Now that the song is copyright-free.
The August 8–14 2015 issue of The Economist has a great couple of pieces basically calling for abolition—or at least radical reform—of the patent system. The first is the leader, “Time to fix patents“; the second is the longer piece, “A question of utility.” The leader notes that “in 19th-century Britain,” The Economist sided with free-traders in calling for the complete abolition of the patent system. As the longer article explains:
THE Great Exhibition, staged in London in 1851, was intended to show off the inventive genius of Victorian Britain. In doing so it sparked a hardfought debate on intellectual property. On one side were public figures horrified at the thought of inviting the whole world to see the nation’s best ideas, only to have most of it go straight home and copy them. They called for the patent system to be made cheaper and easier to navigate, and for the rights it conferred to be more forcefully upheld. These demands, though, were met with a backlash. Supported by economic liberals who had successfully fought for the repeal of the protectionist Corn Laws a few years earlier, this side of the debate argued that free trade and competition were good for the economy; that patents were a restraint on both; and that therefore patents should be not reformed, but done away with.
The Economist, founded by opponents of the Corn Laws, was an enthusiastic promoter of this abolitionist movement. A leader in our July 26th issue that year thundered that the granting of patents “excites fraud, stimulates men to run after schemes that may enable them to levy a tax on the public, begets disputes and quarrels betwixt inventors, provokes endless lawsuits [and] bestows rewards on the wrong persons.” In perhaps our first reference to what are now called “patent trolls”, we fretted that “Comprehensive patents are taken out by some parties, for the purpose of stopping inventions, or appropriating the fruits of the inventions of others.”
Arguing that patents “rarely give security to really good inventions” and fail at their job of encouraging innovation by rewarding inventors for their efforts, we backed the abolitionists in a debate over patent reforms then in Parliament. Our knockout argument: most of the wonders of the modern age, from mule-spinning to railways, steamships to gas lamps, seemed to have emerged without the help of patents. If the Industrial Revolution didn’t need them, why have them at all?
Today’s Economist cannot quite, clearly, explicitly, unambiguously call for abolition, despite framing some of the arguments for it, and even though its arguments for mere partial reform are confused and fall flat. Anyone reading these pieces will at first be nodding, “Yes, yes, I see—maybe they are right—time to do away with these government monstrosities”, only to be confronted near the end with a confusing and unpersuasive series of blacksliding arguments to the effect that “despite all these problems with patents, of course we need them in a few areas these two pieces indicate growing hostility to the idea of intellectual property and growing recognition that patents and IP are incompatible with the free market and property rights.
The “Austrian Economics Center,” which claims to advocate “the ideas of the Austrian School of Economics” and to promote “a free, responsible and prosperous society,” “has joined the Property Rights Alliance (PRA) in an open letter to WIPO Director Dr. Francis Gurry in support of strong protections for all types of IP”.
A letter from Barbara Kolm, the Center’s Director, announcing this, stated:
As we consider free markets and economic growth in Europe we must reflect on the importance of Intellectual Property (IP) rights. We strongly feel IP is key to fostering global innovation, creativity and competitiveness, particularly in today’s knowledge-based economy.
Risk is the lifeblood of creative and innovative economies. IP rights encourage entrepreneurs and creators to push for new advances and contemplate new creations in the face of adversity. Intellectual property is the engine of economic growth and competitiveness, and helps generate breakthrough solutions to global challenges.
In both the United States and European Union, IP-intensive industries support tens of millions of jobs and contribute trillions of dollars to annual GDP. For example, in the EU alone, IP-intensive jobs contribute to 26% of employment and 39% of GDP. Numerous studies have found that countries with strong IP protection programs have up to 13 times higher GDP than those that do not.
That is why we joined 85 think tanks and institutions globally in signing a letter to global leaders that articulates a framework and guidelines regarding intellectual property. As these issues are discussed in various forums around the world, these guidelines will be a helpful resource.
Advanced societies have long understood that by protecting the proprietary rights of artists, authors, entrepreneurs, innovators, and inventors, they are promoting greater public welfare. The continued protection of these fundamental rights is essential to global innovation, creativity and competitiveness.
The comment that “IP-intensive industries support tens of millions of jobs and contribute trillions of dollars to annual GDP” appears to be lifted from a ridiculous “study” by the Commerce Department that is transparently false and flawed—see USPTO/Commerce Dept. Distortions: “IP Contributes $5 Trillion and 40 Million Jobs to Economy”. As for her comment, “Numerous studies have found that countries with strong IP protection programs have up to 13 times higher GDP than those that do not.”—this makes the obvious error of confusing correlation with causation. (See Intellectual Property as a cause of American Prosperity?)
Also signing the letter are other supposed libertarian, free market, liberal, or Austrian groups, such as the F.A. v. Hayek Institute, Austria; Hayek Institute Romania; Ayn Rand Institute Europe (unsurprisingly); Libertarian Club Libek, Serbia; Liberty Forum of Greece; Italian Students for Individual Liberty; The Liberty Institute, India; Digital Liberty, USA; and many others.
To their credit, none of the Mises Institutes that are part of the Mises Global network, nor the Cato Institute, nor the Cobden Centre, signed this letter. Indeed, American groups seem under-represented on this list, perhaps because this letter concerns IP in Europe, and also perhaps because of the growing awareness over here among free market libertarians that IP is monstrous and utterly incompatible with liberal principles.
But it is especially distressing that the soi-disant Austrian groups (the Austrian Economics Center and the two aforementioned Hayek Institutes) are coming out explicitly in favor of IP, despite the fact that many prominent Austrians, such as Bohm-Bahwerk, Mises, Hayek, Rothbard, Kirzner, and Hoppe have expressed extreme skepticism or outright hostility to IP (or to the empirical/utilitarian approach implicitly being advanced here), plus a number of fellow travelers such as Plant, Machlup and Leonard Read. For example, see:
- Böhm-Bawerk on Patent and Copyright
- Fritz Machlup, U.S. Senate Subcommittee On Patents, Trademarks & Copyrights, An Economic Review of the Patent System, 85th Cong., 2nd Session, 1958, Study No. 15 (text excerpt) [“Report to the US congress from 1958, which also extensively narrates the history of the patent movement and of earlier economic research on this subject. Machlup, a renowned American economist of Austrian origin, is the first author of a large treatise on knowledge economics and other treatises which belong to the teaching repertoire of economics departments in universities. His report cites a wealth of historical and economic evidence to refute most of the reasoning used by lawyers to legitimate the patent system.”]; also Fritz Machlup & Edith Penrose, “The Patent Controversy in the Nineteenth Century,” Journal of Economic History 10 (1950), p. 1
- Ludwig von Mises, Human Action 3rd rev. ed. Chicago: Henry Regnery (1966), chap. 23, section 6, pp. 661–62; see also pp. 128, 364; also Kinsella, “Mises on Intellectual Property“
- Hayek: see Hayek’s Views on Intellectual Property; also Tucker, “Misesian vs. Marxian vs. IP Views of Innovation“; Tucker, “Hayek on Patents and Copyrights“; Salerno, Hayek Contra Copyright Laws
- Arnold Plant, “The Economic Theory Concerning Patents for Inventions,”Economica, New Series, 1, no. 1 (Feb., 1934)
- Murray N. Rothbard, Knowledge, True and False; Man, Economy, and State and Power and Market, Scholars Edition, pp. liv, 745-54, 1133-38, 1181-86
- Cordato and Kirzner on Intellectual Property
- Leonard Read, “On Plagiarism” (1972), reprinted in Kinsella, “Leonard Read on Copyright and the Role of Ideas“
- Hoppe on Intellectual Property; Hoppe Interview on Anarchy and Intellectual Property
Intellectual Property is completely contrary to private property rights, free markets, competition, and liberal principles. All Austrian and free market/libertarian groups should strongly oppose IP, not promote it. If these institutions choose to be wertfrei that is fine, but then they should take no policy positions. Once they enter the field of making policy pronouncements they open themselves up to criticism in this arena. (On a slight tangent: as I concluded in New Rationalist Directions in Libertarian Rights Theory:
Under the three theories outlined above—argumentation ethics, estoppel theory, and the self-contradictions of rights-skeptics—we can see that the relevant participant in discourse cannot deny the validity of individual rights. These rationalist-oriented theories offer, in my opinion, very good defenses of individual rights, defenses that are more powerful, in a sense, than many other approaches, because they show that the opponent of individual rights, whether criminal, skeptic, or socialist, presupposes that they are true. Critics must enter the cathedral of libertarianism even to deny that it exists. This makes criticism of libertarian beliefs hollow: for if someone asks why we believe in individual rights, we can tell them to look in the mirror, and find the answer there.
“For Intellectual Property: The Property Ideas of Andrew J. Galambos,” by Richard Boren, was recently published in The Voluntaryist.
Many IP advocates get upset when you accuse them of holding the view that ideas are property—that they think there should be property rights in “ideas”. Nonsense, they say—they are only in favor of property rights in “logos” or “instantiated ideas” or “inventions” or “works of authorship” but the notion that they favor property rights in ideas is ridiculous, a straw man.
Not according to the Galambosian. He frankly admits: “I am in favor of treating ideas as property.”
A few comments. In Boren’s piece, he says: [click to continue…]
Nice article in The Freeman (from 2001) illustrating the pernicious effects of patents. Here, a patent on an early automobile design was used by the Association of Licensed Automobile Manufacturers (ALAM) to restrict competition in the auto industry. For a related episode, see Boldrin & Levine’s discussion of “how the Wright brothers used their patents to try to block the emergence of a US aircraft industry. Interestingly, this pattern of behavior continued. In 1972 the US government charged the aircraft industry with an antitrust violation, basically because they kept using their patent pool and cross licensing to prevent entry. IP-inefficiency at its best.” (ch. 4, Against Intellectual Monopoly).
Melvin Barger is a retired corporate public relations representative and writer who lives in Toledo, Ohio.
More books have been written about auto pioneer Henry Ford than any other person in the car business. Though he had critics, the judgment of history is that he put the world on wheels with his famous Model T. But less well known is the fierce independent streak that led him to wage a lone and heroic battle for the right to run his own business. It was a struggle against the kind of people who think they should have the power to determine what’s best for the rest of us. They were private businessmen, but they were also smug social planners who counted on the assistance of the state.
One of the persistent delusions nourished by social planners everywhere is that elitists in high places can divine who will be the winners and losers in any developing industry. Sometimes called “industrial policy,” this was touted as the secret of Japan’s economic success until that country’s fortunes went sour in recent years. Whether done by government officials or private firms with policing powers, any such planning is a bad idea.
But we don’t have to go to present-day Japan for proof of such failure. [click to continue…]
From the Against Monopoly blog:
Michele and I have long pointed out the human cost of pharmaceutical patents during the AIDS crisis in Africa (and were hardly the first to do so). Via Andy Neumeyer a new film documenting just how bad it was. Trailer here
- Over Two Dozen Patent/FDA-caused Drug Shortage Patients File Suit Against HHS
- Intellectual Property Rights: A Critical History and US IP Imperialism
- HuffPo: Patent Trolls Are Killing People — Literally
- Patents Threaten To Silence A Little Girl, Literally
- Patents Kill: Millions Die in Africa After Big Pharma Blocks Imports of Generic AIDS Drugs
- Update: Patents Kill: Compulsory Licenses and Genzyme’s Life Saving Drug
- Patents Kill: Compulsory Licenses and Genzyme’s Life Saving Drug
- Wenzel on patents in developing countries
- Copyright Kills “Men at Work” Flautist, Greg Ham
- FDA and USPTO: Joint Killers
- Update: Trademark/copyright: Wildwood to Atlantic City – Stop ‘watch the tram car’ please/
Great new article by Matthew McCaffrey in The Freeman, “Are Markets Ruining Video Games? Or is intellectual property the real culprit?” (May 12, 2015).
Capitalism is ruining video games. So says game producer Lorne Lanning, creator of the Oddworld series, who recently sparked controversy by blasting economic developments in the gaming industry.
Lanning blames “capitalism” for gaming’s recent financial and artistic troubles, especially its emphasis on commercial success over artistic creativity. His basic claim is the same one levied against the film industry: major studios have been squeezing out their smaller competitors, taking advantage of market dominance to produce an endless stream of big-budget, artistically uninspiring sequels and spin-off franchises.
It’s unclear what Lanning (or anyone, really) means by capitalism, but he seems to be condemning the largely corporate world of game design and marketing. For instance, he mentions bureaucratic corporate structure, the quest for constant growth, and the need to appeal to mass markets as problems undermining the industry. [click to continue…]
There are theoretical as well as empirical reasons to question whether patent rights advance innovation in a substantial way in most industries. …The literature on the impact of patents on innovation must be considered emergent. One reason is that the effect of patent policy has many dimensions … and these continue to challenge scholars both theoretically and empirically.
Discussed by Torrance here. See also Yet Another Study Finds Patents Do Not Encourage Innovation; and Torrance and Tominlson, PATENTS AND THE REGRESS OF USEFUL ARTS.
In other words, people who say patents encourage innovation do not know what they are talking about and have no clear evidence to back it up.
This reminds of similar conclusions and comments by other researchers, as discussed here:
As economist Fritz Machlup concluded, in an exhaustive 1958 study prepared for the U.S. Senate Subcommittee On Patents, Trademarks & Copyrights:
No economist, on the basis of present knowledge, could possibly state with certainty that the patent system, as it now operates, confers a net benefit or a net loss upon society. The best he can do is to state assumptions and make guesses about the extent to which reality corresponds to these assumptions. … If we did not have a patent system, it would be irresponsible, on the basis of our present knowledge of its economic consequences, to recommend instituting one.” ((Fritz Machlup, An Economic Review of the Patent System 79-80 (1958), c4sif.org/resources; Fritz Machlup, An Economic Review of the Patent System 79-80 (1958); see also my post The Economist on the American Patent System. ))
And the empirical case for patents has not been shored up at all in the last fifty years. As George Priest wrote in 1986:
[I]n the current state of knowledge, economists know almost nothing about the effect on social welfare of the patent system or of other systems of intellectual property.3
Similar comments are echoed by other researchers. François Lévêque and Yann Ménière, for example, of the Ecole des mines de Paris (an engineering university), observed in 2004:
The abolition or preservation of intellectual property protection is … not just a purely theoretical question. To decide on it from an economic viewpoint, we must be able to assess all the consequences of protection and determine whether the total favorable effects for society outweigh the total negative effects. Unfortunately, this exercise [an economic analysis of the cost and benefits of intellectual property] is no more within our reach today than it was in Machlup’s day [1950s].4
More recently, Boston University Law School Professors (and economists) Michael Meurer and Jim Bessen conclude that on average, the patent system discourages innovation. As they write: “it seems unlikely that patents today are an effective policy instrument to encourage innovation overall” (p. 216). To the contrary, it seems clear that nowadays “patents place a drag on innovation” (p. 146). In short, “the patent system fails on its own terms” (p. 145).5
And in a recent study, economists Michele Boldrin and David Levine, authors of Against Intellectual Monopoly, conclude:
The case against patents can be summarized briefly: there is no empirical evidence that they serve to increase innovation and productivity, unless the latter is identified with the number of patents awarded—which, as evidence shows, has no correlation with measured productivity. This is at the root of the “patent puzzle”: in spite of the [enormous] increase in the number of patents and in the strength of their legal protection we have neither seen a dramatic acceleration in the rate of technological progress nor a major increase in the levels of R&D expenditurein addition to the discussion in this paper, see Lerner  and literature therein. As we shall see, there is strong evidence, instead, that patents have many negative consequences.6
- See KOL101 | The Future (the End?) of Intellectual Property (Open Science Summit, 2011) . [↩]
- U.S. Const., Art. I, Sec. 8, Cl. 8), there was still no evidence to back up this assumption. (( Eric E. Johnson, “Intellectual Property’s Great Fallacy” (2011): “The monopolies now understood as copyrights and patents were originally created by royal decree, bestowed as a form of favoritism and control. As the power of the monarchy dwindled, these chartered monopolies were reformed, and essentially by default, they wound up in the hands of authors and inventors.” [↩]
- George Priest, “What Economists Can Tell Lawyers About Intellectual Property,” 8 Res. L. & Econ. 19 (1986). [↩]
- François Lévêque & Yann Ménière, The Economics of Patents and Copyrights 102 (2004). [↩]
- James Bessen & Michael J. Meurer, Patent Failure: How Judges, Bureaucrats, and Lawyers Put Innovators at Risk (2008, excerpts available at researchoninnovation.org/dopatentswork/). [↩]
- Michele Boldrin & David K. Levine, “The Case Against Patents” (June 29, 2012 draft; available at http://levine.sscnet.ucla.edu). [↩]