[IETF-IDRM] [IDRM] Fwd: Patents & Copyright

[Thomas Hardjono]

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Date:         Wed, 30 May 2001 10:54:19 -0700
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Subject:      Is It Hayek? -- Patents & Copyright, a debate
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 >>  Is It Hayek  <<   --    Patent law  /  Copyright


Symposium on patents & copyright -- A Debate, on the web at:

http://www.insightmag.com/archive/200105229.shtml


 >From the debate:

Q: Do patents and copyrights undermine private property?

   Yes: They are a burden to marketplace
   transactions and discourage business
   startups.

   By Ilana Mercer and N. Stephan Kinsella

          Property and liberty are intricately linked. In fact proper=
ty, not
   representative government or majority rule, exemplifies freedom.
   Property is a sphere in which the individual can be free of
   government; the historical role of private property as countervail=
ing to
   the power of the state cannot be overstated. Equally strong is the
   relationship between strong private-property rights and prosperity=
. If
   nothing else, the dismal economic failure of socialism has
   demonstrated what transpires when private ownership of the means
   of production is abolished.
          The insidious and persistent encroachment on property by th=
e
   modern welfare state has, however, resulted in a complete confusio=
n
   about the nature of ownership. By undermining the ethical foundati=
ons
   upon which property rests, the welfare state has made it morally
   acceptable to give people access to property they don=EDt own.
   Property grabs run the gamut from taxation, welfare programs,
   forfeitures, and environmental and antitrust legislation to the mo=
re
   subtle interference with freedom of contract inherent in
   minimum-wage laws and affirmative hiring.
          Copyright and patent grants of privilege are another form o=
f
   property infringement =F3 courtesy of the state. While they have t=
heir
   origins in a much earlier privilege given to =ECfriends of the cro=
wn,=EE in
   their modern incarnation they blend in with the welfare state=EDs
   wealth-distributing impetus. Far from being =ECnatural=EE property=
 rights
   grounded in the common law, patent and copyright are monopoly
   privileges granted solely by state legislation.
          Copyright gives authors of original works (e.g., books) the
   exclusive rights to copy the work or to prepare =ECderivative work=
s=EE
   based on the original. A patent gives an inventor the right to sto=
p
   others from making, using or selling the patented invention. In bo=
th
   cases, the holder of this right is given legal control over how ot=
hers
   use their property. As the author of a differently hued Gone with =
the
   Wind recently found out, the copyright holder can stop you from
   using your own paper and ink to publish a novel that reproduces th=
e
   copyrighted work or one based on its plot. The estate of Margaret
   Mitchell, author of Gone with the Wind, is suing Alice Randall to
   block her from publishing the parody The Wind Done Gone. Randall
   tells the famous tale from the perspective of black slaves.
          The mere act of creation =F3 composing a song, penning a no=
vel
   or inventing a mousetrap =F3 gives the creator control over the ta=
ngible
   property of others. In addition to allowing the author partially t=
o
   control the paper, ink, computer and photocopies of others, copyri=
ght
   in particular restricts not only our rights to our property, but t=
o our
   very bodies. Consider the choreographer of a dance who gets the
   right to stop another from moving his body in a certain fashion.
          First Amendment rights to freedom of speech also are
   compromised. A recent court order obtained by factions of the
   entertainment industry decreed that source code (a computer
   program) is not protected free speech, and the studios have a righ=
t to
   suppress it. What next? Do we unleash the force of the law against=
 a
   devotee who recites computer code on a street corner?
          It gets worse. You don=EDt have to be guilty of copyright v=
iolation
   to be constrained; doing something that might result in some third
   party making prohibited copies will suffice. A particularly rank
   example of prior-restraint legislation is the Audio Home Recording
   Act of 1992. Manufacturers of digital-recording devices are
   compelled by law to incorporate technology that prevents copying;
   they are penalized in anticipation of possible infractions.
   Manufacturers also are made to pony up royalties in lieu of each
   device of blank media sold. Ditto for consumers who pay through
   excise taxes.
          Patents, however, take the cake. The patent holder can prev=
ent
   others from practicing invention even if, as is quite common, they
   arrive at the process quite independently. Happen to think of a ne=
w
   way to tune your car engine to get better gas mileage? Better hope
   someone else does not have a patent on that technique; he could st=
op
   you from twiddling with your own 1967 Mustang in your own garage.

          Thinking of dashing off a quick software-filing program to
   streamline your business? Think again. =ECSoftware-driven, multiho=
st
   storage solutions for powering advanced business applications,=
=EE are
   being patented at a furious rate. Stripped of baffle gab, this mou=
thful
   means that for the privilege of filing, albeit electronically, you=
 will have
   to pay extortion money to a patent holder. It gets scarier when yo=
u
   consider that 20,000 software patents are issued annually.
          Price-inflating patent monopolies have grave consequences f=
or
   undeveloped nations, as the latest patent imbroglio unfurling in S=
outh
   Africa suggests. The government of South Africa enacted legislatio=
n
   to allow parallel importing of, and domestic production of, generi=
c
   AIDS drugs to help deal with the AIDS crisis. The multinational
   pharmaceutical kingpins moved in to enforce their patent monopolie=
s,
   plunging South Africa into a life-and-death battle.
          South African firms presumably have not stolen their equipm=
ent.
   Neither have they trespassed or broken an entry to obtain the
   molecular combinations for AZT, 3TC or ddI. These are in the publi=
c
   domain. So why should South Africans be prohibited from making
   these drugs?
          Given that it=EDs generally a bad thing, through legislatio=
n, to
   transfer control of property from owner to nonowner, what possibly
   is the justification for such laws?
          Most proponents view intellectual property (IP) as a matter=
 of
   utility. Without such laws, the argument goes, we would be deprive=
d
   of clever inventions and beautiful works of art. To utilitarians, =
the
   =ECcosts=EE of monopoly privileges, not least the violation of pro=
perty
   rights, are outweighed by their benefits.
          Utilitarians turn a blind eye to the staggering sums compan=
ies
   spend on the fees of patent attorneys who prepare, file and defend
   patent applications, mostly for defensive purposes. Litigation cos=
ts
   millions. Mergers between companies often occur for no other reaso=
n
   than to settle patent disputes or to allow the merging parties to
   compete with a rival with a large patent armory. Submarine patents
   can emerge at any time, only to sink a high-tech company. The thre=
at
   of patents increases overall business risk and can torpedo margina=
l or
   startup companies. If patents and copyright are essential to
   innovation, as the mantra goes, how is it that day dawns and the
   perfume maker who owns no odor-rights still is marketing high-end
   perfume that can be knocked off? Philosophers persist in writing t=
heir
   tomes, mathematicians toil at solving age-old riddles and physicis=
ts
   don=EDt tire from probing the universe. How does all this creativi=
ty
   continue without the reward of a monopolistic ownership in the
   ensuing ideas? And why is it fair for the law to protect practical
   gizmos but not more abstract ideas such as Einstein=EDs equation
   E=3Dmc2?
          So far, we=EDve highlighted how intellectual-property right=
s
   interfere with the freedom of others to use their own bodies or th=
eir
   justly acquired property in certain ways. But why should they not =
be
   accorded this right? Why should tangible goods be the proper objec=
ts
   of property rights instead of intangibles such as the ideas IP law=
s
   protect? Here we arrive at the nub of the issue.
          =ECHe who receives an idea from me,=EE wrote Thomas Jeffers=
on,
   himself an inventor, =ECreceives instruction himself without lesse=
ning
   mine; as he who lights his taper at mine, receives light without
   darkening me.=EE Jefferson was very definitely not articulating th=
e
   fatuous =ECinformation-wants-to-be-free=EE argument made by the le=
ft
   regarding IP. He was, however, enunciating what is the essence of
   ownable property.
          Ownable property is only that which is economically scarce.=
 And
   by economic scarcity we mean that, absent clear demarcation,
   conflict will arise as to who owns the resource. Land, cars, print=
ing
   presses, paper and ink are scarce in the sense that if we remove t=
hem
   from you, you no longer have them. Our use of an item conflicts wi=
th
   your use of it. While an abundance of computers can be had on the
   market, our use of this particular personal computer excludes your
   use of it. If we could conjure computers with a genie gesture, the=
y
   would be abundant, not scarce, and it would be immaterial if this =
one
   were removed.
          However valuable, ideas are not economically scarce: Our
   listening to a piece of music doesn=EDt conflict with or exclude y=
our
   doing the same. A copy made of a book doesn=EDt remove from its
   author the configuration of ideas that is the book. Ideas, very pl=
ainly,
   can be jointly consumed without dissipating.
          Of course, the end product of an idea =F3 to wit, a book or=
 a
   compact disc =F3 is very definitely scarce. True to John Locke, we
   say that if you purchase the book or buy the CD, you are its right=
ful
   sole owner. Proponents of IP, however, say that some distant autho=
r
   or musician partially may colonize your book and CD and tell you
   how to use them.
          How do we allay the fear that without patent and copyright =
we
   would all perish? Consider this: How many tears would you shed if
   Bill Gates were worth only several =F3 not dozens of =F3billions? =
Since
   Microsoft owes a good portion of its wealth to the copyright
   monopoly, this would be the upshot of its removal. If the company
   relied only on profits from initial sales and from support service=
s,
   would that be so bad?
          Being =ECfirst on the market=EE is its own reward. The vari=
ous
   spin-offs and short-term advantages that accrue to innovators who
   develop new products provide sufficient incentive and profit to re=
nder
   patent protection unnecessary. Removal of patent protection often
   can accelerate research-and-development efforts. No sooner had Eli
   Lilly been stripped of its patent protection for Prozac than the
   company pledged a renewed commitment to innovation. This was
   reflected in investor confidence and climbing stock prices.
          Innovators can and do =ECfence=EE their products. As IP sch=
olar
   Tom Palmer points out, concerts and circuses are fenced-in events
   with =ECtickets sold and checked at the door.=EE There already are
   assorted blank recording media on the market that scramble signals
   beyond recognition, making reproduction impossible.
          Bundling of products is a viable option as are tie-ins: the=
se
   arrangements wed a product to a service. Television broadcasts
   already are tied to advertising, as are so many other goods.
   Computer programs are bundled with manuals or service features.
   The customer would rather purchase the product and get access to
   free maintenance than resort to copying.
          Contracts, of course, inherently are free-market friendly. =
Unlike
   IP rights, they are voluntary and bind only parties to the agreeme=
nt.
   There are leasing arrangements, too. Companies can enforce their
   property rights in the end product of the idea, the tangible good.=
 They
   then lend the thing out subject to conditions specified in a contr=
act.
          Patent and copyright clearly undermine private property. A
   staunch defense of private property must lead to
   anti-intellectual-property conclusions.

          [The views expressed in this article are the personal opini=
ons of
   the authors and should not be attributed to any other entity.]

   Mercer is a free-lance editorial writer based in Seattle and write=
s
   on intellectual property for the National Post and Ideas on Libert=
y.
   Kinsella has written widely on patent law and is vice president
   specializing in intellectual property at Applied Optoelectronics
   Inc. in Sugarland, Texas.


   No: Ownership of ideas and a market
   system are the only reliable incentives
   for productivity.

   By James DeLong

          A decade ago the topic of intellectual property (IP) =F3 pa=
tents
   on inventions; copyrights on books, music, movies and software;
   trademarks on brand names; secrets such as formulas for soft drink=
s
   =F3 was a snoozing backwater of the law. Now it is hot! Cool! Ther=
e!

          The driving force behind the obsession is simple: money.
   Financial markets are dependent on IP. In 1978, the book value of
   tangible property owned by publicly traded companies equaled 83
   percent of the value of these companies=ED stocks and bonds. By 19=
98,
   this tangible book value was only 31 percent of total value, meani=
ng
   that 69 percent of the total came from IP and good will. (Some of =
the
   market value actually came from moonshine, but 1998 preceded the
   biggest inflation of the NASDAQ bubble.)
          Concern about IP is magnified by the Napster software for
   swapping music over the Internet. It demonstrates the vulnerabilit=
y of
   IP in the digital age and threatens to implode the recording indus=
try.
   Concern, perhaps panic, also is reinforced by ongoing lawsuits ove=
r
   DeCSS, the software that decodes the encryption system that
   protects movies on DVD disks. With DeCSS rocketing around the
   Internet, Hollywood fears the worth of any movie put onto a DVD
   disk will be zero.
          Consumers should fear this, too, because it would mean no m=
ore
   movies on DVD, but they have not glommed on to this part of the
   deal yet. Their current reaction to both DeCSS and Napster is: =
=ECHey!
   Free stuff.=EE The obsession with IP is triggering intense debates=
 at both
   the micro and the macro levels.
          At the micro level, the debate jumps around among many topi=
cs.
   Because we do not let people copyright =ECfacts,=EE such as sports=
 scores
   or stock quotations, how do we encourage investment in creation of
   useful databases? Is it legitimate to allow patents on =ECbusiness
   methods,=EE such as Amazon=EDs one-click method of ordering? How d=
o
   we treat information residing in the head of an employee who leave=
s a
   firm =F3 and should law distinguish between information acquired =
=ECon
   company time=EE and a worker=EDs own creative idea?
          There are issues of parodies and book reviews and
   improvements on existing inventions and the doctrine of patent
   equivalents and a zillion other nuts-and-bolts problems. If all cr=
eativity
   draws on a huge =ECcultural commons,=EE as indeed it does, how do =
we
   decide how much people should be allowed to fence off as their
   own?
          At the macro level, discussion is more fundamental: Should =
IP be
   recognized at all? Some analysts of a libertarian bent reject the =
basic
   legitimacy of property rights in the products of the intellect. To=
 explain
   why I think they are wrong, it is useful to reprise the thinking b=
ehind
   our recognition of the human right to own and use property.
          Tough human institutions are like tough trees: They have mu=
ltiple
   roots and draw stability from the combination. The idea of propert=
y is
   one of the toughest of human institutions, existing in all culture=
s across
   the ages, so we would expect to find it supported by a dense root
   system. A big root is the concept of Lockean justice. Ownership of
   one=EDs own self and effort is the most basic of human rights. Sin=
ce
   material things are produced when people mix their labor with natu=
ral
   resources, the idea that one owns the fruits of this effort is pow=
erful.
          Accompanying this concept of justice is the pragmatic truth=
 that
   ownership creates incentives for productivity. People might garden=
 for
   fun, or hunt, dig ditches or write symphonies, but not much. Even =
if
   they wanted to, they would have to make a living, which reduces ti=
me
   and energy available for creativity on the side.
          Giving the producer a property right in the output of his e=
ffort, or
   letting him earn pay in exchange for producing it, is the only sur=
e way
   to foster these activities, outside of compulsion.
          Property rights also are important for efficient allocation=
 of
   resources. If something is scarce, the best way to ensure that it =
is put
   to its most productive use is to assign it to an owner motivated t=
o find
   this best use. Property rights are a keystone of a complex market
   system that allocates resources among myriad investment and
   production possibilities. If society declares that crops belong to=
 the
   grower but that petroleum belongs to all in common, it will produc=
e
   too many crops and no oil. If it denies economic returns to IP, it=
 will
   invest too little in creating it.
          Political reasons favor recognizing property. Democracy wor=
ks
   best, and probably only, if citizens are invested in the stability=
 of the
   polity and have something to lose if its politics run off the rail=
s.
   Investment in the form of electronic bits or worker know-how will
   serve as well as land or money.
          And we have an interest in promoting human autonomy. To the
   greatest extent possible, people should be free to live their live=
s as
   they damn well please. It is impossible to imagine such freedom
   except in the context of a society in which ownership of resources
   liberates people from control by others. Again, intangible resourc=
es
   will do the job as well as material ones.
          All these bases for endorsing the institution of property a=
pply full
   force to the concept of IP, except for one: the point about alloca=
ting
   scarce resources. A pasture needs an owner. If it is a commons use=
d
   by everyone, it soon will be exhausted and the sheep will starve,
   followed by their owners.
          IP is different because many people can use it at once. You=
 can
   play a song without interfering with my playing of exactly the sam=
e
   song at the same time. Millions of others can join us, each at his=
 own
   device. This also is true of patents =F3 you can copy the design o=
f my
   machine without taking it from me. We can all graze our sheep on t=
he
   same intellectual commons without exhausting it. Or, to paraphrase
   Thomas Jefferson, you can light your candle from mine without taki=
ng
   my light.
          This is indeed a powerful difference between physical and
   intellectual property. It greatly influences analysis of many knot=
ty
   micro issues. But it does not justify total rejection of intellect=
ual
   property because the other roots remain.
          Lockean justice still demands that I own the product of my =
labor.
   We still need to give people incentives to produce. We still need
   market signals that people should invest in producing intellectual=
 as
   well as physical capital, and we still need the level of the retur=
ns to
   this investment to reflect at least roughly the rate of return to =
society.
          The health of democratic government and the fostering of hu=
man
   autonomy are still served by intellectual property as well as by
   physical property. Opponents of IP make some additional arguments,
   but none are satisfactory. One is that creators can protect their =
work
   by contract and do not need the support of property law. But
   intellectual property must be disclosed to third parties who are n=
ot
   bound, and after that it is loose in the world.
          This contention also assumes a perfectly functioning legal =
system
   and low transaction costs. Neither is realistic. Besides, to say t=
hat a
   creator has the right to limit disclosure seems to concede the cen=
tral
   point =F3 that he has a right of some sort.
          Opponents sometimes argue that IP interferes with others=
=ED
   abilities to use their physical properties, as when your copyright=
 on a
   book limits my use of my printing press. But so what? Society
   constantly is resolving conflicts over uses of property, and there=
 is no
   reason to say that tangible property automatically trumps intangib=
le.
          Finally, opponents say creativity will find a way and that =
products
   of the mind still will be cranked out even without ownership. This=
 is
   partly true, but neither the quantity nor the quality will approac=
h that
   produced by property rights and a market system.
          Patronage sometimes is cited as an alternative, but to advo=
cate
   reliance on the whims of billionaires and dukes or, worse, the
   National Endowments or National Public Radio, is an odd position
   for libertarians. Nor is sponsorship =FD la broadcast TV an answer=
.
   That industry does not sell a product to consumers; instead, it se=
lls
   eyeballs to advertisers, a very different model that results in
   programming at the lowest common denominator.
          In =ECfree=EE television, the amount spent on a show for my=
 viewing is
   limited to the profit a sponsor can make from selling me a box of
   detergent, which probably is about 10 cents.
          As a consumer, I am better off with pay television. Then th=
ose of
   like mind can combine and offer to pay $2 or $100 for a product th=
at
   suits our tastes. It is no accident that The Sopranos, a subtle an=
d
   masterful work, is on pay TV. But this works only if the creator h=
as a
   mechanism for selling to me, which means a property right.
          Napster partisans are in a comparable situation.
   Intellectual-property opponents are correct in thinking that music=
 still
   will exist, even if it isn=EDt paid for. But it will be from a few=
 bands that
   can pack =EDem in on a tour, plus 100,000 versions of the kazoo gr=
oup
   that rehearses in the garage on Saturday because they must hold
   down real jobs during the week.
          I prefer Bruce Springsteen, the New York Philharmonic and a
   plethora of other professional musicians who are paid so that thos=
e
   with the most talent are drawn into the business and then freed to=
 be
   devoted full time to music. And I will fight those who, in the nam=
e of a
   misguided concept of liberty, would deny me my right to pay them.


   DeLong is a senior fellow in the Project on Technology &
   Innovation at the Competitive Enterprise Institute in
   Washington. He also is the author of Property Matters.


----------