Pro-IP Libertarians Upset about FTC Poaching Patent Turf
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. ((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.)) 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, ((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.)) 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) ((See Milton Friedman on the Distorting Effect of Patents; The Forgotten Costs of the Patent System.)) 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. ((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.))