Ruminations on Licensing: IP as a Private Property Right

If we are to encourage invention and promote investment in innovation and the formation of new enterprises, we must provide a system of laws that recognize intellectual property as having all the attributes of other forms of personal private property.

On Licensing

In his seminal work “On War”, Karl Von Clausewitz described war as merely the continuation of politics by other means. In the same spirit, we might think of litigation as a continuation of licensing by other means. Ultimately, the same result is achieved.   There is a dispute over certain rights, a contest of ideas and/or arms in resolution of the dispute, and, ultimately, resolution in the form of an agreement. Now, it might be that the agreement reached is in the form of an implied license and peaceful co-existence; or it might be a more formal “treaty” whereby the contestants specify anew their respective rights and responsibilities; or it might be a complete vanquishing whereby one side declares total victory. Rarely, however, and especially in today’s highly complex and interdependent markets, is this latter scenario observed. Nonetheless, in each case, there is a settlement of sorts, and usually in the form of a license agreement.

In similar fashion, and of greater benefit to society, is the scenario where a party has a certain property right, duly conferred by an authorized and competent arm of the state, and that property right is respected by the market. In reliance on that property right, the owner affords others the right to use that property, and to derive revenue from its use. In turn, the owner is compensated for the conveyance of that right. Both parties derive benefit, and both parties are better off than they would have been otherwise. As such, the exchange of the right conferred and the right received is a mechanism for mutual enrichment, and the classic win-win scenario is observed, and society is the ultimate beneficiary.

IP as Private Property

The philosopher John Locke wrote of the Commons that are commonly available to the public in general, and of the notion that a property right is properly recognized in those who employ their labor and creative faculties in converting the raw material of the Commons into useful articles. The Commons are those resources that abound and are made available to all, in rough and unrefined form. Those resources are acknowledged as rich in potential, but in their native form of minimal utility. But, by applying one’s labor to those commonly available resources, we promote the individual inclination toward useful endeavors, and we reward the successful and diligent application of those skills toward the production of goods and services of general benefit to society.

Many of the Founding Fathers read extensively of Locke’s work, and were influenced by his philosophy. Thus, the notion of intellectual property as a private property right is found in our Constitution. Article I, Section 8, clause 8 reads:

“The Congress shall have Power To…promote the Progress of Science and useful Arts, by securing for limited Times to Authors and Inventors the exclusive Right to their respective Writings and Discoveries….”

This clause is notable for the fact that it is the only provision of our Constitution associated with a particular and express purpose. In the case of patents, it is the purpose of promoting progress of the useful arts.

Locke’s philosophy is particularly important as we look at licensing, and the ability to freely use the property right that resides in a patent (or other forms of intellectual property). Locke wrote extensively about the value that derives from government recognition of private property rights, and how that recognition can be useful for society as a whole. For one thing, it provides the incentive that rewards the application of skill and industry to the bounty that surrounds us, including the use of our own skills and talents.

By rewarding individuals with a property right in the fruits of their labor, we create a broad array of assets that can be bought and sold, and thereby stimulate commerce. But, more importantly, and particularly as applied to intellectual property, we reward creativity, the development of the intellect, and expand upon the store of basic knowledge, as well as the knowledge and creativity that is employed in the creation of useful articles and services.

And so, if we start with the notion that society benefits from a system of laws that recognize property rights, and we likewise recognize the alienability of those property rights, then we must also acknowledge, as the Founding Fathers did, that intellectual property is a form of property like any other, and thus, should be equally recognized under the law, and equally alienable. Only then do we have a robust and reliable legal regime whereby one’s livelihood may be sustained by the industrious application of one’s intellect and creativity.

We must further recognize that it is the application of one’s intellect and creativity that result in the property right; not how one chooses to ultimately exploit the resulting products. The notion that a property right might properly be confined to specific endeavors in the exploitation of the right cannot properly take hold in a system that values property rights in general, and the merits of the free market in particular. Try to imagine a system where a toolmaker is afforded a property right in the tools it manufactures only insofar as it uses those tools itself rather than selling them to craftsmen skilled in the use, rather than the making, of those tools. It is the same with intellectual property. Inventors must be free to invent, knowing they may convey to others the right to use those inventions in commerce for the benefit of all.

Further, we cannot let go of the notion of intellectual property as property without also addressing a characteristic attribute that the Founding Fathers determined so fundamental as to expressly include it in the Constitution – exclusivity. The Constitution gives Congress the power to grant Authors and Inventors the exclusive Right to their respective Writings and Discoveries. An exclusive right is more than a mere right of remuneration – it is the right to control the use and disposition of one’s property, and to deny others access to it. Without the fundamental attribute of exclusivity, we lurch toward a system of compulsory licensing, or a private right of individuals to take another’s property on the promise of mere monetary compensation. Under our Constitution, and particularly the Fifth Amendment, or the Takings Clause, even the government does not possess that right except that it be for some demonstrable public – rather than private — use. Thus, to be true to the express language of our Constitution, and respectful of the limits imposed on the Fifth Amendment, the rights inherent in intellectual property necessarily must include a right to exclude others from the enjoyment of that property.

Intellectual property rights are rights properly held by the individual responsible for bringing it into existence. In the U.S., these rights have historically, and should continue to, possess all the attributes of private property, including alienability of those rights and the right to exclude others from trespassing on them. This is essential to a dynamic, free-market system that promotes innovation, encourages the birth of new business, and makes the fruits of those endeavors available to the public.


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One comment so far.

  • [Avatar for Raymond Van Dyke]
    Raymond Van Dyke
    October 4, 2017 09:38 am

    The Oil States case will be an ongoing litmus test for the Justices who seem aggravated by the plethora of patent cases before them. Brian’s article is a great introduction into the underlying philosophy of our patent system. The Founders were well-versed into the political philosophies of the time, such as Locke and Montesquieu, as well as the extraordinary benefits of a patent system to the fledgling Nation, which they enshrined into the Constitution itself.

    The Oil States case delves into other Constitutional rights and whether patents, as private property, are imbued with those rights. Hopefully, the Justices will hearken back to these underpinnings, the Lockean personal labor transforming bits of Nature, and not deem patents as instead admixed with government and not entitled to higher Constitutional protections.

    Every year some aspect of patent protection has been chipped away by the Justices. We think it could not get worse. Oil States is worse.

    Ray Van Dyke