Patent Baristas has a Book Review of the new book Driving Innovation. It's interesting to me that patent lawyers seem to be beginning to begrudgingly acknowledge that the patent system has costs:

"The duality of intellectual property is that it is a source of wealth and a source of an equal and opposite cost. That is, IP brings wealth only through a hidden tax whether on competitors or consumers. So it is with IP rights, they inherently set up a tension between the pharmaceutical company enforcing rights and the patients wanting greater (read: less costly) access to medicine. A technology company wants to build and market a product but is forced to pay licensing fees to a patent holder."

What is bizarre here is the blithe assumption that the costs of IP are "equal and opposite" to its benefits. First, they can never be equal, due to the subjective, ordinal, and interpersonally incomparable nature of value. Second, even if they can be compared, there's no reason to think that they are equal--one is likely to be greater than the other. Third, even if you assume they are equal--then why have an IP system? I mean why even bother, if it all balances out? (See my There's No Such Thing as a Free Patent; What are the Costs of the Patent System?)

But even though they acknowledge the system has costs that might offset or even exceed the purported benefits, do they want to probe into whether IP is legitimate or should exist? No, explicitly not: "This book is not about what the IP should be or how it could be changed but is about how to survive in a global system when IP rights have developed."

Ah well, baby steps.

[Cross-posted at Mises Blog.]

Some here might be interested in the remarks on IP by the greatest economist of all time (though Boldrin and Levine will no doubt disagree with this characterization!), Mises:

In this comment on a post here, I was accused of hiding or avoiding mention of one of Mises's comments about copyrights and patents. I suppose the commentor was unaware of my extensive quotes of Mises in this comment on another thread, which quoted a large deal of Mises's remarks on IP, including the one in question. So much for suppression. Since this extensive comment is buried on a thread, I reprint it below as a standalone post.

As I noted in Against Intellectual Property (n. 38), "Mises expressed no opinion on the issue, merely drawing the economic implications from the presence or absence of such laws."

Here are Mises's words:

The External Economies of Intellectual Creation

The extreme case of external economies is shown in the "production" of the intellectual groundwork of every kind of processing and constructing. The characteristic mark of formulas, i.e., the mental devices directing the technological procedures, is the inexhaustibility of the services they render. These services are consequently not scarce, and there is no need to economize their employment. Those considerations that resulted in the establishment of the institution of private ownership of economic goods did not refer to them. They remained outside the sphere of private property not because they are immaterial, intangible, and impalpable, but because their serviceableness cannot be exhausted.

People began to realize only later that this state of affairs has its drawbacks too. It places the producers of such formulas--especially the inventors of technological procedures and authors and composers--in a peculiar position. They are burdened with the cost of production, while the services of the product they have created can be gratuitously enjoyed by everybody. What they produce is for them entirely or almost entirely external economies.

If there are neither copyrights nor patents, the inventors and authors are in the position of an entrepreneur. They have a temporary advantage as against other people. As they start sooner in utilizing their invention or their manuscript themselves or in making it available for use to other people (manufacturers or publishers), they have the chance to earn profits in the time interval until everybody can likewise utilize it. As soon as the invention or the content of the book are publicly known, they become "free goods" and the inventor or author has only his glory.

The problem involved has nothing to do with the activities of the creative genius. These pioneers and originators of things unheard of do not produce and work in the sense in which these terms are employed in dealing with the affairs of other people. They do not let themselves be influenced by the response their work meets on the part of their contemporaries. They do not wait for encouragement.[13]

It is different with the broad class of professional intellectuals whose services society cannot do without. We may disregard the problem of second-rate authors of poems, fiction, and plays and second-rate composers and need not inquire whether it would be a serious disadvantage for mankind to lack the products of their efforts. But it is obvious that handing down knowledge to the rising generation and [p. 662] familiarizing the acting individuals with the amount of knowledge they need for the realization of their plans require textbooks, manuals, handbooks, and other nonfiction works. It is unlikely that people would undertake the laborious task of writing such publications if everyone were free to reproduce them. This is still more manifest in the field of technological invention and discovery. The extensive experimentation necessary for such achievements is often very expensive. It is very probable that technological progress would be seriously retarded if, for the inventor and for those who defray the expenses incurred by his experimentation, the results obtained were nothing but external economies.

Patents and copyrights are results of the legal evolution of the last centuries. Their place in the traditional body of property rights is still controversial. People look askance at them and deem them irregular. They are considered privileges, a vestige of the rudimentary period of their evolution when legal protection was accorded to authors and investors only by virtue of an exceptional privilege granted by the authorities. They are suspect, as they are lucrative only if they make it possible to sell at monopoly prices. [14]. Moreover, the fairness of patent laws is contested on the ground that they reward only those who put the finishing touch leading to practical utilization of achievements of many predecessors. these precursors go empty-handed although their main contribution to the final result was often much more weighty than that of the patentee.

It is beyond the scope of catallactics to enter into an examination of the arguments brought forward for and against the institution of copyrights and patents. It has merely to stress the point that this is a problem of delimitation of property rights and that with the abolition of patents and copyrights authors and inventors would for the most part be producers of external economies.

and here:

The Creative Genius

Far above the millions that come and pass away tower the pioneers, the men whose deeds and ideas cut out new paths for mankind. For the pioneering genius [12] to create is the essence of life. To live means for him to create.

The activities of these prodigious men cannot be fully subsumed under the praxeological concept of labor. They are not labor because they are for the genius not means, but ends in themselves. He lives in creating and inventing. For him there is not leisure, only intermissions of temporary sterility and frustration. His incentive is not the desire to bring about a result, but the act of producing it. The accomplishment gratifies him neither mediately nor immediately. It does not gratify him mediately because his fellow men at best are unconcerned about it, more often even greet it with taunts, sneers, and persecution. Many a genius could have used his gifts to render his life agreeable and joyful; he did not even consider such a possibility and chose the thorny path without hesitation. The genius wants to accomplish what he considers his mission, even if he knows that he moves toward his own disaster.

Neither does the genius derive immediate gratification from his creative activities. Creating is for him agony and torment, a ceaseless excruciating struggle against internal and external obstacles; it consumes and crushes him. The Austrian poet Grillparzer has depicted this in a touching poem "Farewell to Gastein." [13] We may assume that in writing it he thought not only of his own sorrows and tribulations but also of the greater sufferings of a much greater man, of Beethoven, whose fate resembled his own and whom he understood, through devoted affection and sympathetic appreciation, better than any other of his contemporaries. Nietzsche compared himself to the flame that insatiably consumes and destroys itself.[14] Such agonies are phenomena which have nothing in common with the connotations generally attached to the notions of work and labor, production and success, breadwinning and enjoyment of life.

The achievements of the creative innovator, his thoughts and theories, his poems, paintings, and compositions, cannot be classified praxeologically as products of labor. They are not the outcome of [p. 140] the employment of labor which could have been devoted to the production of other amenities for the "production" of a masterpiece of philosophy, art, or literature. Thinkers, poets, and artists are sometimes unfit to accomplish any other work. At any rate, the time and toil which they devote to creative activities are not withheld from employment for other purposes. Conditions may sometimes doom to sterility a man who would have had the power to bring forth things unheard of; they may leave him no alternative other than to die from starvation or to use all his forces in the struggle for mere physical survival. But if the genius succeeds in achieving his goals, nobody but himself pays the "costs" incurred. Goethe was perhaps in some respects hampered by his functions at the court of Weimar. But certainly he would not have accomplished more in his official duties as minister of state, theater manager, and administrator of mines if he had not written his plays, poems, and novels.

and here:

The special conditions and circumstances required for the emergence of monopoly prices and their catallactic features are: ... 11. The monopolized good by whose partial withholding from the market the monopoly prices are made to prevail can be either a good of the lowest order or a good of a higher order, a factor of production. It may consist in the control of the technological knowledge required for production, the "recipe." Such recipes are as a rule free goods as their ability to produce definite effects is unlimited. They can become economic goods only if they are monopolized and their use is restricted. Any price paid for the services rendered by a recipe is always a monopoly price. It is immaterial whether the restriction of a recipe's use is made possible by institutional conditions--such as patents and copyright laws--or by the fact that a formula is kept secret and other people fail to guess it.

The complementary factor of production the monopolization of which can result in the establishment of monopoly prices may also consist in a man's opportunity to make his cooperation in the production of a good known to consumers who attribute to this cooperation a special significance. This opportunity may be given either by the nature of the commodities or services in question or by institutional provisions such as protection of trademarks. The reasons why the consumers value the contribution of a man or a firm so highly are manifold. They may be: special confidence placed on the individual or firm concerned on account of previous experience[15]; merely baseless prejudice or error; snobbishness; magic or metaphysical prepossessions whose groundlessness is ridiculed by more reasonable people. A drug marked by a trademark may not differ in its chemical structure and its physiological efficacy from other compounds not marked with the same label. However, if the buyers attach a special significance to this label and are ready to pay higher prices for the [p. 365] product marked with it, the seller can, provided the configuration of demand is propitious, reap monopoly prices.

The monopoly which enables the monopolist to restrict the amount offered without counteraction on the part of other people can consist in the greater productivity of a factor which he has at his disposal as against the lower productivity of the corresponding factor at the disposal of his potential competitors. If the margin between the higher productivity of his supply of the monopolized factor and that of his potential competitors is broad enough for the emergence of a monopoly price, a situation results which we may call margin monopoly[16].

... In the long run such a national cartel cannot preserve its monopolistic position if entrance into its branch of production is free to newcomers. The monopolized factor the services of which the cartel restricts (as far as the domestic market is concerned) for the sake of monopoly prices is a geographical condition which can easily be duplicated by every new investor who establishes a new plant within the borders of Atlantis. Under modern industrial conditions, the characteristic feature of which is steady technological progress, the latest plant will as a rule be more efficient than the older plants and produce at lower average costs. The incentive to prospective newcomers is therefore twofold. It consists not only in the monopoly gain of the cartel members, but also in the possibility of outstripping them by lower costs of production.

Here again institutions come to the aid of the old firms that form the cartel. The patents give them a legal monopoly which nobody may infringe. Of course, only some of their production processes may be protected by patents. But a competitor who is prevented from resorting to these processes and to the production of the articles concerned may be handicapped in such a serious way that he cannot consider entrance into the field of the cartelized industry.

The owner of a patent enjoys a legal monopoly which, other conditions being propitious, can be used for the attainment of monopoly prices. Beyond the field covered by the patent itself a patent may render auxiliary services in the establishment and preservation of margin monopoly where the primary institutional conditions for the emergence of such a monopoly prevail.

and here:

Another popular fallacy refers to the alleged suppression of useful patents. A patent is a legal monopoly granted for a limited number of years to the inventor of a new contrivance. At this point we are not concerned with the question whether or not it is a good policy to grant such exclusive privileges to inventors.[14] We have to deal only with the assertion that "big business" misuses the patent system to withhold from the public benefits it could derive from technological improvement.

In granting a patent to an inventor the authorities do not investigate the invention's economic significance. They are concerned merely with the priority of the idea and limit their examination to technological problems. They deal with the same impartial scrupulousness with an invention which revolutionizes a whole industry and with some trifling gadget, the uselessness of which is obvious. Thus patent protection is provided to a vast number of quite worthless inventions. Their authors are ready to overrate the importance of their contribution to the progress of technological knowledge and build exaggerated hopes upon the material gain it could bring them. Disappointed, they grumble about the absurdity of an economic system that deprives the people of the benefit of technological progress.

and here:

The convincing power of the productivity argument is in fact so irresistible that the advocates of socialism were forced to abandon their old tactics and to resort to new methods. They are eager to divert attention from the productivity issue by throwing into relief the monopoly problem. All contemporary socialist manifestoes expatiate on monopoly power. Statesmen and professors try to outdo one another in depicting the evils of monopoly. Our age is called the age of monopoly capitalism. The foremost argument advanced today in favor of socialism is the reference to monopoly.

Now, it is true that the emergence of monopoly prices (not of monopoly as such without monopoly prices) creates a discrepancy between the interests of the monopolist and those of the consumers. The monopolist does not employ the monopolized good according to the wishes of the consumers. As far as there are monopoly prices, the interests of the monopolists take precedence over those of the public and the democracy of the market is restricted. with regard to monopoly prices there is not harmony, but conflict of interests.

It is possible to contest these statements with regard to the monopoly prices received in the sale of articles under patents and copyrights. One may argue that in the absence of patent and copyright legislation these books, compositions, and technological innovations would never have come into existence. The public pays monopoly prices for things it would not have enjoyed at all under competitive prices. However, we may fairly disregard this issue. It has little to do with the great monopoly controversy of our day. When people deal with the evils of monopoly, they imply that there prevails within the unhampered [p. 681] market economy a general and inevitable tendency toward the substitution of monopoly prices for competitive prices. This is, they say, a characteristic mark of "mature" or "late" capitalism. Whatever conditions may have been in the earlier stages of capitalist evolution and whatever one may think about the validity of the classical economists' statements concerning the harmony of the rightly understood interests, today there is no longer any question of such a harmony.

Note from a reader (see also my post Copyrights and Dancing):

Dear Mr. Kinsella,

I have yet to read your book or the Boldrin and Levine book, but just reading your blog posts [e.g. There are No Good Arguments for Intellectual Property; What's Wrong with Theft?] and the discussions they generate has convinced me of your position. It seems to me that the only question worth considering is Are ideas property? If an IP proponent could give a good answer to this question, we could have a good debate. But the replies to your argument seem desperate and incoherent. I'm an amateur choreographer so I know that IP is not necessary for creation. Dancers take movement where ever we can find it. The first person to get a copyright on walking would own the dance community and the world, in fact. The first routine I put together used movement from several other performers. If IP were to apply to dance, all dance communities would die the next day. The dance community is experiencing the wrath of IP regarding music, however. We have had problems with the music that we use. Promoters who videotape our performances are reluctant to sell the DVDs because the artists might sue the promoters if their music is used. YouTube is censoring videos in which it can recognize the music in the background. I find this ridiculous. If I have already paid my $0.99 for your song and created a visual expression of the music, from whence do you get the right to now "own" my expression of your song? I think that my dance experience instilled in me a skepticism about IP, but still I find your intellectual arguments indisputable.

Yours,

[C.E.]

[cross-posted on Mises Blog]

There are some decent arguments out there that argue in favor of a state, welfare rights, war, democracy, drug laws, and so on. They are all flawed, since libertarianism is right, but there are coherent, honest arguments that we libertarians have to grapple with.

But it is striking that there are no decent arguments for IP--as Manuel Lora remarked to me, "You know, I haven't seen a good pro IP article ever." This is true. One sees the same incoherent or insincere claims made over and over, such as:

1. It's in the constitution (argument from authority; legal positivism)
2. Intellectual property is called property! (argument by definition?)
3. No movies would be made and kids would die without medicine (artworks and medicine have been produced for ages without IP law; and where's the evidence?)
4. If you "create" something you own it (despite all the exceptions, and despite the fact that creation is neither necessary nor sufficient for ownership; despite the fact that you either limit these rights in scope or time arbitrarily, or you extent them to infinity, choking off rights in real things and forcing life and commerce to a screeching halt)
5. It generates net wealth--more value than its cost (no evidence, ever, for this contention--just assumptions; not to mention the problem of utilitarian summing of values)
6. IP infringement is "theft" (even though the owner still has his property and ideas, and even though IP infringement is just learning and emulating)
7. People "could" create variants of IP via private contracts... therefore artifical patent granting bureaucracies legislated by a criminal state are ... justified?)

There are other arguments, I suppose, but they are so incoherent as to defy description. They often involve crankish initial caps, like Property and Rights, the Internet equivalent of crayons.

I have truly never seen a coherent, good argument for IP. The advocates are either utilitarian, with all the problems that accompany that (not to mention they never have any evidence for their claims); or the advocate a more "principled", rights-based type of IP that, if taken seriously, would completely undermine all real property rights and make life on earth impossible, so they retreat from this and impose arbitrary, senseless limits on it. What a kluge.

In a recent discussion, What's Wrong With Theft?, one of the IP advocates, when pushed into a corner, ended up arguing that rights to own property include the right to control all "access to" and "interactions with" one's property--and that "interactions" include observing or knowing about or learning facts about the things owned by someone, and that when you use this knowledge you are "interacting with" the property, and thus "stealing" it (even though the owner still has it). So here we have it: IP means "interaction rights." Wow. This is how kooky all IP arguments ultimately are.

As I noted in Copypats, many non-specialists and proponents of IP erroneously believe that copying is an element of patent infringement--they conceive of the typical patent infringer as some bad guy who knocked off, or "stole," the patentee-inventor's idea. They are usually unaware that proving copying is neither necessary nor sufficient to prove patent infringement. It's not necessary because even an independent inventor can be guilty of patent infringement. It's not sufficient because the patent may be invalid, or the copier may make changes to "design around" the patented invention (which is encouraged by patent policy--that's one reason the patent is published).

But it is common to charge the patent infringer, especially the idea copier, with theft--he stole the idea, it is said. But if we think about standard cases of theft that we all agree are criticizeable, what is it about them that we object to? Is it that the thief now has a bicycle? Or is it that the owner now doesn't have his bicycle?

Of course it is the latter. If you have a bike, or car, or log cabin, or corn crop, and I could gaze at it from afar, blink my eyes, and conjur up a similar bike, car, cabin, or crop for myself, I do not steal your things. But if I take your bike or car from you, or oust you from home and farm, you no longer have the things you formerly possessed and owned. That is the damage done to you by theft. This corresponds nicely to the very nature and function of property rights: the need for them arises when people need to use scarce resources as means to act in the world, and appropriate unowned ones. The scarce nature of these things is such that use by one person excludes that by another; the goods are rivalrous. (More on this in How We Come to Own Ourselves; Defending Argumentation Ethics; Owning Thoughts and Labor.)

But copying or emulating someone else's idea is not "taking" it from them; it is not theft. The originator of a given pattern still has his idea, and is free to use it in guiding his action and using or transforming his own property. This is why all arguments in favor of IP (and reputation rights) ultimately end up falling prey to the notion that there are property rights in the value of property, rather than in its physical integrity. But this view is fallacious, as shown by Hoppe and others.

Lincoln the Patentee.

I'm reading a great book, Einstein's Mistakes (google version), by Hans Ohanian. Extremely intelligent physicist and fun writer--very opinionated and spins great narratives of Galileo and Newton as a prelude to discussing Einstein. The book is about all the mistakes Einstein made in his discoveries and papers, how he made his great insights sometimes despite the mistakes, and even sometimes because of them.

Ohanian acknowledges Isaac Newton as "the greatest physicist of all times" and "the greatest genius the world has ever known", albeit a "mad scientist" and "the most awesome and the most aful physicist of all times." I was struck by this fascinating account of Newton's views on credit for scientific discoveries (pp. 62-63):

Newton held the odd notion that whenever he discovered some new result in physics or mathematics, it became his personal property, which he was entitled to keep as a secret for as long as he chose, without any need to publish it to establish his priority. If another scientists later made the same discovery independently and published it first, Newton regarded this as trespass and as theft, and he would indignantly refuse to allow such a scientist any share of the credit. ... In Newton's days, the criterion for credit for a discovery was not yet rigidly established. Claims for unpublished discoveries were sometimes accepted, especially if the scientist had the vociferous support of influential friends and patrons--sometimes the early bird got the worm, and sometimes the squeaky wheel got the grease.

Newton's secretiveness about his discoveries led him into many silly but savage disputes with other scientists about what they knew and when they knew it. Driven by his intense paranoia about his scientific accomplishments, he accused Robert Hooke, Gottfried Leibniz, and other scientists and mathematicians of stealing ideas from him. In his treatment of these scientists he was vicious and vindictive. Hooke was a talented scientist, best known for his investigations with microscopes, but he was a dwarfish man, with a stooped back. When Hooke asked for an acknowledgment that he had anticipated some of Newton's investigations of the colors in sunlight, Newton wrote a sarcastic refusal, in which he made an oblique reference to Hooke's diminutive size: "If I have seen farther, it is by standing on the shoulders of Giants."

The German mathematician and philosopher Leibniz discovered the calculus independently, and, in contrast to Newton, he published his discoveries--by the modern criterion, Leibniz would have had full credit for the calculus and Newton none. But when Leibniz asked a committee of the Royal Society to prepare an impartial report judging his share in the invention of the calculus, Newton not only packed the committee with his cronies, but he also wrote the report himself, and then wrote a favorable anonymous review of the report. In his private journal he gleefully recorded that he had bested Leibniz and "broke his heart."

As can be seen from these remarks, Ohanian is delightfully opinionated. For other examples, see his snarky coments on Aristotle (pp. 39-40), where he says that Aristotle was popular because middle ages scholars confused quantity with quality--he ridicules Aristotle's misconceptions about the animal kingdom, and his assertions about the speed of falling bodies being proportional to their weight, without ever simply dropping two different weight objects from his hands to test out this theory. On p. xii, he acerbically criticizes botched translations of Einstein's German writings; on p. xi, he refers to the mistakes "misguided souls imagine they perceive in [Einstein's] theories of special and general relativity"; on p. 9 and elsewhere he skewers Creationists as adherents of "delusional pseudoscientific theories"; and on p. 59 he refers offhandedly to "the usual eccentricities of Englishmen."

And I love this comment about Galileo: according to Ohanian, "Galileo had a talent for making enemies--as Koestler said, he provoked 'the cold, unrelenting hostility which genius plus arrogance minus humility creates among mediocrities.'" (p. 40)

I think we can all now agree that copyright and patent are evil and should be abolished (hey, if they can say we are all Keynsians now...).

But what about other forms of IP, such as trademark? One problem is that IP is not really property at all, and is just an umbrella term linking distinct, mostly artificial, positive rights created by the legislature out of thin air--"legally recognized rights arising from some type of intellectual creativity, or that are otherwise related to ideas." (Against Intellectual Property, p. 9.)

Thus patent gives a monopoly to a way of using, or configuration of, practical, useful devices (inventions); while copyright gives a monopoly to certain uses of original creative patterns of information (works of authorship like novels or paintings). While trademark protects a set of rights clustered around one's reputation (but then, so do defamation laws); and trade secret is more like a type of contractual right to keep people from revealing secret information.

Bad Connections

From what I've seen, it is clear to most activist-opponents of IP that copyright and patent are terrible. But it is not so clear what is wrong with other types of IP, such as trade secret and trademark. What about these, and other rights, such as various other trademark-related rights (rights against "trademark dilution," certain forms of cybersquatting, and various "unfair competition" claims); mask work protection available for semiconductor integrated circuit (IC) designs, boat hull designs, and (proposed) rights in databases, or collections of information? (See Against Intellectual Property, p. 13, summarizing various types of IP.)

The "intellectual" part of IP improperly lumps together conceptually distinct types of laws; and "propery" improperly begs the question. So these must be treated in turn. Mask work, boat hull, and database rights are very similar to copyright at least in what is problematic about them; so they, too, like patent and copyright, are obviously unjust.

As for trade secret--I deal with this in a short section (pp. 56-57) of Against Intellectual Property, as the bulk of the article deals with copyright and patent, and trade secret law is not nearly as problematic.

Trademark

So we come to trademark. I deal with this on pp. 58-59 of Against Intellectual Property, and also in some detail in Reply to Van Dun: Non-Aggression and Title Transfer (esp. pp. 59-63). In my view, the new-fangled extensions of trademark law--rights against "trademark dilution" and cybersquatting, etc.--are obviously invalid. Further, federal trademark law is problematic since it is not authorized in the Constitution (copyright and patent are, but not trademark; trademark relies on the Interstate Commerce Clause, and thus the federal trademark law only covers trademark connected to interstate commerce, and does not preempt state law, so that state trademark law still governs many intra-state situations).

But even if federal trademark law were abolished, as well as modern extensions such as rights against trademark dilution, even common law trademark is problematic, for three primary reasons. First, it is enforced by the state, which gets everything wrong. Second (see First), the test of "consumer confusion" is usually applied ridiculously, treating consumers like indiscriminating idiots. Third, and worst of all, the right at issue is the right of the defrauded consumer, not the competitor. Trademark law ought to be reformed by abolishing the right of trademark "owners" to sue "infringers" (except perhaps as proxy for customers, when consent can be presumed or proved), and treating this as a case of the customer's right to sue a vendor who defrauds him as to the nature of the good purchased. Some might argue that this is only a minor change, but it is not: such a change would make it clear that "knockoffs" are usually not a violation of anyone's rights: the buyer of a $10 "Rolex" is almost never defrauded--he knows what he's getting. Yet by giving an enforceable trademark right to the user of a mark, he can sue knockoff companies even though their customers are not defrauded and in fact are perfectly happy to buy the knockoff products.

By the way, examples of trademark abuse are legion. It's not only copyright and patent that give rise to outrageous examples of injustice. See, e.g., Chip Wood, A Bully-Boy Beer Brewer; Justin Levine, 9th Circuit Appeals Court Says Its Ok To Criticize Trademarks After All, Against Monopoly (09/26/2007); Kinsella, Trademarks and Free Speech, Mises Blog (Aug. 8, 2007); Kinsella, Beemer must be next... (BMW, Trademarks, and the letter "M"), Mises Blog (Mar. 20, 2007); Kinsella, Hypocritical Apple (Trademark), Mises Blog (Jan. 11, 2007); ECJ: "Parmesian" Infringes PDO for "Parmigiano Reggiano", I/P Updates (Feb. 27, 2008); Engadget Mobile Threatened For Using T-Mobile's Trademarked Magenta, Techdirt (Mar. 31, 2008).

Now IP proponents often assume trademark law is unproblematic, and then try to lump types of IP together, so that they stand or fall together. For example it could be argued that if you are for reputation, then you must be for trademark; and if you are for trademark, you must be for "intellectual property"; and thus, you cannot be opposed to IP in principle, so you cannot oppose copyright and patent. (See, e.g., the comments here, making this argument.)

Now one fallacy of this argument is that it relies on the positive law conceptual grouping of different areas of artificial, legislated law to make its point. But there is no reason one has to favor the validity of copyright or patent law, even if one supported trademark law, say. Each has different defects and a different nature.

The other fallacy is the view at work here that there is no such thing as reputation, or even identity, absent trademark law. But this is incorrect. Of course people and firms can have reputations even if trademark law is nonexistent. All that is required is that people be able to identify other people and firms, and communicate. Pro-trademark arguments often implicitly assume that this is not possible, absent state-enforced trademark law, which is ridiculous. For example, how can there be fraud (as in my theory), if the vendor is free to call himself whatever he wants? What if Joe Schmoe sets up a knockoff McDonald's restaurant? Well, it is McDonald's--that's what it calls itself, and the "real" McDonald's can't stop it without trademark rights--so why is it fraud? Well, because the consumer is (per assumption) deceived as to the nature of the goods he is buying. As I argued in Reply to Van Dun (pp. 62-63),

"this response would be easy to overcome. It need only be possible for the customer to adequately identify what the condition is. Language is not infinitely malleable, and communication is (undeniably) possible. If pressed, the customer could specify that the purchase is conditioned on the current store he is in being owned by the same [McDonald's] company first started at such and such date and address, and so on. There is no reason it would be impossible to identify a given vendor without traditional trademark law, just as it is not impossible to identify fellow humans, despite the fact that we do not usually have trademarks on our names (in fact often have identical names, e.g. John Smith).

The other thing to realize is that consumers are not stupid. They can spot a knockoff easily. And the trademark frauds are usually going to be marginal low-life types, who could never compete with a legitimate business anyway--the kind of company that makes knockoff Rolexes, which doesn't fool its customers.

Consider. You have a successful burger joint, let's call it "Tommy's." Now, suppose they have no trademark, and other Tommy's pop up. So if you want the original Tommy's, where do you go? You go to the original Tommy's. Which just calls itself The Original Tommy's. (A similar phenomenon is in Twitter, where some well-known people and celebrities' names are taken, like dvorak--so John Dvorak just goes by "THErealDVORAK". End of problem. No anti-Twittersquatting law needed.)

If some other Tommy's tries to deceive customers into thinking it's owned by the same guy that owns the original Tommy's, then they are eventually going to get sued. Or have only marginal customers as people figure out this new place is run by seedy liars.

The truth is that any legitimate businessman wants to use a unique name. Just like people manage to distinguish their identities, even when they have the same names.

In Patent defendants aren't copycats. So who's the real inventor here?, a great post by IP Reporter Joe Mullin, Mullin describes a new study that shows that most defendants in patent cases are never even accused of copying the plaintiff's patent.

I replied:

Joe,

Great post. A few comments.

First, you're right that the public thinks it's about copying; and they are wrong. Likewise, most proponents of IP (outside the self-serving patent bar) seem to have no idea about the details of patent law, yet support it anyway.

Second, the reason copying is not alleged is that, as you note, it's irrelevant. And it does not demonstrate willfulness, nor does willfulness require copying. Willfulness means you made a product that infringed on a patent, even after you knew about the patent. But this could happen even if you independently invented your product yourself, then find out about the patent (say, you get a C&D letter), adn you keep selling your product anyway--you're willfully infringing from that point on (so that means damages can be trebled for sales made while willfully infringing). So, copying is not necessary to show willful infringement.

It's also not sufficient. You might have heard about pinch-gestures on a touchscreen and you put that feature in your product, thus infringing apple's patents, albeit unwillfully, since you didn't know about the patents.

So, I don't think you can conclude that most patent suits don't involve copying just b/c copying is not alleged or proven at trial. There might be copying in 25% of the cases, but it's only alleged 2% o the time, say. This is b/c when you sue someone for infringement you have to show (a) you have a patent; (b) they are selling a product that contains all of the describd elements in one of the patent's claims. Copying is irrelevant.

(Still, I agree that copying is probably present in only a small minority of all patent infringement cases.)

Third: your article makes it clear that it's unjust that there is no independent inventor exception. Your piece does not mention, I think, the fact that the worst injustice of all is that not only is there not an exception for someone (A) who later independently invents the same thing that B invented first and patented first--there is not an exception even if A FIRST invented it. (It's true that if A invents first and B invents second, and if B files for a patent, then A later files for one, then A wins, in an interference battle or litigation; but if A never files but sells his product using a secret process, say, then after a year he is barred from filing a patent; but B is not.) So if A has a chemical plant using a trade secreted nozzle or mixing method to make some chemical for 50 years, and finally B independently invents the same technique and patents it, he can shut down A even though A invented it first. A general "prior use" defense is what is needed in these cases.

But the prior user defense and independent inventor defense are of limited value for a few reasons. 1. It's hard to prove, esp. for later invention, that you invented it independently, without being influenced by B's patent (which is public, and presumed to be "constructively known" by all); which is why some companies employ the "clean room" approach, but this is expensive and not usually feasible.

2. Once you know about B's patent, you are now unable to invent it on your own, even if you "would have" in the absence of B's patent. I.e., the independent inventor exception largely evaporates soon after a successful product (such as the iPhone's multi-touch) because by then everyone is "contaminated" by it (no cleanroom possible any more).

3. If B invents and patents something, and if A also invents it (earlier or later than B), then this by itself ought to show that the invention was probably obvious (an idea whose time had come) and B's patent should be invalid in general, not just a defense for A.

I just came across an interesting thing I had not known about the effect of state meddling on publishing. See Wikipedia here and here, noting:

Thor Power Tool Company v. Commissioner, 439 U.S. 522 (1979) was a United States Supreme Court ruling which changed the way companies are allowed to depreciate their unsold inventory. Thor's inventory was overestimated, and was written down to scrap, but it did not immediately scrap the items or sell them at reduced prices. Thor treated the write-down of excess inventory as an adjustment to closing inventory increasing the costs of goods sold and reducing tax due. Reducing tax liability may not have been the drive behind Thor management's incentive to reduce inventory, but a welcome by-product; new management may have wanted to reduce the previous year's profits so as to seemingly increase their performance in the following year.

An unforeseen side effect of this decision was that it became less profitable for publishers to keep slowly but regularly selling books in print (their backlist). Some argue that this has made it harder for midlist authors to make a living because books tend to be remaindered or pulped and go out of print more quickly.

In other words, a de facto change in the tax laws concerning inventories made it profitable to pulp unsold books earlier and this has had an adverse effect on authors who have slow but steady sales. As Levine noted to me, this ties into the whole issue of digital technology. On the one hand, digital technology makes copyright de facto obsolete, and it can make it harder for creators to recoup their investment because the market may be flooded with cheap copies quickly. This is what the pro-copyright forces argue (so therefore we need draconian copyright laws to overcome all this). The basic facts are true, but there are many facts that go the other direction. This is one of them--by selling electronic or print-on-demand copies directly to buyers authors don't face "early liquidation" by publishers.