A Response to Claims of Patent Propaganda and a Plea for Interpretive Charity in IP Debate

Following a panel I spoke on with my colleagues Charles Duan of the R Street Institute, Abby Rives of Engine, and Ian Wallace from New America, Lydia Malone wrote a piece critical of our comments on this site. I thank IPWatchdog for the opportunity to respond.

The Claim We are Anti-Patent is Patently False

Appreciating that Ms. Malone characterizes her piece as “one view” of the above-referenced panel, I wish to offer another, hopefully more complete view of last week’s discussion. For example, one feature of Tuesday’s panel is the panel’s discussion of how high-quality patents are an important, valuable, and in some cases necessary element of the innovation ecosystem. I respectfully disagree with Ms. Malone’s assertion that the panel “concluded that we should abolish patents and begin centrally planning the subsidization of research and development for all innovation, all in the interests of their ‘free market.’”

Why don’t I oppose patenting at large? First, there are tremendous benefits from the disclosure requirements associated with patenting. This is not mutually exclusive with making discoveries and inventions from government-financed research available to all, but the disclosure requirement is the clearest benefit from our current system. Second, while government may be able to direct its funding to specific needs, nobody knows where the next great idea will come from. When more direct forms of government support aren’t available for a nonetheless valuable invention, the patent system is a good way to make up for the missing subsidy.

But rather than central planning, my support for greater financing of STEM education, academic, and applied research is a Hayekian one. In some cases, the government may need a specific invention and offer a prize for its invention—granting it only to the party that is able to produce it, making it a customer and not a regulator. In other cases, the funding should be broad and not geared towards any one industry or party, in line with Hayek’s view that rules should be general and abstract. Such is the nature of broad-based funding for research and education.

My general framing of the issue is similar to that of free-market champion Milton Friedman, who said in his 1962 masterpiece Capitalism and Freedom, “[t]he specific conditions attached to patents and copyrights––for example, the grant of patent protection for seventeen years rather than some other period––are not a matter of principle. They are matters of expediency to be determined by practical considerations.” Friedman still defines patents and copyrights as a “governmentally created monopoly” albeit one that is “very different” from other more egregious examples of government-created monopolies, such as taxi medallions.

Patents are Subsidies, but Subsidies Aren’t Necessarily Central Planning

The 30,000-foot-view I offered on patents is that they are not property, but instead a regulatory subsidy. My colleague Brink Lindsey and I give this claim a thorough treatment in our paper “Why Intellectual Property is a Misnomer,” and former Solicitor General Paul Clement recently authored a paper with a similar thesis. I recommend reading both papers in full, but I’ll briefly restate some of our arguments here. First, ownership in the physical world and ownership in ideal objects are two fundamentally different things. Physical property is rivalrous (use by one prevents the use by another), while an infinite number of people can use a design for a widget at the same time. Further, there is no limiting principle for patents–why don’t all original inventions and discoveries deserve patent protection? Also, physical property can remain private indefinitely, but allowing an indefinite right to an invention would be absurd—well beyond even Ayn Rand’s ideal intellectual property regime.

What’s more, intellectual property poses a threat to traditional property rights. I may, through Lockean appropriation or voluntary exchange, acquire all of the parts necessary to create a widget. But the moment I take those parts and put them together into a patented design, the sum of my parts becomes someone else’s whole.

Malone’s claim that I, or any of my colleagues, are in favor of “central planning” is simply wrong. Read virtually any of my work, and you will see that I believe regulations designed in a non-Hayekian fashion (i.e. to produce specific results rather than as general, abstract rules) are detrimental to society and individual liberty. Patents are a regulatory subsidy in the form of a transferable, exclusive right.

Why is this the case? “The justification for the patent system,” wrote Joan Robinson when defining “the paradox of patents,” is to “slow[] down the diffusion of technological progress [to] ensure[] there will be more progress to diffuse.” Part of this initial slowing down is the ability of patent holders to charge monopoly prices to recoup the upfront cost of their investments. But, as a right secured by the government and not the individual (unlike physical property), patents are creatures of government intervention, just like a National Institutes of Health (NIH) grant.

For any given invention, a transfer payment in exchange for an unpatentable invention is strictly preferable to a patent. Why? Suppose the monopoly price for a patented invention is 10% above the free-market price, with that extra 10% charged going to the inventor. Now suppose we had a free market in that invention, but the government charged a 10% tax and gave the revenue to the initial inventor. Aside from the mechanics of the different policies, they are functionally identical–government is intervening in a way that redistributes wealth with the goal of increasing innovation.

The advantage of broader-based funding for research and education, prizes, etc. is that they are financed through our progressive tax system, not regressive monopoly pricing paid by consumers. Both involve government intervention, but the former is a more progressive and less distortive method of funding the intervention.

The ability of government to put resources to their most efficient use is, of course, suspect, which is why patents are an essential part of the mix to promote innovation (see the first section of this article). But, just as government can (and often does) spend far more than is necessary on a given project, the market value of a patent can also be unrelated to the social value of a given incentive to innovate. Take the example of software patents, where overly broad claims can easily hinder innovation at great cost to society, despite the value of the intellectual effort that went into the development of the patent being relatively low.

The Wrongs of the Wright Brothers

Malone’s objection to my characterization of the Wright Brothers as patent trolls is unresponsive. Her claim would give the impression that I deny that the Wright Brothers were essential to innovation in the aerospace industry, as “Any fifth-grader can tell you that the Wright brothers invented the airplane. It’s absurd to claim that two of the most significant inventors in all of history were just ‘patent trolls.’”

It would be absurd to claim that they are just patent trolls, which is why I didn’t. Did they invent the first functional aircraft? Yes. But following the issuance of their 1906 patent, which covered their specific solution (called “wing warping”) to the problem of lateral stability, they sued rivals with alternative solutions to the problem. I also never claimed (as Malone states) that the Wright Brothers’ patent was a bad patent (far from it!). Rather, they abused their patents beyond the scope of what their legal right to exclude granted.

This argument is based on the fact that merely because someone did something good, that doesn’t mean they didn’t also do something bad. There is no reason to think that simply because the Wright Brothers invented the first functional airplane, they also did not abuse their patents to the detriment of innovation in aviation.

Despite H.L. Mencken’s brilliant use of the English language to tackle demagogues and snake oil salesmen, and his advocacy for the admission of Jewish refugees that the Roosevelt administration turned away, he was undoubtedly an anti-Semite. Thomas Edison was a brilliant inventor and businessman, yet he waged an effective PR campaign against Nikola Tesla’s alternating current electricity, a threat to the royalties Edison received from his patents related to direct current electricity. Today, AC electricity is virtually everywhere. Werner von Braun made rockets go up, but where those rockets came down wasn’t his department, to borrow from Tom Lehrer. Much like how most of us can walk and chew gum at the same time, people who have done great things to advance human society can do bad things as well.

What is excluded from this piece is the context of my argument: due to the Wright Brothers’ patent war and the subsequent chilling of innovation, American aircraft were technically inferior to their European counterparts in WWI, costing American lives in the conflict. Also excluded was my argument about Cipro, the anthrax treatment patented by Bayer. Following 9/11, there was an obvious need to accumulate an anthrax vaccine, but it was only after significant pressure from the Bush Administration that Bayer agreed to lower the price. These forms of war profiteering put American lives and national security at risk.

Parting Thoughts on Cheap Shots

In closing, I would like to point out that I am frequently surprised that in the landscape of intellectual property, perhaps the wonkiest topic in public policy imaginable, there exists such rancor and hostility in dealing with intellectual opponents. We should all do our best to live by Antonin Scalia’s maxim to “attack arguments, not people.”

Any reasonable or decent person should welcome good-faith criticism of their arguments and offer the same to their intellectual opponents. But one cannot casually throw around words like “propaganda” and “disinformation,” implying dishonesty on the part of myself or my fellow panelists without serious evidence as to our intentions or integrity, rather than the shortcomings of our arguments themselves. I have no reason to doubt the sincerity or honesty of Malone, other contributors to IPWatchdog, or any of those on the opposing side of this issue and wouldn’t use such language to characterize their arguments. I ask the same courtesy in return.

Image Source: Deposit Photos
Image ID: 13472069
Copyright: jamesgroup