See here, and here, he says:

I'll tell you something interesting about Priceline. Because Priceline was invented in a room, it was an invention. One of the things we did is applied and got U.S. patents on the invention. How do you like that? Then, along comes this little company and you might have heard of it. It's called Microsoft. Microsoft owned this other company called Expedia, at the time. They said, This Priceline thing looks like it is going pretty well. We ought to do that too. We'll just download some of the code right from the website, right from the HTML. Just take that HTML. So, somebody came into the office and said, Well, Jay, just like you said, Microsoft's in our business. I said, Oh, that's not good. But the fact is, in the United States, the intellectual property laws are reasonably strong and although most people didn't understand what Priceline had patented, they thought we had patented some auction, stupid people, we have nothing to do with auctions at all. Some New York Times reporter called it a reverse auction and nobody every got over it. I never forgave the reporter for it. We were branded as an auction, but we weren't. We were a demand collection system and because of that we sued Microsoft and Microsoft decided maybe it wasn't the best idea to copy us. They turned off that functionality on Expedia. Since then, nobody has copied Priceline. It has been ten years. For as long as our present patents last, I don't expect anybody to copy Priceline. Since Microsoft isn't going to copy, that is probably a good sign that others probably shouldn't either, but it proves a very important point. It proves the power of intellectual property, at some level, to provide space for a startup that is truly novel, that is warranting a patent, or we had several patents in this case, to give it the breathing room to invent something new, create value. Eventually, Priceline will have to compete on its invention when the patents expire. However, there are plenty of people competing with Priceline. They're just not copying it. Somebody is offering LastMinuteFares.com and somebody else is offering JoinMyClub.com. In other words, there is a million people competing with Priceline. They just can't copy Priceline's essential idea which is name your own price, put up a credit card for a flexible set of terms and conditions where, if those terms and conditions are accepted, you basically own the product. That's the core Priceline patent. So, there's how Priceline, again, anticipated copying. Let's just say there was no intellectual property. What would that mean? That would mean Priceline would have to go quickly, right? They would have to keep innovating.

Yeah--we're from the government, and we're here to help you--to "give you space," to "give you breathing room"--while we tax and regulate the living crap out of you!

[StephanKinsella.com cross-post]

In What Are Words Worth?, the author writes:

I was listening to a podcast talk from Mises University 2009 the other night called "Intellectual Property and Libertarianism", in which speaker Stephan Kinsella made the usual Slashdotty-type case against IP from a libertarian perspective. This was novel for me, perhaps because libertarians tend to be very defensive of property rights, such as Ayn Rand's assertion of IP as a right to the products of a person's own mind.

Kinsella rejects Rand explicitly, saying her case offers little more than deification of the creator. His counter-argument is interesting: IP is inconsistent with property rights because it violates the rights of others to use their property. To wit, if I own a typewriter and a stack of paper, or a CD burner and some blank discs, then those should be mine to do with as I see fit. But because of copyright, I can't use the typewriter to transcribe a book, or to use the burner to copy a CD, even if I've bought original copies of the hypothetical book and CD. IP asserts a partial ownership enough to say "you can't do that" over this other property I own. That, according to Kinsella's argument, is inconsistent and therefore invalid.

Interesting, and tricky, and I don't quite know what to make of it.

It's important because, of course, my income is highly dependent on the idea of IP. If I couldn't charge for copies of iPhone SDK Development, I probably wouldn't have spent hundreds (possibly thousands?) of hours over the last year and a half co-writing it. If I couldn't charge for apps on the App Store, would I write them?

The counter-argument comes from the open-source crowd, who say to give away your content (which, by the earlier argument, you couldn't own anyways), and make your money some other way.

The author here is admirably open-minded. I think he is a bit confused when he says the "counter-argument" is to give away your content, but he also inadvertently hits on an important insight. It's not a "counterargument" of ours to say you "should" just give away content. This is rather a prediction that some business models may employ this approach. But note the author says: "If I couldn't charge for copies of iPhone SDK Development,..." Well, of course you can charge for copies. It's just that it might be hard to prevent others from offering it for free or for a lower price, if you don't find some means of exclusion. In other words, part of the entrepreneur's job is to find efficient means of exclusion. Drive-in movie theater owners employ ticket counters, pay for locks on the doors, and for the installation of hundreds of parking-lot per-car speakers to exclude free-riders. Every business has costs of exclusion. If, in the end, the entrepreneur finds that he cannot make a profit in a given endeavor, taking all costs--including costs of exclusion--into account, then that project would require an inefficient allocation of capital. Simple.

[Cross-posted at SK]

I presented a speech last week at Mises University 2009 on "Intellectual Property and Libertarianism." The audio is available here; the video will be available later this month. This presentation was different than others I've done in the past on IP, partly because, as it for students, I tried to start from the ground up, and also to integrate the proper approach to IP with the essential principles of libertarian political philosophy. Thus part of the talk summarized my view of what libertarianism is, and then applied it to IP; this summary view of the libertarian framework was distilled from a more elaborated version, contained my chapter What Libertarianism Is, which appeared in the recently published Hoppe Festschrift, Property, Freedom and Society. An article based on my speech is forthcoming in Liberty magazine.

[Cross-posted at StephanKinsella.com]

I previously noted that NTP used the patent system to wring over $600M out of RIM, the manufacturer of the Blackberry smartphone. As noted by Mike Masnick, now RIM has coughed up another quarter billion dollars to another company, Visto ("coincidentally" a licensee of NTP). A quarter billion dollars--everyone yawns. Masnick asks, why did NTP have to pay Visto?

For being the loser in the market place. This is a tax on innovation. The loser in the marketplace forces the winner to hand over a nice chunk of profits. It's bad for everyone (except some lawyers and Visto shareholders).

Masnick is right: this is yet another tax on innovation. Patents are killing innovation (see Yet Another Study Finds Patents Do Not Encourage Innovation). This is the age of technocide.

[Masnick opined that one reason NTP invested in Visto to get it to take out an NTP license was: "That certainly looks like NTP paying a company to license its patents, just to make it looks like there were some legitimate licensees."

This may be right, but as I explain in "Impact of Patent Licensing on Patent Litigation and Patent Office Proceedings" (available on my legal site), "a license under the patent may be offered as persuasive evidence in rebutting a prima facie case for obviousness." In other words, one reason patentees seek to license their patents is to build up the case that the patent is not obvious--to use it in litigation later to help defend the patent.]

[Mises cross-post; SK cross-post]

Following up on An Anti-Patent Patent Attorney? Oh my Gawd!, I was chatting with a friend about the following. I've argued that merely filing for patents is not inherently unlibertarian since patents, like guns, have both legitimate and illegitimate uses. The former being defensive use to ward off patent infringement suits or to countersue someone who sues you first. Still, there's an ... icky ... feeling involved in getting a patent. The following may be a bit inside baseball for patent lawyers but I thought revealing some of the innards of how the process works may be of interest to some readers.

Laymen may not be aware of this but patent "prosecution" work (as filing the patent and interacting with the patent office to get it allowed, is called) is fairly fungible, low-dollar work, compared to other types of IP. To prepare and file a patent application, the patent attorney might charge anywhere from $7k to $15k or more. But patent litigation is much more lucrative (or can be), since the lawyers can get a cut of, or be paid based on the hopes of, multil-million or billion dollar judgments.

Patent lawyers also are often called on to prepare patent opinions. The good thing about these is they are more lucrative than patent prosecution--the attorney can often charge a good $25k or more to prepare one--and they can be completely libertarian. The typical usage is this. Company A is minding its own business and then becomes aware of a patent owned by company B that they are accused of, or otherwise concerned that they might be, infringing by selling a certain product that. Quite often the issue is not clear cut--the patent language is ambiguous and there are a variety of possible legal defenses one might have, that might or might not succeed at trial. If the risk seems high and the product is not important, the company may (a) design around the patent--that is, modify the product's design so that it doesn't infringe the patent; (b) stop making the product; (c) approach the patentee for a possible license. If the risk is low or the product is essential, sometimes there is option (d): keep making the product and pray that you are not sued. Option (c), designing around, sometimes employs an opinion of an attorney that the new design doesn't infringe, or relies on input from patent attorneys as to how to increase the chance that the new design doesn't infringe.

But when option (d) is invoked, then here is the dilemma companies face. If you go to trial, and lose, you may have to pay damages for past infringement--some kind of "reasonable royalty"; and the patentee may be able to get an injunction to force you to stop making the product going forward (which may result in a license with a royalty provision). However, the patent statute also provides for enhanced damages--"the court may increase the damages up to three times the amount found or assessed", in certain cases--which the courts have found to be cases of "willful infringement".

Now, the courts hold that if you get an unbiased opinion from a professional that says you do not infringe the patent, and you rely on this, then even if you lose at trial (and the attorney turns out to have been wrong), then you have a good argument that, although (it turns out) you were infringing, it was not willful since you "sincerely" believed (hoped) that you were not infringing, because you were "relying" on an attorney's opinion.

Thus, when patent litigation is threatened or a possibility, the potential infringer will often pay patent attorneys tens of thousands of dollars to exhaustively research the problem patent(s), and to prepare an opinion that "concludes that the patent is invalid, unenforceable, and/or not infringed." (One of the most recent cases on this is the Seagate case (discussed here), which reduces but does not eliminate the need for such opinions.)

In other words, potential patent victims are so desperate to keep selling their product, that they in effect pay tens of thousands of dollars to get a patent opinion that buys them "insurance"--it basically reduces the risk of treble damages being awarded in the event they lose at trial.

Anyway--I can't see any possible libertarian argument that preparing such a purely defensive opinion is unlibertarian. Indeed, it's heroic, much like income tax defense or criminal defense work.

[Against Monopoly cross-post]

On occasion you get some defender of patents who is upset when we use the m-word to describe these artificial state-granted monopoly rights. For example here one Dale Halling, a patent attorney (surprise!) posts about "The Myth that Patents are a Monopoly" and writes, " People who suggest a patent is a monopoly are not being intellectually honest and perpetuating a myth to advance a political agenda."

Well, let's see. First, see my post Epstein and Patents, noting that the pro-patent Epstein writes:

Patented goods are subject to a lawful monopoly created by the state in order to induce their creation. No one thinks that new pharmaceutical drugs will be invented by private firms that cannot receive a rate of return sufficient to recover [various costs]. … The legal monopoly granted by the patent is the only mechanism that allows the producer to recover those fixed costs….

Is the pro-patent Epstein being dishonest?

And see my comments (1, 2) on The Three Stages of Invention post, excerpted below:

First, as to whether patents are monopoly grants--hell, even the feds admit this: "Section 154 and related provisions [e.g. Sec. 271] obviously are intended to grant a patentee a monopoly only over the United States market...." U.S. Supreme Court, Deepsouth Packing Co. v. Laitram Corp., 406 U.S. 518 (1972). See also: King Instr. v. Perego, by the Court of Appeals for the Federal Circuit ("Congress made the policy choice that the "carrot" of an exclusive market for the patented goods would encourage patentees to commercialize the protected inventions so that the public would enjoy the benefits of the new technology during the patent term in exchange for granting a limited patent monopoly. In other words, the public expected benefits during "'the embarrassment of an exclusive patent as Jefferson put it.'" Graham v. John Deere Co., 383 U.S. 1, 10-11 (1966).)

See also Engel Ind. v. Lockformer Co. ("We hold that the disputed royalties provisions do not inappropriately extend the patent monopoly to unpatented parts of the patented system"); Carborundum Co. v. Molten Metal Eq. Co. ("A patentee, in demanding and receiving full compensation for the wrongful use of his invention in devices made and sold by a manufacturer adopts the sales as though made by himself, and therefore, necessarily licenses the use of the devices, and frees them from the monopoly of the patent.")

And: Rice v. Santa Fe Elevator Corp., 331 U.S. 218, 230 (1947):

The Florida statute is aimed directly at the promotion of intellectual creation by substantially restricting the public's ability to exploit ideas that the patent system mandates shall be free for all to use. Like the interpretation of Illinois unfair competition law in Sears and Compco, the Florida statute represents a break with the tradition of peaceful coexistence between state market regulation and federal patent policy. The Florida law substantially restricts the public's ability to exploit an unpatented design in general circulation, raising the specter of state-created monopolies in a host of useful shapes and processes for which patent protection has been denied or is otherwise unobtainable. It thus enters a field of regulation which the patent laws have reserved to Congress. The patent statute's careful balance between public right and private monopoly to promote certain creative activity is a "scheme of federal regulation . . . so pervasive as to make reasonable the inference that Congress left no room for the States to supplement it."

Brenner v. Manson, 383 U.S. 519 (1966):

Whatever weight is attached to the value of encouraging disclosure and of inhibiting secrecy, we believe a more compelling consideration is that a process patent in the chemical field, which has not been developed and pointed to the degree of specific utility, creates a monopoly of knowledge which should be granted only if clearly commanded by the statute. Until the process claim has been reduced to production of a product shown to be useful, the metes and bounds of that monopoly are not capable of precise delineation. It may engross a vast, unknown, and perhaps unknowable area. Such a patent may confer power to block off whole areas of scientific development, without compensating benefit to the public. The basic quid pro quo contemplated by the Constitution and the Congress for granting a patent monopoly is the benefit derived by the public from an invention with substantial utility. Unless and until a process is refined and developed to this point -- where specific benefit exists in currently available form - there is insufficient justification for permitting an applicant to engross what may prove to be a broad field.

Diamond v. Chakrabarty, S.Ct. (1980), Brennan's dissent:

I agree with the Court that the question before us is a narrow one. Neither the future of scientific research, nor even the ability of respondent Chakrabarty to reap some monopoly profits from his pioneering work, is at stake. Patents on the processes by which he has produced and employed the new living organism are not contested. The only question we need decide is whether Congress, exercising its authority under Art. I, 8, of the Constitution, intended that he be able to secure a monopoly on the living organism itself, no matter how produced or how used.

Now you can argue that patent holders do not necessarily have "monopoly power" (see The Importance of Patents for Economic Development - 1999, by Prof. William Hennessey), but as Rothbard et al. have pointed out, the government's concept of monopoly is flawed; the only issue that matters is whether there is a legal monopoly granted. See, e.g., Hoppe, A Theory of Socialism and Capitalism, ch. 9, pp. 185-86:

The monopoly problem as a special problem of markets requiring state action to be resolved does not exist. In fact, only when the state enters the scene does a real, nonillusory problem of monopoly and monopoly prices emerge. The state is the only enterprise whose prices and business practices can be conceptually distinguished from all other prices and practices, and whose prices and practices can be called "too high" or "exploitative" in a completely objective, nonarbitrary way. These are prices and practices which consumers are not voluntarily willing to pay and accept, but which instead are forced upon them through threats of violence.

See also Rothbard, Man, Economy, and State (with Power and Market): "The only viable definition of monopoly is a grant of privilege from the government."

Now it is, indeed, clear that a patent is a monopoly grant to someone that permits them to charge above-market prices; this is exactly the goal of the patent law: to provide this monopoly profit to inventors so as to incentivize them to innovate and file for patents. And it is why, for example, Blackberry paid over $600 million to NTP in a recent patent suit; and it is why consumers will have to pay more for Blackberry services than they otherwise would, etc. Did NTP have "monopoly power" as defined by the government's antitrust scheme? I don't know. Probably not. But did they extort RIM/Blackberry by use of the government-granted patent monopoly? Of course.

See also Arnold Plant, The Economic Theory Concerning Patents for Inventions, sections 16, 19, 20, 24:

The patent system may, on the one hand, be expected to affect the making of inventions in two ways. The first is to divert inventive activity into those fields in which the monopoly grant will be expected to prove most remunerative. It may, secondly, affect the total amount of inventive activity.

... the utilitarians assumed that the patent system was responsible for the greater part of inventing activity. The question which they one and all failed to ask themselves, however, is what these people would otherwise be doing if the patent system were not diverting their attention by the offer of monopolistic profits to the task of inventing. By what system of economic calculus were they enabled to conclude so definitely that the gain of any inventions that they might make would not be offset by the loss of other output? By no stretch of the imagination can the inventing class be assumed to be otherwise unemployable. Other product which is foregone when scarce factors are diverted in this way completely escaped their attention.

... at the beginning of this century Professor J. B. Clark was still writing: "If the patented article is something which society without a patent system would not have secured at all - the inventor's monopoly hurts nobody… His gains consist in something which no one loses, even while he enjoys them."? No inkling here that the patent inducement to invent diverts scarce human effort from other production, and that the subsequent exploitation of patents again interferes with the disposition of scarce factors which would obtain under competitive conditions.

... It seems unquestionable not only that a very considerable volume of inventive activity must definitely be induced by price conditions, but also that that activity is diverted by price movements from other types of endeavour as well as from other fields of invention. Entrepreneurs faced with new difficulties or with new opportunities will divert not only their own attention, but that of every technician who can be spared, from the business of routine production to that of urgent innovation. They will not rely exclusively upon those types of professional inventors whose autonomous output pours out in a stream of unvarying size, and some of whom may be prepared, in return for the inducements which the entrepreneurs can offer, to transfer their spontaneous activity to their service. It cannot be assumed that all who are capable of innovation spend their whole lives in inventing. Many of them are also able administrators and production controllers; some in the past have been clergymen and barbers, and in our own time there is a steady flow of technicians from the research laboratories of pure science into those of industrial invention and out again. ... The patent system ... enables those who "have the monopoly of the right to use a patented invention to raise the price of using it ... and in that way to derive a larger profit from the invention than they could otherwise obtain. The effect must surely be to induce a considerable volume of activity to be diverted from other spheres to the attempt to make inventions of a patentable type. [emphasis added]

See also Rothbard, Man, Economy, and State, ch. 10, sec. 7:

It is by no means self-evident that patents encourage an increased absolute quantity of research expenditures. But certainly patents distort the type of research expenditure being conducted. . . . Research expenditures are therefore overstimulated in the early stages before anyone has a patent, and they are unduly restricted in the period after the patent is received. In addition, some inventions are considered patentable, while others are not. The patent system then has the further effect of artificially stimulating research expenditures in the patentable areas, while artificially restricting research in the nonpatentable areas.

A friend of mine was asked by a patent attorney he knows how I can be a patent attorney and against IP. The assumptions behind the question are odd; here was my reply.

First, when there are tax laws, there is a need for tax lawyers. When there is cancer, we need cancer doctors. There is nothing wrong with advising people or companies as to how to navigate the positive law in society.

Second, just as having a gun is not a crime since the gun can be used for good or evil, so having a patent is not in an of itself evil--there are both legitimate and illegitimate uses of them. For example if I am sued for patent infringement I will use my patents in a countersuit. In fact most patents are held for defensive purposes--to ward off suits.

Third, it could be that being a patent lawyer has helped me to see why patent law is unjustified.

Fourth, this kind of assumption reminds me of what annoys me about criticisms by liberals and blacks of any black such as Clarence Thomas who opposes the standard liberal crap on affirmative action etc. It's as if they think the unwilling "beneficiary" of their liberal policies should also shut up about it and toe the line. Do the advocates of IP want those most able to oppose it to be muzzled? Can only those ignorant of how IP works complain about it?

Fifth, I have yet to see a sincere or informed pro-patent opinion by a single patent attorney. The few I know who are cynics like me are resigned to it; the patent lawyers who promote the system invariably repeat the tired and pathetic arguments in favor of it. I have yet to find a single patent lawyer who promotes IP who has a sincere or serious argument in favor of it. (For more on this see There's No Such Thing as a Free Patent, Yet Another Study Finds Patents Do Not Encourage Innovation, Patent Attorney Admission, Miracle--An Honest Patent Attorney!) I don't mind patent attorneys doing their jobs, to put bread on the table. But when they start trying to justify their profession by repeating the bankrupt arguments of utilitarians and statists, they open themselves to criticism.

Finally, these pieces of mine might be of interest (available also here): The Morality of Acquiring and Enforcing Patents and Letter to an Anonymous Patent Attorney.

In an email someone mentioned to me a particular key invention from a few decades ago, which was responsible for a number of other high-tech innovations that we now enjoy, and asked me to "show us how any of that could have happened if there were no patents." My response is below.

Why is the burden on me to show how it could have happened without patents? The question is itself question-begging, as it assumes the patents played a causal role, which must be either explained away or for which a substitute incentive effect must be found.

I'd say that almost any invention that comes will come eventually--maybe even sooner, absent the patent system, absent the state (see Yet Another Study Finds Patents Do Not Encourage Innovation). In my experience, this view is almost universal among inventors and engineers. We would have had transistors by now without Shockley, Planck, and Schrödinger; we would have had light bulbs without Edison; and one-click purchasing on web sites without Jeff Bezos. Maybe a bit later, but eventually. And maybe even earlier--patents slow things down too, after all.

And we cannot forget that a huge factor in innovation is wealth. Wealth is needed to provide spare time and resources to engage in research and development. And wealth is no doubt hampered severely in a society that has a state, which any patent society must. Without a state there would be no patents, but a far richer world, and more innovation because of that factor alone.

Finally--so what if we wouldn't have had invention X, Y, Z, as early, or even ever, without a patent system? After all, a patent system undeniably has costs in terms of both rights and money. How can it be shown that having invention X is worth the violation of rights incurred as a result of the patent system necessary to generate X? Utilitarianism is a bankrupt doctrine, after all. And even if you approach it from a utilitarian, wealth-maximization angle: how can it be shown--who has shown?--that the cost of the patent system that generates X is less than the value of X?

[Mises cross-post; SK cross-post]

As mentioned by Jeff Tucker, in the Pope's new encyclical, Caritas in veritate, he writes:

On the part of rich countries there is excessive zeal for protecting knowledge through an unduly rigid assertion of the right to intellectual property, especially in the field of health care.

As Jeff writes, "I wish it had gone further to reject the whole idea of a IP but this is an excellent statement as far as it goes."

Study Finds Patent Systems May Not Be an Effective Incentive to Encourage Invention of New Technologies reports:

A new study published in The Columbia Science and Technology Law Review challenges the traditional view that patents foster innovation, suggesting instead that patents may harm new technology, economic activity, and societal wealth. These results may have important policy implications because many countries count on patent systems to spur new technology and promote economic growth.

The study is: Patents and the Regress of Useful Arts, by Dr. Andrew W. Torrance & Dr. Bill Tomlinson, Colum. Sci. & Tech. L. Rev. 10 (2009): 130 (Published May 15, 2009).

As those familiar with my libertarian and IP views know, I'm not a utilitarian (see my There's No Such Thing As A Free Patent; Against Intellectual Property); but almost all IP proponents are, and claim that IP is "worth it" because it generates additional innovation the value of which is implicitly presumed to be obviously much greater than the relatively trivial cost of having an IP system. So it is striking that there seems to be no empirical studies or analyses providing conclusive evidence that an IP system is indeed worth the cost. Every study I have ever seen is either neutral or ambivalent, or ends up condemning part or all of IP systems. Utilitarian IP advocates remind of the welfarist liberals skewered by Thomas Sowell in his The Vision of the Anointed: Self-Congratulation as a Basis for Social Policy--liberals continue to advocate policies long after there is overwhelming evidence these policies do not work, even by the naive, socialistic standards of their proponents; likewise, utilitarians keep repeating the mantra that we need patent and copyright to stimulate innovation and creativity, even though every study continues to find the opposite.