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The Schizo Feds: Patent Monopolies and the FTC

From the Mises blog; archived comment below.

Controls breed controls, as Mises (I believe) noted. Is it surprising that when the state grants a monopoly in the form of a patent, and also regulates the living hell out of monopolies in its antitrust law, that conflicts in the law are bound to arise? (See the post IP vs. Antitrust.) As one commentator noted in that 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.” (And yes, patents are monopoly grants–see my first comment to the post The Three Stages of Invention.)

Similarly, as noted in The Schizophrenic State, the state tries to keep pharmaceutical companies from charging too-high prices for drugs like Cipro–prices which are too high because of the state’s artificial patent monopoly system in the first place; so the state threatens same companies with the loss of the state-granted monopoly if the companies actually use this monopoly when it would embarrass same state.

Yet another entry from bizarro fed-land is the persecution of Rambus, the computer memory chip developer.Rambus took advantage of the state’s patent office–a unique agency, open to the public, which hands out state monopolies for a modest fee. Now Rambus stands accused by the FTC of having “unlawfully monopolized markets for four memory chip technologies” (2). And how did they do this? Well, Rambus became a member of an industry standards committee “working on standardization of DRAM chips.” And while it was a member of this committee, Rambus “continued to file and prosecute certain patents and patent applications related to the technology under review by” the committee. So, when the standard was released, it was covered by Rambus’s patents.

Hey, pretty creative business move by Rambus, wouldn’t you say?

But not so fast. As a remedy to the sin of actually applying for the monopoly grants the government offers, the FTC wants to “bar Rambus from enforcing any existing licensing agreements, along with certain patents.”

Ah, what the state giveth, the state taketh away.

Archived comment:

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David C August 28, 2006 at 10:23 am

This brings up an intersting point. As a company executive, a person has a moral obligation to his share holders to make sure that their value doesn’t get destroyed. But as an individual a person has a moral obligation not to use the governments tools of coercion on other people. So how does one in an executive position meet both these duties.

One thing I’ve seen in a lot of companies is the use of patents to woo investors, and the use of patents to countersue against friviolous lawsuits, but then to otherwise ignore them. Also, a lot of companies use patents to get into cross-licensing agreements where they promise not to sue each other. (but this is also dangerous for the same reason that all the cross-treaties during WW1 were dangerous. All it took was one or two countries to pick a fight, and all of Europe ended up in war.)

I think the real issue with patents is that eventually 3d-printers, nanotech, and so on are goiong to shift manufacturing away from the factory and back into the home. As this happens, many patent holders are going to have a vision of the future where they collect infinite royalities from the billions of individuals who create. In order to implement this system, it will require massive physical coercion and massive government intrusions into peoples personal lives.

IMHO, in the future there will be a strong push to regulate nanotech and extend patent controls.

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