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Madison on So-Called IP:
In the course of finishing my casebook on constitutional law, I was reading James Madison's "Detached Memorandum" that was discovered in 1946. It ranges over many topics including that of monopoly, in which category he includes the protection for authors and inventors that, on his motion, was included in the Constitution. The passage makes clear that he does not see this grant of monopoly as "property" given that it is granted for strictly limited times, and that it might be a good idea if the State had the right to buy it back:
Monoplies tho' in certain cases useful ought to be granted with caution, and guarded with strictness agst abuse. The Constitution of the U. S. has limited them to two cases, the authors of Books, and of useful inventions, in both which they are considered as a compensation for a benefit actually gained to the community as a purchase of property which the owner might otherwise withold from public use. There can be no just objection to a temporary monopoly in these cases: but it ought to be temporary, because under that limitation a sufficient recompence and encouragement may be given. The limitation is particularly proper in the case of inventions, because they grow so much out of preceding ones that there is the less merit in the authors: and because for the same reason, the discovery might be expected in a short time from other hands.

Monopolies have been granted in other Countries, and by some of the States in this, on another principle, that of supporting some useful undertaking until1 experience and success should render the monopoly unnecessary, & lead to a salutary competition. . . . But grants of this sort can be justified in very peculiar cases only, if at all; the danger being very great that the good resulting from the operation of the monopoly, will be overbalanced by the evil effect of the precedent; and it being not impossible that the monopoly itself, in its original operation, may produce more evil than good.

In all cases of monopoly, not excepting those specified in favor of authors & inventors, it would be well to reserve to the State, a right to terminate the monopoly by paying a specified and reasonable sum [to the holder.] This would guard against the public discontents resulting from the exorbitant gains of individuals, and from the inconvenient restrictions combined with them.

Update: Eugene usefully points out that Madison referred to "literary property" in his Vices of the Political System of the United States. I think this is a fair point and a useful correction. Indeed re-reading the quote, I notice that Madison refers to the monopoly grant for limited times as "compensation for a benefit actually gained to the community as a purchase of property which the owner might otherwise withhold from public use." So let me revise my point to the more limited observation that Madison saw these grants to be a narrow exception to the general objection to monopolies, that were dangerous and should be carefully limited. And however these limited grants are labeled, they do not have all the attributes we normally associate with tangible property. Given that they typically involved interference with the freedom of others to trade what was theirs, the sorts of monopolies to which the Founders strongly objected are not the same as the "monopoly" one has on one's own tangible property. And it is to this objection, Madison made a narrow exception to provide a public subsidy for writers and inventors.

JohnEMack (mail):
One of the most interesting features of madison's memorandum is its anti-capitalist implications. Madison speaks of "[a] right to terminate the monopoly by paying a specified and reasonable sum [to the holder.]" because "This would guard against the public discontents resulting from the exorbitant gains of individuals...." But if one intends to prevent "exorbitant gains," one is not going to pay fair market value for the interest purchased. The value of a right or a property interest is the expected value of its exploitation, and so payment for that value at its market price can never be "exorbitant." Naturally, Madison was no Marxist, nor was he a socialist -- that would be anachroistic, in any case. But he was a southern gentleman, and he ha an instinctive aversion to equating value with "what the market will bear."

Moreover, I wonder if he (or other 18th century politicians) had settled upon "fair market value" as the measure of "just compensation." The two phrases are not identical, after all. The Catholic Church spent the better part of a millenium trying to work out the concept of a "just price" apart from market value, and I wonder if our founders had been disabused of that sort of thinking before the Constitution was drafted.
6.12.2007 10:21am
anonVCfan:
The passage makes clear that he does not see this grant of monopoly as "property" given that it is granted for strictly limited times, and that it might be a good idea if the State had the right to buy it back.

How does this show that Madison didn't view IP as "property"? Under eminent domain power, the State can buy real property from its owner "by paying a specified and reasonable sum."
6.12.2007 10:37am
GMUSL 3L (mail):
Randy, the government DOES have the right to "buy it back". It's called a taking. See Monsanto and Zoltek for more.

Just as an aside, I have to say that I utterly detest the use of the word "monopoly" to refer to IP and not just because it recalls Stevens's and Black's economically ignorant populism.

A patent in and of itself is not a monopoly; it is the right to exclude, not the right to practice. Cf. Juicy Bang v. Orange Whip. If a patent is a monopoly, then Randy has a monopoly on his own labor and (jointly, with his wife) on the property that they own, just as the Yankees have monopolies on Joe Torre, Roger Clemens, Derek Jeter, Jorge Posada, and A-Rod.

As alluded to in Independent Ink save the smears of "monopoly" for a showing of non-trivial market power. Otherwise, be sure to use it every single time a property right is involved, including your monopoly on posting here as Randy Barnett.

(This little rant brought to you by Don Boudreaux's wonderful demolition of the word "monopoly")
6.12.2007 11:06am
GMUSL 3L (mail):
I should also add that the case for IP-as-monopoly is even weaker after eBay.
6.12.2007 11:17am
ATRGeek:
I agree with Madison that "intellectual property" is more properly categorized as a form of state-protected monopoly, and I think his idea of a buyback provision is a darn good one.

JohnEMack,

Madison's views are not anti-capitalist, unless you think all antitrust regulation is anti-capitalist. The fundamental problem is that a concept like "fair market value" usually assumes that the goods or services in question will be priced by a free and competitive market (that is usually part of what is built into the idea of a "fair" market). But in a monopoly situation, the market is not competitive, so the observed prices are not indicative of the prices that would be set in a competitive market.

More broadly, this points out a tension in what "capitalism" means. For some it primarily means strong private property rights, in which case to the extent that antitrust regulation prevents people from exercising their property rights as fully as they might wish, antitrust regulation is "anti-capitalist". But to others capitalism primarily means the organization of the economy (including investment, production, distribution, pricing, income, and so on) through free and competitive markets.

Given the latter conception of capitalism, strong private property rights are generally a good ideam since they tend to encourage free and competitive markets. But in limited circumstances--such as monopoly situations--those property rights might have to give way in the name of perserving the free and competitive nature of the markets. In other words, this tension is caused by different senses of the priority within capitalism between strong property rights and free and competitive markets.

Anyway, Madison is actually being quite generous: if the state removes its protection from "intellectual property" (eg, the state refuses to punish alleged "infringers" who seek to compete with the person claiming an "intellectual property" right), the person will still get whatever value from their ideas that they can get in a competitive market. So, Madison could actually just argue that the term of the monopoly be cut short as soon as the state concludes it is no longer in the public interest.

In other words, for the state to give the person any compensation on top of what they can continue to get without the monopoly is basically to compensate them for their lost monopoly profits. That may be a good idea for the ordinary public policy reasons (or not--it is not clear that government subsidies for invention are really necessary or even a good idea). But it isn't mandated by "fair market value" considerations once you redefine the relevant market as one in which the person does not benefit from the state enforcing a monopoly on their behalf.

As I see it, then, Madison is proposing a wait-and-see attitude toward these issues: people may provisionally be granted a limited term monopoly as an incentive to invent. But if it appears after a while in a particular case that the anti-competitive harms outweigh the beneficial incentive effects of the monopoly, the state can revert to a cash subsidy for the invention in lieu of the monopoly. That strikes me as pretty sensible, because it is hard to know in advance whether the monopoly-based or cash-based approach to incentivizing invention is going to better serve the public interest.
6.12.2007 11:18am
Hank:
GMUSL 3L: Why is the case for IP-as-monopoly even weaker after eBay?
6.12.2007 11:21am
ATRGeek:
GMUSL 3L,

To state the obvious counter-argument, Derek Jeter cannnot both play for the Yankees and for another team at the same time, because he is just one person and can only be playing in one game at a time.

But the thing about ideas is that you can reproduce them with loss. So, you can take an idea for a better mousetrap and use it to make mousetraps, and I can take the same idea for a better mousetrap and also use it to make mousetraps, and the fact that I am using the idea too does not prevent you from using the idea. And having both of us doing that is ordinarily a good thing for the consumers of mousetraps.

And if baseball teams could somehow just reproduce Derek Jeter without loss, that might also be a good thing for consumers of baseball games. In such a case, we might well be reluctant to give the Yankees a right to prevent other teams from reproducing Derek Jeters of their own.

Indeed, the more proper analogy would be something like a Yankee pitcher inventing a new pitch, and then enforcing a right by the Yankees to prevent the pitchers for any other team from reproducing that pitch. And again, it is not so obvious that would be a good idea.

That said, of course it is true that "intellectual property" does not always result in a monopoly. But in those cases it is actually failing to achieve its purposes, because without the ability of the IP-holder to extract monopoly profits, the relevant rights provide no additional incentive to invent.
6.12.2007 11:32am
GMUSL 3L (mail):
Hank, if it were in fact a state-enforced "monopoly" as we understand the term, then injunctive relief would be the primary remedy, available as a matter of course both preliminarily and permanently. It would seem that if it were a monopoly, it would be the defendant's case to prove why there should be no injunction rather than the plaintiff proving the limited and specific set of circumstances in which injunctive relief would be available.

While it had become more common than the Kennedy plurality preferred, it was never available in every case. While I disagree with eBay, because I do see IP as property, it further undercuts the case for IP-as-Monopoly on those grounds.

Then again, I think that injunctions should be available as a matter of course for trespass on both physical and intellectual property, but I think that this just bolsters my point -- how useful or informative is it to refer to home ownership as a "monopoly" as opposed to a property right? It's even more ridiculous to refer to personal property rights as a form of "monopoly".

At least to me, a monopoly is a government-granted affirmative right to do something -- like cable companies in most municipalities, or the way the Baby Bells used to be. You can't compete in the field, let alone the technology; the barrier to entry is infinite, and the only solutions are wildly different technology, such as using satellite or Verizon FiOS.

It's just very hard for me to view the grant of a patent, which is extremely narrow by comparison, as a monopoly by comparison to physical property, let alone government-sponsored utilities.
6.12.2007 11:33am
PersonFromPorlock:
In fact, the state does not 'grant' monopolies on IP, it charges an arm and a leg for them. This somewhat limits their usefulness in encouraging invention.
6.12.2007 11:38am
GMUSL 3L (mail):
ATRGeek,

So the only distinction between IP "monopoly" on one hand, and property/contract non-monopoly exclusion on the other, is that that IP is non-rivalrous?

That's a fairly weak justification for calling something a monopoly.

Also, you're confusing "monopoly profits" with rents and return on investment. They're not co-terminous concepts or terms.

The idea that any market power (and the ability to get profits above those predicted by the never-realized ideal of "perfect competition") implies a monopoly relies on the "old bad monopoly concepts" that even IP-suspicious antitrust had abandoned decades ago.

If that's the argument, then we should get rid of trademarks too. Damn that pesky brand loyalty. Let everything be indistinguishable in the bland world of perfect competition.
6.12.2007 11:43am
Clayton E. Cramer (mail) (www):
I have this odd feeling that I have read this statement by Madison somewhere before, but it is good to see it again. Patents are certainly one of those things which makes true monopolies (in the sense of a single company preventing competition) possible, and Madison was right: the justification for patents and copyright is the benefit that they grant to the society; hence, the relatively short lifetime that both enjoy, unlike tangible property, which exists until you destroy it.
6.12.2007 11:55am
GMUSL 3L (mail):
It's also instructive to note that the tradeoff is NOT between patents and full disclosure of research with full allowance.

A non-trivial portion of patents would be replaced with trade secrets, which are not only undisclosed, but actually secret. This reduces the amount of available information, preventing researchers from standing on the shoulders of giants or midgets, and increasing unnecessary duplication of research effort.

Unlike patents, trade secrets are of potentially unlimited duration (the manufacturer of Listerine is still paying a per-gallon fee to the inventor's family) and can involve criminal penalties, as in the case of the Coke employees who contacted Pepsi. Should we get rid of this "monopoly" too?

Weakening patents increases incentives for trade secret protection instead and reduces the amount of available information. It's one of the great ironies that the "open source" and "open society" anti-patent advocates' policies would have the effect of reducing the amount of technical information.
6.12.2007 12:10pm
ATRGeek:
GMUSL 3L,

First, the fact that there is no action for trespass on "intellectual property" is a very good indication that it is not in fact "property". An action for infringement, on the other hand, is exactly a claim that someone is competing in a way the law says they are not allowed to compete. That is why it is quite obvious that "intellectual property" is actually a form of monopoly (in a broad sense, see below): the right in question is not a right to retain possession, but rather the right to ask the state to protect the rights-holder from competition.

As an aside, obviously we limit "IP" rights in all sorts of ways, in part precisely because we are worried about their anti-competitive nature. So, for example, compulsory licenses are in some sense an attempt to cut back on IP in the name of reducing anti-competitive harms. Again, though, I think this all just confirms that IP is fundamentally about the state protecting the rights-holder from competition, which is why the limits of IP are so often set in the name of not limiting competition too much.

And that is why the "non-rivalrous" nature of ideas is not a weak justification for calling "intellectual property" a form of monopoly--rather, it is a fundamental distinction. Again, when I "infringe" your "intellectual property" rights, I do not in fact deny you the use of your ideas. All I am doing is using the same idea to compete, and it is the non-rivalrous nature of ideas that allows me to compete without reducing your ability to use the same idea. Again, that is why "intellectual property" by nature is about preventing competition.

As for monopoloy profits versus return on investment: you are exactly right they are not the same thing. Indeed, without "intellectual property" there would still be a return to investment on innovation (eg, because of the first-mover advantage, network efficiencies, and so on). What "intellectual property" does is increase the return to investment on innovation by also giving the rights-holder the potential benefit of excluding competition. That is why "intellectual property" can add a monopoly profit component to the return on investment in innovation, but it is precisely because there is already a return on investment to innovation that it is far from clear that adding this monopoly profit component is always a good idea.

All that said, I agree that we could be more precise here by using terms like "anti-competitive" and "market power" instead of "monopoly", since anti-competitive structures and practices can take many forms besides monopolies. I don't think that semantic issue is really the important one, however: again, the basic point is that IP, to the extent it works, incentivizes invention by having the state protect the rights-holder from competition. And I think Madison and others are just using "monopoly" in a broad sense, one intended to capture all the relevant forms of anti-competitive structures and practices.
6.12.2007 12:11pm
David Drake:

GMUSL 3L:

I'm reading a lot of 17th Century English history right now and "patents" are regularly described as "monopolies", and vice-versa. They were a big problem back then. Madison is undoubtedly using the term in the 17th and 18th Century sense, being ignorant of precedent under U.S. patent laws.

The more I read of President Madison's writings, the more impressed I become.

BTW, the case is Juicy Whip v Orange Bang.
6.12.2007 12:11pm
ATRGeek:
By the way, the "trade secrets" issue is a reasonable consideration, but it is just another component of the public policy balancing act. Of course, you can make publication a requirement of any sort of subsidy for innovation.

In general, the complexity of the public policy issues is part of why I think Madison's approach is a good one: rather than trying to determine all this in advance with a blanket approach, it makes sense to me to create points at which we could reconsider the approach we have taken in particular cases in light of the information we have gathered up to that time.
6.12.2007 12:20pm
ATRGeek:
Oh, and I wanted to note that a government-granted right to engage in an activity (what we might call a state license) is not a monopoly per se, because the state could grant that license to multiple competitors. It is only when the state determines that it will grant that license to only one person in the relevant market that it creates a monopoly.

IP, of course, does not necessarily replace the licensing part of this situation (you could have IP and yet the government could deny you the necessary license to use it). But it does provide the anti-competitive part (the state-enforced decision that at most one person will have the right to use the IP), and of course that is the part that turns a state licensing scheme into a monopoly scheme.
6.12.2007 12:36pm
Mark Amerman (mail):
About JohnEMack's comment,

It's rather ironic and amazing that he'd equate monopoly with
capitalism, since Adam Smith's "An Inquiry into the Nature and
Causes of the Wealth of Nations" is in to a significant extent an exposition on the evils of monopoly and an articulation of
a strategy to combat it.
6.12.2007 12:39pm
byomtov (mail):
At least to me, a monopoly is a government-granted affirmative right to do something -- like cable companies in most municipalities, or the way the Baby Bells used to be.

Humpty-Dumpty speaks. Why must it be government granted? And why don't I have a monopoly on my own labor? Granted, it's not a particularly useful way to think about it, but nonetheless no one but me can sell my labor.

The distinction between the right to exclude and the right to practice also doesn't strike me as useful. You need both to have a monopoly, but the right to practice is normally independent of monopoly status.
6.12.2007 12:45pm
ATRGeek:
byomtov,

I just want to note again that if someone else could simply reproduce and sell your labor without diminishing your ability to sell your labor, we might well think that was a good idea. Of course, that isn't possible when it comes to your labor, but the point is that it is possible when it comes to your ideas.
6.12.2007 12:58pm
GMUSL 3L (mail):
ATRGeek:

Actually, patent infringement has always historically been analogized to a trespass. It's just called infringement instead. It's an incredibly frequent set of string cites in patent cases, particularly in the ones involving genus/subgenus/species claims and "blazemarks" issues. Chisum on Patents has a nice section on this issue. Also, try looking up "land patents".

Moreover, as Professor Adam Mossoff detailed in his amicus brief urging cert. in Zoltek (and on which our eponymous host is a signatory), patents WERE considered property during the 19th century, not a "monopoly" (regardless of Madison's confused aside to the contrary, but keep reading for that...)

The government-grant of a right is not necessarily sufficient, but it is necessary for a monopoly. This is why GSM has a monopoly in Europe, but not in the US -- the EU decided on the standard, whereas we didn't decide to use one or the other, and GSM and CDMA coexist. In contrast, the rights-of-way and easements required for laying cable or fiber require the government grant. Even if you wanted to compete, you'd have to make a nearly impossible case to the municipal government to let you tear up the town just to lay parallel cable.

As for compulsive licensing, it's basically a non-issue in the US in patents and trademarks in most circumstances (with Bayh-Dole being the most notable exception). It applies more broadly to (c), which is a much more screwed-up incentive system (e.g., criminal penalties easily available, no examination, attaches by default, incredibly long term), and compulsory licensing exists in (c) in part because it's so incredibly difficult to determine the rights-holder for a 70-year old work when transfers need not be recorded and the work itself might not have even been registered.

David Drake:

There's a simple answer to your confusion, based on the fact that England and the US have very different patent systems. In the 17th and 18th centuries, the word "patent" referred to different things. In England, the king gave out "patent monopolies", which were legal government-granted monopolies to supplement his income, the exclusive right to, e.g., sell a type of cloth in a particular locale or import wine. They were completely arbitrary, issued or denied at his whim, and mostly offered NOT in exchange for the public disclosure of valuable technological innovation.

The US never used the term "patents" to describe situations of that sort. The British certainly were, and Madison probably was, referring to the BRITISH situation using the word "patents" and not the American patent system.

The term patent was somewhat of a late addition as well. The constitution does not use the term "patent" in Art. I, S.8, cl.8, but instead allows congress to give "inventors" the "exclusive right" to innovations to promote "the useful arts". Congress decided to use the term "patent" for short. But it's a fundamental historical and intellectual error to conflate the two practices.

Ain't history fun?
6.12.2007 1:02pm
David Maquera (mail) (www):
Well, I guess its time for my lunch break anyway.

Am currently reading Ron Chernow's biography on Alexander Hamilton. Fascinating! In the latter half of the 18th century, Great Britain fostered the development of proprietary methods for its textile mills, which were a source of its commercial power. Great Britain jealously guarded such trade secrets as if they were state secrets so that it could maintain its commercial supremacy over commercial rivals including the American Colonies. The penalties for anyone disclosing such trade secrets were quite severe (possibly death).

In light of the foregoing, the Founding Fathers insert the clause in the U.S. Constitution, which became Article I, Section 8. Hamilton comes along as Treasury Secretary and wants to acquire Great Britain's trade secrets so that the United States can transition from a poor supplier of raw materials to a wealthier manufacturing based economy. Hence, Hamilton engages in what might be viewed as commercial espionage in order to acquire Great Britain's trade secrets. Patents (or Monopolies) are granted to those individuals who replicate Great Britain's pre-existing trade secrets in the United States.
6.12.2007 1:09pm
GMUSL 3L (mail):
Bernie Holiday, nice to hear from you again!

The distinction between the right to exclude and the right to practice also doesn't strike me as useful.

Here's an example: You can get a patent for a suicide booth. You can get a patent for a method of mass-extermination. You can get a patent on a method to sneak a gun through a metal detector, or on a metal strong enough for use in firearms and knives that avoids the conventional detection methods.

You can get a patent for something arguably fraudulent, ala the machine in Juicy Whip, which might be prohibited in wacky places like California.

Regardless of the partial birth abortion ban, you can get a patent on partial birth abortion methods. Regardless of the ban on stem cell research, you can get all sorts of patents in the US on the results of stem cell research abroad. You can get patents on human cloning technology, Chimeras, or just about anything else that is illegal.

Moreover, your patent may be blocked by somebody else's patent, especially if it's an improvement. How many "monopolies" are blocked by another "monopoly"? Take a look at the semiconductor industry -- if patents are monopolies, then the term has no meaning.

But that doesn't mean that you can actually practice your US patent in any of these or many other circumstances, even though you can sue somebody else who (also illegally) practices your invention.
6.12.2007 1:12pm
GMUSL 3L (mail):
Also the analogy to trespass does not require an actual dimunition of your own use. It's 1L property law that a trespass is actionable even if nothing is broken, if you're not home, if your use of the property is not denied in any way. The offense is crossing the property line.

Now, the amount, impact, and circumstances of the trespass relate to damages, but liability starts from crossing the property line. There's not, nor has there been, a requirement that the property owner's actual use be diminished for there to be a trespass, as opposed to, say, conversion.
6.12.2007 1:20pm
Esquire:
Interestingly, Federalist 43 concedes that copyrights are common law property, although that's probably a reference to the later-overruled (by the House of Lords in Donaldson v. Becket in 1774) adjudication in Millar v. Taylor, from the King's Bench in 1769.

So for 5 brief years, copyrights in Britain were natural law PROPERTY rights, and Federalist 43 does seem at least somewhat complicit with that notion. Now, whether the framers were *unaware* of Donaldson, OR whether they knew of it and just disagreed with it, either way it might support an original-intent argument for the property-view.

But I also agree that the "literary property" in "mental labor" (as it was called...emphasizing the parallels to physical property, where man likewise enjoys RIGHTS in the fruits of his labors!) conception was only workable because the rights were indeed so narrowly defined. When these rights get stretched, then people start invoking a more *intertwined* perspective of how "inevitably" related various works allegedly are, as opposed to the more all-works-exist-in-a-vacuum view (which of course has is limits, but is not nearly as illegitimate as it's sometimes derided to be).

Then again, some scholars suggest that Madison was merely trying to appeal to folks whom he knew wouldn't tolerate anything sounding like the monopolistic activity the Crown was so known/disdained for...

Justice Thompson's dissent in the first (1834) US case regarding copyright-as-common-law-property (in arguable addition to the federal supplemental protection, as analogous the what the Statute of Anne had initially been held to be in Millar) is actually a very interesting review of the relevant historical developments. Lord Mansfield (author of Millar) had apparently criticized opponents of literary property for scaring people into thinking that it was somehow problematic to recognize it -- in part because the scope of those rights were too *narrow* to lock up ideas, etc., as still feared today...with perhaps more justification.
6.12.2007 1:24pm
Esquire:
Moreover, the potential for disparate treatment of patents vs copyright which is notably alluded to is also supported by the historical development...
6.12.2007 1:27pm
Adam Mossoff (mail):
This posthumously published writing by Madison is interesting for more reasons that simply noting that Madison associated the term "monopoly" with patents and copyrights. First, Madison was not against ascribing as "property" things that were intangible, as he identified that people have a property right in their opinions and thoughts in his published 1793 essay, "Property."

Madison's "Property" essay, and his remarks on the Patent and Copyright Clause in the The Federalist Papers lead to my second observation: Madison was not necessarily consistent between his persona, unpublished writings and his published writings. In fact, if Madison believed that patents were merely, in Randy Barnett's words, "a narrow exception to the general objection to monopolies," then he was in the minority in thinking this within the American government up through at least the antebellum period.

My primary historical research into this issue has uncovered substantial court opinions, legislative records, and in primary treatises, such as James Kent's Commentaries and St. George Tucker's Blackstone’s Commentaries, in which American patents are expressly treated as civil property rights in accord with traditional rights in land and chattels. Supreme Court Justices, both in the Supreme Court and riding circuit, often referred to infringers of patents as "pirates," and I found Justice Story using this term in the early 1820s. On the grounds of labor desert policies, patent terms were extended in private legislation and a seven-year term extension was provided for in the 1836 Patent Act. In fact, in the antebellum period, federal judges and Justices created explicit canons of liberal and expansive treatment of patents on the grounds that these were valuable and important property rights securing to inventors the "fruits of their labors" (this fundamental natural rights policy was invoked as a principal justification for securing patents as property rights throughout the antebellum period). Even more significantly, Justices and judges expressly relied on real property cases, invoking property doctrines and concepts, as determinative precedent in deciding patent cases.

I review these primary historical sources and discuss the omnipresent natural-rights justification for patents in the early American Republic in my article coming out this summer in the Cornell Law Review. For anyone interested in seeing the historical evidence for yourself, an early draft can be read at:

http://papers.ssrn.com/sol3/papers.cfm?abstract_id=892062
6.12.2007 1:47pm
byomtov (mail):
GMUSL 3L,

I wrote,

You need both to have a monopoly, but the right to practice is normally independent of monopoly status.

Pay attention to the words "both" and "normally."

Now in fact I think all this discussion of what is or is not a monopoly is sort of a silly semantic game. First of all, it has somewhat different meaning in economics than in anti-trust law. Second, the term's very usefulness is based on evaluating the actual effects, good or bad, of real monopolies. So while it might be interesting to talk about patents on illegal devices, etc., it's not particularly helpful.

These are no different, from an economic point of view, than patents on perfectly legal devices for which there is no demand. If I invent and patent such a device do I have a monopoly? I think so, but it's hardly worth fighting about the definition.

ATRgeek,

I just want to note again that if someone else could simply reproduce and sell your labor without diminishing your ability to sell your labor, we might well think that was a good idea. Of course, that isn't possible when it comes to your labor, but the point is that it is possible when it comes to your ideas.

We also might not think so. If you can reproduce and sell my labor you lower the price of my labor. This doesn't diminish my ability to sell it, of course, but it does diminish my incentive to do so, or to invest in training to increase the value of my labor.

Further, Inventions are not just ideas. Novels, music, etc. are not just ideas. They are ideas plus labor - "2% inspiration and 98% perspiration." If you can reproduce the labor part easily you might not get so much creative work.
6.12.2007 1:52pm
Esquire:
Very interesting! (I also liked your article on copyright in the FedSoc Publication, BTW.) In my research, I've found the natural-rights view much more compelling in the copyright context than with patents, but I'll check out your article...
6.12.2007 1:52pm
Bruce:
Several politicians in the early Republic were also fairly suspicious of government contracts, which they too thought of as "monopolies." Interesting stuff, but not especially relevant for today's debates.
6.12.2007 1:59pm
Jam:
When did Madison write the "Detached Memorandum?"

The Constitution does not provide for providing a "public subsidy for writers and inventors." It only provides for a time-limited protection. The General Welfare, if you take a more expansive interpretation, combined with the Takings Clause then provides for the renumeration of the inventor/author by purchasing, for the benefit of the public, and not any individual, the "protection" period.
6.12.2007 2:04pm
American Psikhushka (mail) (www):
JohnEMack-

Naturally, Madison was no Marxist, nor was he a socialist -- that would be anachroistic, in any case.

Well he's advocating the government setting prices for intellectual property and then forcing the sale of same. And then he's talking about preventing the creators of intellectual property from making "exorbitant gains" on their property. That's pretty socialist/collectivist - enough for me to contemplate inventing (and patenting) a time machine so I that could go back and slap him.
6.12.2007 2:13pm
David Drake:
GMUSL 3L

"The US never used the term "patents" to describe situations of that sort. The British certainly were, and Madison probably was, referring to the BRITISH situation using the word "patents" and not the American patent system."

That was my point.
6.12.2007 2:20pm
speedwell (mail):
I'm just a know-nothing layman, but the part of the first paragraph in which Madison says, "...a purchase of property which the owner might otherwise withold from public use...." grabbed my attention and won't let go.

Isn't that an awful lot like punishing a crime before the (alleged) "perpetrator" committed (or didn't commit) it? Why institute such a legal mechanism in preference to one that is triggered only upon actual, verifiable evidence that the owner is unjustifiably withholding from public use (along with showing that the public is materially injured thereby, and all that jazz)?
6.12.2007 2:50pm
American Psikhushka (mail) (www):
ATRGeek-

But the thing about ideas is that you can reproduce them with loss. So, you can take an idea for a better mousetrap and use it to make mousetraps, and I can take the same idea for a better mousetrap and also use it to make mousetraps, and the fact that I am using the idea too does not prevent you from using the idea. And having both of us doing that is ordinarily a good thing for the consumers of mousetraps.

But unprotected intellectual property provides you with windfall profits. I could have a large R&D division that is very costly. In your scenario you don't even need an R&D division, you just obtain one of my traps and have your manufacturing division copy it. So your scheme actually disincentivizes and handicaps creation and invention. This doesn't seem to be a positive for anyone, because I'm not going to be able to afford the R&D division for very long and will scrap it to become a cherry-picker like your firm. In a short time, innovation (at least on any kind of large scale) in this sector is probably going to come to a stop.

Note this dynamic is the definition of anti-competitive, because I am actually punished by the costs of innovation, while competing firms are not.

As for monopoloy profits versus return on investment: you are exactly right they are not the same thing. Indeed, without "intellectual property" there would still be a return to investment on innovation (eg, because of the first-mover advantage, network efficiencies, and so on). What "intellectual property" does is increase the return to investment on innovation by also giving the rights-holder the potential benefit of excluding competition. That is why "intellectual property" can add a monopoly profit component to the return on investment in innovation, but it is precisely because there is already a return on investment to innovation that it is far from clear that adding this monopoly profit component is always a good idea.

When you remove the "monopoly profit component" from the equation you are changing the dynamics of investment in research and innovation. You are changing the risk profile of the investment process, most likely skewing investment away from expensive and/or high risk projects because you have taken the high rewards away. This seems like it would be quite negative, since some of the most rewarding and revolutionary inventions likely involve a lot of expensive and/or high risk investment.

Now you could say that Madison's idea of government payments for this is the necessary bandaid, but here you have the government setting prices, which governments are notoriously horrible at - and which is basically socialization.
6.12.2007 2:59pm
ATRGeek:
GMUSL 3L,

I think the conversation is moving on to other threads, so I will follow it there. I will just note generally that I don't deny there have always been people who favor the natural property view of "intellectual property", just as there have always been people who favor the state-enforced monopoly view, and that shows in the way various people (including courts) have talked about "intellectual property" over time. I just happen to agree more with the monopoly view.

byomtov,

Sure, that is a sketch of the basic IP tradeoff: on the one hand IP rights can cause anti-competitive harms, but on the other hand they might help subsidize beneficial activities. If for some reason labor was subject to the same analysis, we would confront a similar tradeoff.

I'll just note again, however, that is not obvious that subsidies for invention (broadly defined to include both the "inspiration" and the "perspiration" components) are necessary. Again, there is already likely to be a return on investment in invention for other reasons, and it is entirely possible in fact that even without subsidies, the incentives to invest in invention would be too high, not too low, from a public interest standpoint.
6.12.2007 3:07pm
ATRGeek:
American Psikhushka,

Your initial doomsday scenario implies that there is no other way to capture a return on investment in R&D. This is not automatically the case: as I noted, among other things the first-mover advantage and network effects can provide a return on investment in R&D. As GMUSL 3L pointed out, you can also get a return on investment in R&D through trade secrets. And so on.

The question, then, is whether the incentives to invest in R&D without the state protection would be sufficient. It is not obvious they would not be sufficient, and as I noted it is possible they would actually be excessive even without a subsidy (for example, from a public standpoint there can actually be overinvestment in R&D, particularly to the extent people are duplicating each others efforts and/or spending a lot more on R&D just to slightly hasten the time in which an invention would otherwise appear).

There is also no reason to expect that "high risk/high reward" projects are in particular need of the subsidies associated with IP. Indeed, it could be the case that IP actually distorts the incentives the other way, directing people to invest more in what would otherwise be low reward projects simply because the anti-competitive projections provided by IP will render these projects more profitable.

Finally, IP does not actually avoid the problem of government making a lot of economic and business decisions. For example, the government has to decide what counts as a true innovation requiring this additional incentive, how long the incentive should last, what sorts of exceptions should be provided, and so on. Indeed, you even get a lot of government price-setting (as a result of some of the exceptions).

So, if you really want the government out of the picture, you could just eliminate IP and let people compete freely.

In general, I think your conceptual problem is that you are starting with the IP status quo, noting that departures from the status quo would change the incentives, and assuming that resulting new incentive structure would be worse from a public policy perspective. But only the middle step is obvious (that changing the IP status quo would change the incentives), and it is entirely possible that the new incentive structure would be better from a public policy perspective--and involve the government less in the process to boot.
6.12.2007 3:24pm
Luke Wrinkle (mail):
If Madison knew that copyright protect lasts in some cases as long as the life of the author plus fifty years he would turn over in his grave.
6.12.2007 4:26pm
William Spieler (mail) (www):
The idea of a 28 U.S.C. § 1498 proceeding (which courts unfortunately do) as a taking gets it totally wrong. Unlike takings, the government doesn't have to offer you anything to take a compulsory license, it just does it. You have to sue to collect. That lawsuit is itself not grounded on the Constitution but rather on a waiver of sovereign immunity. The federal government could, if it wishes, take compulsory licenses without compensating the patent-owner were 1498 amended. Yes, 1498 is somewhat of a statutorily-created analogue to the constitutional takings clause, but compulsory licenses do not raise constitutional concerns.
6.12.2007 5:09pm
William Spieler (mail) (www):
Oh, I'll also throw in my pet issue, that the Hatch-Waxman Act needs to be amended to permit FDA approval of ANDAs claiming a 1492-granted compulsory license in the interest of national security. I don't see any way to file an ANDA if you're claiming that the use is licensed, and normally one wouldn't ever be in a situation where you would be a license before ever submitting an ANDA unless you had obtained a compulsory license from the federal government.
6.12.2007 5:13pm
Jam:

The idea of a 28 U.S.C. § 1498 proceeding (which courts unfortunately do) as a taking gets it totally wrong. Unlike takings, the government doesn't have to offer you anything to take a compulsory license, it just does it. You have to sue to collect. That lawsuit is itself not grounded on the Constitution but rather on a waiver of sovereign immunity. The federal government could, if it wishes, take compulsory licenses without compensating the patent-owner were 1498 amended. Yes, 1498 is somewhat of a statutorily-created analogue to the constitutional takings clause, but compulsory licenses do not raise constitutional concerns.


I am not a lawyer and I do not know about a "28 U.S.C. § 1498 proceeding" but I have read the Constitution. Where is the licensing authority granted to the Central government? And it is taking, even if the goverment calls it by another name.

I wish that the members of the SCOTUS would simply read the Constituion every one in a while. After all, the CONstitution is the law of the land and not previous decisions.
6.12.2007 5:47pm
William Spieler (mail) (www):
"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;" and the system of letters patent that had existed in the common law. The fact that the Constitution places the onus on Congress to do the securing should carry some implication, namely that unless and until Congress itself makes some pronouncement on the issue, inventors are without secured rights. Of course, Congress has done so.

Notice how the Constitution gives Congress the power to "promote the progress of science and useful arts, by securing for a limited time to [] inventors the exclusive right to their [] discoveries" Powers, of course, can be left not exercised. And Congress doesn't necessarily need to be expected to know who an inventor is, which is why there is licensing, so that you actually have to make a prima facie showing that you actually are the inventor of the discovery in order to get a patent.
6.12.2007 6:11pm
byomtov (mail):
I'll just note again, however, that is not obvious that subsidies for invention (broadly defined to include both the "inspiration" and the "perspiration" components) are necessary. Again, there is already likely to be a return on investment in invention for other reasons, and it is entirely possible in fact that even without subsidies, the incentives to invest in invention would be too high, not too low, from a public interest standpoint.

Sure. I suspect that it varies by the specifics of the invention. I'm not here yelling for ever more IP protection. I just got into the thread to note that some of the discussion of whether this or that is a "monopoly" is not helpful in understanding the problems.

I am dimly aware that there is some serious economic research on the consequences of patents, but I'm not familiar with it. Whether it reaches any consensus on the value of patents I don't know.
6.12.2007 7:10pm
GMUSL 3L (mail):
Bernie,

Now in fact I think all this discussion of what is or is not a monopoly is sort of a silly semantic game.

That's my point -- that the use of the term "monopoly" is not useful in this discussion. Although I agree with at 95% of the rest of what Prof. Barnett typically says, the only useage in this case is sort of a "Madison calls IP "monopolies", monopolies are bad, therefore IP is bad" sense. My point in ridiculing and point out the extent of monopolies is just to point out that the term brings nothing to the table except to smear IP.

First of all, it has somewhat different meaning in economics than in anti-trust law.

The difference is much smaller than it used to be, since the economically rational approach to antitrust beat back the populists (other than Stevens) and the other approaches from back when they hyphen-ated it ala T. Herman Zwibel. Economic analysis is the cornerstone of antitrust these days, short of the extremely few remaining per se categories. The two are necessarily and inexplicably intertwined.

Second, the term's very usefulness is based on evaluating the actual effects, good or bad, of real monopolies.

This illustrates the rest of of my point in pointing out how many monopolies there are. The law -- and we! -- don't care a rat's ass about actual effect of nearly all monopolies. Otherwise we'd be applying ownership of one's own labor, personal property, real property, etc. to all sorts of antitrust analysis. We only care about monopolies with MARKET POWER, attempts to monopolize (whatever they are), and market concentration in mergers.

Without market power, we don't really care about monopolies. This is (to beat the dead horse) the very point of Independent Ink -- we no longer presume that a patent conveys market power. Since we don't care about monopolies without market power, how is labelling patents "monopolies" at all useful? It just seems to be a slur-by-association.

ATR:

IP, of course, does not necessarily replace the licensing part of this situation (you could have IP and yet the government could deny you the necessary license to use it). But it does provide the anti-competitive part (the state-enforced decision that at most one person will have the right to use the IP), and of course that is the part that turns a state licensing scheme into a monopoly scheme.

Again, this is what I was getting at with my cites and examples. You don't have a right to use -- that's a monopoly. You have a right to exclude others from using. If my competitor patents A+B+C, and I can surely patent A+B+C+D, an improvement. But I can't use it without a license or the risk of liability until his patent expires, is found invalid, or unenforceable. The lack of affirmative right to practice even your own validly patented and enforceable invention due to blocking patents, illegality, fraud, &c. is why it is not a monopoly but instead the right to exclude. That's the distinction between the two.
6.12.2007 8:03pm
ATRGeek:
byomtov,

That is part of what I find intriguing about Madison's proposal--it gives the state a way to terminate the anti-competitive approach if it doesn't seem to be working out in the public interest.

GMUSL 3L,

I'm not sure what you mean when you talk about monopolies without market power. You do not have a monopoly unless you are the only provider in the relevant market, and obviously in that case you have market power.

I am also baffled as to why you are defining a monopoly as a "right to use". Again, a monopoly exists when you are the only provider in the relevant market, which I suppose implies a right to use something or another, but it certainly is not a sufficient condition for a monopoly to exist.

Now, it is certainly true that IP does not automatically give you a monopoly/market power, as I already noted above. And it is true that one of the ways this could fail to happen is if you lack a license necessary to make use of your IP.

My point above, however, was that to the extent your IP doesn't give you a monopoly/market power, the fundamental purpose of giving you IP rights has been thwarted. That is because in such a case your IP is not allowing you to collect any more profits than if you did not have the IP, and hence you are not being incentivized by the existence of IP to invent.
6.12.2007 8:46pm
American Psikhushka (mail) (www):
ATRGeek-

Your initial doomsday scenario implies that there is no other way to capture a return on investment in R&D. This is not automatically the case: as I noted, among other things the first-mover advantage and network effects can provide a return on investment in R&D. As GMUSL 3L pointed out, you can also get a return on investment in R&D through trade secrets. And so on.

Unless you can cite something, this seems to be primarily speculation. The additional ways that you list to capture the return on R&D investment would be at least partially inhibited by removing patent protection. My "first-mover advantage" isn't worth that much if you can be cranking out product with the same features within months of me introducing them. And as far as network effects go, one can envision these being greatly reduced without patent protection, since given enough funding one could make product which could piggyback on competitors' networks. (Depending on the situation, admittedly there are some scenarios where this advantage would still be preserved.)

The question, then, is whether the incentives to invest in R&D without the state protection would be sufficient. It is not obvious they would not be sufficient, and as I noted it is possible they would actually be excessive even without a subsidy (for example, from a public standpoint there can actually be overinvestment in R&D, particularly to the extent people are duplicating each others efforts and/or spending a lot more on R&D just to slightly hasten the time in which an invention would otherwise appear).

You seem to be defining "excessive" by what your opinion happens to be. Note that the market is determining the rewards here - if your intellectual property isn't valued by the market the market players won't pay to obtain it. Great innovation and great value creation deserve to be rewarded, so in the majority of cases I disagree with describing large profits as "excessive". (Actual value creation should be rewarded - creation that results from stealing the intellectual property of others is just theft.)

As far as the risk of "overinvestment in R&D" is concerned, I believe this is already handled by the market. And even duplicate research efforts have their value, as this works to determine the best ways to provide solutions to various problems - a competing market for solutions.

And again I note the socialist or collectivist undercurrent here. An automatic assumption that whatever is claimed to "serve the community" is an optimal solution, when decades of socialist economic experiments have shown that this is often not the case. There can always be collectivist arguments made for violating private property rights. I realize Madison mentioned the benefits to the "community", but he could have easily missed the necessity of protecting individual property rights in intellectual property, and been ignorant of the many dangers of socialization and collectivization.

There is also no reason to expect that "high risk/high reward" projects are in particular need of the subsidies associated with IP. Indeed, it could be the case that IP actually distorts the incentives the other way, directing people to invest more in what would otherwise be low reward projects simply because the anti-competitive projections provided by IP will render these projects more profitable.

You're in effect saying that projects should only be undertaken if they can provide a positive return after the end product is socialized (taken for public use). And note this was a problem with socialism - most technology and innovation (with some exceptions) is aimed at the mass common denominator. That's why all the cars were econoboxes (that fell apart), and nearly all the apartment buildings were bland boxes.(While the elites imported Mercedes to tool around in, at public expense.) What you're proposing would seem to have a similar effect across the whole spectrum of intellectual property.

Finally, IP does not actually avoid the problem of government making a lot of economic and business decisions. For example, the government has to decide what counts as a true innovation requiring this additional incentive, how long the incentive should last, what sorts of exceptions should be provided, and so on. Indeed, you even get a lot of government price-setting (as a result of some of the exceptions).

Yes, I realize this. And it does make me uncomfortable. My field isn't intellectual property, but if it was I would be keeping an eye out for ways to protect intellectual property with the least amount of government intervention possible.

So, if you really want the government out of the picture, you could just eliminate IP and let people compete freely.

This is debatable. Libertarians are against fraud and theft, so this issue hinges on whether you think individuals should have a private property interest in their intangible creations and ideas. I think they should, so intellectual property in some cases is private property, which should be protected like material private property.

In general, I think your conceptual problem is that you are starting with the IP status quo, noting that departures from the status quo would change the incentives, and assuming that resulting new incentive structure would be worse from a public policy perspective. But only the middle step is obvious (that changing the IP status quo would change the incentives), and it is entirely possible that the new incentive structure would be better from a public policy perspective--and involve the government less in the process to boot.

Not quite. I come at this issue from a libertarian and natural rights prospective. The current system seems to be fairly congruent with this. I don't think the current system is perfect - I think it should be made much more accessible to those with less money, for example. I just don't think the changes you propose would be improvements, I tend to regard them as the socialization and collectivization of intellectual property.
6.13.2007 4:41am
ATRGeek:
American Psikhushka,

There is quite a bit of economics literature on both the first-mover advantage and network effects, as well as trade secrets. I could look up cites, but I trust you are capable of that yourself. Of course, those are just examples. But I think the point is clear: while it is undoubtedly true that IP can increase the return on R&D, there would still be a return on R&D without IP. The question, then, is whether the additional returns to R&D provided by IP are in the public interest.

As for "excessive": again, there is a lot of economics literature about the optimal investment in R&D from a public perspective, and you could look up cites if you were interested. I'll just note again a couple things.

First, when you say the market is setting the price, that is not right: the state is intervening to prevent competition, so the market is not really setting the price, but rather the monopolist with the help of the state is setting the price. Second, once you start talking about what rewards innovators "deserve" to get, and describing infringement of your preferred forms of IP as "theft", you have left the realm of economics and are entering the realm of morality.

As for the "socialist undercurrent" versus the market determining value, I would again note that your scheme actually requires the state to intervene in the market and prevent competition. Your original argument was that this state intervention was good because otherwise the incentives for R&D provided by the market would be too low. So, I think you are the one who is not content to let the markets work this out, but instead want state intervention.

I have no idea where you got the idea that I wanted products "socialized". I envision private actors making products and selling them to willing buyers in ordinary markets. My point in the relevant quote was actually that when the state intervenes in the market and eliminates competition through the mechanism of IP, it could easily distort what R&D is performed and what products get produced in a way that benefits the monopolists but not the public. But by the public, I mean the consumers of goods and services, the willing buyers in the market place.

As for libertarianism, you start with the claim that people "should have a private property interest in their intangible creations and ideas." But is this an economic/public policy claim (eg, your original argument that without state intervention the incentives for R&D will be too low), or a moral claim (people "deserve" these rights)? Moreover, you originally seemed to be arguing that less government interference is a worthwhile public policy goal relevant to our determination of what IP rights should exist, but now you seem to have reversed your priorities and are willing to tolerate more government interference in the name of protecting your preferred IP scheme.

So, I think you are failing to see the tension between your "libertarian" and "natural rights" views. If your natural rights arguments lead you to believe innovators "deserve" to be reward (and infringers "deserve" to be punished), then you necessarily have to advocate for more government interference in the markets, and less competitive markets in general.

And again, I would emphasize that weaker IP rights is not "socializing" IP, because the state would not own the IP either. Indeed. to think in this way is to assume that IP is "property", but the point of the Madisonian view is that IP is actually a bundle of state-enforced anti-competitive measures, not property in the ordinary sense. So, given the Madisonian view, when you weaken IP, the state is not taking property, but rather reducing its interference in the markets.
6.13.2007 9:23am
American Psikhushka (mail) (www):
ATRGeek-

There is quite a bit of economics literature on both the first-mover advantage and network effects, as well as trade secrets. I could look up cites, but I trust you are capable of that yourself. Of course, those are just examples. But I think the point is clear: while it is undoubtedly true that IP can increase the return on R&D, there would still be a return on R&D without IP. The question, then, is whether the additional returns to R&D provided by IP are in the public interest.

But the thing is first mover and to an extent network effects are often very wrapped up in IP protection. Weakening of IP protection would also significantly weaken those advantages. I haven't heard of studies stripping those advantages out and determining how significant they would be if there was little or no IP protection. If they do exist, I wouldn't know where to find them. (Note that I'm not in an academic or firm setting - I don't have access to any paid research services.)

First, when you say the market is setting the price, that is not right: the state is intervening to prevent competition, so the market is not really setting the price, but rather the monopolist with the help of the state is setting the price.

If the lion's share of profits from R&D comes from or is dependent on IP protection, your scheme tends to be just as anticompetitive, if not more so. Firms are penalized for innovations that involved significant cost, because the competition will just copy these innovations without having to pay the same costs.

Second, once you start talking about what rewards innovators "deserve" to get, and describing infringement of your preferred forms of IP as "theft", you have left the realm of economics and are entering the realm of morality.

Not any more than with material property if you believe that there is a private property right in intellectual property. If you buy tanning beds for use in your business and I borrow them and use them in my business instead, I am depriving you of the returns for your investment. Research and development is slightly different, but it is still an investement that is made to produce returns in areas other than academia and the like.

As for the "socialist undercurrent" versus the market determining value, I would again note that your scheme actually requires the state to intervene in the market and prevent competition. Your original argument was that this state intervention was good because otherwise the incentives for R&D provided by the market would be too low. So, I think you are the one who is not content to let the markets work this out, but instead want state intervention.

If you believe there is a private property right in intellectual property, protecting that property is an acceptable use of state or private enforcement mechanisms, just as it would be for physical property. So this isn't interventionism any more than it is calling the police on a burglar.

I have no idea where you got the idea that I wanted products "socialized". I envision private actors making products and selling them to willing buyers in ordinary markets. My point in the relevant quote was actually that when the state intervenes in the market and eliminates competition through the mechanism of IP, it could easily distort what R&D is performed and what products get produced in a way that benefits the monopolists but not the public. But by the public, I mean the consumers of goods and services, the willing buyers in the market place.

If one believes in a private property interest in IP, you are forcing the creators of IP, who have invested capital and/or labor in acquiring IP, to give it away or sell it to the public at prices they would not agree to if their IP rights were protected. And some members of the public will be using this property to sell competing products. So in effect it amounts to a seizure or forced sale of property, with said property then being distributed to the public as a subsidy. That's pretty socialist.

As for libertarianism, you start with the claim that people "should have a private property interest in their intangible creations and ideas." But is this an economic/public policy claim (eg, your original argument that without state intervention the incentives for R&D will be too low), or a moral claim (people "deserve" these rights)? Moreover, you originally seemed to be arguing that less government interference is a worthwhile public policy goal relevant to our determination of what IP rights should exist, but now you seem to have reversed your priorities and are willing to tolerate more government interference in the name of protecting your preferred IP scheme.

Well again this hinges on whether you believe there is a private property interest in intellectual property. I tend to believe there is for several reasons. As the market shows it is valuable, otherwise people wouldn't pay for it. This value also implies scarcity, if it wasn't scarce people wouldn't have to pay for it. And lastly there is often (though not always) labor and/or capital investment involved in the process of developing and selling it. So in the end if one believes there is a private property right in IP it is much like material property - there are both public policy and moral reasons for protecting those rights.

So, I think you are failing to see the tension between your "libertarian" and "natural rights" views. If your natural rights arguments lead you to believe innovators "deserve" to be reward (and infringers "deserve" to be punished), then you necessarily have to advocate for more government interference in the markets, and less competitive markets in general.

If I believe there is a private property right in intellectual property this tension falls away - government or private action to protect intellectual property rights is just as valid as that used to protect other property rights. So it could be considered police action rather than market intervention.

And again, I would emphasize that weaker IP rights is not "socializing" IP, because the state would not own the IP either. Indeed. to think in this way is to assume that IP is "property", but the point of the Madisonian view is that IP is actually a bundle of state-enforced anti-competitive measures, not property in the ordinary sense. So, given the Madisonian view, when you weaken IP, the state is not taking property, but rather reducing its interference in the markets.

I think you're mischaracterizing his view. He seems to acknowledge that it is property:

"...in both which they are considered as a compensation for a benefit actually gained to the community as a purchase of property which the owner might otherwise withold from public use."

And he seems to realize that the incentive to create would be destroyed if the interest in IP is not compensated or protected in some way. But he couches it in a lot of terminology - "community", "public use", etc. that, coupled with the strange concern about the "exorbitant gains" for inventors, seem like socialist arguments. (Like the focus on bloodlines, class, immense hereditary wealth, etc. of the time weren't the problem, but advancement through merit was some great danger. One wonders whether this might be elitist thinking concernced about the hoi poloi authors and inventors becoming too financially successful.) So I'm not convinced we should be moved by arguments that seem rooted in socialist or collectivist theory, even from one of the founders.

And as I mentioned above, the scheme proposed in operation is socialist - in essence it is a seizure or forced sale with the property being distributed to the public as a subsidy.
6.13.2007 11:32am
abb3w:
One more hole in the "tresspassing" analogy: aren't there legally assured right-of-way easements against most IP from fair use doctrines?
6.13.2007 1:17pm
ATRGeek:
American Psikhushka,

I will just sum up by saying I think you last response makes it clear how much you are relying on the belief that "there is a private property right in intellectual property" (by which I take it you mean a natural right to strong IP protection).

But my point is that if you do not believe that (and I don't think Madison does--his use of the phrase "property" is not dispositive of whether he believes there is a natural right to strong IP protection), then it stops being "socialist" to advocate in favor of weak IP rights. Rather, it becomes just a matter of arriving at a different calculation about matters such as whether we actually need strong IP protection to incentivize R&D.

And I would note again that to the extent one does NOT believe there is a natural right to strong IP protection, then libertarian considerations would seem to cut in favor of the state not providing strong IP protection (which means a lot of state involvement in the markets) unless the public policy argument (eg, the need to incentivize more R&D) is very strong. And even a very strong public policy argument may not be enough for a strict libertarian who does not believe in a natural right to strong IP protection.

In short, then, one can be an ardent capitalist, and in fact a libertarian, and believe in weak (or no) IP rights. And that is because one need not believe, as you do, that there is a natural right to strong IP protection.
6.13.2007 7:55pm
American Psikhushka (mail) (www):
ATRGeek-

I will just sum up by saying I think you last response makes it clear how much you are relying on the belief that "there is a private property right in intellectual property" (by which I take it you mean a natural right to strong IP protection).

So why isn't there a private property right in intellectual property? It is valuable and that value indicates scarcity. Why should there not be a right to ownership there, as opposed to other valuable and scarce material?

But my point is that if you do not believe that (and I don't think Madison does--his use of the phrase "property" is not dispositive of whether he believes there is a natural right to strong IP protection), then it stops being "socialist" to advocate in favor of weak IP rights. Rather, it becomes just a matter of arriving at a different calculation about matters such as whether we actually need strong IP protection to incentivize R&D.

Well then these calculations are very important, but I havn't seen much about them. You mention these factors like "first mover advantage" and "network effects" that are supposed to sufficiently reward R&D if IP rights are done away with. But these advantages themselves are significantly dependent on IP rights, so it is not clear that the calculation you refer to is accurate.

And I would note again that to the extent one does NOT believe there is a natural right to strong IP protection, then libertarian considerations would seem to cut in favor of the state not providing strong IP protection (which means a lot of state involvement in the markets) unless the public policy argument (eg, the need to incentivize more R&D) is very strong. And even a very strong public policy argument may not be enough for a strict libertarian who does not believe in a natural right to strong IP protection.

Since libertarians generally believe in natural rights I'm not sure how many would agree with your reasoning if it were laid out. And note that whether or not Madison thought of IP as property, he understood that creation and invention needed to be incentivized. So even if he did follow the chain of reasoning you suggest, which I find dubious, he didn't come to the same conclusions that you do. He suggested shorter term IP protection and a government power to force the sale of IP in certain cases. This isn't weakening or doing away with IP protection to the extent that you are advocating.

In short, then, one can be an ardent capitalist, and in fact a libertarian, and believe in weak (or no) IP rights. And that is because one need not believe, as you do, that there is a natural right to strong IP protection.

Possibly. But it's not clear that your calculations and reasoning are sound. You seem to start with a result - you want to weaken and do away with IP rights - and attempt to construct a chain of reasoning that supports this.
6.14.2007 4:00am
ATRGeek:
American Psikhushka,

As to your first point, I believe your arguments actually rest on the assumption that IP is not in fact naturally scarce. As discussed above, ideas are non-rivalrous: you and I can use the same idea, and my using the idea does not prevent you from using it. Hence, in such cases ideas are not in fact scarce: they can be infinitely reproduced.

Note, by the way, that to the extent one can keep "trade secrets", arguably the relevant ideas are in fact scarce. But for ideas where that is not possible, not only are they not naturally scarce, it is actually impossible to make them scarce: the state can't stop people from reproducing the idea in their own heads. All the state can do is prevent those people from using the ideas in their head to compete with the holder of the IP rights.

This, in fact, is the underlying assumption of your own R&D argument: without strong IP protections, the ideas produced would actually not be scarce and therefore not have value (although it is not true in my view that the value of an idea is entirely dependent on its scarcity). So, this argument actually depends on the view that the state needs to step in and prevent competition in order to make these ideas "scarce" (or, rather, to make the ability to compete using the ideas scarce), because otherwise there would be no natural value to ideas and therefore no incentive for R&D.

So on this view--the one underlying your R&D argument--the ideas in question are NOT naturally valuable, but rather only artificially valuable: they have value only because the state is willing to step in and protect the IP-holder from competition with those who have the same idea in their heads. And again, it is worth emphasizing that this is not a case of the state protecting the IP holder from having his idea being taken away from him, because taking the idea out of his head is just as impossible as taking the idea out of other people's heads. What the state is doing is stepping in and regulating who gets to use the idea to compete, and that is the source of the idea's artificial value (although I would contend that is only part of its value).

As for the R&D calculation: when I am talking about the first mover advantage, network effects, and trade secrets, I am explicitly distinguishing the natural component of those effects from any such effects arising from state-enforced IP rights. But I will agree there is nothing obvious about how these effects will work in any given case, just as there is nothing obvious about what effect any particular IP regime will have on the incentives for R&D in any particular case. My point is just that this is a balancing act, and from a public policy perspective, it is not automatically the case that the additional incentives for R&D investment provided by any given IP scheme are a good thing.

Moreover, it turns out that strong IP rights can actually disincentivize R&D investment in some cases (where, for example, investing more in marketing your existing IP turns out to have a better expected return than investing in generating more IP; or when IP right generate high transaction costs that disincentivize R&D by others; and so on). Again, the basic point is not to prove that any particular IP scheme is necessarily good or bad from a public policy perspective, but rather just to acknowledge the very fact that no particular IP scheme is necessarily good or bad from a public policy perspective.

As for libertarians--obviously they do not all believe in natural rights, and they certainly do not all believe that one has a natural right to everything one would want. So, it is not a question of accepting or rejecting natural rights theory in general: the specific question is whether one has a natural right to IP, and natural rights theorists can and do disagree on that issue.

As for Madison versus me: I am not sure what conclusions you think I have come to. I have described IP as a balancing act, one where we should set the limits of IP based on balancing factors such as beneficial R&D incentives (to the extent they exist) and anti-competitive harms. I do happen to think the balance has gotten out of whack in many areas of IP law recently, and I also think a strict libertarian could argue in favor of dumping IP entirely. But as it turns out I am not a strict libertarian, and I am fine with a limited amount of IP protection for the purposes expressed in our Constitution. And as noted before, I agree with Madison that it might be a good idea to add some ex post elements to how we perform this balancing act.

To sum up: hopefully it is now clear that one can be concerned about the anti-competitive effects of IP and somewhat skeptical about the necessity of the R&D incentives associated with any given IP scheme without in fact being a "socialist". I agree that doesn't prove that Madison or myself have gotten the proper approach to IP exactly right--that is a hard job, and one which I personally think can't be done entirely ex ante, which is why I like Madison's proposal for an ex post "buyback". Again, though, regardless of what IP scheme you might prefer, I don't think it is helpful or accurate to call anyone who favors weaker IP rights than you would prefer a "socialist".
6.14.2007 9:24am
American Psikhushka (mail) (www):
ATRGeek-

As to your first point, I believe your arguments actually rest on the assumption that IP is not in fact naturally scarce. As discussed above, ideas are non-rivalrous: you and I can use the same idea, and my using the idea does not prevent you from using it. Hence, in such cases ideas are not in fact scarce: they can be infinitely reproduced.

But you can reduce or destroy the value of my ideas in the marketplace by using them yourself. And as far as scarcity is concerned I think you are confusing reproductibility with whether or not something is scarce. We both have computers with printers attached. If I write the Sci-Fi bestseller "Attack of the Mutant Chipmunks" it doesn't mean you can too. You could copy and print out copies of "Attack of the Mutant Chipmunks", but that doesn't mean you could write it too. The skill to write "Attack" is scarce, and therefore valuable. By extension other IP is scarce, and therefore valuable. The ability to reproduce or copy it just makes it somewhat vulnerable.

Note, by the way, that to the extent one can keep "trade secrets", arguably the relevant ideas are in fact scarce. But for ideas where that is not possible, not only are they not naturally scarce, it is actually impossible to make them scarce: the state can't stop people from reproducing the idea in their own heads. All the state can do is prevent those people from using the ideas in their head to compete with the holder of the IP rights.

Actually, since the ideas are scarce its more appropriate to say that the state can prevent you from using other people's protected ideas - protecting their property rights.

This, in fact, is the underlying assumption of your own R&D argument: without strong IP protections, the ideas produced would actually not be scarce and therefore not have value (although it is not true in my view that the value of an idea is entirely dependent on its scarcity). So, this argument actually depends on the view that the state needs to step in and prevent competition in order to make these ideas "scarce" (or, rather, to make the ability to compete using the ideas scarce), because otherwise there would be no natural value to ideas and therefore no incentive for R&D.

That's not what I'm saying. As demonstrated above the ideas are scarce. The state is only keeping you from copying my ideas, it isn't stopping you from generating your own ideas. In that sense it is not anti-competitive, you are free to develop your own competing ideas at any time.

And the ideas do have "natural value" - otherwise people wouldn't want to use them. So your argument is contradictory, on one hand you are saying that the ideas don't have value, but then you want to be able to use them.

So on this view--the one underlying your R&D argument--the ideas in question are NOT naturally valuable, but rather only artificially valuable: they have value only because the state is willing to step in and protect the IP-holder from competition with those who have the same idea in their heads. And again, it is worth emphasizing that this is not a case of the state protecting the IP holder from having his idea being taken away from him, because taking the idea out of his head is just as impossible as taking the idea out of other people's heads. What the state is doing is stepping in and regulating who gets to use the idea to compete, and that is the source of the idea's artificial value (although I would contend that is only part of its value).

Same contradiction. If my ideas are valuable why do you want to use them? Because they ARE valuable. And again, the state isn't keeping you from competing with your own ideas, it is just keeping you from using my ideas without my permission.

As for the R&D calculation: when I am talking about the first mover advantage, network effects, and trade secrets, I am explicitly distinguishing the natural component of those effects from any such effects arising from state-enforced IP rights. But I will agree there is nothing obvious about how these effects will work in any given case, just as there is nothing obvious about what effect any particular IP regime will have on the incentives for R&D in any particular case. My point is just that this is a balancing act, and from a public policy perspective, it is not automatically the case that the additional incentives for R&D investment provided by any given IP scheme are a good thing.

Well perhaps if the calculations are uncertain (or impossible, as they are with some socialist initiatives) maybe it would be better to side with those in favor of natural rights?

Moreover, it turns out that strong IP rights can actually disincentivize R&D investment in some cases (where, for example, investing more in marketing your existing IP turns out to have a better expected return than investing in generating more IP; or when IP right generate high transaction costs that disincentivize R&D by others; and so on). Again, the basic point is not to prove that any particular IP scheme is necessarily good or bad from a public policy perspective, but rather just to acknowledge the very fact that no particular IP scheme is necessarily good or bad from a public policy perspective.

That doesn't necessarily reflect negatively on IP. In some situations it turns out that marketing existing features is likely to pay off better than additional R&D.

As for libertarians--obviously they do not all believe in natural rights, and they certainly do not all believe that one has a natural right to everything one would want. So, it is not a question of accepting or rejecting natural rights theory in general: the specific question is whether one has a natural right to IP, and natural rights theorists can and do disagree on that issue.

But the reasons you have provided for disagreeing with a natural rights view are not accurate - IP is scarce, and therefore it is valuable.

To sum up: hopefully it is now clear that one can be concerned about the anti-competitive effects of IP and somewhat skeptical about the necessity of the R&D incentives associated with any given IP scheme without in fact being a "socialist". I agree that doesn't prove that Madison or myself have gotten the proper approach to IP exactly right--that is a hard job, and one which I personally think can't be done entirely ex ante, which is why I like Madison's proposal for an ex post "buyback". Again, though, regardless of what IP scheme you might prefer, I don't think it is helpful or accurate to call anyone who favors weaker IP rights than you would prefer a "socialist".

I thought I only referred to the policies and practices suggested as socialist, if I called you a socialist directly I apologize. However I do view some of the policies and practices that have been suggested as quite socialist, collectivist, etc. in nature.
6.14.2007 11:44am