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Shughart’s Defense of IP

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Free-market economist Professor William F. Shughart II attempts to defend the need for IP in “Ideas Need Protection,” The Baltimore Sun (Dec. 21, 2009) (previously published in the Christian Science Monitor). Subtitled “Abolishing Intellectual-property, Patents Would Hurt Innovation: A Middle Ground Is Needed,” the piece suffers from flaws found in others defenses of intellectual monopoly and pattern privilege. For example, Professor Shughart writes:

Article I, Section 8, of the Constitution explicitly delegates to Congress authority “to promote the progress of science and useful arts, by securing for limited times to authors and inventors the exclusive right to their respective writings and discoveries.”

While it is true that copyright and patent are constitutional, this does not make these laws just. What the artificial law-writing coup-leaders wrote a document designed to help the state seize more power is simply not relevant to the normative question of whether there should be IP.

Pro-patent law arguments rest on the assumption that the patent system generates overall wealth–that its benefits are greater than its costs–without ever making this case. Instead, they point to ways that the patent system benefits some people, and never bother to even try to tally up the costs to make sure it’s a net positive. In other words, they don’t even take their own justifications seriously. Shughart makes the same mistake:

Developing and successfully commercializing new products and technologies typically requires large investments of time and treasure. Most research and development (R&D) investments end in failure.

Granting a temporary monopoly to the rare breakthrough is necessary, therefore, to provide its inventor with an opportunity to earn a return on the investment that led to the new idea–and to encourage additional such investments. Such protection is especially important in the pharmaceutical industry, where, in its absence, new drugs could be duplicated by competitors, and the incentive to invest would disappear, stifling the discovery process.

The word “therefor” is unwarranted; this is a non sequitur. Later on in the piece, he writes:

Incentives matter. Although there may be a passionate few who don’t require payment for contributing to the common pool of knowledge, technological advancement will be much more rapid if an explicit economic payoff is available.

Much more rapid–? How much more? Who knows? The IP advocates don’t. So how do they know it justifies the cost?I found this to be an refreshing admission of the stifling effect mercantilist intellectual monopoly has on the spread of ideas:

To paraphrase the late economist Joan Robinson, patents and copyrights slow down the diffusion of new ideas for a reason: to ensure there will be more new ideas to diffuse …

Unfortunately, he supports these laws anyway. Shughart also candidly and explicitly admits the monopoly character of of patent and copyright:

Granting a temporary monopoly to the rare breakthrough is necessary…

(Some IP advocates get very irked when patents are called monopolies. For example (as noted in Are Patents “Monopolies”?), patent attorney Dale Halling, in a piece entitled “The Myth that Patents are a Monopoly,” writes, “People who suggest a patent is a monopoly are not being intellectually honest and perpetuating a myth to advance a political agenda.” But it is common for IP advocates to acknowledge this. For example, Richard Epstein writes “Patented goods are subject to a lawful monopoly created by the state in order to induce their creation … The legal monopoly granted by the patent is the only mechanism that allows the producer to recover those fixed costs….” And Objectivist IP attorney Murray Franck has argued that “if the creator’s rights are not protected, his survival is jeopardized. If another can market his creation, the creator is deprived of the money he would otherwise earn.” See also my comments here, noting that even the Supreme Court and other federal courts slip up and admit the monopoly character of IP on on a regular basis.)

Consider this argument our author makes:

It is true that other means exist for creative people to profit from their effort. In the case of copyright, authors can charge fees for reading their works to paying audiences. Charles Dickens did this, but his heavy schedule of public performances in the United States, where his works were not protected by copyright, arguably contributed to his untimely death.

Can Shughart really be arguing that we need copyright, for otherwise another potential Charles Dickens might drop dead early? (This reminded me of a bizarre argument made by patent attorney Gene Quin, noted in this post. In an online discussion, IP opponent David Koepsell had mentioned “that in the 19th and early 20th centuries, two of the most innovative countries on earth (The Netherlands and Switzerland) had no patent systems at all.” In response, Quinn says: “Thank goodness the Swiss did have a Patent Office. That is where Albert Einstein worked and during his time as a patent examiner came up with his theory of relativity.” So … we need a state-granted monopoly system … so that Albert Einstein could have had a job in Switzerland. What does one even say in response to such an “argument”?)

Professor Shughart continues:

The hard questions are: What kinds of ideas should be eligible for patent and copyright protection, and how long should that protection last?”

What’s needed is a middle ground. Even if we can all agree that intellectual property is an important social commodity, one size doesn’t fit all in the modern Digital Age.

While a 20-year monopoly may be appropriate for new drugs, it may not be appropriate for software, a new electronic game or, as Justice Sonia Sotomayor seemed to suggest during questioning in the Bilski case, a new “speed-dating service.”

A 20-year patent monopoly on a method for speed-dating may not be appropriate?! How would Justice Sotomayor know, really?

As for there being “hard questions”–who can answer them? And if “we need a middle ground”–even though we have no evidence to know where the “optimum” is–how can we achieve this? Who can do it? Shughart’s answer: Congress and the courts:

Rather than abolishing patent and copyright protection for some categories of intellectual property, Congress and the courts should consider varying the length for which exclusive monopoly privileges are granted, depending on the expected commercial vitality of the creative work. [emphasis added]

The state is neither benevolent nor competent (well, they are good at two things: destruction, and propaganda). There is no reason to believe Congress or the courts want, or are equipped, to find the “right” answers to such questions. (As J.H. Huebert observes about government courts: “In general, judges and those who appoint them have no reason to want to limit government. … Have not judges been responsible for some of the most outrageous expansions of government power? And, after all, are judges not a product of the same political system that gives us legislators and presidents? What president would appoint judges who would tell him he cannot do anything he wants? What Senators would confirm a judicial candidate who tells them that everything they have ever done in office is unconstitutional? The whole enterprise of libertarian constitutional theory ignores all we have learned from public choice economics about the incentives of government actors.”) There is no reason to trust state employees to determine the optimum length of patent and copyright monopolies for various types of inventions and artistic works, much less by using “the expected commercial vitality of the creative work” as a test.

***

Appendix:

N.B: My original draft was done in very sarcastic style. At the urging of some friends, I ultimately decided to rewrite it in more standard, serious, respectful, straight style. But for those who like a bit of humor, here’s the original sarcastic post:

Shughart’s IP Parody

In “Ideas Need Protection,” subtitled “Abolishing Intellectual-property, Patents Would Hurt Innovation: A Middle Ground Is Needed,” free-market economist William F. Shughart II has penned a wickedly funny parody of typical arguments in favor of IP. Brilliantly, he somehow managed to slip it by the editors of The Baltimore Sun as well the Christian Science Monitor, where it was first published, without either publication realizing it was a parody.

Shughart mocks the arguments typically given in defense of intellectual monopoly and pattern privilege, such as appeals to authority and positive law, when he writes:

Article I, Section 8, of the Constitution explicitly delegates to Congress authority “to promote the progress of science and useful arts, by securing for limited times to authors and inventors the exclusive right to their respective writings and discoveries.”

Ha ha! As if what the artificial law-writing coup-leaders wrote a document designed to help the state seize more power is relevant to the normative question of whether there should be IP. Good one, Professor.

He goes on, mercilessly lampooning the intellectual monopolists:

Developing and successfully commercializing new products and technologies typically requires large investments of time and treasure. Most research and development (R&D) investments end in failure.

Granting a temporary monopoly to the rare breakthrough is necessary, therefore, to provide its inventor with an opportunity to earn a return on the investment that led to the new idea–and to encourage additional such investments. Such protection is especially important in the pharmaceutical industry, where, in its absence, new drugs could be duplicated by competitors, and the incentive to invest would disappear, stifling the discovery process.

I like this. First, he demonstrates how pro-patent law arguments rest on the assumption that the patent system generates overall wealth–that its benefits are greater than its costs–without ever making this case. Instead, they point to ways that the patent system benefits some people, and never bother to even try to tally up the costs to make sure it’s a net positive. In other words, they don’t even take their own justifications seriously. The point is reinforced by the totally unwarranted word “therefore” inserted above, in a blatant example of non sequitur. Revisiting this theme later on in the piece, our author writes:

Incentives matter. Although there may be a passionate few who don’t require payment for contributing to the common pool of knowledge, technological advancement will be much more rapid if an explicit economic payoff is available.

Much more rapid–? How much more? Who knows! The IP advocates don’t! “What are they jabbering about? How do they know?”, Shughart seems to be saying, if you read between the lines.

Professor Shughart has no doubt noted that although it gives IP advocates a case of the vapors if you call IP a “monopoly,” too many hapless IP advocates just seem unable resist admitting this. Thus, he writes:

To paraphrase the late economist Joan Robinson, patents and copyrights slow down the diffusion of new ideas for a reason: to ensure there will be more new ideas to diffuse … Granting a temporary monopoly to the rare breakthrough is necessary…

This is just a perfect impression of the typical blunder made by patent and copyright proponents when they inadvertently acknowledge the stifling effect mercantilist intellectual monopoly has on the spread of ideas. This is a very common faux pas of the monopolists, who forget to hide the fact that IP is, in fact, a monopoly. When IP’ers stray from the reservation like this, it really irks the organized pro-patent forces. For example (as noted in Are Patents “Monopolies”?), patent attorney Dale Halling, in a piece entitled “The Myth that Patents are a Monopoly,” writes,

People who suggest a patent is a monopoly are not being intellectually honest and perpetuating a myth to advance a political agenda.

But, as Shughart demonstrates, all too often the pro-monopoly forces can’t help themselves and inadvertently let the truth tumble out of their mouths. For example, we have pro-patent Richard Epstein (see Epstein and Patents), noting that

Patented goods are subject to a lawful monopoly created by the state in order to induce their creation … The legal monopoly granted by the patent is the only mechanism that allows the producer to recover those fixed costs….

And here we have Objectivist IP attorney Murray Franck arguing that “if the creator’s rights are not protected, his survival is jeopardized. If another can market his creation, the creator is deprived of the money he would otherwise earn.”

And see my comments here, noting that even the Supreme Court and other federal courts slip up and admit the monopoly character of IP on on a regular basis:

Section 154 and related provisions [e.g. Sec. 271] obviously are intended to grant a patentee a monopoly only over the United States market….”; “Congress made the policy choice that the “carrot” of an exclusive market for the patented goods would encourage patentees to commercialize the protected inventions so that the public would enjoy the benefits of the new technology during the patent term in exchange for granting a limited patent monopoly. In other words, the public expected benefits during ‘the embarrassment of an exclusive patent as Jefferson put it.’”; “We hold that the disputed royalties provisions do not inappropriately extend the patent monopoly to unpatented parts of the patented system”; “A patentee, in demanding and receiving full compensation for the wrongful use of his invention in devices made and sold by a manufacturer adopts the sales as though made by himself, and therefore, necessarily licenses the use of the devices, and frees them from the monopoly of the patent.”; “The Florida statute is aimed directly at the promotion of intellectual creation by substantially restricting the public’s ability to exploit ideas that the patent system mandates shall be free for all to use. Like the interpretation of Illinois unfair competition law in Sears and Compco, the Florida statute represents a break with the tradition of peaceful coexistence between state market regulation and federal patent policy. The Florida law substantially restricts the public’s ability to exploit an unpatented design in general circulation, raising the specter of state-created monopolies in a host of useful shapes and processes for which patent protection has been denied or is otherwise unobtainable. It thus enters a field of regulation which the patent laws have reserved to Congress. The patent statute’s careful balance between public right and private monopoly to promote certain creative activity is a “scheme of federal regulation . . . so pervasive as to make reasonable the inference that Congress left no room for the States to supplement it.”; “Whatever weight is attached to the value of encouraging disclosure and of inhibiting secrecy, we believe a more compelling consideration is that a process patent in the chemical field, which has not been developed and pointed to the degree of specific utility, creates a monopoly of knowledge which should be granted only if clearly commanded by the statute. Until the process claim has been reduced to production of a product shown to be useful, the metes and bounds of that monopoly are not capable of precise delineation. It may engross a vast, unknown, and perhaps unknowable area. Such a patent may confer power to block off whole areas of scientific development, without compensating benefit to the public. The basic quid pro quo contemplated by the Constitution and the Congress for granting a patent monopoly is the benefit derived by the public from an invention with substantial utility. Unless and until a process is refined and developed to this point — where specific benefit exists in currently available form – there is insufficient justification for permitting an applicant to engross what may prove to be a broad field.”; “I agree with the Court that the question before us is a narrow one. Neither the future of scientific research, nor even the ability of respondent Chakrabarty to reap some monopoly profits from his pioneering work, is at stake. Patents on the processes by which he has produced and employed the new living organism are not contested. The only question we need decide is whether Congress, exercising its authority under Art. I, 8, of the Constitution, intended that he be able to secure a monopoly on the living organism itself, no matter how produced or how used.”

Anyway, Shughart must have noticed this habit of inadvertently admitting the true nature of the patent grant–a habit that makes fellow IP advocates grimace and exclaim, “Damn! He admitted it too!“–and imitated it here to perfection. “Those crazy patent guys,” Shughart seems to be saying, with a sly smile and a twinkle in his eye, “can’t get their story straight.”

Here’s another patentism Professor Shughart tackles. Sometimes IP advocates trot out the most ridiculous arguments when they have no other response available, such as this bizarre argument by patent attorney Gene Quinn (noted in this post). In an online discussion, IP opponent David Koepsell had mentioned “that in the 19th and early 20th centuries, two of the most innovative countries on earth (The Netherlands and Switzerland) had no patent systems at all.” In response, Quinn says:

Thank goodness the Swiss did have a Patent Office. That is where Albert Einstein worked and during his time as a patent examiner came up with his theory of relativity.

You got that? We need a state-granted monopoly system … so that Albert Einstein could have had a job in Switzerland. I mean, what does one even say in response to this, which is not even a pretense at serious argument? Our observant author must have noticed this and other such arguments, which he is clearly mocking here:

It is true that other means exist for creative people to profit from their effort. In the case of copyright, authors can charge fees for reading their works to paying audiences. Charles Dickens did this, but his heavy schedule of public performances in the United States, where his works were not protected by copyright, arguably contributed to his untimely death.

See? We better have copyright–you don’t want another potential Charles Dickens to drop dead early, do you?

Professor Shughart continues:

The hard questions are: What kinds of ideas should be eligible for patent and copyright protection, and how long should that protection last?”

What’s needed is a middle ground. Even if we can all agree that intellectual property is an important social commodity, one size doesn’t fit all in the modern Digital Age.

While a 20-year monopoly may be appropriate for new drugs, it may not be appropriate for software, a new electronic game or, as Justice Sonia Sotomayor seemed to suggest during questioning in the Bilski case, a new “speed-dating service.”

The IP advocate is here portrayed as unable to even definitively object to a 20-year patent monopoly on a method for speed-dating–”it may not be appropriate”! And the part about “these are hard questions” … who can answer them, oh who?– and “we need a middle ground”–even though we have no evidence to know where the “optimum” is. But wait for it–Congress might know! –

Rather than abolishing patent and copyright protection for some categories of intellectual property, Congress and the courts should consider varying the length for which exclusive monopoly privileges are granted, depending on the expected commercial vitality of the creative work. [emphasis added]

Shughart is so right here: the proponents of intellectual monopoly, like all interventionists, do indeed have an utterly misplaced, naive faith in the state’s benevolence and competence. Why, let’s have Congress should figure this out! Oh, I’m in stitches. And the courts–yeahhhhh, they’ll do a great job–the same courts witheringly described here by J.H. Huebert:

In general, judges and those who appoint them have no reason to want to limit government. … Have not judges been responsible for some of the most outrageous expansions of government power? And, after all, are judges not a product of the same political system that gives us legislators and presidents? What president would appoint judges who would tell him he cannot do anything he wants? What Senators would confirm a judicial candidate who tells them that everything they have ever done in office is unconstitutional? The whole enterprise of libertarian constitutional theory ignores all we have learned from public choice economics about the incentives of government actors.

I will close by noting my favorite line of this sparklingly humorous essay: to determine the right length of patent and copyright monopolies for various types of inventions and artistic works, Congress should be not only trusted to want to do this, but should use “the expected commercial vitality of the creative work” as the test! Oh, man. I’m crying.

Stephan Kinsella is an attorney in Houston, director of the Center for the Study of Innovative Freedom, and editor of Libertarian Papers.

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