Did you know that one of last year’s winners of the Nobel Prize in economics was a software patent critic? I didn’t. Looks like a good paper. I wish I’d noticed it back when Maskin’s Nobel prize was announced.
Patents 
I have in past years learned a great deal from reading John Calfee’s book “Fear of Persuasion,” on the consumer benefits of advertising. Now he is writing on drug development in “The Indispensable Industry,”
http://www.american.com/archive/2008/may-june-magazine-contents/the-indispensable-industry
He considers, one after another, various proposals to fund drug development using public funds, prizes, or other plans. He writes:
There are two problems with government and nonprofit R&D as a substitute for the traditional for-profit industry. One lies in what the nonprofit sector has not tried to do; the other lies in what it has tried to do.
We have to remember that no laws, regulations, or traditions have prevented the public research system from inventing the drugs we need if it was really capable of doing that and no one else was. In principle, publicly funded drug research can run all the way from basic research through clinical trials to FDA approval and, if the believers in this approach are correct, it can be conducted at reasonable costs including the inevitable losses from drilling dry holes.
But let’s look at the record. If we really had a reliably productive government-nonprofit drug development system, we should have seen its fruits by now. Those fruits would have arrived in such areas as the testing of off-patent drugs with great potential and the creation of new drugs where profit incentives are inherently weak because of inadequate intellectual property laws. We should have seen, for example, clinical demonstrations of aspirin for heart disease and cancer much faster than actually occurred…
The piece is well worth reading in its entirety.
Jamie Plummer points me to this story suggesting that Libertarian vice presidential candidate Wayne Allen Root is a patent troll. The patent looks like your typical software patent:
A method and apparatus for facilitating electronic commerce between suppliers of predictions and consumers of predictions. Suppliers provide their predictions on the outcomes of future events in one or more categories, and each supplier’s accuracy is tracked. Consumers interested in obtaining predictions for one of more of those categories are allowed to selectively choose which suppliers’ predictions they wish to view. The suppliers are compensated based on the number of consumers who view their predictions. In one embodiment, the consumers pay for the predictions that they view while the suppliers are paid a portion of the revenue obtained from the consumers. In another embodiment the consumers are not charged and all revenue is derived from advertisers. The system in accordance with the present invention includes a controller which automatically credits each supplier’s account, aggregates earnings for that supplier, and automatically sends an electronic pay order to the Federal Reserve’s automated clearinghouse to thereby facilitate payment.
I was already unenthusiastic about the Barr-Root ticket. This is another reason to be skeptical.
I’ve doing several interviews this week. In a couple of hours I’m interviewing Patri Friedman about Seasteading. Then, tomorrow I’ll be talking to Jim Bessen of Patent Failure fame, and the president of the Encyclopedia Britannica. What should I ask them?
Megan McArdle’s critique of Dean Baker’s post on free trade is mostly solid, but I think her reply on copyright and patent protections is a little bit off base:
Property rights are not inconsistent with free trade. I cannot justify selling stolen televisions on the grounds that this is just the working of the free market. The US thinks, with good reason, that intellectual property protections benefit everyone in the country over the long run. Thus, it enforces them by preventing other industries from selling property here that has, legally, been stolen.
How is this different from labor and environmental standards, liberals will ask. Well, we have copyright and patents because otherwise, you have goods with an enormous positive externality, but virtually no positive internality. Companies that use patented ideas without paying for them are creating a big negative externality–reduced incentive to innovate–while internalizing all the benefit from doing so. This is one of those situations where we look for some sort of legal arrangement, which we might call, oh, “intellectual property law”, to keep those skewed incentives from making us all ultimately worse off.
In the case of labor and environmental standards, whatever negatives there are are largely internalized to the countries. The awfulness of low wages and environmental standards is presumably even more awful if you are already extremely poor with limited recourse to a safety net. You’re unlikely to end up with an inefficient outcome.
There are a number of problems with this argument:
It’s inaccurate, or at least begging the question, to say that a company that infringes a patent is “creating a big negative externality.” Such a company is certainly failing to create an incentive for future patenting, but this is only a negative externality if we assume as our baseline a world in which all infringers obtain licenses and all patent royalties create incentives for innovation. In the real world, neither of these conditions hold. For example, when an extremely poor nation allows local pharmaceutical companies to produce patented drugs for the local market, it is not necessarily the case that the patent holder is thereby deprived of significant income. Most of the people who buy such patent-infringing drugs would not have been able to afford the drugs at anything close to full price.
I’ve got an in-depth discussion of last week’s In Re Bilski case up at Ars Technica.
One of my favorite things about writing for Ars is their knack for coming up with amusing illustrations for longer articles. You can see their handywork over on the right there.
I discuss the parties in the case, the judges’ questions, and speculate on the likely outcome. My prediction is that the Federal Circuit will make some relatively minor changes that rein in the patenting of abstract concepts on the margin but basically leave the problem unresolved. The big open question is whether the Supreme Court will be interested enough to take it, and if so whether they’ll have the stomach to make the significant changes that are needed. We know Justice Stevens is, and a couple of other justices have made comments suggesting that the patentability of software is at least an open question in their minds, so there’s some reason for hope.
Also, I forgot to link to it last week, but I did a Cato Daily Podcast on the day Bilski was argued.
Matt Yglesias was kind enough to link to my write-up of Math You Can’t Use. Matt’s commenters made some not-very-persuasive counter-arguments, which prompted Tom Lee to pen a nice re-statement of the basic argument against software patents:
the last few years have demonstrated that for many areas of creative endeavor we have massively overestimated the compensation that must be provided in order for society to continue enjoying plentiful ideas. The success of the open source movement and the continued thriving of the music industry, for example, clearly show that we, the greedy masses, can help ourselves to considerably more free intellectual output than we’d thought without endangering the whole system. We’ll all enjoy the benefits — as well as the savings to be had by not spending as many of our resources on enforcing IP laws.
Of course, how far this can be pushed is up for debate. Other fields — publishing, filmmaking, drug discovery — may not be as adaptable. In some cases I’m optimistic that the associated capital costs have or will fall to the point where creator compensation can be safely diminished in order to benefit us all. But now we’re getting into the weeds. Clearly there ought to be a negotiation around each IP-producing field to determine whether the benefits provided by restricting the use of its output outweigh the value lost by imposing that restriction.
And for software patents, the situation is extraordinarily clear: it’s very hard to find a software author who thinks they have contributed anything useful to the process of innovation, and most think they have exerted a significant retarding effect. If the ideas produced and protected under the software patent system were the sorts of novel and valuable contributions that the system is designed to encourage, one might expect to hear about them.
One of the remarkable things about the software industry is that it’s awfully hard to find smart programmers who are strong supporters of software patents. You’ll find a good number who haven’t given the subject a lot of thought, but the vast majority of those who have given the subject a lot of thought are unanimous in their opposition.
Part of the problem is a very basic lack of knowledge. The vast majority of voters—hell, the vast majority of educated, politically savvy voters like Matt’s readers—can barely explain the difference between copyrights and patents, to say nothing of making fine distinctions among types of patents. And meanwhile, there’s a wealthy and growing patent bar with a vested interest in more lenient patent rules. And some large software companies that have amassed patent arsenals and are eager to derive licensing revenues from them. The result is that it’s an uphill battle to even explain what the issue is and why it matters, to say nothing of building real political momentum for reform.
This is part of the reason that I think our one hope of serious reform is the courts. The Federal Circuit has so brazenly trampled on Supreme Court precedent that I think the Supremes may feel compelled to defend their institutional prerogatives, despite the lopsided interest group pressures. And the Supreme Court is much better situated than Congress to delve into complex issues and understand the point of principle involved. The Supreme Court is also much more responsive to elite opinion, and we have more chance of swaying a few thousand elite opinion makers than we do of educating the general public. This is one of the reasons I think Ben Klemens’s End Software Patents coalition is so important, and why I think their courts-focused strategy is probably the right one. It’s still going to be an uphill battle to get the Supreme Court to straighten out the patent mess, but our odds there are a lot better than in Congress.
I’ve finally had the chance to read Math You Can’t Use, Ben Klemens’s excellent book on software patents. It’s the clearest brief for the repeal of software patents that I’ve read, and Ben does a great job of pulling together law, economics, and computer science to make his argument. I agreed with almost everything he says, and much of it covers ground I’ve talked about here on TLF. But let me highlight a few of the things I thought were unique.
Probably the most ambitious part of the book is Chapter 3, which is a brief overview of computer science. In less than 20 pages, Ben covers circuits, boolean logic, source code and assembly language, algorithms and data structures, functions, libraries, and the Church-Turing thesis. The goal was to provide a crash course on concepts he uses later in the book. Since these concepts were already familiar to me I’m probably not a good judge of whether he succeeded in making them understandable to the layman, but it seemed pretty clear to me. On the other hand, I suspect that some of the implications of these concepts aren’t obvious until you’ve rolled them around in your mind for a while. It’s not hard to explain what the Church-Turing thesis says, for example, but until you’ve written some actual programs I’m not sure you can really appreciate its importance or its relevance to the patent debate.
One of the most interesting points Ben makes is how quickly and totally the Federal Circuit abandoned the legal framework the Supreme Court established in its software patent cases. In its landmark 1981 decision of Diamond v. Diehr, the Supreme Court held:
Insignificant post-solution activity will not transform an unpatentable principle [i.e. a mathematical algorithm, law of nature, or abstract ideas] into a patentable process. To hold otherwise would allow a competent draftsman to evade the recognized limitations on the type of subject matter eligible for patent protection.
Thirteen years later, in In Re Alappat, the US Court of Appeals for the Federal Circuit not only allowed applicants to evade the recognized limitations on the type of subject matter eligible through clever draftsmanship, it actually held that if an applicant failed to do so, the Patent Office had an obligation to re-draft it for them, by re-writing the claims in a form that would meet the letter of the “no software patents” rule while flouting its spirit. It was an amazing bit of chutzpah.
In addition to talking about software patents, Ben also devotes a chapter to the DMCA. Ben has a funny section where, on the same page, he has a figure showing the source code for DeCSS and a figure showing the recipe for a fertilizer bomb. He notes that the latter is protected speech under the First Amendment, while printing the former is a felony. This state of affairs is awfully hard to square with either the constitution or common sense.
It’s a great book, and I encourage you to check it out.
Over at Larry Lessig’s blog, David Friedman has a really interesting comment about libertarian attitudes toward patent and copyright law (I’m going to relax my usual rule about the phrase “IP” because of the way Friedman and Lessig have framed it):
You write: ” There is a divide in the libertarian camp about IP extremism.”
I think that understates the case. There has long been a divide among libertarians about IP itself. Some see it as the purest and most morally defensible form of property, on the grounds that it is produced by the human mind without using any unproduced resources, such as land, which one might have difficulty justifying the ownership of. Others see it as a clear violation of rights, on the grounds that if something such as a book belongs to me, I have the right to do with it as I will.
This is an accurate summary of the state of play among philosophically-minded libertarian generalists. Anybody’s who’s spent a lot of time in libertarian circles can almost recite the competing arguments in their sleep. Frankly, they start to seem kind of vacuous after a while.
This is most obvious in the anti-“IP” camp. If you believe that copyright and patent law are nothing but infringements on peoples’ natural rights, then you have a simple, compelling answer to every question in this area of law. You’re also going to be completely left out of the practical discussions of copyright and patent reform. Because if all copyright and patent monopolies are illegitimate, there’s no obvious way to tell which ones are the most illegitimate. Or to put it a different way, if you’re an “IP” abolitionist and you want to participate in contemporary policy debates, you need to have an additional set of principles that tells you which parts of the copyright and patent systems to reform first, and these principles are ultimately going to do more to drive your policy choices than the principled opposition to government monopolies in all of their forms.
Continue reading →
I’ve got a new piece up at Ars taking a look at three amicus briefs in the Bilski case, which could give the Federal Circuit the chance to rein in patents on non-physical “inventions” like software, business methods, financial strategies, tax planning advice, etc.
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