From the NYT: Chinatown Funeral Goods Bring Copyright-Infringement Arrest: “Paper imitations of luxury items are traditional at Chinese funerals as gifts for the dead, but a seller of cardboard handbags was arrested on copyright-infringement charges on Tuesday.” Read more>> (H/t Rob Wicks.)

I think it’s trademark, not copyright, but anyhoo. The IP po-po came in and arrested this guy for selling cardboard imitations of Louis Vuitton handbags and Gucci loafers. Took him to jail.

Mises blog; archived comments below.

I’ve noted before the “tension” between federal antitrust law (which penalizes private “monopolies”, while excusing real monopolies, i.e. those formed by state agencies and law) and patent law (in which the state grants private monopolies to some companies to allow them to avoid “unbridled” competition for 17 or so years).

In some previous posts and lectures, I’ve noted that if the FTC were to pursue various companies using state-granted patent monopolies to form cartels and oligopolies, this would not be the worst miscarriage of justice.¹ Not that we want the FTC to exist at all, or to exercise powers not authorized by the Constitution or federal law. But if it aims its fire at the patent office and patents granted by its sister agencies in the state, this is not something a libertarian ought to weep over. We might be worried that the FTC exists, or that it feels free to disregard constitutional or statutory limits on its powers, but not about its choking back on patent monopoly power.

But pro-IP libertarians don’t have this perspective. They don’t like the FTC taking away monopoly power grants by their sister agency, the PTO. In response to an FTC proposal on patent notice and remedies, “The Evolving IP Marketplace: Aligning Patent Notice and Remedies with Competition,” pro-IP libertarian Richard Epstein,² and two other co-authors argue, in “The FTC’s Proposal for Regulating IP through SSOs Would Replace Private Coordination with Government Hold-Up,” that if the FTC intervenes in IP, it will “distort the operation of the intellectual property (IP) marketplace in ways that will hamper the innovation and commercialization of new technologies.” Such a conclusion can be reached only if one assumes that IP does not distort innovation (false)³ and that IP, when left alone by the rapacious FTC, encourages net innovation (false).

Epstein’s article also worries that the FTC intervention in IP “would seriously undermine capital formation, job growth, competition, and the consumer welfare the FTC seeks to promote.” IP itself undermines all these things, so it is hard to see how another federal agency somehow ameliorating or blunting the effects of the monopoly privilege grants by another federal agency would be bad. And, of course, it is not true that the FTC “seeks to promote” capital formation, competition, consumer welfare, etc. This is confusing the propaganda spouted by a criminal state agency with its real function and nature.

Yes, the FTC should be abolished. But not because its turf overlaps that of the USPTO. Limiting patent rights may be the one non-horrible thing the FTC does.

This is yet another example of how support for IP can lead to a confused analysis of the state and policy. For example, the support of patents has led some libertarians, including Epstein, Doug Bandow, and Michael Kraus, to oppose free trade when it comes to drug reimportation that threatens the patent-monopoly profits of domestic corporations.⁴

[mises]

Archived comments:

Dale B. Halling August 25, 2011 at 10:16 am

nate-m August 25, 2011 at 10:30 am

A patent is a property right it is not a monopoly.

Maybe not the patents you want. But we are talking about actual patents that get created by the patent office, which seem to be very different from what you think they are.

Patents in the USA are absolutely monopoly grant privileges.

Like all property the source of the property right is creation.

Actually no property right is like that at all. Completely misleading and wrong statement.

If someone else were to create the invention they could obtain a patent (property right) in the invention also.

No, actually they can’t. The patent system allows you to successfully sue over acts of independent creation that infringe on your patent. It happens _all_the_time_. It’s very frequent. It may actually be the source of most patent lawsuits today.

This is like all other property rights and not at all an arbitrary government grant.

The fact that it does not work at all like you think, but actually acts like you say that the government grant behaves, it does helps to undermine your argument.

Finally, a patent is freely alienable, it can be sold, lease, assigned, etc. Again this is not true of government granted monopolies.

There is absolutely nothing intrinsic to government grants that says that they cannot be transferred. It depends on the legal details with each grant. Your just making stuff up now.

Take a ‘taxi token’. This gives you the ‘property right’ to own the ability to provide taxi services in certain cities. Often these tokens can be transferred, sold, or leased to other people.

patents are NOT private property rights:

They are grants of privilege. Monopoly grants that are designed to provide so-called ‘economic rights’ that are just like the rights granted to social security or special privileges for unions. Rights created and enforced by government fiat in attempt to improve the economy or make up for some sort of perceived deficiency in the market.

REPLY

Stephan Kinsella August 25, 2011 at 10:41 am

Just to those lurking: Halling is a patent lawyer who routinely shills for the existing system that butters his bread. He is scientistic and never had sincere normative arguments. He reasons like a technocratic monist engineer bereft of any comprehension of ethical reasoning–thinking it’s sufficient to trot out statist-positivist bromides his law professors regurgitated to him.

Now:

A patent is a property right it is not a monopoly.

As for its being a monopoly: see Are Patents “Monopolies”?. One would not expect Halling, ignorant of economics and uninterested in genuine discourse, to have a clue about this. The only real monopolies are those granted by the state. Halling and his fellow IP protectionists are in favor of the state granting monopoly privileges to people to protect them from competition.

Of course IP is not a real property right. This is just a propaganda term used to sell these privileges to a naturally suspicious public. See Intellectual Properganda, noting:

state-granted privileges like patent and copyright were not originally called property at all. This was a latter innovation, used for propaganda purposes. This was observed by Fritz Machlup and Edith Penrose in two seminal studies:

Those who started using the word property in connection with inventions had a very definite purpose in mind: they wanted to substitute a word with a respectable connotation, “property”, for a word that had an unpleasant ring, “privilege”.

[Fritz Machlup & Edith Penrose, “The Patent Controversy in the Nineteenth Century,” Journal of Economic History 10 (1950), p. 1, 16]

While some economists before 1873 were anxious to deny that patents conferred “monopolies”–and, indeed, had talked of “property in inventions” chiefly in order to avoid using the unpopular word “monopoly”–most of this squeamishness has disappeared. But most writers want to make it understood that these are not “odious” monopolies but rather “social monopolies”, “general welfare monopolies”, or “socially earned” monopolies. Most writers also point out with great emphasis that the monopoly grant is limited and conditional.

[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)]

Like all property the source of the property right is creation.

Creation is not a source of property at all. You didn’t create your body, yet you ought to own it. If you find an unowned field, and build a farm, you own it because you were first to appropriate it, not because you created the land. Creation means transforming things you own, into more valuable configurations. Creation presupposes you already own the factors that you transform. Creation comes after ownership. It does not give rise to property rights. Creation is not a source of property rights. This is a common mistake.

If someone else were to create the invention they could obtain a patent (property right) in the invention also. This is like all other property rights and not at all an arbitrary government grant.

Of course it is arbitrary, for any number of reasons–including the term, the criteria, the process used, and the fact that the patent one inventor gets lets him stop other, independent inventors from using the invention they came up with on their own.

Finally, a patent is freely alienable, it can be sold, lease, assigned, etc. Again this is not true of government granted monopolies.

It’s true of this one. What kind of reasoning is this?

In addition, our Modern antitrust law turned

Why capitalize “Modern”? Today’s college graduates and patent lawyers are really hacks.

the law against monopolies on it head. The Statute of Monopolies limited the power of the Crown (government) to interfere with private property rights.

Not enough. It left the power of the state to grant monopolies for inventions.

The Statute of Monopolies excluded patents for inventions because they result from the creative act of the inventor and therefore are property rights.

This is not an argument. It’s just assertion. The kind of rhetoric you would expect from a patent shill.

REPLY

Chris Rhodes August 25, 2011 at 11:59 am

It pains me to think that I was once a Pro-IP libertarian without even realizing the inherent contradiction between the two.

“That piece of paper there, is it your property?”
“Why yes, yes it is.”
“And this piece of paper here, would you say that it’s my property?”
“Most certainly.”
“Okay then, I’m going to write a sentence on my piece of paper. See here?”
“Yep.”
“Alright, now I want you to try and write the same thing on your piece of property.”
“Sure, I’ll just . . .”
“STOP! IF YOU SO MUCH AS WRITE ONE SYLLABLE DOWN ON YOUR PROPERTY, I WILL HAVE MEN WITH GUNS INVADE YOUR HOUSE, STEAL ANYTHING YOU HAVE OF VALUE TO GIVE TO ME, KIDNAP YOU, AND THROW YOU INTO A CAGE FOR SEVERAL YEARS!”

Now, doesn’t that seem like a fine “libertarian” position? *puke*

REPLY

Peter Surda August 25, 2011 at 12:10 pm

Dale,

A patent is a property right it is not a monopoly.

Patents contradict property rights (or, in the corner cases, are redundant). If you disagree, show me a counterexample.

Furthermore, the concept of monopoly is overused, nevertheless since I last debated with you I came up with a more coherent definition that fits economic science: monopoly is the concept of making mutually inexclusive actions illegal.

REPLY

Chris Rhodes August 25, 2011 at 12:03 pm

1. E.g., Price Controls, Antitrust, and Patents and Intellectual Property and Economic Development.; also IP vs. Antitrust; State Antitrust (anti-monopoly) law versus state IP (pro-monopoly) law;  The Schizo Feds: Patent Monopolies and the FTC; The Schizophrenic State; Intel v. AMD: More patent and antitrust waste. [↩]
2. See “Richard Epstein on ‘The Structural Unity of Real and Intellectual Property‘”; The Structural Unity of Real and Intellectual Property (video); The Disintegration of Intellectual Property? A Classical Liberal Response to a Premature Obituary. [↩]
3. See Milton Friedman on the Distorting Effect of Patents; The Forgotten Costs of the Patent System. [↩]
4. See Ideas Are Free: The Case Against Intellectual Property; Pilon on Patents; Drug Reimportation; Cato on Drug Reimportation; and Patents, Prescription Drugs, and Price Controls. [↩]

As noted in my post Intellectual Property Advocates Hate Competition,  IP proponents support these monopoly privileges on explicitly anticompetitive grounds. 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

This opposition to “unbridled” competition sounds like something Ayn Rand might have mocked in Atlas Shrugged. Oh, wait. She did: the villains enact the “Anti Dog-eat-dog rule”. From Wikibooks:

Anti-dog-eat-dog Rule

The Anti-dog-eat-dog Rule is passed by the National Alliance of Railroads in section 145, allegedly to prevent “destructive competition” between railroads. The rule gives the Alliance the authority to forbid competition between railroads in certain parts of the country. It was crafted by Orren Boyle as a favor for James Taggart, with the purpose of driving the Phoenix-Durango out of Colorado.

Sad that Rand, who rightly mocked the hostility to “unbridled” market competition in Atlas with her “Anti Dog-eat-Dog” rule, found a way to endorse IP, the very purpose of which is to prevent a free market and its “unbridled competition.”

[Mises cross-post; archived comments]

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; see also IP Rights as Monopolistic Grants to Overcome the Public Goods Problem. [↩]

From “Jesus Diaz” on Gizmodo:

We Hope Apple Wins the Patent Wars

Read more>>

This is about Apple using its patents against Android, resulting in: “A Dutch court has banned all trading of Samsung Galaxy S, Galaxy S II and Ace across most countries in Europe.” Unless the author is being sarcastic, this is one of the most dishonest, disgusting things I’ve read in some time. What a horrible defense of patent protectionism. Gizmodo is way behind the curve on this. Other tech-savvy people are realizing how horrible and protectionist and anti-competitive and unjust patents are. I hope Gizmodo goes down in flames, and burns in bankruptcy hell.

From Mike Masnick at Techdirt:

Newspaper Claims Satirical Blogger Mentioning Its Name Is Trademark Infringement

from the get-better-lawyers dept

Gatehouse Media — a smaller newspaper chain who actually had done some fairly innovative online things in the past — has really become rather crazy when it comes to intellectual property lately. First it sued the NY Times for linking to it, then it threatened a forum site for linking to it with headlines and ledes (which most people consider to be fair use). Now it’s going even further. Keyop points us to the news that the lawyers for one Gatehouse paper, the Utica Observer Dispatch have threatened a local satirical blogger with trademark infringement claims for the great sin of mentioning the name of the Utica Observer Dispatch.

We wish to advise you that the name, “The Observer Dispatch,” that you are using is the property of GateHouse Media, protected by trademark and past usage rights. Your use of such name constitutes infringement of GateHouse’s rights under federal, state and common law. Our proprietary rights in such name include the right to restrict the use of the name. It is important that we exercise our right to protect our name. Its serves as an important and distinctive representation of the origin of our products as well as the goodwill of GateHouse Media.

The blogger, Ray Jadwick, definitely makes fun of the Utica Observer Dispatch on his site, but it certainly doesn’t appear to be trademark infringement. Making fun of your paper isn’t likely to confuse even a moron in a hurry.

From the Public Patent Foundation:

Farmers and Seed Distributors Defend Right to Protect Themselves From Monsanto Patents

NEW YORK – August 11, 2011 – The eighty-three family farmers, small and family owned seed businesses, and agricultural organizations challenging Monsanto’s patents on genetically modified seed filed papers in federal court today defending their right to seek legal protection from the threat of being sued by Monsanto for patent infringement should they ever become contaminated by Monsanto’s genetically modified seed.  The Public Patent Foundation (PUBPAT) represents the plaintiffs in the suit, titled Organic Seed Growers & Trade Association (OSGATA), et al. v. Monsanto and pending in the Southern District of New York.  Today’s filings respond to a motion filed by Monsanto in mid-July to have the case dismissed.

“Rather than give a straight forward answer on whether they would sue our clients for patent infringement if they are ever contaminated by Monsanto’s transgenic seed, Monsanto has instead chosen to try to deny our clients the right to receive legal protection from the courts,” said Dan Ravicher, PUBPAT’s Executive Director.  “Today’s filings include sworn statements by several of the plaintiffs themselves explaining to the court how the risk of contamination by transgenic seed is real and why they cannot trust Monsanto to not use an occurrence of contamination as a basis to accuse them of patent infringement.”

Plaintiffs Bryce Stephens, who farms in Kansas, Frederick Kirschenmann, who farms in North Dakota, C.R. Lawn, who is founder and co-owner of Fedco Seeds in Maine, Don Patterson of Virginia, and Chuck Noble, who farms in South Dakota, each submitted declarations to the court describing their personal experiences with the risk of contamination by genetically modified seed and why those experiences have forced them to bring the current suit asking the court to declare that Monsanto could never sue them for patent infringement if they were ever contaminated by Monsanto’s GMO seed.  As summarized by the accompanying brief filed by PUBPAT on the plaintiffs’ behalf, “Monsanto’s acts of widespread patent assertion and plaintiffs’ ever growing risk of contamination create a real, immediate and substantial dispute between them.”

Twelve agricultural organizations also filed a friend-of-the-court amici brief supporting the right of the plaintiffs to bring the case.  In their brief, the amici describe some of the harmful effects of genetically modified seed and how easily GMOs can contaminate an organic or conventional farmer’s land.  The organizations filing the amici brief were Farm and Ranch Freedom Alliance, Biodynamic Farming and Gardening Association, Carolina Farm Stewardship Association, Ecological Farmers of Ontario, Fair Food Matters, International Organic Inspectors Association, Michigan Land Trustees, Natural Environment Ecological Management, Nebraska Sustainable Agriculture Society, Organic Council of Ontario, Slow Food USA, and Virginia Independent Consumers and Farmers Association.

The brief filed by the plaintiffs in opposition to Monsanto’s motion to dismiss is available here.

The amici brief filed in support of the plaintiffs is available here.

More information about PUBPAT’s suit against Monsanto’s seed patents can be found at PUBPAT > Monsanto Seed Patents.

From Timothy Geigner at Techdirt:

Author Says eBooks Will Hurt Authors Because Of Royalty Rates

from the but-the-percentages-say-otherwise dept

Opinions on the emergence of eBooks in the modern era come with all manner of widely varied opinions. We saw J.K. Rowling go from staunchly refusing to offer her works as eBooks to routing around her publisher and offering them directly to her fans. Barry Eisler turned down a huge publishing contract to self-publish his eBooks, even as the Mystery Writers of America were telling Joe Konrath, Eisler’s friend, self-publishing meant he wasn’t a “real author”. And, of course, we have the always prevalent opposed viewpoints of the benefits of carrying your digital library everywhere versus the preference for the look and feel of a physical hardcopy tome.

But one argument I haven’t heard before (and I spend a decent amount of time reading and learning about the publishing world, for obvious reasons) is that eBooks are dangerous to the future of young authors because the royalty rates won’t support them making a living. That’s theargument Graham Swift made in an article in The Telegraph by Nick Collins. Graham is quoted as saying:

“The e-book does seem at the moment to threaten the livelihood of writers, because the way in which writers are paid for their work in the form of e-books is very much up in the air. I think the tendency will be that writers will get even less than they get now for their work and sadly that could mean that some potential writers will see that they can’t make a living, they will give up and the world would be poorer for the books they might have written, so in that way it is quite a serious prospect.”Swift is an award-winning author and, as such, I assume he’s as or more informed about the publishing world than I am, but I’m having trouble rectifying his speculation on declining royalty rates for eBooks with how such royalties are handled now. Unfortunately, because there is some variance in how royalties are handled in the publishing world, particularly with fiction, there are some distinctions to be made with how this all works.

First, let’s quickly look at royalties offered in a standard publishing contract through a mainstream press. Hardcover royalties are typically between 10% and 15%, with some variance in the contract based on the number of units sold. Paperback royalties are typically between 6% and 9%, usually also with breaking points based on sales. Meanwhile, the standard eBook royalty rates tend to be much higher, anywhere between 25% and 50%. Now, Graham appeared to be speaking of the future decline of eBook royalty rates, but the general trend with established publishers has been for those rates to rise rather than fall, recently.

Now, as everyone is aware, the emergence of eBooks has coincided with a boom in the self-publishing industry. I’m going, for the sake of this argument, to set aside true vanity publishers with awful reputations in the publishing world. Some authors out there will tell you horror stories about operations like Publish America, but they have an equally bad reputation when it comes to both hardcopy books and eBooks. Instead, let’s deal with how royalties work for self-publish eBook operations like Lulu and the Amazon Kindle market. As someone who has published on both platforms, I’m very familiar with how royalties work with each.

With Lulu, there is some wiggle room for authors to set their own retail price and, therefore, royalty for physical books. The default settings come to something around 9% for hardcopy books. That same default setting for eBooks? Roughly 55% in royalty for the creator. Creators offering up eBooks on the Kindle Direct Publishing platform can expect their royalties to start at 35% (although there are some options that can bump that royalty to 70%, depending on how much the author wishes to sell their eBook for).

And none of that even takes into account authors who are cutting out the middlemen with eBooks entirely and offering up their works with something like a PayPal account, yielding royalties for eBooks effectively somewhere around 75%. This is a sector of authors that’s only going to grow, as we’ve discussed here before. The beauty of the eBook is that an author no longer has to worry about the single most difficult aspect of getting his or her work to the reader: the physical production of the printed book. With that barrier gone, it seems as thoughmore young writers will find themselves suddenly able to enter the market, not fewer.

So, perhaps Swift knows something I don’t, but everything I read seems to indicate that eBooks are going to result in options for higher royalties, not lower. So I have to wonder where this fear comes from?

From The Federalist No. 43, the only reference to the patent and copyright clause in the Federalist Papers: Madison “argues”: “the utility of this power will scarcely be questioned.” Well, then, that settles it! No need for studies or empirical evidence. A hunch, a handwave, is good enough!

From Wired — a rarity nowadays: a slightly positive move in copyright law:

Amazon, Dropbox, Google and You Win in Cloud-Music Copyright Decision

The disk drives powering Dropbox, Amazon’s Cloud Drive, and Google Music likely issued a small sigh of relief Monday, after a federal court judge found that the MP3tunes cloud music service didn’t violate copyright laws when it used only a single copy of a MP3 on its servers, rather than storing 50 copies for 50 users.

For Amazon and Google’s nascent cloud music services, the decision clears the way for them to make it easier and faster for customers to use their music services; gives them legal cover to reduce the amount of disk space needed per user; makes it less likely that new customers of their music services will bust through their ISPs data caps when signing up; and clears the way for the companies to let users add songs found on webpages and through search to their lockers with a single-click — all without either being sued by record labels for doing so.

Monday’s decision centers on MP3tunes, a cloud-based online music locker service, that allows a customer to upload the music from their hard drives to a “locker” on the web, where they can play back the songs from any connected device.

But instead of uploading all of a user’s songs, MP3tunes’ software would check the library for previously uploaded songs and if a match existed, the song would just be added to the locker without requiring an upload. No matter how many customers “uploaded” that song, MP3tunes kept only a single copy.

Read more>>

A comment by a friend about a future world of smart machines and robots made me think of one way to illustrate the manifest injustice and absurdity of patents. Whenever patent and copyright are discussed, a few typical arguments routinely emerge:

• how would pharmaceutical companies make money without? After all, it takes hundreds of millions of dollars to do the research and testing, and if some competitor could just knock them off, no one would make the drugs in the first place. (Nevermind Boldrin & Levine’s complete evisceration of the empirical assumptions here in ch. 9 of Against Intellectual Monopoly.)
• And without copyright, you could never have blockbuster movies. (As if the purpose of this state monopoly is to make sure society produces Avatar; and forgetting that people go to movie theaters and pay for the privilege.)
• Patents are essential to protect the little guy. (Forget the fact that patents protect larger companies from competition from smaller players, leading to barriers to entry and oligopolies. See Patent Cross-Licensing Creates Barriers to Entry; Intellectual Property Advocates Hate Competition; also Kevin Carson, Criminalizing Competition.)

My point here is that the “strongest” case for patents is alleged to be the pharmaceutical industry. Now imagine a not-too-distant future world where 3D printers of all types are becoming more prevalent. It is easy to imagine machines designed to fabricate pharmaceuticals. If a new life-saving drug hits the market and costs thousands of dollars per year (due to the combination of the patent monopoly, the FDA system, medical licensure of doctors, government regulation of prescription drugs, and other state interventions), some consumers may prefer to “make their own” generic version, using reverse-engineered “recipes” floating around the web programmed into their own, or a friend’s, 3D drug printer. Just as the hacker community quickly cracks new iOS releases on the iPhone, say, it is not hard to imagine the drug-hacker community reverse engineering the composition and manufacturing method of pharmaceuticals–especially in this near future world with increasingly sophisticated and cheap analyzing and related equipment.

Now, these home-made generic pharmaceuticals might not be as good as the official ones. They might even be more dangerous. But to save thousands of dollars a year, many people might turn to this.

In such a world, what would Big Pharma and the state that it is in bed with do? Today, it’s easy for the state to pursue generic drug companies: they are visible and easy to target and find. And though attacking them indirectly harms the consumer, it’s not seen as a direct attack on the consumer–just as the poor and middle classes sometimes support taxes on corporations even though this ends up filtering down to them in terms of higher prices.

But in a world of home-brew drug printers, what would the state and its Big Pharma cronies do? Would Patent SWAT teams break down the front doors of homes of suspected “patent smugglers,” as is done now in the drug war? (And as illustrated in fiction, with respect to the use of patents to shut down crops infected by patented “seeds”–see, e.g., The Evil of Patenting Food and Seeds; season 4, episode 5, of the TNT program “Leverage”; Geoffrey Allan Plauché’s review of “The Calorie Man” by Paolo Bacigalupi.) There may be some of this, but in the end it would be hard to prevent such widespread “homebrew” drug fabrication. This would, of course, drive down the prices of the patented, “official” products.

Another tack the state might take would be to go after the use of information, as it does now in the case of copyright. Owning a 3D drug printer would not be per se illegal since it has so-called “non-infringing” uses. The only thing that would make certain uses of it illegal would be loading a given recipe into it that enables it to fabricate a version of some patented pharmaceutical. How would a consumer obtain these recipes? Probably on the Internet, by email, the Pirate Bay, and so on. So what the state would have to make illegal would be knowledge itself, a recipe for how to do something. It would be illegal to find out how to make a given drug. We are already seeing the beginning of the IP War on 3D Printing; it would no doubt escalate as home fabricators were used to manufacture high-priced drugs. So we can see that in the future, the only way to protect the patent for the allegedly most important case for patents, would be to have the state police and censor knowledge and information. And,

That, of course, is what the state does now, it’s just that it’s not as easy for consumers to see this yet. In the future, hopefully, with increasingly advanced technology, it will be harder and harder for the state to maintain its cover.

[mises]

From Jeff Tucker at the Mises blog:

In-N-Out Sues Grab-N-Go

August 23, 2011 by Jeffrey Tucker

The battle over the burger takes the low road as In-N-Out sues Grab-N-Go for copyright infringement.

A system where companies learn from examples of success and emulate in the service of the consumer? We can’t have that!

A recent fascinating KERA Think podcast interview with Johnnie Hughes, The Evolution of Ideas, discusses his book On the Origin of Tepees: The Evolution of Ideas (and Ourselves). He has some great ideas about … ideas and their origin, function, and evolution. The interview is great, and the books sounds interesting–I intend to buy it. In the interview he discusses four types of creatures. He gives an example of the relative success, and effect of natural selection on, animals trying to cross a busy road:

• Darwinian creatures: such as a jellyfish. Their behavior is pre-programmed;
• Creatures that operate by instinct but it can learn;
• “Popperian” creatures (like chickens) that have little model of the world and can crudely plan;
• “Dennettian” creatures (after philosopher Daniel C. Dennett, who has a model of intelligence), who can communicate rationally, swap information, trade ideas, learn, etc. The other three types inherit genes; we can inherit, trade, ideas and information.

This interested me because of my focus, in studying intellectual property law and its intersection with ideas and the role of ideas in human action and the economy, e.g. in my recent talk Intellectual Property and Economic Development. It also called to mind some of Hans Hoppe’s recent thoughts on the role of human intelligence in helping humanity evolve to the point of intelligence sufficient to escape the Malthusian trap (discussed in Advanced Graduate Seminar, Tuesday, July 26, 2011).

Speaking of tepees, he mentions that one advantages of these lightweight, collapsible tents is that they could easily be carried–initially by dogs, before Europeans brought horses over–hence the origin of the expression “dog days.” Hunh. Not sure he has the origin of that expression right, but interesting hypothesis.

NSK Interview on Patents, by Taylor Conant — this link above is defunct; here is the original, from WayBackMachine:

APRIL 6, 2007

“Big Dig #3” – Patent Law

The following was an assignment, “Big Dig #3,” for a business journalism class. I researched the patent process and interviewed a patent attorney from Houston, Texas, Stephan Kinsella (his personal website is available here).

—

On November 28, 2006, the Supreme Court heard oral arguments in the KSR v. Teleflex patent case, a trial which could produce the most important ruling for patent law in forty years.

The case involves a dispute between KSR, a company which manufactures gas pedals that use an electronic signal rather than a mechanical cable to signal the engine, and Teleflex, a company which claims KSR has infringed a patent it was issued in 2001 for a similar technology. The dispute revolves around whether or not KSR’s system was an “obvious” integration of known technologies or not.

“The implications of this case to the patent system are huge. It could impact millions of U.S. patents currently in force and over 700,000 patent applications currently being examined by the PTO,” according to an interview conducted by PRNewswire.com of Robert Greene Sterne, a member of the counsel for KSR.

Patents, like trade secrets, trademarks and copyright, seek to protect “intellectual property,” or “IP.” Of the general IP category, only patents and trade secrets protect inventions.

According to Stephan Kinsella, a patent attorney from Houston, Texas, there are four criteria the United States Patent and Trademark Office (or PTO), use when judging whether or not an invention is patentable—statutory subject matter, utility, novelty and non-obviousness.

“Basically you can patent machines and processes that produce a useful result, so that’s the first one, and utility means it just has to do something useful,” says Kinsella.

So, based on the first two criteria, drugs are in (potentially make you healthier), while nuclear bombs and perpetual motion machines are out (nukes can only do harm or disutility, while perpetual motion machines are impossible according to the laws of thermodynamics).

“Novelty means it has to be new, and that’s usually pretty easy to overcome,” Kinsella continues. “But then you have to ask yourself if it’s an obvious difference or a non-obvious difference, and in most other parts of the world this is called the ‘inventive step.’”

So, by way of example, Kinsella says patenting the use of an LCD panel with a computer would not be a possibility because it is already obvious that you would use a display device with a computer, even though and LCD is new in comparison to a standard CRT monitor.

As the Supreme Court case shows, and as Mr. Kinsella emphasizes, obviousness – or lack thereof – is the central issue of patent law being debated these days. And the spread of the Internet and electronic goods will serve only to further complicate the patent system in that regard.

“About five years ago, Amazon got an injunction against Barnes and Noble to stop their one-click—they had a patent on clicking once on the basket to buy something as opposed to clicking twice,” says Kinsella, recounting a key moment in the growth of e-commerce. “It’s ridiculous, utterly ridiculous… Barnes and Noble is lagging behind now and I don’t know if that’s why, but it’s possible.”

According to Kinsella, there may even be a kind of populist revolt against the concept of IP by consumers who are increasingly frustrated by restrictions on the way they use their electronic media and information technologies.

“I believe there is a growing hostility towards IP in general, at least among Gen-X and the tech people,” Kinsella says, citing the examples of the RIAA, Disney and the recent Blackberry patent suit in which the company was forced to pay hundreds of millions of dollars to another company which claimed Blackberry had violated one of its patents. “There is an increasing fear a lot of small companies are in of patent infringement when they’re just trying to do business.”

That’s a concern worth taking seriously—after all, the patent system is predicated on the belief that the limited-monopolies granted by it incentivize creativity and create a net benefit for the economy. But if the arbitrariness of the patent system leads to exponentially-increasing costs, the economic usefulness of the system might need to be reexamined.

“If you really take seriously the idea that anyone who comes up with an idea has some property right in it, it either has to be definite or infinite. If it’s infinite, the human race probably would’ve died out a long time ago, because no one would be able to use the wheel, or fire or build a house without getting permission,” says Kinsella. “Therefore, the only way to make them work is to define their duration, but then you run into the problem of arbitrariness—twenty years for a patent, seventy-five years for a copyright, ten year renewable terms for trademarks.”

Until the time comes for Mr. Kinsella’s ideal system which only respects trade secrets and trademarks, he and others concerned with the patent system will just have to cheer on the right outcome in court cases such as KBR v. Teleflex. Depending on the way the ruling goes, that case could result in a striking down of current notions regarding “secondary conditions of non-obviousness,” which Kinsella views as currently helping to promote the arbitrariness of the patent system which is responsible for situations like the Amazon one-click patent.

According to the industry blog PatentlyO.com, Justice Scalia has already hinted that a conclusion in the case has been reached, saying, “I know how that one comes out, but I’m not going to tell you.”

Stephan Kinsella has his fingers crossed.

POSTED BY THE OWNER AT 2:43 PM