IP Rights as Monopolistic Grants to Overcome the Public Goods Problem

by Stephan Kinsella on December 4, 2010

Libertarian and other IP advocates sometimes get miffed when you refer to a patent or copyright as a monopoly privilege granted by the state (see my post Are Patents “Monopolies”?). But some IP proponents are quite forthright about this. Take this explicit opening passage in an article by an ardent IP advocate, Jerome H. Reichman, a law professor at Duke:

Governments adopt intellectual property laws in the belief that a privileged, monopolistic domain operating on the margins of the free-market economy promotes long-term cultural and technological progress better than a regime of unbridled competition.

… Intellectual property laws typically provide qualified creators with temporary grants of exclusive property rights that derogate from the norms of free competition in order to overcome the “public goods” problem inherent in the commercial exploitation of intangible creations.1

Notice how much is packed into this short passage. First, an explicit admission that IP grants are monopolistic and derogate from free market norms and are opposed to a regime of “unbridled competition”–i.e., IP is anti-competitive. As is to be expected–after all, it’s a monopoly grant. Second, that IP rights are only temporary–they are a mere policy tool, not a natural right (natural rights are not temporary).2 Third, that the legitimacy of IP is based on the modern economic idea of “public goods.”3

Update: From a recent article in Harvard’s Journal of Law and Technology (JOLT):

The “patent bargain” is an easily understood concept. Awarding an inventor twenty years exclusivity naturally entails considerable social cost — a cost that rises in direct proportion to the value of the covered invention. In certain instances — those where the patented technology is so useful that no substitutes exist — the award of a patent creates a complete economic monopoly.

— Alan Devlin, “The Misunderstood Function of Disclosure in Patent Law

Bonus quote from the same article:

To derive value from her insights, an inventor must transform abstract conceptions into a commercial product or license her discovery to a third party who will do the same. But if an inquisitive rival can inspect the end product and derive the underlying invention for himself, the inventor’s ability to reap pecuniary reward from her innovation will be jeopardized. To counter this dilemma—a problem deemed endemic in public goods—an inventor will have to manufacture complexity into her end product, artificially rendering it unsusceptible to reverse engineering. Like the myriad inventions that Da Vinci put to paper in impenetrable fashion, innovators would do everything within their power to mask their discoveries from unwelcome eyes.

But the truth is, as noted in my post Leveraging IP, due to the existence of IP, companies complicate and distort the design of their products to take advantage of IP rights, from Omega adding copyright-protected logos on watches to use an arcane aspect of copyright law to block price arbitrage imports; to laser printer vendors adding needless patented circuits to prevent competition from generics.

[Mises cross-post]

  1. Reichman, “Charting the Collapse of the Patent-Copyright Dichotomy: Premises for a Restructured International Intellectual Property System,” Cardozo Arts & Ent. L.J. 13 (1995): 475. []
  2. See Tom W. Bell, Intellectual Privilege: Copyright, Common Law, and the Common Good, Part 1, Chapter 3, Sec. B.1. []
  3. See, on this fallacious notion, Hans-Hermann Hoppe, “Fallacies of the Public Goods Theory and the Production of Security,” in The Economics and Ethics of Private Property []
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