Patents and Progress – Loans for Stock in Austria

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On August 12, 2022
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Murray Rothbard rejected patents, and other writers, following and extending his views, have developed a wide array of arguments against patents in particular and intellectual property (IP) in general. Stephan Kinsella’s Against Intellectual Property is the most detailed and carefully argued of these studies. Not all of those inclined in a free market direction agree with this position, though, and in this week’s article, I’d like to look at some arguments in defense of patents found in Adam Mossoff’s article “Intellectual Property,” in The Routledge Companion to Libertarianism (pp. 471–85). The article sets out very well the main arguments for and against IP; and although Mossoff is a strong proponent of IP, which he defends from the standpoint of Objectivism, the article’s aim is to explain the arguments in the controversy rather than to defend his own position.

Opponents of patents say that you can’t own an idea, and Mossoff responds that in one sense, they are right.

If IP rights literally meant people owned ideas … then thinking about a patented invention or a copyrighted book would be patent or copyright infringement. But this has never been true: IP rights protect only real-world inventions, books, movies, songs, corporate logos, and commercial secrets by preventing unauthorized copies, sales, or uses of these products or processes. (p. 474)

Here a problem arises if, like Rothbard, you hold that people acquire unowned resources by appropriating them—i.e., by being the first to use them. This is a “Lockean” view, though to avoid problems pointed out by David Hume, among others, it is perhaps better to drop John Locke’s phrase that you acquire resources by “mixing your labor” with them. In this theory, it isn’t at all clear how arriving at a new idea, and making this public through a recognized process, would give you rights over a physical object. It’s interesting to note, though, as Mossoff points out, that Locke himself accepted patents (in effect) and copyright, though he did not know the former word; but in arriving at our own position, what is of interest is the essential truth, if truth it be, of the Lockean theory rather than the ipsissima verba of its inventor. Further, as Stephan Kinsella has pointed out to me, Locke did not take copyrights and patents to be natural rights.

Mossoff would respond by rejecting Lockean theory. If, as I think we can, we attribute to him the views he ascribes to Ayn Rand, Mossoff would argue in this way:

Although Rand’s justification for property rights is often associated with Lockean or natural rights, it is distinct from it in several respects, such as her unique concept of “value” and her insight in creating and using values … Rand justified IP rights as “the legal implementation of the base of all property rights: a man’s right to the product of his mind.” (p. 477)

In Rand’s usage, a “value” is not the subjective process of valuing but rather what we aim to gain or keep, and she is certainly right that it is ideas that have made possible the tremendous growth in productivity since the Industrial Revolution, greatly aiding human survival. But I think there is danger of a misstep here. “Value,” in the sense of what we aim to gain or keep, must be distinguished from the economic value or price of something, which is determined by market actors’ subjective valuations. The Austrian theory of economic value is quite compatible with Rand’s account of “value,” though I’m not sure whether Objectivists do in fact accept it. But the misstep is to assume that in acquiring resources, people come to own the economic value of what they acquire and, as a corollary, to assume that people can acquire only things that the market values. Thus, if someone is the first to appropriate some rocks that no one else wants but that he, for reasons of his own, finds worth acquiring, he is just as much their owner as someone who sees the rocks’ economic potential and because of that is the first to use them.

For this reason, the fact mentioned by Mossoff, that oil was not a valuable resource “until humans invented steam engines and generators requiring lubricating oil and combustion engines requiring fuel” (p. 481) is no doubt true, but not on point, as this does not provide grounds for acquiring the physical resource of oil. If someone had been the first to use some deposit of oil, even though oil had no market value, why wouldn’t have acquired it as his property?

Rand would disagree, as she holds that the

ultimate source of property … remains value-creating productivity … which is what is recognized and secured by IP rights … what makes something a value depends on the question to whom and for what. For instance, a desert is a disvalue to a farmer who instead requires fecund soil. Yet a desert may be of tremendous value to individuals inventing and producing integrated circuits, which requires silicon. The value is not the (scarce) object as such, but rather the value it represents to the rational mind, who is producing and using it in human life—the fundamental moral justification of all property. (p. 481)

All of this, to reiterate, seems to me to confuse why we want physical things and the basis on which we acquire them.

You might object that it’s unfair to deny inventors IP rights. Their ideas contribute more to the production process than anything else. Once an invention becomes known, why shouldn’t the inventor have the right to the economic gain people get from its use, at least for a period of time?

One answer to this is to appeal to and extend a point Rand herself makes in arguing for limited rather than perpetual patents. As Mossoff explains her view,

unlike with static material values, such as an automobile, dynamic claims to production of values do not require continued actions to sustain or keep them as values. Without having to maintain the value, such as taking one’s automobile to the mechanic to repair it, IP rights could over time become used by people doing nothing to sustain the value, but simply using the IP rights parasitically to leech from the value creation by others in creating new values (property) (p. 477)

Rand argues, in my view correctly, that holders of IP rights who do not contribute to the production process act parasitically: they say, “You must pay me for the use of the idea to which I hold a patent, even though the idea is public knowledge once disclosed.” Extending the argument, isn’t anyone who demands a fee for using his idea acting parasitically? If the inventor of an idea uses it in a production process, he gains the economic value of using it, and he secures extra gains if he’s the first user of the idea, but why do ideas entitle inventors to more than this?

Mossoff has with great skill compressed a large amount of material into his article, and I have been able to comment on only a few of his arguments. I do not think, though, that the other material requires revising my view that patents are unwarranted, though readers must judge for themselves. Patents lack a basis in natural rights; to the contrary, they may be, as Wendy McElroy has suggested, a patent absurdity.1

 

1. I am grateful to Stephan Kinsella, whose knowledge of this topic far exceeds my own, for helpful comments.

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