Posts tagged with: intellectual property

The presence of one group at the Occupy Wall Street (OWS) protests might be surprising: the Distributist Review has produced this flyer for distribution at the protests.  They don’t seem to have asked themselves whether G.K. Chesterton and Hillaire Belloc would have gone down to protest with the unwashed masses (the answer, of course, is never in a million years) but contemporary “neodistributists” are a more inclusive set. They go far beyond the metaphysical and aesthetic principles of Chesterton and Belloc’s economics. Since that flyer’s a little hard to read, we’ve put together a list to help you identify your inner distributist: herewith, Ten Signs You May Be a Distributist:

  1. You can’t wait for the Revolution: As we’ve explained before, the changes distributists want amount to revolution. That puts them squarely in line with the rest of the OWS camp, whose communications head told NPR, “My political goal is to overthrow the government.” Fortunately, the revolution will be prosecuted in accord with Catholic Social Teaching. (What’s a little property-snatching among friends?) If this idea excites you, you may be a distributist!
  2. You just want to grow heirloom tomatoes in a co-op: Or maybe your grandfather’s strain of prized carrot. Either way, if think the Catholic Social Teaching mandates this kind of lifestyle, you may be a distributist!
  3. You abominate the seedless watermelon: The seedless watermelon is an unnatural monstrosity, you say? If you oppose genetic engineering on principle and begrudge the one billion lives saved by the Green Revolution, you may be a distributist!
  4. You find yourself supporting environmentalist policies, but for different reasons: If you find yourself always on the side of radical environmentalists, but as with the seedless watermelon, different principles lead you to their extreme positions — well, puzzle no longer. You may be a distributist!
  5. You think you live in a polis: If you’d like to impose virtue on 307 million people the same way you would on 75,000; if you think that what worked on a co-op level in Spain can be scaled up 60,000 percent without distortion; and if you insist on economic self-sufficiency — in short, if you’re more attached to the form of the polis than Aristotle himself was, then you may be a distributist!
  6. You find yourself asking “What would Frodo do?”: Distributists often take The Shire of J.R.R. Tolkein’s The Lord of the Rings as a model society (mostly those who consider a return to the polis too fantastical). If you’re convicted that eating two breakfasts a day is more in line with Catholic Social Teaching, you may be a distributist!
  7. You really miss guilds: If you’ve mythologized the quaint, confraternal aspects of medieval guilds, and don’t mind overlooking how controlling they were; if you love the idea of long apprenticeships and don’t mind sweeping grants of patent and absolute trade secrecy, you may be a distributist!
  8. You dislike intellectual property: If you view Article I, Section 8 of the Constitution as a tool for enriching the plutocracy (except of course when monopolies are given to guilds) and identify more with the Swedish-internet-pirate school of thought, you may be a distributist!
  9. You bleed your patients with leeches: If you long for the simpler, more local health care system of the Middle Ages, when your barber performed appendectomies and your doctor’s first instinct in case of illness was to send for leeches, then you may just be a distributist!
  10. You brew your own beer: Coors is the beer of Republicans, O’Doul’s is probably the beer of the Tea Party, and the unwashed hipsters at OWS all drink Pabst Blue Ribbon, but if you brew your own beer, you may be a distributist! (No word on what Chesterton thought of bathtub gin.)

Note: If you would like a more serious response to distributism, see here and here.

Last week the Federal Circuit Court handed down what seemed to many a funny decision: that human genes are patentable. Myriad Genetics owns patents for two tumor suppressor genes, BRCA1 and BRCA2 (mutations of these genes are correlated with increased incidence of breast cancer, making them of great interest to doctors and scientists). Myriad was sued by doctors and researchers who claim that genes fall into the category of “products of nature,” which makes them unpatentable, but the court disagreed.

Myriad’s patents allow it to charge licensing fees to doctors who wish to screen their patients for BRCA1/2 mutations, and also to researchers developing drugs that would target BRCA1/2 abnormalities in breast cancers. Myriad claims that its patents allow it to recover the costs of identifying the two genes, and so are just like the patents for Velcro, ShamWow, or the Segway. Aside from the legal dispute—i.e., the majority’s facially risible argument that “the molecules as claimed do not exist in nature,” since bits of the BRCA1 gene aren’t floating around in ponds—there are two problems with the patenting of genes: a moral one and a practical one.

In his Acton monograph The Social Mortgage of Intellectual Property, David H. Carey addresses intellectual property rights vis-à-vis the distribution of medicine. He focuses on the AIDS epidemic and infectious diseases in the Third World, and presents the Vatican’s 2001 argument that the principle of solidarity supersedes patent rights where the lives of the poor are at stake, even though the long-term consequences of a suspension of intellectual property might be severe.

Admittedly, personalized cancer treatment in the United States alters the moral calculation, but the American public has made its consideration, and by the establishment of the National Cancer Institute (part of the National Institutes of Health), has decided to fund early stage cancer research publicly. Certainly in order recoup the billions of dollars of testing required to bring a cancer drug to market, companies need the assurance of patent protection, but the sequencing of a gene comes years before any drug begins testing (Myriad filed for its patents in 1994).

As Francis S. Collins, head of the NIH, explained in a recent book,

The information contained in our shared [genome] is so fundamental, and requires so much further research to understand its utility, that patenting it at the earliest stage is like putting up a whole lot of unnecessary toll booths on the road to discovery.

Whether the Supreme Court reverses the Federal Circuit’s decision, or Congress passes a law making clear the proper extent of patent protections, this intellectual property mess must be untangled.

News broke yesterday of an audacious violation of Apple Computer’s intellectual property rights (IPR) in China. This expat blogger posted photos of three sham Apple Stores she discovered in the city of Kunming—the stores have been set up by some entrepreneurial chap hoping to capitalize on the company’s Chinese popularity.

The story was slightly amusing, especially in light of Apple’s recent earnings announcement. (“They totally did it again,” said one analyst. It was also revealed that Apple now sits on enough cash in hand to buy 100% of Goldman Sachs at its current market value.) It seems that the Apple brand is now so valuable that the Chinese are counterfeiting the company’s retail outlets to sell Apple’s own products at full price. As one employee of the fake store said when reached by the Wall Street Journal,

It doesn’t make much of a difference for us whether we’re authorized or not. I just care that what I sell every day are authentic Apple products, and that our customers don’t come back to me to complain about the quality of the products.

But that’s precisely why Apple’s IPR must be protected. The company is one of the most innovative ever—their graphical user interface, popularization of the computer mouse, iPod music player, and touch-screen devices have dragged the technology sector forward, to say nothing of their design contributions—and that innovation would not have been supported without protections for the company’s intellectual property.

The U.S. Constitution justifies the establishment of IPR in giving Congress the power

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.

As David H. Carey explains in his Acton monograph The Social Mortgage of Intellectual Property,

If allowing some techonology to be patented benefits society in the long run more than it costs society temporarily to forego unrestricted use of that technology, then such patents are morally defensible.

The Apple Store “experience” is tightly bound up with the company’s products (remember how miserably Dell stores failed?), and part of allowing Apple temporary exclusive use of its inventions is allowing it to sell them as it sees fit.

There is also the question of trademark, which exists primarily for the protection of consumers, so that when I buy a tube of Crest toothpaste from a CVS I know that I’m not getting a Chinese imitation accidentally laced with cyanide, stocked by a shyster posing as a reputable franchisee.

Whatever employees of these fake Apple Stores may say—and according to the blogger who broke the story, none of the stores’ sales force realized at the time that they weren’t working for Apple—it’s China! Would you buy an iPhone from one of the fake stores? The Chinese government has a responsibility to its citizens to enforce Apple’s trademarks and protect its citizens from fraud.

By pure coincidence, I can illustrate the importance of protecting IPR in China: Yesterday, about the time this story was hitting the internet, my father went to the Apple Store in Dallas (an authentic one) and purchased an iPad. While he is away for a week on a theology course, Apple’s device will give him access to email and other business tools, so that he can grow in virtue and keep his business running at the same time (and once they debut the iSpankings app, he’ll be able to keep his kids in line, too). He chose an iPad over any number of other devices because his IT guy—who doesn’t like Macs, as IT guys never do—told him it would do the job best.

Except for the U.S.’s protection of IPR, that market solution wouldn’t have been possible.

Back in September I posted an announcement about a new book that contributed in interesting ways to our understanding of patent/intellectual property issues. Now Julio Cole’s full review of the book in the Independent Review is available online. An excerpt:

Should we really be surprised that the patent system’s internal dynamics have finally brought us to the point at which the potential profits of patenting have, for most industries, been entirely gobbled up by lawyers’ fees? Isn’t that outcome what we should expect after having studied the literature on rent seeking? If patents are really nothing more than special privileges granted by the state, then wouldn’t we expect the monopoly rents derived from such grants to become dissipated eventually through steady increases in rent-seeking costs?

Blog author: kschmiesing
posted by on Tuesday, September 9, 2008

As I’ve said before, some of the most interesting debates are those that break down along atypical lines: for example, by splitting dedicated limited government advocates rather than pitting them against statists. Back in 2001, the Journal of Markets & Morality conducted a controversy between two libertarian-leaning economists, Julio Cole and Paul Cleveland, concerning copyright and patent law.

Last year, we published a Christian Social Thought Series volume on intellectual property rights by David Carey that didn’t come down squarely on one side or the other, recognizing both the important role of incentives to innovation but also the obligation to limit property rights when the common good demands.

The issue hasn’t been settled yet, but now comes an important new data point from Princeton University Press: Patent Failure: How Judges, Bureaucrats, and Lawyers Put Innovators at Risk, by James Bessen and Michael J. Meurer. (HT: The aforementioned Julio Cole of Universidad Francisco Marroquín, Guatemala.)

This study shifts the terms of the debate by marshalling empirical evidence to show that one of the chief arguments in defense of patent restrictions—the innovation incentive—does not hold water. In an era of big business and big litigation, the ideal of the eccentric inventor making his living by patenting his creations appears to be antiquated. Specifically, what Bessen and Meurer demonstrate is that the costs for businesses to defend themselves againt patent infringement suits now far outweigh the benefits reaped by owning patents ($12 billion to $3 billion in 1999). In other words, patents are no longer an incentive to invention so much as a legal tool with which to damage one’s competitors.

[A caveat: This finding excludes chemical and pharmaceutical companies.]

A couple weeks ago the NYT magazine ran a piece by contributing writer Tina Rosenberg, which attempts to outline some of the ways in which “everyone in a wealthy nation has become the beneficiary of the generous subsidies that poorer countries bestow upon rich ones.”

What does she mean? In “Reverse Foreign Aid,” Rosenberg asserts that there are five major forms of poor-to-rich international subsidy. The first is the tendency among poorer nations to build-up great reserves of hard currency, often in the form of T-bills. The problem here is that there is an opportunity cost in holding the low-return but ultra-secure US Treasury bills: “All the money spent on T-bills — a very substantial sum — could be earning far better returns invested elsewhere, or could be used to pay teachers and build highways at home, activities that bring returns of a different type.”

A second form of subsidy is in the WTO requirements that member nations abide by copyright and intellectual property protections. “There are good reasons for countries to respect intellectual property, but doing so is also an overwhelming burden on the poorest people in poorer countries,” writes Rosenberg.

So-called “tax holidays” form a third kind of subsidy, in which poorer nations offer tax incentives and various other breaks to multi-national corporations to entice them to bring their operations to their country. Rosenberg writes, “Since deals between corporations and governments are usually secret, it is hard to know how much investment incentives cost poorer countries — certainly tens of billions of dollars. Whatever the cost, it is growing, as country after country has passed laws enabling the offer of such incentives.”

Rosenberg also describes brain drain as a form of subsidy, in which skilled professionals who are trained in poorer nations emigrate to wealthier ones. She also points out the adverse effects that domestic subsidies of various industries, such as agriculture, can have on poorer nations. Somehow or other this direct subsidy becomes a “reverse subsidy” because “corn, rice or cotton exported by rich countries is so cheap that small farmers in poor countries cannot compete, so they stop farming.”

And finally, Rosenberg calls the disproportionate negative effects of climate change on poorer nations the “ultimate subsidy.” She writes, “American energy use is being subsidized by tropical coastal nations, who appear to be global warming’s first victims.”

The essay is really a bit uneven. It’s hard to fathom why, for example, cheaper imports of agriculture commodities from wealthier nations should be seen as “reverse” subsidies. Just because a certain practice or policy negatively affects a poorer country doesn’t mean that it is a “reverse” subsidy. And just because wealth is created in the first world doesn’t mean that it comes at the expense of someone in the third world, although there are good reasons to see that Rosenberg is right about the consequences on agricultural sectors in developing nations.

With respect to the second form of “reverse subsidy,” Rosenberg is really describing a kind of competition between developing nations, and the beneficiaries aren’t so much wealthier governments but large multi-national corporations. Of course, many critics of the developed world can’t or won’t distinguish between these two (all the better to fit into the picture of a growing neo-liberal “empire”).

Brain drain is a real problem for the developing world, but as is the case with so many of these instances of “reverse subsidy,” Rosenberg is pointing to a legitimate issue or concern but failing to ask the right kinds of questions, and thus providing some questionable solutions (a neo-Keynesian answer for T-bill stockpiling?). Why, for instance, are professionals leaving developing nations to work in places like the United States? In many, if not most, cases money surely is a motivation. But there certainly are other factors at work, and the potential for greater income isn’t a sufficient explanation as to why so many people leave their home, friends, and family to go live in a foreign country. Indeed, large-scale migration out of a nation is a pretty reliable indicator that something is wrong in the native country.

And maybe the fact that poorer nations don’t respect copyright and IP rights is as much a contributor as it is an effect of their lower economic status. How can you expect to be a country that fosters innovation if there are no legal protections for innovation and invention?

A recent NBER paper, “Globalization and Poverty,” examining some of these issues makes the case that globalization is a complex phenomenon and that in some cases segments of the poor can be made worse off. This is no doubt true, and the merit of Rosenberg’s piece is that it points out some of the real-world issues that a globalized economy faces. The question remains, however, whether at least some of these negative effects might be mitigated by a freer and more liberalized system of trade rather than one which relies on subsidies, tariffs, and protectionism.