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What is a Patent? | | | The current system gives patent holders many of the same rights a real property owner would have. Patent holders have the right of possession, right to sell, and the right to exclude. In addition, similar to property rights, the government has a right the right to use a patent as long as it gives the owner just compensation. In regards to real property, Kelo ruled that a government takings of private land for economic development constitutes “public use” and is therefore constitutional. Patents may or may not be real property and in any case are not governed by the same principles that real property (federal vs. state). Nevertheless, the majority's rationale in interpreting “public use” can be helpful—and instructive—in interpreting the similar “for the United States” provision in USC 28 S 1498. | |
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< | The Constitution doesn’t mandate the creation of patents or even the promotion of progress in science, but grants power to the federal government to enact laws to that effect if they want to. So, patents are optional. | >
> | The Constitution doesn’t mandate the creation of patents or even the promotion of progress in science, but grants power to the federal government to enact laws to that effect if it wants to. So, patents are optional. | | | Agreed, and, having read the position in your paper I wholeheartedly agree. Nevertheless, the concept of intellectual property rights may not be encoded in the Constitution because they pre-existed the Constitution . Such rights did not come, generally, from the common law but from statute ("creatures of statute" as it was said). In English history, copyright law goes back to the early 18th century (Statute of Anne). In American history, before the Constitution passed (after the Revolution), some "states" created patent systems of their own. One of the first pieces of major legislation Congress passed (1790) was the Patent Act. All of this goes to show two things. First, patents/intellectual property may have some historical cultural grounding with people and human nature to have enterprise in their work. Personally, I don't reject this view today (clearly)--but I think that the system persists in its current form to maintain power structures and in some cases to actively inhibit human happiness (expounded upon later). Second, and more important, I think your position misinterprets what the Constitutional provision is in effect. Technically, your comment is spot on. However, in view of historical circumstances, the provision is clearly an allocation of a power (patent making) that was presumed to have existed and would subsequently result in the creation of patents. | |
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< | Second, if patents are personal property, rather than real property, extending real property doctrines to them seems risky, formally (real or personal, pick) and logically. Real property is tangible, while patents have no physical existence. When trespassers occupy real property, the land’s utility to the owner decreases. No reduction in the utility of a patented innovation results from the infringer’s use of it. The knowledge contained in a patent is a public good, in that the use of a patent does not reduce the future utility of the idea. The “taking” of a patent is, then, the making of a public good out of that which already was a public good. This illogicality is already latent in the statutory scheme of § 1498, and I’m not sure why we would want to extend it further, by exercising the statutory taking power widely, without a strong need to do so. | >
> | Second, if patents are personal property, rather than real property, extending real property doctrines to them seems risky, formally (real or personal, pick) and logically. Real property is tangible, while patents have no physical existence. When trespassers occupy real property, the land’s utility to the owner decreases. No reduction in the utility of a patented innovation results from the infringer’s use of it. The knowledge contained in a patent cannot be exhausted, and is therefore a public good. The “taking” of a patent is, then, the making of a public good out of that which already was a public good. This illogicality is latent in the statutory scheme of § 1498, and I’m not sure why we would want to extend it further, by exercising the statutory taking power widely, without a strong need to do so. Also, for a taking, compensation must be paid, which might be very costly depending on the pricing scheme chosen. | | | Not entirely sure what you are getting at here but a couple comments. First, Kelo is in regards to real property, however, it by no means extends or limits my argument. The power to repossess the patent is statutory and needs no Constitutional justification. However, I mention it only to point out what a "public good" may be. Also, there is a legitimate counter argument that there is a reduction in the utility when infringers use patents, a so-called field reduction. When an infringer uses one patent, it reduces the value of existing and future patents (perhaps, this is the classic argument). I feel this is too big of an elephant to ignore. Of course, I think the better question to ask is whether the costs (to society, to enforce) here exceed the benefits (innovation, research). | | | True enough. This comment prompted me to look up data on health care expenditures and see that drugs were only ~30% of health care expenditures. Perhaps my above statement was made in a bit of ignorance. Drug prices may or may not be, however, more inflated than the above mentions. There are, indeed, other problems with our health system. I do not know (and I don't think it can be stated) if public insurance is the solution. | |
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< | Another point to consider is that patent monopolies in healthcare allow a patent holder to set the supply curve for a drug is wherever the patent holder wants. This distorts the intersection point of the supply curve with the (socially-determined) demand curve. A taking would not solve this pricing problem, but would make the public foot the bill. Competition between drug makers would, however, solve the pricing problem, and this is possible if patents are eliminated. | >
> | Another point to consider is that patent monopolies in healthcare allow a patent holder to set the supply curve for a drug wherever the patent holder wants. In seeking to maximize price times quantity, the patent holder distorts the intersection point of the supply curve with the (socially and medically determined) demand curve, raising prices. A taking would not solve this pricing problem, but would make the public foot the bill. Competition between drug makers would, however, solve the pricing problem, and this is possible if patents are eliminated. | | | Employing such a tactic could bring about a revolution in health care practices. The Government could (but realistically will not) strong arm Merck, Pfizer, and the like into affordable drugs. The decree would be as follows: lower the price on Drug X or I will own drug X. Equally important, the Government could broker cross-licensing agreements and avoid the gridlock Heller deplores. The decree would be as follows: license your patent to company X or I will do it for you. Both of these decrees seem to be well within the Constitutional definition of “public use.” Is there anything more important and more used by the public use than health care? These intrusions would also be well protected by statutory language as use for the “United States.” | |
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< | This forced price reduction did actually occur with AIDS drugs in the early 2000s, but only with respect to Africa and other developing countries. The way that this was accomplished was not through takings, but through Clinton’s promise that the US would not enforce US patents against African countries that chose to infringe by buying generic drugs. The solution was not a taking, but the abolition of the right through abolition of the remedy. This could be accomplished with pharmaceutical patents generally, through elimination of patents, provided that the government creates a mechanism to pay for clinical trials. As I mentioned above, the basic research is done at universities, and is government funded. Also, Switzerland’s pharmaceutical industry flourished without patents on pharmaceutical products, only processes, up until 1978. Also, other mechanisms besides patents exist can yield profits for innovation. The cost of copying a technology through reverse-engineering is estimated to be somewhere around 50%, on average, resulting in a partial advantage for innovators, and a big advantage goes to a first-movers in a marketplace. I’m not sure that these advantages are enough to cover the cost of clinical trials, but with government funding for that, these forces would suffice to make almost all patented technologies producible, and the innovations profitable, including information technology. | >
> | This forced price reduction did actually occur with AIDS drugs in the early 2000s, but only with respect to Africa and developing countries. The way that this was accomplished was not through takings, but through Clinton’s promise that the US would not enforce US patents against African countries that chose to infringe by buying generic drugs. The solution was not a taking, but the abolition of the right through abolition of the remedy. This abolition of patents could be accomplished generally, provided that the government creates a mechanism to pay for clinical trials for drugs. As I mentioned above, the basic research is done at universities, and is government funded. Also, Switzerland’s pharmaceutical industry flourished without patents on pharmaceutical products, only processes, until 1978. Also, other mechanisms besides patents exist can yield profits for innovation. The cost of copying a technology through reverse-engineering is estimated to be somewhere around 50%, on average, resulting in a partial advantage for innovators. A significant further advantage accrues to first-movers in a marketplace. I’m not sure that these mechanisms are enough to cover the cost of clinical trials, but with government funding for that, they would suffice to make almost all patented technologies producible, and the innovations profitable, including information technology. | | | These are very interesting and pertinent points and have sparked a new thought and direction for where I want this to go. A much longer, more controversial direction I might add.
For a number of political reasons this revolution will probably be deferred to another generation's future. Nevertheless, such a vision would be consistent with the Constitution's decree to protect the “general welfare.” It would strike that delicate balance between protecting the inventor's enterprise and ensuring public benefit. | |
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< | It sounds almost like you’re admitting that inventors “deserve” to profit, a common misinterpretation. Inventors should profit only if that incentivizes innovation. Patents are often used quite openly for rent-seeking. Patent holding companies are one example. Another is the push by the Chinese government for Chinese companies to apply for more patents at the World Intellectual Property Organization, in order to show off their financial strength and attract investors. This behavior shows the blatantly profit-driven side to patents. | >
> | It sounds almost like you’re admitting that inventors “deserve” to profit, a common misinterpretation. Inventors should have profit only so far as that increase in profit incentivizes innovation whose benefit exceeds the harm of increased prices. Patents are often used quite openly for rent-seeking by patent holding companies, as well as corporations that want to show off their financial strength to investors. | | | | |
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< | With regard to anti-commons, Bill Gates once said, “If people had understood how patents would be granted when most of today's ideas were invented, and had taken out patents, the industry would be at a complete standstill today.” Even today, the company evaluates strategic decisions based on how incompatibilities and technological barriers will be created with its software releases. Patents make the financial winners those who prevent innovation, not those who create it. I think the best solution may be the elimination of patents altogether. This only requires a congressional majority. | >
> | With regard to anti-commons, Bill Gates once said, “If people had understood how patents would be granted when most of today's ideas were invented, and had taken out patents, the industry would be at a complete standstill today.” Even today, his company evaluates strategic decisions based on how incompatibilities and technological barriers will be created with its software releases. Patents make the financial winners those who prevent innovation, not those who create it. I think the best solution may be the elimination of patents altogether. This only requires a congressional majority. | | | | |
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< | I just want to mention that I really enjoyed reading and commenting on your paper. Having thought about the Heller article and your other points, including the takings idea, I have some new ideas I want to incorporate into my own paper on patents. I hope my suggestions haven’t been too disheartening. Thanks for writing a new second paper that’s easy to comment on. Best of luck with revisions. | >
> | I just want to mention that I really enjoyed reading and commenting on your paper. Having thought about the Heller article and your other points, including the takings idea, I have some new ideas for how the patent system could be improved if it can't be eliminated. I hope my suggestions haven’t been too disheartening. Thanks for writing a new second paper that’s easy to comment on. Best of luck with revisions. | | | Sam Wells - 26 April 2010 |
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