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Source link: http://archive.mises.org/18211/pro-ip-libertarians-upset-about-ftc-poaching-patent-turf/

Pro-IP Libertarians Upset about FTC Poaching Patent Turf

August 24, 2011 by

I’ve noted before the “tension” between federal antitrust law (which penalizes private “monopolies”, while excusing real monopolies, i.e. those formed by state agencies and law) and patent law (in which the state grants private monopolies to some companies to allow them to avoid “unbridled” competition for 17 or so years).

In some previous posts and lectures, I’ve noted that if the FTC were to pursue various companies using state-granted patent monopolies to form cartels and oligopolies, this would not be the worst miscarriage of justice. ((E.g., Price Controls, Antitrust, and Patents and Intellectual Property and Economic Development.; also IP vs. Antitrust; State Antitrust (anti-monopoly) law versus state IP (pro-monopoly) law; The Schizo Feds: Patent Monopolies and the FTC; The Schizophrenic State; Intel v. AMD: More patent and antitrust waste.)) Not that we want the FTC to exist at all, or to exercise powers not authorized by the Constitution or federal law. But if it aims its fire at the patent office and patents granted by its sister agencies in the state, this is not something a libertarian ought to weep over. We might be worried that the FTC exists, or that it feels free to disregard constitutional or statutory limits on its powers, but not about its choking back on patent monopoly power.

But pro-IP libertarians don’t have this perspective. They don’t like the FTC taking away monopoly power grants by their sister agency, the PTO. In response to an FTC proposal on patent notice and remedies, “The Evolving IP Marketplace: Aligning Patent Notice and Remedies with Competition,” pro-IP libertarian Richard Epstein, ((See “Richard Epstein on ‘The Structural Unity of Real and Intellectual Property‘”; The Structural Unity of Real and Intellectual Property (video); The Disintegration of Intellectual Property? A Classical Liberal Response to a Premature Obituary.)) and two other co-authors argue, in “The FTC’s Proposal for Regulating IP through SSOs Would Replace Private Coordination with Government Hold-Up,” that if the FTC intervenes in IP, it will “distort the operation of the intellectual property (IP) marketplace in ways that will hamper the innovation and commercialization of new technologies.” Such a conclusion can be reached only if one assumes that IP does not distort innovation (false) ((See Milton Friedman on the Distorting Effect of Patents; The Forgotten Costs of the Patent System.)) and that IP, when left alone by the rapacious FTC, encourages net innovation (false).

Epstein’s article also worries that the FTC intervention in IP “would seriously undermine capital formation, job growth, competition, and the consumer welfare the FTC seeks to promote.” IP itself undermines all these things, so it is hard to see how another federal agency somehow ameliorating or blunting the effects of the monopoly privilege grants by another federal agency would be bad. And, of course, it is not true that the FTC “seeks to promote” capital formation, competition, consumer welfare, etc. This is confusing the propaganda spouted by a criminal state agency with its real function and nature.

Yes, the FTC should be abolished. But not because its turf overlaps that of the USPTO. Limiting patent rights may be the one non-horrible thing the FTC does.

This is yet another example of how support for IP can lead to a confused analysis of the state and policy. For example, the support of patents has led some libertarians, including Epstein, Doug Bandow, and Michael Kraus, to oppose free trade when it comes to drug reimportation that threatens the patent-monopoly profits of domestic corporations. ((See Ideas Are Free: The Case Against Intellectual Property; Pilon on Patents; Drug Reimportation; Cato on Drug Reimportation; and Patents, Prescription Drugs, and Price Controls.))

{ 6 comments }

Dale B. Halling August 25, 2011 at 10:16 am

Stephen,
A patent is a property right it is not a monopoly. Like all property the source of the property right is creation. If someone else were to create the invention they could obtain a patent (property right) in the invention also. This is like all other property rights and not at all an arbitrary government grant. Finally, a patent is freely alienable, it can be sold, lease, assigned, etc. Again this is not true of government granted monopolies.

In addition, our Modern antitrust law turned the law against monopolies on it head. The Statute of Monopolies limited the power of the Crown (government) to interfere with private property rights. The Statute of Monopolies excluded patents for inventions because they result from the creative act of the inventor and therefore are property rights.

On the other hand modern antitrust law increases the power of government to interfere with private property rights. The underlying theory of antitrust law is the efficient market hypothesis. The hypothesis postulates that wealth is created by falling prices for existing goods and services and this is result of competition to sell existing goods and services. However, this is not true. Increases in per capita income are the result of increases in technology – inventions. Antitrust law undermines the incentive to create and invest in new technologies and therefore hurts our economic health.

nate-m August 25, 2011 at 10:30 am

A patent is a property right it is not a monopoly.

Maybe not the patents you want. But we are talking about actual patents that get created by the patent office, which seem to be very different from what you think they are.

Patents in the USA are absolutely monopoly grant privileges.

Like all property the source of the property right is creation.

Actually no property right is like that at all. Completely misleading and wrong statement.

If someone else were to create the invention they could obtain a patent (property right) in the invention also.

No, actually they can’t. The patent system allows you to successfully sue over acts of independent creation that infringe on your patent. It happens _all_the_time_. It’s very frequent. It may actually be the source of most patent lawsuits today.

This is like all other property rights and not at all an arbitrary government grant.

The fact that it does not work at all like you think, but actually acts like you say that the government grant behaves, it does helps to undermine your argument.

Finally, a patent is freely alienable, it can be sold, lease, assigned, etc. Again this is not true of government granted monopolies.

There is absolutely nothing intrinsic to government grants that says that they cannot be transferred. It depends on the legal details with each grant. Your just making stuff up now.

Take a ‘taxi token’. This gives you the ‘property right’ to own the ability to provide taxi services in certain cities. Often these tokens can be transferred, sold, or leased to other people.

patents are NOT private property rights:

They are grants of privilege. Monopoly grants that are designed to provide so-called ‘economic rights’ that are just like the rights granted to social security or special privileges for unions. Rights created and enforced by government fiat in attempt to improve the economy or make up for some sort of perceived deficiency in the market.

Stephan Kinsella August 25, 2011 at 10:41 am

Just to those lurking: Halling is a patent lawyer who routinely shills for the existing system that butters his bread. He is scientistic and never had sincere normative arguments. He reasons like a technocratic monist engineer bereft of any comprehension of ethical reasoning–thinking it’s sufficient to trot out statist-positivist bromides his law professors regurgitated to him.

Now:

A patent is a property right it is not a monopoly.

As for its being a monopoly: see Are Patents “Monopolies”?. One would not expect Halling, ignorant of economics and uninterested in genuine discourse, to have a clue about this. The only real monopolies are those granted by the state. Halling and his fellow IP protectionists are in favor of the state granting monopoly privileges to people to protect them from competition.

Of course IP is not a real property right. This is just a propaganda term used to sell these privileges to a naturally suspicious public. See Intellectual Properganda, noting:

state-granted privileges like patent and copyright were not originally called property at all. This was a latter innovation, used for propaganda purposes. This was observed by Fritz Machlup and Edith Penrose in two seminal studies:

Those who started using the word property in connection with inventions had a very definite purpose in mind: they wanted to substitute a word with a respectable connotation, “property”, for a word that had an unpleasant ring, “privilege”.

[Fritz Machlup & Edith Penrose, “The Patent Controversy in the Nineteenth Century,” Journal of Economic History 10 (1950), p. 1, 16]

While some economists before 1873 were anxious to deny that patents conferred “monopolies”–and, indeed, had talked of “property in inventions” chiefly in order to avoid using the unpopular word “monopoly”–most of this squeamishness has disappeared. But most writers want to make it understood that these are not “odious” monopolies but rather “social monopolies”, “general welfare monopolies”, or “socially earned” monopolies. Most writers also point out with great emphasis that the monopoly grant is limited and conditional.

[Fritz Machlup, U.S. Senate Subcommittee On Patents, Trademarks & Copyrights, An Economic Review of the Patent System, 85th Cong., 2nd Session, 1958, Study No. 15 (text excerpt)]

Like all property the source of the property right is creation.

Creation is not a source of property at all. You didn’t create your body, yet you ought to own it. If you find an unowned field, and build a farm, you own it because you were first to appropriate it, not because you created the land. Creation means transforming things you own, into more valuable configurations. Creation presupposes you already own the factors that you transform. Creation comes after ownership. It does not give rise to property rights. Creation is not a source of property rights. This is a common mistake.

If someone else were to create the invention they could obtain a patent (property right) in the invention also. This is like all other property rights and not at all an arbitrary government grant.

Of course it is arbitrary, for any number of reasons–including the term, the criteria, the process used, and the fact that the patent one inventor gets lets him stop other, independent inventors from using the invention they came up with on their own.

Finally, a patent is freely alienable, it can be sold, lease, assigned, etc. Again this is not true of government granted monopolies.

It’s true of this one. What kind of reasoning is this?

In addition, our Modern antitrust law turned

Why capitalize “Modern”? Today’s college graduates and patent lawyers are really hacks.

the law against monopolies on it head. The Statute of Monopolies limited the power of the Crown (government) to interfere with private property rights.

Not enough. It left the power of the state to grant monopolies for inventions.

The Statute of Monopolies excluded patents for inventions because they result from the creative act of the inventor and therefore are property rights.

This is not an argument. It’s just assertion. The kind of rhetoric you would expect from a patent shill.

Chris Rhodes August 25, 2011 at 11:59 am

It pains me to think that I was once a Pro-IP libertarian without even realizing the inherent contradiction between the two.

“That piece of paper there, is it your property?”
“Why yes, yes it is.”
“And this piece of paper here, would you say that it’s my property?”
“Most certainly.”
“Okay then, I’m going to write a sentence on my piece of paper. See here?”
“Yep.”
“Alright, now I want you to try and write the same thing on your piece of property.”
“Sure, I’ll just . . .”
“STOP! IF YOU SO MUCH AS WRITE ONE SYLLABLE DOWN ON YOUR PROPERTY, I WILL HAVE MEN WITH GUNS INVADE YOUR HOUSE, STEAL ANYTHING YOU HAVE OF VALUE TO GIVE TO ME, KIDNAP YOU, AND THROW YOU INTO A CAGE FOR SEVERAL YEARS!”

Now, doesn’t that seem like a fine “libertarian” position? *puke*

Peter Surda August 25, 2011 at 12:10 pm

Dale,

A patent is a property right it is not a monopoly.

Patents contradict property rights (or, in the corner cases, are redundant). If you disagree, show me a counterexample.

Furthermore, the concept of monopoly is overused, nevertheless since I last debated with you I came up with a more coherent definition that fits economic science: monopoly is the concept of making mutually inexclusive actions illegal.

Chris Rhodes August 25, 2011 at 12:03 pm

When I think of Rand and her backwards beliefs on IP, one phrase from Atlas Shrugged comes to mind:

when you see that in order to produce, you need to obtain permission from men who produce nothing

We’re there already, thanks in part to “intellectual property”.

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