Posts tagged with: patents

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.

Blog author: kschmiesing
posted by on Thursday, March 19, 2009

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?