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Source link: http://archive.mises.org/9247/hayek-on-patents-and-copyrights/

Hayek on Patents and Copyrights

January 16, 2009 by

From Individualism and Economic Order (ironically under copyright), Chicago, 1948, pp. 113-14.

Where the law of property is concerned, it is not difficult to see that the simple rules which are adequate to ordinary mobile “things” or “chattel” are not suitable for indefinite extension We need only turn to the problems which arise in connection with land, particularly with regard to urban land in modern large towns, in order to realize that a conception of property which is based on the assumption that the use of a particular item of property affects only the interests of its owner breaks down There can be no doubt that a good many, at least, of the problems with which the modern town planner is concerned are genuine problems with which governments or local authorities are bound to concern themselves. Unless we can provide some guidance in fields like this about what are legitimate or necessary government activities and what are its limits, we must not complain if our views are not taken seriously when we oppose other kinds of less justified “planning.”

The problem of the prevention of monopoly and the preservation of competition is raised much more acutely in certain other fields to which the concept of property has been extended only in recent times. I am thinking here of the extension of the concept of property to such rights and privileges as patents for inventions, copyright, trade-marks, and the like. It seems to me beyond doubt that in these fields a slavish application of the concept of property as it has been developed for material things has done a great deal to foster the growth of monopoly and that here drastic reforms may be required if competition is to be made to work. In the field of industrial patents in particular we shall have seriously to examine whether the award of a monopoly privilege is really the most appropriate and effective form of reward for the kind of risk-bearing which investment in scientific research involves.

Patents, in particular, are specially interesting from our point of view because they provide so clear an illustration of how it is necessary in all such instances not to apply a ready-made formula but to go back to the rationale of the market system and to decide for each class what the precise rights are to be which the government ought to protect. This is a task at least as much for economists as for lawyers. Perhaps it is not a waste of your time if I illustrate which have in mind by quoting a rather well-known decision in which an American judge argued that “as to the suggestion that competitors were excluded from the use of the patent we answer that such exclusion may be said to have been the very essence of the right conferred by the patent” and adds “as it is the privilege of any owner of property to use it or not to use it without any question of motive.” (Continental Bag Co. v. Eastetn Bag Co., 210 U.S. 405 (1909). It is this last statement which seems to me to be significant for the way in which a mechanical extension of the property concept by lawyers has done so much to create undesirable and harmful privilege.

Also, from The Fatal Conceit, 1988 (p. 35) :

The difference between these and other kinds of property rights is this: while ownership of material goods guides the user of scarce means to their most important uses, in the case of immaterial goods such as literary productions and technological inventions the ability to produce them is also limited, yet once they have come into existence, they can be indefinitely multiplied and can be made scarce only by law in order to create an inducement to produce such ideas. Yet it is not obvious that such forced scarcity is the most effective way to stimulate the human creative process. I doubt whether there exists a single great work of literature which we would not possess had the author been unable to obtain an exclusive copyright for it; it seems to me that the case for copyright must rest almost entirely on the circumstance that such exceedingly useful works as encyclopaedias, dictionaries, textbooks and other works of reference could not be produced if, once they existed, they could freely be reproduced.

Similarly, recurrent re-examinations of the problem have not demonstrated that the obtainability of patents of invention actually enhances the flow of new technical knowledge rather than leading to wasteful concentration of research on problems whose solution in the near future can be foreseen and where, in consequence of the law, anyone who hits upon a solution a moment before the next gains the right to its exclusive use for a prolonged period.

{ 67 comments }

Yeahsurewhatever January 18, 2009 at 3:58 am

“I would hate to see the Government confiscate my new technology and then regulate the price of it.

I would rather let the market make the call on my patent-protected products.”

I think you’re assuming too much in making that call, namely that your ‘patent-protected products’ are in fact worth what you hope they are (unlikely as a rule), and you are assuming you’d always necessarily get a more favorable price in the free market. That is not the case.

How the market prices commodities is not related to your love for them, or how vital they are to your livelihood. Rather, it’s much more related to how vital those products are to the livelihood of other people. You seem to be putting a seller’s psyche into a buyer’s wallet, which is absurd.

When government intervenes to regulate price, it is usually to regulate it at too high a price, making it over-favorable to the seller, taking ‘caveat emptor’ a little too far. When government intervenes on behalf of the buyer, it is usually not to regulate price, but simply to ban the product.

Peter Cohen January 18, 2009 at 8:54 am

Kiba wrote: “It is also not just a mere principled stance. It is also a recognition of reality.”

Yes, Kiba, I will grant you that. Regardless of the ethics of the matter, the fact remains that I simply cannot stay in business in an environment in which that which I produce looses all sales value the instant it is made available. Unfortunately because in my business, I deal with a niche market, I cannot avail myself of mass market advertising revenue. I AM out of business and all I have produced for the last twelve years avails me nothing.

I have other skills that I could use to be productive, but those too would create ‘intellectual property’ which everyone again will simply avail themselves of for free, simply because they can. Yes, I can concoct perversions of my ideas which by obscene machinations can manage to twist some measure of revenue out of their mutation. But those are pale and ugly versions of the visions I would otherwise create, given an environment in which I would have the right to own what I create.

Ergohead January 18, 2009 at 11:22 am

@ Yeahsurewhatever

Ergohead: “I would hate to see the Government confiscate my new technology and then regulate the price of it.

Ergohead: “I would rather let the market make the call on my patent-protected products.”

ysw: “I think you’re assuming too much in making that call, namely that your ‘patent-protected products’ are in fact worth what you hope they are (unlikely as a rule), and you are assuming you’d always necessarily get a more favorable price in the free market. That is not the case.”

THE MARKET IS THE ONLY EMPIRICAL AND LEGITIMATE METHOD FOR TESTING AND THEREWITH ESTABLISHING PRICE.

I, LIKE MOST INVENTORS, AND GOOD SCIENTISTS, DO NOT TEND TO WALK AROUND WITH, OR RELY ON, ASSUMPTIONS.

THAT IS MORE THE BEHAVIOR PATTERN OF LAZY-MINDED PEOPLE, WHO ARE ONLY ONE KNOTCH ABOVE BELIEVERS.

ysw: “How the market prices commodities is not related to your love for them, or how vital they are to your livelihood. Rather, it’s much more related to how vital those products are to the livelihood of other people. You seem to be putting a seller’s psyche into a buyer’s wallet, which is absurd.

THE ONLY WAY TO FIND OUT IS TO TEST IT IN THE MARKET. I, LIKE MOST INVENTORS AND GOOD SCIENTISTS, DON’T TEND TO WALK AROUND WITH, OR RELY ON, ASSUMPTIONS.

ysw: “When government intervenes to regulate price, it is usually to regulate it at too high a price, making it over-favorable to the seller, taking ‘caveat emptor’ a little too far.”

I AM INTRIGUED. CAN YOU GIVE SOME EXAMPLES?

ysw: “When government intervenes on behalf of the buyer, it is usually not to regulate price, but simply to ban the product.”

I AM INTRIGUED. CAN YOU GIVE SOME EXAMPLES?

Ergohead January 19, 2009 at 10:29 am

Kiba: “The free market is already responding to the tyranny of copyright and patents.”

The ease of theft of IP today is mostly the result of utility innovations.

On the business side – computers, CD burners, and oh yes, copy machines – and on the Government side, the non-utility, non-copyrighted, INTERNET.

Anything invented by the Government, is by the very existence of the U.S. Government – Public Domain.

“Tyranny” is a word generally assigned to a “property” of Government – an unlawful property in this country, and usually restrictive in its effects.

For many years in the USSR, copy machines were prohibited from the general public’s use in order to keep IDEAS from spreading. The Gutenberg lesson.

Currently, the Greedy are responding to the overwhelming ability to steal, caused by the “tyranny” of utility patents. This reduces the creation and availability of art to the public by debilitating compensation for effort.

Someone might invent a tool that would dismantle all known automobile security and identification systems, and this also would allow the Greedy to “respond” to an increased ability to succeed at Greed.

Yup, an unintended consequence of IP law is a major tilting of the playing field away from the intention of IP law. Believe it or not.

Oh, would that utility patents were outlawed years ago!

Ergohead January 19, 2009 at 11:56 am
Ergohead January 19, 2009 at 12:59 pm

Ergohead: “Since the founding of this nation there has been an ongoing battle between Big Business and Big Government over who gets to be on top.”

Capitalism – When Big Business is on top.

Socialism – When Big Government is on top.

Fascism – When Big Business and Big Government are spooning.

U.S. Constitution – Free Enterprise.

I wonder why Hitler, the Socialist, admired Mussolini, the Fascist, so much.

Ergohead January 19, 2009 at 1:29 pm

Fascism – When Big Business and Big Government are lying on their sides (69 or 99).

99 if Heterosexual.

I wonder why Hitler, the Socialist, admired Mussolini, the Fascist, so much. Was he a closet gay?

http://www.city-data.com/forum/michigan/534379-big-tall-wish-about-new-president-13.html#post7069524

Ergohead January 19, 2009 at 1:36 pm

But I digress.

NEVER MIND.

Peter Surda January 25, 2009 at 10:52 am

> Why would anyone spend a ton of money
> developing a new technology, and then another ton
> of money marketing the technology, if they were not
> secured a significant advantage in the marketplace
> for obtaining a return on the investment, which has
> already involved significant risk?
Why would anyone do anything risky without having the government granting them a monopoly? Why would you go to a university if millions of other people do? Why would you ask a girl out if anyone else can?

This is called competition my dear. Get used to it. Especially since you seem to live in the US.

Cheers,
Peter

Ergohead January 26, 2009 at 1:01 am

Peter: “This is called competition my dear. Get used to it. Especially since you seem to live in the US.”

Ergohead: Patenting is very competitive. It is that legal monopoly – reward potential, that fuels it.

Competition, is well suited for satisfying self-interest. It adds a certain, dynamic, to accomplishment.

Without self-interest – what would one desire to compete FOR?

There have been less than 8 million Utility Patents issued in the U.S. in the past 220 years, and probably, to only about 5 million inventors, a very small percentage of a 220-year population accrual.

You, Peter, are probably not one of them.

It appears you derive YOUR satisfaction from attempting to manipulate people instead of things.

You probably think that makes you, superior – especially if you have hope of eliminating the satisfaction others have earned.

Better Business Model? Ohhh, I’ll bet your are a clever one. Oh, your are. You are.

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