriminating idiots. Third, and worst of all, the right at issue is the right of the defrauded consumer, not the competitor. Trademark law ought to be reformed by abolishing the right of trademark "owners" to sue "infringers" (except perhaps as proxy for customers, when consent can be presumed or proved--as I discuss in this interview: Free Talk Live Interview on Reducing IP Costs (Jan. 20, 2010)), and treating this as a case of the customer's right to sue a vendor who defrauds him as to the nature of the good purchased. Some might argue that this is only a minor change, but it is not: such a change would make it clear that "knockoffs" are usually not a violation of anyone's rights: the buyer of a $10 "Rolex" is almost never defrauded--he knows what he's getting. Yet by giving an enforceable trademark right to the user of a mark, he can sue knockoff companies even though their customers are not defrauded and in fact are perfectly happy to buy the knockoff products.

The other fallacy is the view at work here that there is no such thing as reputation, or even identity, absent trademark law. But this is incorrect. Of course people and firms can have reputations even if trademark law is nonexistent. All that is required is that people be able to identify other people and firms, and communicate. Pro-trademark arguments often implicitly assume that this is not possible, absent state-enforced trademark law, which is ridiculous.

In any event, on to a collection of trademark outrages for the horror files (some of these are also listed in Reducing the Cost of IP Law):


Taken (in part) from my article Radical Patent Reform Is Not on the Way, Appendix: Examples of Outrageous Patents and Judgments:

Examples of (at least apparently) ridiculous patents and patent applications abound (more at PatentLawPractice): The Supreme Court, in the 1882 case Atlantic Works v. Brady, 107 US 192, itself lists examples of patents issued to "gadgets that obviously have had no place in the constitutional scheme of advancing scientific knowledge … the simplest of devices." These included
  • a particular doorknob made of clay rather than metal or wood, where differently shaped doorknobs had previously been made of clay;
  • making collars of parchment paper where linen paper and linen had previously been used;
  • a method for preserving fish by freezing them in a container that operates in the same manner as an ice-cream freezer.
  • rubber caps put on wood pencils to serve as erasers;
  • inserting a piece of rubber in a slot in the end of a wood pencil to serve as an eraser;
  • a stamp for impressing initials in the side of a plug of tobacco;
  • a hose reel of large diameter so that water may flow through the hose while it is wound on the reel;
  • putting rollers on a machine to make it movable;
  • using flat cord instead of round cord for the loop at the end of suspenders;
  • placing rubber hand grips on bicycle handlebars;
  • an oval rather than cylindrical toilet paper roll, to facilitate tearing off strips.
Below are a few notable or recent examples of large, significant, troubling, or apparently outrageous injunctions, damages awards, and the like:


Some of these are also listed in Reducing the Cost of IP Law: See also:

Trade Secret

Even trade secret law, the least objectionable of the four main types of IP, has been corrupted by the state.

[Mises; SK]


Another couple of examples you might want to add to the list are the Newcastle Brown case, and the Arsenal case.

In the Newcastle Brown case, a brewery applied for, and obtained a protected designation of origin ("PDO") for Newcastle Brown Ale, which was manufactured in Newcastle. The intention of PDOs is ostensibly to protect the consumer from inferior goods from outside the protected geographical area. So when the brewery decided to close the Newcastle brewery, and move production to Gateshead (across the river, but certainly not Newcastle, as any Geordie will tell you), the brewery then applied to have the PDO revoked, as apparently it was no longer in the consumer's interest that Newcastle Brown Ale was only capable of being brewed in Newcastle. http://eur-lex.europa.eu/LexUriServ/LexUriServ.do?uri=OJ:L:2007:210:0026:01:EN:HTML

In the Arsenal case, a trader was sued by Arsenal football club for trade mark infringement.


He was selling scarves and other items bearing Arsenal's registered trade marks, but had a clear disclaimer on his stall saying that they were not authorised merchandise. The first instance Judge, the late great Sir Hugh Laddie, found that the use of the marks was not to indicate origin (because of the disclaimer), but was merely a badge of allegiance, but he referred the matter to the European Court of Justice on a point of law related to trade mark infringement. The European Court took it upon itself to exceed its authority, and overturn a finding of fact which Laddie J had already made (namely that the use of the marks was not indicative of origin), and when the case was remitted back to the Laddie J, he was pretty scathing and disregarded the (nominally superior) court's ruling on the facts, on the basis that they had exceeded their authority.

Arsenal took the case to the Court of Appeal in England, which cravenly followed the ECJ's ruling, and rejected Laddie J's finding of fact (even though the appeal was again on a point of law), and found in favour of Arsenal and its brand protection.

On that dark day, the English law of trade marks moved from a consumer-protection regime, intended to give consumers a guarantee of origin, to corporation-friendly unfair trading regime, intended to maximise the monetary value of trademarks at the expense of consumers.

My final comment relates to the Budweiser dispute as an aside: anyone who has ever tasted both beers will tell you that you that Budvar is infinitely higher quality brew.

Thanks for these links! By the way, I have just added a Reference List to my economics blog with economic data series, history, bibliographies etc. for students & researchers. Currently over 200 meta sources, it will in the next days grow to over a thousand. Check it out and if you miss something, feel free to leave a comment. Will try and find statistics on trademarks now as well.
Funnily enough, I made a comment about trademark just a couple of days ago on TechDirt:

Trademark is about authorship (identity of manufacturer), and authorship constitutes a natural monopoly.

If Fred makes a vase then only Fred can truthfully claim that he made the vase. The government doesn't grant him this monopoly. Nature imbues him with it. The government is supposed to protect Fred's natural (aka moral) right to identify himself as the maker of the vase, and thus to deny anyone else from making false claims (identifying someone else as maker of Fred's vases, or identifying Fred as the maker of vases he didn't make).

Fred can mark his vases with a unique symbol or name to indicate his authorship, to identify himself as the manufacturer.

Trademark law is about a government regulated registry of such marks to avoid the same symbol being used in the same trading context (by different manufacturers) such that authorship risks becoming confused (in the marketplace). So, there is a small element of government granted monopoly in that the manufacturer who first registers a particular mark for a particular product in a particular context is able to prevent others using that mark where that risks confusing the identity of the product's manufacturer.

The problem with trademark is that holders overreach its purpose to prevent confusion and deceit, and attempt to claim exclusive use of their mark in all contexts. For that reason trademark law needs reforming, possibly even abolition.

Even so, even without the trademark registry, it should still be prohibited to deceive people (intentionally or through negligence) as to the identity of a product's manufacturer.

Branding of cattle with unique symbols is similar, though concerns the identity of the breeder or owner rather than the manufacturer.

Here we go again w/ the incoherent notion of "natural monopoly." Can't you see, Crosbie, that your idiosyncratic use of terms is utterly unhelpful and only causes confusion? It adds nothing to the analysis.
There is, of course, nothing idiosyncratic or incoherent about the notion of "natural monopoly": http://en.wikipedia.org/wiki/Natural_monopoly
Stephan, the existence of natural monopolies does not risk validating unnatural, government granted monopolies.

Similarly, the fact that one can recognise intellectual property to be as natural as material property does not validate the granting of monopolies to the creators of intellectual work.

Language does not define the principle, it is used to label and describe the principle once it's been defined.

Thus it is not the word 'theft' that defines when a privacy violation has occurred, but the principle of privacy. Theft is simply the label applied to a particular kind of violation.

Monopoly doesn't just mean 'government granted'. It means any situation where something can only be provided or supplied by a single entity.

Crosbie, as best I can make out, you are saying literally nothing.
Crosbie writes:

It is not the word 'theft' that defines when a privacy violation has occurred, but the principle of privacy.

Indeed, the word 'theft' applies instead when larceny has occurred. The phrase 'privacy violation' applies when a privacy violation has occurred.

Stephan, the subtle ideological schism that lies between our positions renders everything I write as incoherent in your eyes, and consequently leaves you incapable of responding with anything other than vacuous criticism. It's probably best if you join me in an entente cordiale.
Is that like a menage a trois?
Crosbie, I don't think you deserve to be treated as a worthy enough adversary to even have such a detente with, sorry.
Ok then Stephan, I'll carry on with the cogent argument for IP Naturalism, and you carry on unconstructively denouncing everything I write as incoherent or devoid of substance. Sounds like a rather Pyrrhic debating technique to me, but whatever floats your boat...
Crosbie, you are not carryign on any argument. You are babbling incoherently. At last IP advocates have the decency to be wrong--they actually say something, so we can then at least say that and why they are wrong. You are saying nothing.
From Imagine a World Without Copyright:
We propose that the risk bearer - the artist, the producer or the patron - receive for works of this kind a one-year usufruct, or right to profit from the works.
So the "world without copyright" would in fact be with copyright?
The third situation for which we must conceive a solution is when a certain artistic creation is not likely to flourish in a competitive market, not even with a one-year usufruct. It may be the case that the public still has to develop a taste for it, but that we still find, from the perspective of cultural diversity, that such a work must be allowed to exist. For this situation it would be necessary to install a generous range of subsidies and other stimulating measures, because as a community we should be willing to carry the burden of offering all kinds of artistic expressions a fair chance.
Why the distinction between "the public" and "we"? Who is this "we" - some elite entitled to judge what good culture ought to be and what "the public has to develop a taste" for? I guess when something is "not likely to flourish in a competitive market", then it does not deserve to exist. If something flourishes even though there is not a sufficient demand for it on the market, it means that someone is being coerced and his real rights are trampled.
@Crosbie: I agree *natural monopolies* do exist, despite any tendency for SK and Bill Stepp to shut their eyes and poke their ears and yell "nahnahnah" whenever the term comes up. Violent action forms a natural monopoly for the victor, because you can't compete equally when you're dead or injured, and your weapons can be taken from you by any assailant. The first person to invent any given weapon has a natural monopoly on who has access to that weapon, including the decision whether to bring that weapon to an open or anonymous market, or whether to kill anyone before they can create a similar weapon. I don't think you're using the term "natural monopoly" correctly here though, and I thank a certain Nobody for posting the Wikipedia link.

I agree that people have a "moral right" (societal not natural) to identify their own work as their own, and not have anyone claim their work, or claim that work done by someone else is their's. That "moral right" still doesn't extend to using a non-unique mark, for example a common name or dictionary word. Care must be taken that a mark is unique, so it's harder for someone else to accidentally use a duplicate mark. That's why we sign things "in our own hand" rather than with a standard font or block text -- personal signatures are much harder to duplicate by accident, even when people's names are exactly the same. If this unique identification process was really a "natural monopoly", plagiarism and forgery would not be problems, as "nature" would prevent such copies from happening without a cost-prohibitive amount of effort. This all gets into definitions of plagiarism, counterfeit, and forgery, which are outside of the bounds of Constitutional law concerning "limited times" monopolies that are granted for "useful arts and sciences". All these problem areas can instead be solved as consumer protections, which makes enforcement much easier. It's a lot easier for a consumer to claim being fooled, than for a rival producer to claim the same on their behalf. Part of the problem with current trademark law is that it largely rests on assumptions about knowing what's best for consumers, rather than just letting the consumers decide for themselves as problems arise.

SK: Yes we all agree that IP in all its forms are purely government granted monopolies. Proponents of IP think it's a useful government function, and opponents of IP don't think it's useful, but that doesn't mean all opponents think government isn't useful in general. We don't all agree that government is the sole source of monopoly (especially democratic governments which seek to avoid internal power monopolization via egalitarian voting rights, term limits, and administrative power balances). Choosing to ignore useful or historical counter-examples to your theories about monopoly is no replacement for actual debate. Yelling at straw men and subjective labeling doesn't count as debate.

Fred, I recognise that 'natural monopoly' may have a more specialised meaning for economists, and that my usage may be less useful or common: a monopoly as a consequence of nature or a natural right, e.g. an individual's natural monopoly over the use of their body, or the supply of its products.

However, whether or not this usage is common does not prevent what I describe from being a monopoly. This is why 'monopoly' in the context of IP is often qualified to be a 'state granted' monopoly.

I agree that people only have natural/moral rights as far as the truth is concerned, i.e. a right to the truth (against impairment) does not naturally warrant a monopoly on the use of any symbol or name. If there is only one individual (identical to you) then only you can claim to be that individual - however that doesn't mean you can assume a monopoly over the use of your name.

This is a real monopoly. That other people can lie does not invalidate it as a monopoly. Even if others offer imitation "Celebrity X's Freshly Worn Panties", they are still not actually the genuine article. They remain unable to supply such a monopoly controlled good - they can only defraud their customers.

Just as fraud does not prevent that monopoly from being a monopoly, so wilful infringement of state granted monopolies does not render those monopolies to be 'not monopolies'.

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