IPR abolition, papers in May 2011

Reposting my papers written in May 2011.

(1) On anti-drug patents.

A number of libertarians call IPR as “intellectual monopoly rights.” They argue that IPR is “evil because granting artificial rights to non-property restricts everyone else’s property rights.”

One such article is by Jock Coats in the Adam Smith Institute blog. Coats’ short paper, Intellectual property: an unnecessary evil, argues further that

…”intellectual property” is a contemporary conceit to conceal crude market interference through state granted privilege with the flimsiest gossamer of respectability. The primary origins of patents lie in maintaining the state’s coffers, and of copyright in state censorship of ideas.

Property rights arise from a desire to prevent conflict over scare resources. Ideas, patterns, recipes and processes are non-scarce. Intellectual monopoly laws impose different time periods and restrictions…

19th century libertarians ranked Intellectual Monopoly as state created privilege that impoverishes the majority. We should heed them: they are still destructive, unnecessary, statist and evil.

It was a friend in facebook, a young German liberal thinker, who posted that article. I mentioned to him that top anti-IP libertarians like Stephan Kinsella want the abolition of all forms of IP — copyright, patent, etc. They argue that ideas can never be owned. If I am an aspiring rock or rap star, I composed several good rock/rap songs, then I cannot say “I own” those songs. My friend replied,

You will still be recognized as the producer of that song and be able to make money with it, even without IP protection (contract law is sufficient). And with modern technology it is becoming increasingly difficult to protect IP and in the process of protecting them you are causing more harm to the principles of liberalism/libertarianism than otherwise. And by composing a rap song you will undoubtedly use some other form of IP in the process and should you not pay royalties to the inventor of rap? That seems absurd. And your song won’t be scarce, if I copy it, I’m not taking anything away from you. Earning money will be more difficult for you, I grant that. But doesnt that create an incentive for quick production of new IP? This will create more dynamism and make it more difficult for monopolies to emerge, a major criticism of market-sceptics. And physical property – which must be protected – is being attacked on by protection of IP, as the ways you can use the former can be limited throuh IP protection.

I suggested in my earlier paper that it should be up to the IP owner if he wants to share his invention for free, or to be protected. Very often, the cost of enforcement is much much larger than the benefits of full enforcement, say of fighting song piracy, so many IP owners, except the big ones like The Beatles and U2 perhaps, won’t bother full enforcement of their IPR.

I think the bigger debate on IPR is on expensive inventions like drug molecules. If the cost of inventing a new beer molecule (or compound of molecules) is not very high, then the new beer inventor/s may not press for full IPR protection. But in the case of drug molecules where the average industry cost of producing one successful molecule (successful meaning safe, hurdled dozens of clinical trials, and effective as killer of a particular disease) is up to $1 B, then such inventors will try to seek full IPR protection whenever possible.

One big opposition to IPR by the libertarians, liberals, anarchists and other shades of free marketers, is that it is a government (usually the Intellectual Property Office) that gives IPR. If that is a big problem for them, then it can be solved by having a private entity, say a federation of industry players, that can give such IPR.

Do the anti-IP people consider a molecule or an atom as “non-tangible”? I still have to dig about this. But for me, a newly-invented molecule (or compound of molecules), say a drug molecule, tire molecule, beer molecule, etc. are tangibles. Water is a tangible object, it is composed of 2 atoms of hydrogen and 1 atom of oxygen (H2O).

Related to health, a molecular invention, say a new anti-cancer drug, a new weight-loss food supplement, a new skin whitener, etc., the bigger the cost of inventing them. Inventors and manufacturers have to entertain the possibility that they can be sued someday by their customers if the latter will suffer some adverse health results, or at least if the promised “miracle” did not happen. If there is huge costs in the R&D of such drugs or food supplement or ointment, if there is huge costs in possible future legal battles over the safety of such new products, then the inventors and manufacturers need to price their new invention at a higher level, via the temporary monopoly period (a patent, copyright, etc.).

Some anti-IP libertarians can unwittingly merge ideologically with the leftists and socialists in arguing for the eradication of IPR in drugs. The higher price of new and patented drugs compared to off-patent and older ones is, for them, proof of the evil of IPR. And this is another dangerous mistake that free marketers from whatever shade should avoid committing. Pricing is a private property right. It can never be communal or government right.

(2) PRPX forum in Sydney, 2010

The attack against intellectual property (IP) and IPR is coming from all directions, particularly from the socialists (social and collective property rights, not private property rights) and the libertarians, the anarchist wing in particular (ideas cannot be owned, IPRs are state-issued that further expand the state). I do not know how long this trend has been, I just notice them as some friends just email them to me, or post them in my facebook wall.

One such literature is Bourbon for Breakfast: Living outside the statist quoby Jeffrey Tucker of Mises Institute in Alabama. The (3rd) chapter on Technology is about IP, although the focus is on copyright of books.

Last September 30, 2010, during the 4th Pacific Rim Policy Exchange in Sydney, Australia, one of the panel discussions was on IP, Jobs and the Economy. One of two speakers there was Michael Williams (in this picture) of Gilbert + Tobin law office in Sydney. His paper was entitled Resisting populist calls for a wind back of IP laws and showing leadership in the promotion of IP laws.

I show here 3 of his 7-slides presentation. Click the slides to get a larger image.

Mr. Williams’ concern though, is more with the socialists and anti-capitalist individuals and groups, especially academics, who regard private property rights in general, and IPR in particular, as extension of exploitation and mass disenfranchisement by capitalism. He did not discuss the equally anti-IP sentiment by some libertarians.

Here he showed one law enacted 302 years ago, theStatute of Anne 1709, giving property rights to authors of printed books. I observe from several literatures of the anti-IP writers, their argument that “IP = monopoly”. Since monopoly is evil, then IP is also evil. I will grant that this is a correct proposition if we are talking about an industry or sub-industry monopoly. Say a monopoly in telecommunication, a monopoly in music industry, monopoly in movie industry, and so on.

But I think there is nothing in the IP laws that says “All rock songs (or all action movies, all science fiction books, all anti-hypertension drugs, all racetrack tires,…) are copyrighted by ______ company for its exclusive use, sale, transfer, for __ years.” What the IP laws say is that “one copyright for each rock song by each rock band/singer” and there are 1,000 or 100,000 rock bands and singers worldwide producing 100,000 or 1 million rock songs.

Mr. Michaels correctly asserted that “The attempted wind back of IPR is an attack on rights of personal property.” An IPR vested on each author, or composer, inventor, innovator, does not automatically mean that each author or inventor will go for exclusive use and control of his IP work or molecular invention. It is possible that he will waive his IPR and monopoly right of use and share his work with the rest of humanity for free.

The security of an IPR is reserved for those inventors and composers/authors who think they are better recognized and compensated (financially, intellectually, culturally, etc.) if an IPR is granted upon them.

Mr. Michaels concluded that “The recognition of IPR is consistent with the pursuit of democracy, property rights and economic development… Now is the time to strengthen IP laws to drive technological development in the digital age and to provide certainty for investment in the future.”

Amen to that.

(3) Comments to  #2 above.

After posting #2 above in my facebook wall, it attracted a number of comments. For brevity purposes, I will enumerate the comments and questions from 6 friends – Froilan, Say, Siegfried, Marvin, Dominic and Donaldson. Here they are:


1. Here’s a libertarian’s comment on this group: “Lets put it this way… I bought a book from a great author and I love to share it with my friends and relatives for free, re-print it using my paper, ink, printing machine, my valuable time and produces 100 the same copy with the full name of the author and title. And the author is nowhere to be found or maybe he’s already dead. Still I have no right?” SO EVIL!
http://www.facebook.com/home.php?sk=group_196382230406190

In a society that respects property rights, which include IP rights, no one may infringe upon anyone’s right (copyright, patent right, etc.) however noble the intention. But in an anarchic society, reprinting copies of an author’s book even without the latter’s consent either for good intention or for profit is deemed perfectly “moral” [and legal].

2. What does one actually own under an intellectual property rights regime? I believe ownership of property can only be physical ownership. Under a property rights regime, I own physical stuff like chairs and houses. Under an intellectual property rights regime, what do I physically own?

3. As to IPRs, I do feel they are materially different, and intrinsically weaker, than property rights in land and goods, simply because land and goods can only be used by one person at a time, while intellectual goods can be used by multitudes simultaneously. IPRs sole justification is thus a claim on the fruits of one’s labour, which is important but has to be balanced by the need to avoid socially harmful extended monopolies that pre-empt potentially beneficial markets. There is considerable scope for misuse when IPRs are claimed without an intention to use the invention, just to pre-empt competitors, or when farmers are not allowed to produce their own seedgrain from patented seeds, to cite two notorious examples. And the extension of Disney’s IPR to Mickey Mouse by the US Congress shows how open this all is to political manipulation.

4. I agree with your blog’s general direction from an evolutionary economics (neo-Schumpeterian) point of view.

In the present world, much ‘intellectual property’ is the result of conscious effort and work not just of individuals but also of institutions like R&D laboratories or research universities – new knowledge comes more and more from the work of teams. Some form of IP protection provides incentives for such innovation work to happen. Societies that provide the fairest protection, like the U.S., Switzerland, EU, become the most innovative and therefore best able to deliver rising living standards to its citizens. Two examples:

a) For drugs and medicine, the safety and efficacy standards of the U.S. Food and Drug Administration (FDA) to protect the populace from quacks and snake oil salesmen require a fixed stress test period of seven years that is quite expensive and a big barrier (and still gives incomplete protection for cases like mutative risks from toxic compounds – mercury- or lead-based – that accumulate in the parent but affect the offspring, i.e. thalidomide or nicotine/saccharine that are consumed in minute quantities and take up to thirty years to become high risk of local cancer to the consumer).

If one agrees that the FDA provides value to society, in concept, then drug developers ought to be given enough time to obtain returns on their directed effort to develop drugs.

Even this reasonable period may still not be enough without government spending on the science research (not just application development) that requires finding new and basic knowledge that are not appropriable to discoverers, not in the best interest of society to provide temporary monopoly cover, or too expensive for even large corporations or countries to invest. Four examples – (a) Manhattan project for national defense in the development of the atomic bomb, (b) DARPA project for alternative distributed command-and-control channel in case of nuclear that was eventually released to the public domain in 1995 when risk from war with the Soviet Union to become the Internet/WWW, (c) CERN collider in Europe to discover the behavior of atomic particles for leading-edge Physics, and (d) mapping the human genome for future development on next level gene-based drugs.

b) Thus far, patents that provide temporary monopoly protection for about seventeen years (that in the case of drugs 7-10 years are already used in the approval process) and seem to be the fairest and at the same time most advantageous to society in providing incentives for innovation.

Obviously, there is some administration needed to do this in behalf of the total population and thus taxes to pay for such administration. As mentioned above, the U.S. patent system, on the whole, provided fair protection and created the richest and most innovative society.

With the recent crises, some budget proposals are made to gut the U.S. Patent Office under the general ideological rubric, without looking at the details, of creating small government.

Let us watch the reduction of U.S. dominance in having 19 out of 20 top universities in the world and the migration of research laboratories overseas now happening (as pull in) because of the search for talent but maybe accelerating in the future because of lack of IP protection from patents (as push out).

5. So I’m going to warn a friend who is passionately creating and innovating a device that will surely help his father because of disability. He might get sued…. As Mr. Michaels concluded that “The recognition of IPR is consistent with the pursuit of democracy, property rights and economic development… Now is the time to strengthen IP laws to drive technological development in the digital age and to provide certainty for investment in the future.”

Are we asking here for more Government intervention? I think the drive for technological development and advancement will come from the market, the competition, not from more regulations.

6. The intellectual property regime is full of grey areas.


Here are my response and rejoinder to the above six comments and questions.

On #1, I think that even if the author is alive, is around nearby, he won’t mind that his book is being copied and distributed for free to more people. What he would object would be if his book is copied and sold for a good price or profit by some guys.

On #2, In the IP regime, one owns ideas, an invention, a composition, a molecule or compound of molecules. Ideas are ownable. For instance, one  million rock songs from 100,000 rock bands and singers worldwide, one million copyrights (on each of those songs), what’s wrong with this? Invention of drug molecule to control if not kill breast cancer, such molecule is a product of hard work, huge investments, long R&D work, involving several dozen scientists. In a No-IP regime, anybody can also claim, “I also invented that useful drug molecule” even if they spent not a single $ for its discovery.

On #3, Patented seeds number in millions. Rice seeds in the IRRI seed bank alone, should be several tens or hundreds of thousands, each may be patented. The reason for the expansion of so many different seeds is biotechnology and agri- or bio-engineering. The seed patent system has encouraged thousands of seed scientists to invent new breeds, new varieties, with very specific properties. Say a rice with vitamin C, a rice harvestable in just 2 1/2 months, a drought-resistant rice that can survive with just few days of rain up to harvest. On Mickey’s patent, thanks for it, other cartoon producers simply say, “So we cannot use Mickey for our tv program? We will just invent our own cartoon characters.” That is why Winnie the Pooh, Tigger and Pooh, Dora, Dibo, Pocoyo, Pororo, Angelina Ballerina, Chuggington, Little Einsteins, Barbie, and several dozen other cartoon characters were invented. All competing with each other, and little kids today know more cartoon characters than 2 or 3 decades ago. The IP mini-monopoly system created more and more products and services, more innovators, all competing with each other.

On #4, Amen to your points, Marvin.

On #5, Don’t warn your friend, encourage him to pursue it. Each invention, especially health related, requires some form of “clinical trials”. If he succeeds in his invention to help his father, he can show it as proof, he can go to IPO and register his invention for IP recognition, only if he wants it. Or he can share it with the rest of humanity, no problem on both actions. Re Michael Williams’ concluding note, No, no need for “additional” government intervention. The interventions and regulations are already there. What he is referring to, is for governments not to bend to the anti-IP academics and socialists to relax if not abolish the IP system.

On #6, Yes, IP has lots of grey areas. But if we focus on “more private ownership, more capitalism; more social ownership, more socialism”, I think we can reduce the grey areas and limit the debate to a few issues.

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