Full-out patent war against an equally matched competitor means mutually assured destruction … so large companies inevitably settle and use their patents to keep new innovators out.
As if to prove my point, Fortune quotes Oppenheimer’s Yair Reiner who says that is exactly what is happening:
Starting in January, Apple launched a series of C-Level discussions with tier-1 handset makers to underscore its growing displeasure at seeing its iPhone-related IP [intellectual property] infringed. The lawsuit filed against HTC thus appears to be Apple’s way of putting a public, lawyered-up exclamation point on a series of blunt conversations that have been occurring behind closed doors.
“Our checks also suggest that these warning shots are meaningfully disrupting the development roadmaps for would-be iPhone killers. Rival software and hardware teams are going back to the drawing board to look for work-arounds. Lawyers are redoubling efforts to gauge potential defensive and offensive responses. And strategy teams are working to chart OS strategies that are better hedged.”
The winner in this battle is not just Apple, but any market leader with patent portfolios to back up their products:
Our checks indicate that Microsoft has been quick to sniff out this burgeoning opportunity and has begun to aggressively promote the strength of its own IP portfolio, as well as its willingness to join battle with customers that come under IP attack.
If you believe that Apple’s patents are justified, I suppose you think that all this is just justice being done. As someone who works in the mobile application development market, I respectfully disagree and offer two observations:
If the purpose of patents is to encourage inventors to introduce new products to market, why do they always seem to end up being used by market leaders to keep new competitors out?
Visit an AT&T, Sprint, or Verizon store near you. Are the Android, and Palm phones merely clones of market leaders Apple, Microsoft of Blackberry? Or do they all advance the state of the art? Their designs are the result of extensive (and expensive) research. Yes, to some extent, insights that were introduced by Apple have been incorporated in the next generation. But those insights are ideas whose time has come, much as Apple spearheaded, but did not invent the graphical user interface. This process is happening within one-two year cycles, not the 20 year monopoly granted by patents. If patents were enforced with complete effectiveness, we’d all be using 1990-era phones. How would that serve inventors?
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David, you have you hit on something with the 2-year vs. 20-year invention cycles. The patent law presumes a certain pace of economic development, like a central plan, but can’t adapt when that presumed pace of change shift. Another point here too concerning whether and to what extent one company has copied the ideas of another: the whole point of market competition – its very existence – is to draw more resources toward successful endeavors and away from unsuccessful ones. If companies cannot emulate the behavior of more successful companies, the whole basis of the market process is short circuited.
Re: 2-year vs. 20-year invention cycles This is very true. This is not something I’ve really thought about. Thanks for highlighting it.
I’ve heard something similar about the FCC, which uses the virtually the same rules drafted for radio in the 1920′s to try and govern all communications. Needless to say, there’s some disconnect in the market due to their actions.
I can’t imagine trying to do central planning, especially now. Central planning, as stupid as it was when it came more into being in the late 1800′s and early 1900′s, probably made sense logically because. . . Even with increases in technology and production that were noticeable, the pace innovation ran at was sharply lower than now.
Ten years of development in 1810 is not even close to ten years of development in 1910, which also pales in comparison to development in 2010. It’s practically exponential on a ten year basis nowadays.
It’s hard enough for even the people at the forefront, the entrepreneurs to keep up, how can a central planner be anything but a slug in comparison?
Here’s a Newsweek article from 1995 written by a commentator that was a market actor that said everything happening today was impossible.
The Internet? Bah!
Why cyberspace isn’t, and will never be, nirvana
http://www.newsweek.com/id/106554
All the things the author said were fantasies have come to pass: Telecommuting, interactive libraries, multimedia classrooms, electironic town meetings, virtual communities, taking a computer to a beach, getting books and newspapers online, e-commerce, booking airline tickets and restaurant reservations, etc.
Getting back to the original post on this: I fail to see how, even if someone were to believe in imaginary property, the current patent arrangement can be seen as anything but a mess. While total abolition would be perfect, if they were to reduce the years of patent it would be a great help.
The point is not to stop development but to make sure that if someone uses your IP that you get a cut of the action. It is in Apple’s interest to licence it’s IP and make more money. Thus if people use what Apple did (which was revolutionary at the time the Iphone was originally released) then they should be payng royalties for the innovations that Apple provided them that makes their product valuable in the market.
This allows the original inventor to make money off the ideas that assist others. The point to the patent system is not to keep development at a standstill but make sure that the natural innovation process of standing on the shoulders of those that came before doesn’t result in all of the hard work being done by the first innovator and others just making incremental improvements resulting in the innovator getting nothing.
It’s easy to argue in this case that patents dont’ work because Apple also happens to be the best seller in the market, so it appears that this stops competition, but what if it was me, the individual that came up with the iphone with little money? Then everyone that used the ideas that I came up with would be paying me to use my ideas which is as it should be. My IP enables their products to exist and for them to make money.
Unfortunately with ownership comes battles over who can use who’s property when. But this is natural and companies and people figure this out just fine. That’s why we have a court system. Microsoft stepping in is just part of the competition and balances things out with Apple and enables competition in another way other than licencing.
Oh and incase you say “Apple doesn’t licence, they hoard!” You’re right, they do. And it’s both counterproductive to their competitors and themselves. Apple is riding a wave right now where they’ve stayed ahead of the curve. That’s very hard to do in the long term and the end result is that Apple is playing a dangerous game where they may not have anything to fall back on when they are behind the curve as happened in the 1990s. Microsoft is a bohemouth, and stays that way because it lets everyone use their stuff and makes money from it. They’re way has far less risk and not coincidently is also better for the market.
There is lots of abuse of the patent system (i.e. software patents, process patents, patenting things in natural such as DNA) but this isn’t one of them. This is a real product that really innovated and the breakthroughs that came from it are Apple’s and everyone else should have to pay for it to use it since they make money from it too. (or find different ways of making fantastic product).
As has been recently pointed out, the cell phone market is about to stagnate because it’s reached saturation. This is a market that is quickly reaching end of life. As is the nature of all innovation this will result in a period where nothing much happens, the market consolidates, competition goes away and prices flat line or even go up a little. But with all things, a new innovation will come along and make the old market obsolete. The few companies that were in the limited, consolidated old market will likely miss the boat, or at best be just part of everyone else running to the new market, and the cycle will start again. And the person that starts that cycle, as Apple did with the Iphone should be rewarded for breaking up the status quo and giving us something better, not run over by the heard on their way to profits.
Is 20 years too long? Perhaps, if you’re a large corporation you can bring something to market and make money off of it for 2 years. However patents are pre-release. You have to start the process before you’ve ever released anything to market, and every second of every day that you don’t file your patent is roulette that you’re going to be beaten to the punch. Thus for the little guy, 2 years to develop something amazing isn’t enough time. Heck the iphone took more than 2 years from patent stage to release so it would already be out of patent before it was released. What should happen is that patents shouldn’t be enforced until you actually have a product on the market selling. It shouldn’t be good enough to come up with an idea, you should have to actuall produce it and make money from it and as soon as you do, then your protection starts, even though you filed first years ago.
There already is a way of “getting a cut” from the immaterial outcome of one’s effort without any IP laws. It’s called contracts, and in the broader perspective, business models that do not depend on a monopoly rent. Any “should be” that lies outside of the scope of contracts is purely arbitrary.
Actually, I don’t think you can say that Apple believes it’s in their own interests to merely get a cut. They want others to desist. They want to be the only iPhone, no ‘iPhone killers’ allowed.
James, some of what you describe is activity related to defensive patents, actions that would not be necessary if patents were completely abolished. As for your opening statement about an innovator needing a cut, Bastiat addressed this in the 19th century. The cut comes from being the first to market, from being the innovator, from attracting customers away from other products toward yours. This first-mover advantage is incredible and far outlasts the 2nd period of imitation – as the software industry has shown us again and again and again. Branding and name recognition count for so much. Otherwise, Bayer Aspirin would have been clobbered long ago.
Bastiat lived in an age where to copy and bring someone’s ideas to market took years. We live in a time where Chinese companies can knock off your product in hours and have it to market in weeks.
There is no opportunity to establish your name as Bayer did before someone else comes along and creates the same thing, but cheaper. Hence the little guy that has no name when he starts is screwed in your world of no patents. He will never be able to get the funding necessary to bring the idea to market because there isn’t any protection for him to provide him time to establish his name and sell his product while the other guys scramble.
To assert what you have is a case of context dropping which people on this blog so hate in liberals, but you do yourselves in this case all of the time. (To get Bayer’s name, Bayer had to have the exclusive market in the first place, otherwise Bayer wouldn’t have a name that is recognized and a brand that is salable even though there are many others selling the same thing fore cheaper. In your world the cheapest product on the shelf always wins no matter what, not the innovator, thus innovation dies.)
The iphone was cloned and sold in China within 1 month of its release. And when I say cloned, I mean it was an exact copy. It’s not coincidence that the iphone wasn’t in China for years and doesn’t do particularly well. There is no value placed on copyright and patents in China and because of that others rip people off regularly thus no name recognition matters, just who’s cheapest. China is a dead market for innovation. They exist as leaches off of everyone else’s ideas and will continue to do so until they value IP. We enable China because we come up with the ideas. Take that away and China falls because they won’t have any ideas to build because no one in their right mind builds something when it can be taken from you by the next most powerful person in a heartbeat. (or the government for the greater good)
The biggest issue I have with this free for all that pervades here is that you’ve made the mistake of not understanding that if you don’t have a standardized rule of law and protections for things like copyright and patents then you’re in the world of Nietzsche. Whoever is strongest wins. Competing police forces are a wonderful idea, but only if there is a standardized rule of law, otherwise any gang can create their own police force and enforce their own rules, and you’re subject to them simply because you drove into their gang territory even though you can’t possibly know what the rules are. Hence the rules could change in a heartbeat simply because one gang takes over the gang that runs your area.
Nietzsche thought this was fantastic and wonderful. But guess what? It’s not. You must have an objective rule of law, and you must recognize the property of the mind as well as of the hands. They are both pivotal in the development of society. It must be universal and it must be absolute. Yes the patent system is broken, but only because it’s forgotten that it’s the protection from people stealing IDEAS. Discovering a DNA sequence is not an idea, Building the machine that CAN discover the DNA sequence or use that DNA sequence to cure cancer, is an idea. Writing software in a specific way to solve a problem is not an idea, the way you solve the problem is the idea. (i.e. the iphone interface could be written millions of ways, that’s irrelevant. What is relevant is the interface and how it works)
As with everything, the leaches have come out in patents and have given it a bad name. It needs to be refocused on what it’s supposed to be doing, nothing more. Just like our government, the concept of government is a good idea, but only if it’s built from the objective absolute of morality based on your life and your personal ability to make the best decisions for your life and only your life, while not harming others.
“Bastiat lived in an age where to copy and bring someone’s ideas to market took years. We live in a time where Chinese companies can knock off your product in hours and have it to market in weeks.
There is no opportunity to establish your name as Bayer did before someone else comes along and creates the same thing, but cheaper. Hence the little guy that has no name when he starts is screwed in your world of no patents. He will never be able to get the funding necessary to bring the idea to market because there isn’t any protection for him to provide him time to establish his name and sell his product while the other guys scramble.”
I know a software company making millions a year, and opening in Asian markets, with a total of 0 patents in their arsenal. Are you saying that they’re an optical illusion of sorts (a theoretical play on words)?
You offered a Hobbesian scenario (or a Nietzschian one) in a world without patents bringing war of all against all, but consider the sectors in which IP does not apply. I’m thinking of the example of fashion. Pirates are everywhere. Last season’s designer labels are copied and sold for 1/100th the price the next season in K-Mart. Somehow the sector manages to be super profitable and active. Sure, designers would love to enforce IP. Thank goodness they cannot. Every season there is change. This makes the world a more beautiful and interesting place. Recipes are another case. Anyone can copy anyone’s recipe. That hasn’t killed the market; quite the reverse, and take a trip to Barnes if you doubt it.
Indeed, the whole history of innovation from the ancient world to the present shows that what you imagine to happen in a world without IP does not happen. Or just look around with new eyes: consider Mises.org alone. Everything here is available to the world. It can be copied by anyone and duplicated by anyone. I have no doubt that if we became slackers, we would be crushed in time. But the very prospect keeps us on our toes, constantly innovating and working hard. This is what competition does. It brings out the best in us. David is right that if you subvert this process with laws against emulation and learning you bring stagnation and death. There is nothing to fear from a free market. It is laws against competing that are doing the damage.
I highly recommend Boldrin and Levine for more real-world examples http://mises.org/store/Against-Intellectual-Monopoly-P552.aspx
Your fears are understandable. It takes time to think these issues through. But please keep an open mind about it.
Both your examples are not valid examples of the value of IP.
The fashion industry does not derive specific value from the clothes themselves (a sack would do just as good a job at the utility of covering us up and keeping us warm as Armani). Those that do derive value from the cloth used do have patents (Gortex comes to mind). The fashion industry is selling prestige, not utility. (Apple is too, but without the utility the prestige doesn’t matter, hence why 93% of all computers sold are Windows.) If the cut of the fabric derived new utility and constituted an innovation, then, as the supreme court’s ruling on the subject clearly states, it would be patentable. This your example proves my point.
Mises.org’s content is not of value without the context and understanding (and we’re now talking about copyright, not patents btw which is an entirely different concept and thus a different argument). It’s pointless to just hand out Mises.org materials without the context and understanding that goes with it. I can make money from understanding the ideas and selling my knowledge of those ideas, but I’m not building anything as a result of those ideas. While you choose to give it away for free, if I started to make money off of the sale of the content of mises.org (i.e. by creating a textbook of all of the content and selling it to schools) I definitely should be paying the author of said content for the works because I’m making money from it directly. That is to say it wasn’t digested by me and created into a new work. This is why we have citations in essays to credit those that did the work, and not coincidently, almost every piece on mises.org has citations all over them, thus I know that mises.org agrees with me on this.
Not to say that mises.org has no value, but it has no stand-alone value, thus there is no reason to steal it. (and it’s in your interests for people to use it anyhow). This is not the case with a movie. Any use of that movie derives material benefit to the user. Fair use as a doctrine is of convenience only because most of the time fair use actually benefits the copyright holder (i.e. using a clip of a movie as a promo for your review helps sell the movie) but it’s implied consent because of mutual value, nothing more. You have chosen to waive your copyright claims on the content. That’s your choice, but not one that you have the right to force everyone to do.
The content of my works is mine. If I don’t own my ideas, and the product of my work, either intellectual or manual, I have no incentive to produce. We know what happens in a society that has no incentive to produce.
Thus in both cases you’ve proven my point. Thank you.
There is such a thing as a design patent. You can patent the ‘look’ of your product. You can patent your logo. Apple just received their patent for the design, as in ‘physical appearance’, of the iPhone, which I had mistakently assumed was fully sewn up by Dial. I suppose the ‘innovation’ of adding a push-button on the front was sufficient to distinguish the iPhone from a bar of soap. I suppose Apple will have a talk with Dial about their design infringement real soon.
You didn’t know that patents aren’t really all that concerned with what you term ‘utility’? Hmmm.
BTW:
“It is laws against competing that are doing the damage.” (fully what happens when I copy something from this site… proves my point too)
Then you should be in favor of antitrust laws, because they supposedly favor competition. This site clearly is not. You have a contradiction.
If your argument is that antitrust laws are bad only because they don’t work, then you need to check your premises because you have yet another contradiction.
If your argument is that because patents ensure that the inventor receives his due for his innovation and utility created so that others can’t just leach off of his hard work and thought and skip to building without doing the work of designing and thinking, because it stifles innovation (there is no evidence of this in patent law properly applied) then you have another contradiction because you’ve thrown out the basis of all production: ownership, which this site says that it values.
You can’t say that you value someone producing a machine with their hands and owning the work that they did, but also say that you don’t value the person that came up with the way that the machine should be built, because to do so drops the context. The man that builds the machine with his hands cannot do so unless someone invents the machine in the first place. Both are pivotal and cannot exist without the other. To reward one, and ignore the other is the worst of socialist values.
If I steal the completed machine, that is theft. If I steal the concepts that allowed the machine to be built in the first place so that I can build my own in exactly the same way, then I have still committed theft because the theft is of the idea that allowed it to be built and the action that built it because the action of building could not occur unless the ideas that designed it happened. (again your argument suffers from context dropping)
In law, this is called Mens and Actus Rea, but it applies to everything. Hence my comment about patents not being granted until you actually are building and selling something based on the patent and your patent expiring the moment you stop producing something that uses it. Because we have invented division of labor so that the man that creates design of the machine isn’t the one that builds the machine we must have patents to protect both men, otherwise you’re enslaving the inventor just as surely as you’re enslaving the man making it if you don’t enter into a contract for that production.
Patents are the legal equivalent of the 13th amendment. They force other parties to enter into contract to use the innovation. (you mention this but fail to understand that if a man doesn’t have to enter into a contract and pay someone else, they likely won’t, see my China example for living proof). Without this protection, there would be no contracts of use (see Apple case where HTC has directly ripped off Apple’s innovations and not entered into contracts with Apple for their use because they haven’t been forced to and under your system never would).
Context dropping is the problem with your argument (and yes I’ve read every argument on this site in favor of doing away with patents etc. and they all fail this simple test)
In a perfect world, people would value other people’s ideas and production. That world doesn’t exist. In the world you propose the person with the most power always wins, which is clearly not an acceptable outcome, because force is not a virtue by an objective measure.
Dear James,
instead of addressing every single fallacy in your argument, I’ll cut it short. IP proponents typically draw and arbitrary curve on a two-dimensional graph where the axes are causality and similarity, and call the inside of the curve “IP”. You appear to be doing the same. So, I would like you to explain the shape of the curve. In other words: how do you distinguish between “IP” and externality on the causality scale, and between “IP” and substitute on the similarity scale.
What continues to amaze me at the Ludwig von Mises Institute is that in the case of intellectual property, everyone seems to default to Rothbard and Kinsella instead of Mises. Mises’ views on intellectual property were expressed clearly and concisely in Human Action without having to resort to the convoluted state-of-nature debates invoked by Kinsella and his ilk.
But rather than point out what is deeply flawed in Kinsella’s argument, I’m just going to copy-and-paste Ludwig von Mises’ views on intellectual property verbatim, rigth here, right now. Here it is:
Yet there is an exception to this general rule that monopoly prices benefit
the seller and harm the buyer and infringe the supremacy of the consumers’
interests. If on a competitive market one of the complementary factors,
namely f, needed for the production of the consumers’ good g, does not attain
any price at all, although the production of f requires various expenditures
and consumers are ready to pay for the consumers’ good g a price which
makes its production profitable on a competitive market, the monopoly price
for f becomes a necessary requirement for the production of g. It is this idea that people advance in favor of patent and copyright legislation. If inventors
and authors were not is a position to make money by inventing and writing,
they would be prevented from devoting their time to these activities and
from defraying the costs involved. The public would not derive any advantage
from the absence of monopoly prices for f. It would, on the contrary,
miss the satisfaction it could derive from the acquisition of g.
– Human Action, pp. 385-386
Well, although so far I am unconvinced by IP proponents, I think that Stephan Kinsella’s arguments contain holes (or more precisely, depend on unnecessary assumptions). So the opposition to IP is more varied than you allege. Coincidentally, I have been listening to Human Action audiobook lately, and therein Mises claims that non-scarce things are not economic goods, and gives recipes as an example.
The quote you provide is mathematically correct, however it relies on the assumption that the the market price of f does not exist. If you pay attention closely, the text you quote does not claim that the assumption is true. Some time ago I provided a five-point refutation of this assumption, regrettably I can’t find it anymore, so I’ll try to reconstruct.
Empirically, the price exists even in the absence of IP
If it is possible to bundle the immaterial good onto other goods that you can sell, they would have a market price
It is impossible to sell immaterial goods directly without unbundling them from material ones
You can handle them as indirect costs
Can’t remember the fifth
I though this was an interesting Apple tidbit. . .
Although I object to use of the word “steal, ” this video is interesting. It’s Steve Jobs talking about the Mac, a computer originally known for being the first widely popularized graphical user interface operating system, an idea that he copied from work Xerox had done in the 1970′s. Being the hypocritical person he is, he doesn’t mention that he was suing Microsoft for doing the exact same thing he did in creating Microsoft Windows.
http://www.youtube.com/watch?v=CW0DUg63lqU
Peter – Very interesting. I will keep that in mind as I read. In quoting that passage, I have also omitted a citation to Mises’ later treatment of IP.
One thought that immediately springs to mind is that there can be no price for f unless there is a market for f. In absence of such a market, its costs can be bundled into the selling price of g. However, this “bundled cost” only applies to the seller’s willingness to sell g and has no impact on the buyer’s perspective at all.
Alas Mises isn’t here to clarify, but my understanding is that, when faced wtih the choice of having access to a market for g versus not having g at all, the consumer would prefer to have access to g. This preference is justification enough for the existence of a monopoly on f.
However, the real disagreement (I think) is whether the existence of a monopoly for f harms consumers in ways that reach beyond the initial production of g.
Thanks for your reply. You got my thoughts rolling.
“Yet there is an exception to this general rule that monopoly prices benefit”
There is no such thing as an exception. It is the same thing as a contradiction. IF you encounter one check your premises because you are WRONG.
Ryan,
It is irrelevant if a monopoly hurts and benefits the consumer. I have a monopoly on that which I produce, intellectual or otherwise. It is immaterial whether or not it hurts someone else if I don’t sell it or do sell it to them, or sell it to someone else instead of them. That’s their issue to resolve, not mine.
My sole responsibility is for myself and my welfare without exception or contradiction. As long as I don’t take actions that directly physically harm another or their property without consent I am acting rightly and the law does not have the right to interfere.
The price of a good is the cost of R&D + manufacturing + “Gotta Have it” = Saleable Price. If “Gotta Have It” = a negative, then you’re screwed. R&D is innovation and it absolutely is yours just as the manufacturing is yours as well. R&D is not free and any economic theory that makes it free is as flawed as Kaynes.
No one would argue that if I build something with my hands it’s mine and I have the right to sell it at whatever price I choose (well no one that understands property rights anyhow). However, you’re more than willing to steal what I built with my mind. That’s a contradiction because you must have both or you don’t have a product. To discount the mind’s production is to discount the entire cause of the build process.
Peter,
There is nothing outside IP. IP is the direct cause of everything that man produces without exception. Whether it be the case of copyright or patents, it’s 100% all of the time. Drawing it on a graph is silly. It is everything because without it nothing can be built. If you remove the value from IP then you eliminate production because production can’t happen without the IP (design) to build it.
I would draw it like this: IP => Production => Cost ?= Sales.
The question mark being if anyone wants it at the price you’re offering it at. => is causal.
The middle ages, which everyone attributes the industrial age for starting because people got to own that which they worked to produced occurred not just because and not mainly because that which someone produced was taken by others without payment. On the contrary, it was because IP was not respected that it failed. It was only when I could build a steam engine and benefit from it and someone else couldn’t steal the idea that we started to have a revolution, and even then governments were routinely stealing people’s wealth from their labor. (even if it was a little less than before). It was the devaluation of intelligence and intellect and thought that caused the dark ages. In short it was the church punishing anyone that thought about what the church was saying as a heretic or a witch or variations on that theme that caused the dark ages. It was the theft of mind, not body that caused it and is starting it all over again today.
People won’t try if before they even do, someone has stolen their idea and taken it for their own.
Property rights are paramount. IF any part of that property is stolen, then production declines and ceases as the theft gets worse. My thoughts and my ideas are my property. There is no way to look at it any other way other than a contradiction. Thus when someone steals my ideas for their own they are a thief just as surely as someone that steals my car.
Thus there must be a law to protect those ideas and that which my brain produced. If you want to call it copyright and patents great, if you want to make up a new name for it, I don’t care, but however you go about it, the product of my mind must be protected just a surely as the product of my hands.
James, do you agree or disagree that patents should expire?
Physical property rights do not expire but IP rights do. I would take this as an admission that the two are fundamentally different.
James,
I encourage you to read Mises’ chapter on Prices in Human Action. Much of what you are saying, he himself says. He phrases it in a more “catallactic” way (for lack of a better term). He differentiates between “monopoly profit” (which is what Peter, Jeffrey, et al, are talkingn about) and “entrepreneurial profit” (which is what you are talking about).
It is an interesting economic and catallactic line to draw. All the more fascinating that Ludwig von Mises identified its importance long ago, in anticipation of many of the arguments surrounding IP. It’s available free on this website – check it out, it’s great!
James,
“The price of a good is the cost of R&D + manufacturing + “Gotta Have it” = Saleable Price. If “Gotta Have It” = a negative, then you’re screwed.”
Doesn’t this equation remind you a little of the labor theory of value, the idea that just because I put my time, resources, energy, and mind into the production of something that it has an inherent value? Seems that way to me, and that is an idea that has been thoroughly refuted time and again on this site. The price of a good is only that to which the seller and the buyer agree. You could put an enormous amount of capital energy into something and value it at $X, but if no one wants to pay for it, then you either have to lower your price until someone will pay for it, or find a cheaper way of production, or change your product altogether anyway.
Apple put a tremendous amount of capital into the iPhone. What if no one bought it? What would their arsenal of patents and lawyers do for them then? No one is entitled to profit, if we were entitled to profit, this world would look a lot different, and would have completely different laws of economics. But unfortunately, we are not born with the right to profit, we are born with the right to work. If you cannot work profitably, different work needs to be found. That is true in a world with patents, as it forces people to not enter markets because of the ridiculous costs involved which drive entrepeneurs out of business, and it is also true in a world without patents, where people unwilling to take risks will stay away from entrepeneurship.
Also, IP for me causes strange contradictions, such as: If I purchase something from you and there is no contract between us as to how I am allowed to use it and how I am not allowed to use it, is it not mine? Can I not do what I please with what I have purchased from someone else with the product of my labor? If I find a better use for it and can reproduce it and make profit is that not my right? If it isn’t, then you are saying that even after you sell me your good you still own it. Does that not sound contradictory? If we define property as being both physical and intellectual, and I buy your physical and intellectual property, does it become only my physical property and my mind is not allowed to work with it? Or if I do apply my mind to it, and the seller claims IP rights to it, are they not in effect claiming ownership of my mind, the very thing most fundamental to self-ownership? Basically, I’d like to know how the act of purchasing a product is not a complete transfer of ownership.
We seem to talk about IP as though it is exclusively the right of the producer/seller to claim it. I’d like to address the buyer. What are the rights of the buyer? Is the buyer not allowed to advance and expand the work of those who produced before? At what point is this work infringing on a patent, and at what point has it moved beyond patent infringement? Beauty is in the eye of the beholder on this one is it not? If one guy sells me a mallet, and another guy sells me a pick, and I decide to combine them so that on one side has a blunt head and on the other a pointed head and call it a makosh, sell it and profit thereby “depriving” the other two of profits, have I created something “original” or have I infringed on some aspect of both of their claims to patent or IP? The problem in this case is one of boundaries, where does the Patent holder claim infringement and at what point have we moved beyond that into new territory? One person might call my makosh completely original and mine, another might call it a complete ripoff and say that the two vendors of the mallet and pick are each entitled to half of my profits. Another might say it is somewhere in the middle. Now where are we? We are somewhere where the concept of ownership is almost useless and we are pushed back to a point where all new innovation must start with the raw natural materials and build up from there, and that just isn’t how things work.
These are the types of problems I encounter with IP, I’m still wrapping my head around all the nuances myself, but these are the implications as I see them.
I have difficulty deciphering this. Are you claiming that there are no externalities, or to rephrase it, all externalities are property rights violation absent agreement? If yes, to bring up my former examples, children would be the property of their parents, and Soviet Union would co-own Atlas Shrugged. Is this what you claim? If no, then you need to explain where on the causality scale property becomes externality.
Are you claiming that there are no substitutes, or to rephrase it, all substitutes are property rights violations absent agreement? If yes, all trade would be illegal.
This is precisely my point. So far however, no IP proponent is able to avoid this problem.
This is either empirically false, or you are using your own definition of IP which you need to explain. Unless you define IP, it is pointless for me to address anything else you said as it makes no sense to me.
Lack of the actual definition of IP is another problem plaguing IP proponents.
North:Patents should expire the moment you stop producing something with them. Otherwise it’s as long as you use the idea.
Ryan: I confess that I am just working my way through Human Action now. My position comes from my reading of most of the great philosophers from Aristotle to Locke to Swift, to even Kant, and of course the greatest mind, Rand, which she built on top of the others both their greatness and their mistakes that she avoided.
One point of clarification: Things in nature don’t have IP because nothing was created by man. You can assert your rights (not given by government because they didn’t have the right to it in the first place) and that’s first come first serve for lack of a better system, until such time as someone else wants to buy those rights, and then at such time they can if you’re willing to sell. (and only then). The moment man does something with the natural (and accidental) resources, it’s owned by the man that does it and there is no difference between production of mind and production of body without exception and both are protected under the law, and SHOULD be protected under the law. Patent law, as originally intended is not only right, it’s a necessity of a free society and part of the enforcement of property rights. Without them we have a race to production and cheapness nothing else, and thus nothing will ever be invented.
Thanks, that’s an interesting answer.
Would you apply the same restriction to physical property (like a hammer; when you stop using the hammer it is no longer yours to own)?
I would assume based on “there is no difference between production of mind and production of body without exception and both are protected under the law, and SHOULD be protected under the law” that you would say the hammer is not mine anymore if I don’t use it but I often assume wrong
If my assumption is incorrect, why the different treatment of physical property?
“thus nothing will ever be invented” – I call bullshit. Eli Whitney didn’t patent his cotton gin; Franklin patented little if any of his innovations. Ancient Rome lacked patent laws, AFAIK, yet Heron of Alexandria produced the steam ball(he was about half a step away from the steam engine), automatic doors and a coin-operated water dispenser, amongst many, many others. The most likely reason for innovation being put on hold for so long is that labor-saving devices were considered heresy and antisocial because they threatened the established powers, not the creation of IP.
Points by others in bold, my comments below that:
“Doesn’t this equation remind you a little of the labor theory of value, the idea that just because I put my time, resources, energy, and mind into the production of something that it has an inherent value? Seems that way to me, and that is an idea that has been thoroughly refuted time and again on this site. The price of a good is only that to which the seller and the buyer agree. You could put an enormous amount of capital energy into something and value it at $X, but if no one wants to pay for it, then you either have to lower your price until someone will pay for it, or find a cheaper way of production, or change your product altogether anyway.”
No, because if no one wants something, the value is 0, thus the “gotta-have-it” is negative of the other two. An item has value to it’s owner because of the thought and physical labor that went into it. Does that mean that it has value to others? No. Hence the equation. Everything has internal and external value. To put it another way, all production, regardless of sales has cost. All sales requires production. The value of the sale is the direct result of those costs and the consumer’s desire to buy it. (Say’s law put another way)
“Would you apply the same restriction to physical property (like a hammer; when you stop using the hammer it is no longer yours to own)?”
Just because I stop using it for the moment doesn’t mean that I won’t likely use it again. I own the hammer and keep it (and don’t throw it in a landfill or sell it to someone else or give it away) because I likely will use it again. If I won’t, I will get rid of it. The same (obvious) logic applies to IP. Again, no contradiction. I write down lots of good ideas, some of which I keep others I throw away, just like the useless hammer. They’re still mine until I release those because they have no utility to me. I have to choose to release my IP. Just like property, IP can be handed down to my children or my pet monkey, it is no one’s business but my own. Only when I stop using it, and throw it in the garbage or give it away have I released it and signed a contract (of sorts) to stop using it hand it over. I can also choose not to assert my ownership of my IP. Edison and others did this occasionally (although Edison bought a good chunk of his “ideas” so I wouldn’t put him in the same class as Franklin) Franklin derived value and wealth in other ways, but it doesn’t mean that his IP wasn’t his and it wasn’t of value to him. When I say that IP stops when I stop using it, I mean that I volitionally stop using it. I choose to discard it.
But to be clear, my point about IP not being protected until you do something with it is just that. The potential value of your ideas is worthless, just as I could build a hammer but didn’t, doesn’t mean that I have a right to sue the man that did and sold his hammer to a man that would have bought mine if I had chosen to put the effort into building the hammer. Thus if someone else comes up with the same idea and acts on it when you haven’t, you have not been materially harmed, thus you have no claim. (cause without effect)
“I have difficulty deciphering this. Are you claiming that there are no externalities, or to rephrase it, all externalities are property rights violation absent agreement? If yes, to bring up my former examples, children would be the property of their parents, and Soviet Union would co-own Atlas Shrugged. Is this what you claim? If no, then you need to explain where on the causality scale property becomes externality.”
The Soviet Union didn’t produce anything (ever actually, not just in reference to Atlas Shrugged, nor does any government, they can’t own anything, IP or otherwise because all they do is steal in the current involuntary form). There was no idea in Atlas Shrugged that was created by the Soviet Union (except for the negative which Rand used to exemplify the problem). Aristotle definitely does (although because he’s dead he can’t make a claim, thus his IP has lapsed because as far as we know, he didn’t hand down his rights to his heirs) and Rand acknowledges it.
While children are the property of their parents by the laws of production and property rights, the point to parenting a child is to allow them free will and self-determination. The very purpose of the child is to allow your life to go on in a specific way. Thus to fulfill your creation, both intellectually and physically, you must transfer your possession to the child over time. That cannot occur while they are an automaton. Thus, while you can claim responsibility for a subset of that self-aware being and it’s choices in an indirect, you cannot control them without creating a contradiction of purpose, hence you logically release your property rights slowly over time as the child becomes more self-aware and self-deterministic. This is the nature of parenting, the transition from automaton to self-aware autonomous being that cannot be possessed and no parent would ever choose for their children to be so if they act with logic and reason. If you think about it without the blinders of the horror of ownership of a person, you’ll see this clearly in the contract between parent and child and the gradual transformation of the relationship, and even the pains between parent and child as one is not ready for the other’s assertion of freedom and the other not ready for the responsibility of the level of freedom demanded etc. We, in effect, hand over our property rights so that the child becomes self-possessed over time. And we do so freely. It is only the self-aware man, that can assert this right to self-possession whether granted freely or not.
Everyone that I built upon, everyone that ever contributed to an idea that that I came up with has a claim to a small part of that creation. Everything I ever do, say or produce is the sum of others that came before me. (Rand says this literally in her notes on the subject of Atlas Shrugged about Aristotle). Just as we have marketplaces for goods, in a just society there would be a marketplace for ideas. The buying and selling and trading of those ideas would be paramount. The rights of one person would be marketed and sold to others for use in their ideas. Yes, we sort of have this today but it is a mess because we don’t understand that there is no difference between the production of our mind and that of or body… or maybe it is because we value the product of our mind as little as the product of our body that it is such a mess?
This is either empirically false, or you are using your own definition of IP which you need to explain. Unless you define IP, it is pointless for me to address anything else you said as it makes no sense to me.
IP is everything that is created in the mind. Every idea, every thought, every dream is IP. But like the law which you can’t break without both mind and action, IP is worthless without action, just as there can be no action without intention (formed consciously or otherwise). That doesn’t mean it isn’t yours, it just means that it doesn’t have value even to the individual thinking it up until such time as it is used to act, to create something. It has potential value and it is owned, just like the hammer sitting in your garage, and it is yours and that potential value is yours to choose to tap or not, but it has no real value until you use it to create and thus improve your life, because all value is determined from the only absolute there is: Your life.
It is the only thing that can be destroyed absolutely. It ceases to exist on your death. Thus everything’s value is measured from it’s ability to improve or harm your life. It is not the dictum of some unprovable god, or a society telling you what is of value that determines it’s value, you and your life are the sole arbitrators so long as you don’t physically harm another or their property.
“What are the rights of the buyer?”
The buyer’s rights are simply this: To decide (or not) to purchase, at the price offered by the seller, and with the terms determined by the seller the goods and or services offered by the seller. They have no other rights, because the seller’s rights to their property is absolute. (they of course have the right to negotiate without the use of force with the seller for as long as the seller agrees to negotiate.)
If the buyer wants to use that item to build something else, then he must negotiate the rights to the original item to be used in that manner in such a way that is acceptable to the original seller. The buyer does not have the right to in any way force the seller to give up their property in any way shape or form without consent or to use it in ways not agreed upon by the seller. The government does not have the right to put a gun to the owner’s head and force them to “be reasonable” and allow the other party to use said property for any reason, least of all “the greater good”.
As for Rome, it fell because it devalued it’s currency and no one produced anything (exaggeration to make the point, but it’s production fell because there was no protection from it being stolen). It wasn’t in their interest to produce. The military took everything that you produced, the state didn’t enforce the rights of men to own their ideas, and the society fell. It is specifically the respect for ideas and invention and production that caused Rome to be great at first. It is the ideas of Aristotle that created Rome, it is the ideas of those that which to take away our minds and our production that destroyed it. It is that same attitude under the Roman Catholic Church that continued that into the dark ages that lasted 1300+ years. Your example is a perfect one because it is precisely this that caused it’s downfall, just as it is precisely this that is destroying our civilization now. If we were to create a new civilization without intellectual property rights, we would fail instantly for this very reason.
Dear James,
I’ll begin from the end. First of all “IP” is not “everything that is created in the mind”. A lot of IP proponents try to transpose physical property into immaterial property. But this misrepresents what it is and causes misunderstandings and flawed theories. IP is only a subset of transposed rights, more specifically the right to prevent third party from using an immaterial goods. It is not a right to use an immaterial good, or a right to trade an immaterial good. Even if we ignore current laws (which match the above description) and tried to implement IP anew, the right to use or trade immaterial goods is already present in the material property rights and does not vanish when IP is abolished. I repeat, IP, whether declared by current or hypothetical laws, does not enable the creator to use or trade the results of his/her creation.
This is why the arguments for IP that are based on the ability to use or trade are incorrect, as IP does not grant them and the absence of IP does not eliminate them.
Now, back to the causality/similarity issue.
Just because Soviet Union did not produce anything ethically positive does not invalidate my argument. Ayn Rand’s writing of Atlas Shrugged was causally related to the actions of Soviet Union. It contains the abstract concepts (=ideas) that Soviet Union was based on. Merely because they are presented in a negative light does not mean they were not “used”. “From each according to his ability, to each according to his need” was, for example, according to Wikipedia, first used by Louis Blanc in 1840. The publishing of Atlas Shrugged, therefore, according to the IP theory, requires his heirs’ permission. If Soviet Union’s existence was maintained by stealing from people and terrorising them, then it should be the those victims, rather than the politbeaureu, who co-own Atlas Shrugged. According to the IP theory at least.
Regarding children: you have avoided to answer the question. On the contrary, you have demonstrated yourself the transformation from property to externality, but fail to explain the underlying principles thereof. You have demonstrated that there is an ownership overlap (which is precisely the issue with IP) and arbitrarily decide which takes precedence when. This does not solve the problem, it accentuates it.
Correct. All sorts of activities are causally related, some more obviously, some less obviously. According to IP proponents, however, they need to be divided into property and externality. You have yet to explain how this should be done.
As I explained above, these markets exist regardless of IP. IP merely expands the property boundaries on the causality/similarity graph. This increases some revenues, but also some costs. Strictly speaking, it is a redistribution scheme, rather than “enabling” scheme. Only those whose inputs aren’t affected by IP (e.g. patent trolls) are apriori going to profit from it.
@Peter Surda:
Congratulations on your post! You are spot-on!
If there was something like ip then every (!) act of thinking would be in violation of someones “ip rights”.
What a nightmarish world that would be…
“This is why the arguments for IP that are based on the ability to use or trade are incorrect, as IP does not grant them and the absence of IP does not eliminate them.”
The only way that this is possible is if I keep a secret so no one knows of my ideas, otherwise they can use them themselves in the case of no IP without repercussion. Thus it would be impossible to approach investors, or manufacturers to build my ideas. Hence you’re all at once back to no value in ideas and the death of innovation. Sorry but the only non-contradictory approach I have ever read is that everything you create in your mind is yours. Everyone you built upon you owe for those ideas.
Under your theory, the only men of value are those that have utility in the implementation of their ideas. (Edison for example made sure that he horded his ideas and made sure that he had a place in their implementation instead of patenting his ideas. AC versus DC being an excellent example of this.) In your world without IP there is no value in the inventor that has no skills to build with his hands, or the philosopher, or the writer, the songstress, the orator. Anyone can use their works and make money off of their hard work for nothing more than the ability to make a production of those works. You eliminate all be a few handfuls of utility based inventions from the grand scheme of human enlightenment and you ensure that Nietzsche strongest will rule comes to pass.
Sorry but that is a society that has been tried and has failed horribly. I don’t want to repeat it.
As for Soviet Russia and Rand. You can’t steal from a thief is my point. You can’t steal from the government for the same reason. (Theirs or ours, because they don’t create ideas, they don’t produce anything. They steal.). Whether the law says otherwise right now is only relevant in-so-much-as the government has the guns. But yes, Rand would have to both credit and seek approval for use in a just society for her use to the person that actually did come up with the idea. (and I think to the best of her ability given the current very imperfect system she did)
Correct. All sorts of activities are causally related, some more obviously, some less obviously. According to IP proponents, however, they need to be divided into property and externality. You have yet to explain how this should be done.
As I have said there is no such thing as externalities of ideas. They, by definition are all property because man creates them. Only facts such as DNA which exist and have existed without the interference of man are not IP specifically because they exist without man. Any dreamed up use for said natural resources however is the property of the men that do the dreaming.
Regarding children: you have avoided to answer the question
No sir. I answered it very directly:
“While children are the property of their parents by the laws of production and property rights, the point to parenting a child is to allow them free will and self-determination.”
What I am clearly saying is yes, children are our property. But the point to children is to make them their own being that is free to choose. Thus we give up our rights to our production willfully. And as I later state very clearly, the child, possessing free will, can, when they are fully conscious assert their self-possession and divorce themselves from their parents, and thus that ownership. Because we are alive and self-aware we have a unique (but still very non-contradictory, because we happen to be the only entity with this property) place in our known universe of entities. We are the only beings that can be self-possessed, but that is by no-means immediate or absolute, it must be asserted and until that self-possession they are the property of their parents.
There is no contradiction and IP and property rights don’t require it. We may be horrified to think of children that way, but in fact, that is exactly how we act, while justifying it for other reasons.
As I explained above, these markets exist regardless of IP. IP merely expands the property boundaries on the causality/similarity graph. This increases some revenues, but also some costs. Strictly speaking, it is a redistribution scheme, rather than “enabling” scheme. Only those whose inputs aren’t affected by IP (e.g. patent trolls) are apriori going to profit from it.
From an economics perspective, yes I have no argument with this point. However, economics like all other sciences is derived from Physics and Physics from Philosophy. Thus, the salient philosophical argument is one of non-contradiction and self-ownership. If you do not own the production of your mind, then you are not free, and in fact a slave to whomever would take those ideas and make money from it, just as surely as the black man on the cotton farm who was used to create revenue for the plantation owner. There is no difference. Thus economics must recognize the philosophical basis for the discussion and integrate the non-contradictory value-construction into it’s equations.
It is irrelevant, antiip, if it’s difficult, or really hard and would “create a nightmare” to paraphrase. Utilitarians have been discredited and proven wrong. I won’t go into it in detail, but this point has already been tested and dis-proven. It only matters what is non-contradictory and just based on a non-contradictory system of values. Convenience is irrelevant to justice (just because it’s inconvenient that someone doesn’t have a car, does that entitle them to steal yours?). And guess what? Men that own their ideas will come up with ways to solve the “nightmarish” problems, just as we have with everything else, because it is in their interest for their ideas to be used and for them to be reimbursed for their use. That’s the beauty of the ownership of the mind. IT provides incentive for creation of ideas just as we provide incentive for production through the ownership of the product of our labor.
Allow me please to start from the end again. You have not defined “IP” other than by causality, which I demonstrated to be an insufficient condition, because it cannot be distinguished from externality. Unless you explain how to distinguish between them, the arguments are invalid.
It is correct that absent IP laws, one can’t have the complete control over all the effects of one’s actions. However, as I am trying to point out, unless you reject externalities, no theory grants a complete control anyway. IP merely shifts the control further on the causality scale, but fails to provide a theoretical explanation for the newly established boundaries. The only response I got from some IP proponents is the claim that IP is not an externality, but “the same” as the original.
This is another issue, the similarity scale. What does that mean, “the same”? With material goods, “the same” is defined by the four dimensions (space & time). What does it mean with immaterial goods? It means that if you observe two objects or actions and find an attribute that matches both, then the value of the attribute is “the same”. This is a similar approach as with material goods. But whereas with material goods there are only four attributes (3d + time), and all have to match, with immaterial goods the number of attributes is infinite. Which ones should be relevant for determining if the immaterial good is “the same”? In the broadest sense, all physical objects are “the same”, as they all contain atoms. All activites are “the same”, as they all contain human action.
Now directly to your objections:
Any action that you perform can influence other people and make it easier for them to beat you on the market. Should all these be forbidden? If WalMart, for example, buys a piece of land, it is easy to deduce that they are trying to build there a new store, and they expect it to be profitable, even if they did not explicitly say anything. The building of the store in that area is their “idea”. Now, if I was a competitor, thought I could undercut them (because I can e.g. build a store faster and provide cheaper goods), have I stolen their “idea”? My point is, “stealing of an idea” is a very fuzzy concept. In its extereme, it can mean anything. Unless a clear definition is made, “ideas” therefore cannot be used as a property boundary.
As I am trying to explain, you are attempting to make a sharp distinction inside a fuzzy area. That’s the theoretical objection. The practical is that there are still plenty of ways to make money even with a comparably smaller area of influence. The most important ones are the first mover advantage (demonstrated plentifully by Boldrin and Levine: Against intellectual monopoly) and increase of reputation. Both of these give you an edge that can’t be taken away by imitators and if exploited carefully, would not cause any problems earning money. The others are for example: deceiving of competitors, dumping, cost accounting, product lifecycle management, marketing, bundling, vendor lock-in, vapourware, trusts.
But this still does not mean that if you “steal” from a thief, it belongs to you. If Soviet Union’s actions and ideology are reflected in Atlas Shrugged, that would be “intellectual theft” and would require permission of those whose resources were stolen in order to perpetrate those actions and promote the communist ideology. Therefore, Ayn Rand would need to seek permission from everyone who had been opressed by Soviet Union, before publishing the book.
However, children are also their own property. This creates an overlap, just like IP and physical property create overlaps.
So a child asserting ownership of their body preempts the parents’ ownership of the outcome of their labour. Why should then an assertion of an owner of physical goods not preempt the author’s ownership of the result of their labour too?
As I have been trying to point out for a long time, this is a very fuzzy area. What is “the production of your mind” and how is it distinguished from causality? If it isn’t, that makes all externalities property rights violations. If it is, how do you non-arbitrarily establish boundaries?
But this still does not mean that if you “steal” from a thief, it belongs to you. If Soviet Union’s actions and ideology are reflected in Atlas Shrugged, that would be “intellectual theft” and would require permission of those whose resources were stolen in order to perpetrate those actions and promote the communist ideology. Therefore, Ayn Rand would need to seek permission from everyone who had been opressed by Soviet Union, before publishing the book.
If you are the rightful owner of the ideas, or the ideas were created by a society without property rights and the person creating it agreed with said lack of property rights, you are totally within your rights, because you were the property holder or the person already gave up their right to the property. Unfortunately, because of the wanten destruction of property rights in the soviet union there is some intellectual property that we will never know what their wishes were. In that case, it’s unfortunate, but doesn’t lock it up forever because there is no statement of property ownership thus no ownership. This is why we have a copyright and patent office.
You did not react to my objections. You only took one of them and used it as a starting point for a diversion.
Well, as for every companies, if you want to be known then why not compete with the well-known one? Study and innovate the technique they’re using for your benefit and that’s it, the name is yours! That’s just the way how competition goes for this era. People think of the best way to compete with the other and do all their best to out shine in the way of sometimes manipulating somebody. We cannot change the way how people think/act since we’re in the world of computers, it’s fast changing/pacing onward not backward, but we can minimize this by some laws that governs of this kind of situation, although, we cannot altered that fact.
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