As I noted in The Schizo Feds: Patent Monopolies and the FTC, the state grants patent monopolies and then uses antitrust law to attack the beneficiaries of those monopolies. As one commentator noted in a related thread, "It is amusing, watching one agency of government applying a system whose entire purpose is the creation of monopolies, and then another agency tasked with preventing monopolies turning up and trying to do something about it." A case in point is the flack about the Cipro drug where the state whines about the prices charged for Cipro during the anthrax scare a few years back and threatened to choke back on the patent monopoly it had granted for it. The state is schizo in many other ways too, of course--it foisted MTBE (a gasoline additive) on the country and then, years later, after fears of groundwater contamination, mandated that MTBE be phased out (I'm sure that the lobbying of ADM for ethanol to be used instead had nothing to do with that).

I previously noted the Rambus v. FTC case. Rambus was part of a standards-setting organization "working on standardization of DRAM chips." As a court later summarized this,

After lengthy proceedings, the Federal Trade Commission determined that Rambus, while participating in the standard-setting process, deceptively failed to disclose to the [standards-setting organization] SSO the patent interests it held in four technologies that were standardized. Those interests ranged from issued patents, to pending patent applications, to plans to amend those patent applications to add new claims.... Finding this conduct monopolistic and in violation of § 2 of the Sherman Act, ... the Commission went on to hold that Rambus had engaged in an unfair method of competition and unfair or deceptive acts or practices prohibited by § 5(a) of the Federal Trade Commission Act.

The FTC then sought to compel Rambus to license its patents at "reasonable royalty rates." Rambus appealed to the U.S. Court of Appeals for the DC Circuit and, in April, won its appeal, clearing the way for Rambus to try to extract maximum royalties from its former partners.

The FTC has filed a petition for rehearing. Skip Oliva has filed an amicus brief opposing the FTC's petition. Now I agree with Oliva that it's troubling when the state formulates new theories of antitrust liability. But from the libertarian view, the patent system and the FTC are all just internal parts of the state. So under the result favored by the FTC, what we really have is the state granting a slightly more limited patent monopoly to Rambus (that is, a patent for which only state-approved "reasonable royalty" rates may be charged) than is normally granted. I don't see what all the hubbub is about. What the state giveth, the state taketh away.

My view is that anything that chokes back the state-granted patent monopoly is, ceteris paribus, to be favored. And I agree with the general idea that it is detestable for a company to secretly seek patents on the technology of the SSO the company is part of, and that these patents should not be enforceable. The default contractual rule should be that if you work with others to adopt a technological standard, you implicitly agree not to use state-granted patent monopolies on that technology to block or extract royalties from use of that standard. I would say that derogation from this default rule should be explicitly spelled out. Imagine what response you would get from other SSO members if you try to add a clause saying that you may secretly apply for patents and enforce them against other members or companies using the standard.

[cross-posted at Mises blog]

There was a fascinating discussion on TWIT 144 with Brewster Kahle of the Internet Archive and the Wayback Machine. Kahle is great--he put up a heroic fight against the FBI after it served the Internet Archive in 2007 with a "national security letter" seeking the identity and behavior of an Internet Archive user. The letter circumvented the FISA court and put Kahle and his attorneys under a gag order under penalty of incarceration. Kahle's discussion of his Kafka-esque battle--except that he won--is inspiring and fascinating. Apparently the FBI served 200,000 such letters in four years. The Internet Archive and Kahle was limited in how it could respond to the suit, so it ended up just suing the goverment (Internet Archive v. Mukasey) with help of the heroic ACLU and the Electronic Frontier Foundation. In response to a victim who was not willing to just roll over, the FBI instantly wanted to settle, but the Internet Archive would not agree to this until the settlement permitted all this to be public, so that other victims of such "national security letters" might have an idea of how to fight back.

In any event, I was aware of the Internet Archive's Wayback Machine but hadn't realized that Archive.org is trying to be a sort of open library storing books, films, etc., nor that Microsoft had teamed up with Archive.org (see this Dvorak column). Microsoft helped start the project but has backed out; but at least it removed contractual restrictions on the books it had scanned. You can find hundreds of thousands of free books now on the Internet Archive; take, for example, this gorgeous scan of a classic 18th century nursery book Goody Two Shoes.

(Cross-posted at Mises.org)

While IP may not stimulate true innovation and creativity, Hayek suggests that copyright might stimulate something more pernicious: the intellectual class. In The Intellectuals and Socialism, he writes:

In the sense in which we are using the term, the intellectuals are in fact a fairly new phenomenon of history. Though nobody will regret that education has ceased to be a privilege of the propertied classes, the fact that the propertied classes are no longer the best educated and the fact that the large number of people who owe their position solely to the their general education do not possess that experience of the working of the economic system which the administration of property gives, are important for understanding the role of the intellectual. Professor Schumpeter, who has devoted an illuminating chapter of his Capitalism, Socialism, and Democracy to some aspects of our problem, has not unfairly stressed that it is the absence of direct responsibility for practical affairs and the consequent absence of first hand knowledge of them which distinguishes the typical intellectual from other people who also wield the power of the spoken and written word. It would lead too far, however, to examine here further the development of this class and the curious claim which has recently been advanced by one of its theorists that it was the only one whose views were not decidedly influenced by its own economic interests. One of the important points that would have to be examined in such a discussion would be how far the growth of this class has been artificially stimulated by the law of copyright.

Yet another strike against copyright!

Excellent post by Mike Masnick on Techdirt:

It's an ongoing theme around here, but ideas are everywhere. The real trick to making something great often has extremely little to do with the idea, and much more to do with the execution. That's where the real innovation occurs -- in taking an idea and trying to figure out how to make it useful. It's that process that's important, much more than the original idea. As nearly anyone who has brought a product from conception to market will tell you, what eventually succeeds in the market is almost always radically different than the original "idea." That's part of the reason why patents are so often harmful to innovation. The patent is for that core idea, which is rarely the key in making something successful. But by limiting who can innovate off of the idea (or just by making it much more expensive) you're limiting that process of innovation. ... [A]s the founder of [failed company] Cambrian House admitted in explaining the company's changing plans, it wasn't difficult to get people to come up with all sorts of interesting and exciting ideas -- but where the company failed was in getting anyone to actually execute on any of those ideas. Ideas are a starting point -- but it's high time that we stopped worshipping the idea, and started recognizing how much more important execution is in driving innovation.

Jeff Tucker makes a similar point in his article Is Intellectual Property the Key to Success?:

A clue to the copyright fallacy should be obvious from wandering through a typical bookstore chain. You will see racks and racks of classic books, presented with beautiful covers, fancy bindings, and in a variety of sizes and shapes. The texts therein are "public domain," which isn't a legal category as such: it only means the absence of copyright protection. ... But they sell. They sell well. ... The much-predicted disaster of an anti-IP world is nowhere in evidence: there are still profits, gains from trade, and credit is given where credit is due. Why is this? Quite simply, the bookstore has gone to the trouble of bringing the book to market. It paid the producer for the book and made an entrepreneurial decision to take a risk that people will buy it. Sure, anyone could have done it, but the fact is that not everyone has....

As Tucker observed to me--this whole issue speaks directly to the Kirznerian vs. Hülsmannian view of entrepreneurship, and also the Hayekian vs. Salernoian view of calculation.

Or, as my "little buddy"* Gil Guillory wrote me,

This is a key point in VC partner, multiple entrepreneur, and author Rob Adam's A Good Hard Kick in the Ass: Basic Training for Entrepreneurs. The very first chapter is "good ideas are a dime a dozen", with lots of good anecdotes and rules of thumb. One of them: at his VC company, if someone asks them to sign an NDA, they see it as a red flag. What's most important, he says, is having a good execution team. A good execution team is what they fund, even if the idea is not that hot. They'll find a winning idea with a good team. And this is also what Napoleon Hill wrote. And Carnegie. And Martha Stewart. And Jim Collins."

*My 4 year old referred to him and Tom Woods that way after a Boston Legalesque sleepover.

My Austrian Scholars Conference 2008 Rothbard Memorial Lecture, "The Intellectual Property Quagmire, or, The Perils of Libertarian Creationism" (originally titled "Rethinking IP Completely"), is now online. Here's the audio, the video, and the accompanying Powerpoint presentation (PPT, 32 MB; PDF version, 51 MB). Update: the Google Video version is now available; embedded version below.

In Nobel Prize Winning Economist Explains How IP Rights Are Part Of The Globalization Problem, techdirt's Mike Masnick (who is heroically great on IP) notes the "fascinating speech by Nobel Prize-winning economist Joseph Stiglitz on Making Globalization Work. We've written about Stiglitz in the past, for his explanation of how patents often do more harm than good economically."

But not so fast. Is Stiglitz really that good on IP? As I noted in Patents and Utilitarian Thinking Redux: Stiglitz on using Prizes to Stimulate Innovation, Stiglitz has advocated replacing the patent system with a system for "awarding prizes"--presumably taxpayer funded--for innovations and inventions. In Scrooge and intellectual property rights, Stiglitz endorses a "medical prize fund" that "would give large rewards for cures or vaccines for diseases," which "prizes could be funded by governments in advanced industrial countries." Two cheers for capitalism! Or is that the other one?

Kurt Denke is my new hero. He's the former lawyer who is President of Blue Jeans Cable, a competitor of Monster Cable. When he received a cease and desist letter from Monster, who alleged some of Blue Jeans' "Tartan" cable products were too similar to Monster's, Denke sent back a devastating and heroic reply. This is one of the best letters I've ever read. It's heroic and ballsy, and strategically brilliant. Further, I think this letter can help illustrate the unavoidable practical difficulties that will necessarily plague any attempt to have an IP--that is, pattern privilege--system. It helps to highlight why such a system cannot be but unjust. These kind of expensive and intractable problems, inherent vagueness and bullying tactics, will always accompany a patter privilege system. Any layman who is in favor of patent should read this letter, and think about the consequences of the system they advocate.

(Cross-posted at Mises blog)

In a recent Mises blog post, Renaming Intellectual Property, I noted that in If Intellectual Property Is Neither Intellectual, Nor Property, What Is It?, Techdirt writer Mike Masnick (who continually has excellent comments on IP policy) discusses various proposd replacements for the misleading term "intellectual property." Contenders include "intellectual monopoly," "intellectual privilege," "imaginary property," and "None of the Above." There are problems with each of these. Masnick concludes: "In general, because of common usage, I don't think it's bad to use the phrase "intellectual property" just so that people know what you're talking about -- but we should be careful to not use it in a way that reinforces the concept that it's property just like other kinds of property."

I tend to agree. What IP law does it give legal (positive) rights to people to try to protect or stimulate innovation or creation. It gives them rights in innovations, creations, recipes, or patterns. If one keeps in mind the distinction between natural and positive rights, then it's easy to see that laws do create legal rights, and of course all rights are, in the end, types of property rights. So IP laws do create (positive, or legal) (property) rights. And they do have to do with products of the mind, or intellect. So "intellectual property" rights seems fine to me, if one realizes that there is a difference between positive right (positive law) and natural rights (natural law).

Still, some ideas came to me (and I own them, I suppose). It would be nice to take the word "property" out, and just refer to the rights conveyed. Copyright gives authors of original works certain (legal) rights to their "works" or creations. Books, songs, paintings are regarded as "original works of authorship". There is an element of "creativity" to these things. Patents give certain (legal) rights to inventors of practical inventions--methods or processes for doing things (recipes) or arrangements of matter (designs). What do inventions and "works of authorship" have in common? One is practical, aimed at some gizmo or method that produces a practical result (a machine or process). Another is aimed at "creative" things--paintings, novels, songs. J. Neil Schulman, in his neo-Randian/Galambosian [I don't know if he would accept this label] IP theory groups them all under the term "logorights," where the "logo" refers to a "pattern". I think this is a pretty good description: a recipe is a type of pattern; as is the design for a practical machine or device. Likewise, original works like paintings, music, etc., are obviously representable digitally, as patterns. Copyright and patent law clearly grant rights ... to whom? To creators--inventors and authors--of "logos"--patterns, such as machine designs, process steps, or the patterns that represent the song, painting, etc.

So, as much as I disagree with Schulman's justification for "logorights," the term is a pretty good one--except that it is so arcane. A variation on it using more standard terms might be better: pattern rights, or perhaps innovation rights. Or, to make the label a bit less "neutral," replace "rights" with "monopolies" or "privileges," since that is what is being granted by the state. So we have "pattern monopolies" or "pattern privileges," "innovation rights" or "innovation privileges."

As I noted in my Austrian Scholars Conference 2008 talk, I think I like the term "pattern privileges" best.

As reported on Patently-O, after Microsoft was ordered by a jury (where else: the Eastern District of Texas) to pay over $100M in damages for patent infringement, and after losing on appeal to in the CAFC, Microsoft is asking the Supreme Court to overturn the CAFC's requirement that "clear and convincing evidence" be presented to invalidate a patent even when a defendant presents evidence of invalidity that was not considered by the PTO. Microsoft is right. Why there should be any presumption of validity at all for any issued patent, given the PTO's bureaucratic incompetence, is not clear (or convincing).

I've noted many times that one fallacious line of reasoning in support of intellectual property is the idea that creation is an independent source of rights. In libertarian circles, I have begun to refer to this as "libertarian creationism." I critique this notion, inherent in a recent paper by libertarian philosopher Tibor Machan, in the comments here.