Intellectual Property Laws are Harmful

on Wednesday, February 15, 2012

Intellectual property is not the same as other forms of wealth, and should be considered in a different light. It's a whole new animal, as it were, because "theft" traditionally means that an asset moves out of the possession of its original owner, and into the hands of a thief. It harms the previous owner.

With IP, assets can be transferred to an infringer at no cost to the victim of the theft. The loss of his ability to market his asset can be more reasonably controlled via the private markets. It isn't reasonable to socialize (make all citizens pay) the cost of protecting the value of an invention. That cost is, in my opinion, something with which an inventor should be burdened.

IP laws are today used as weapons, and stifle innovation. When the steam engine was invented in the late 19th century, its inventor used his patent to block innovation from other inventors, who had improved upon his design. And ironically, he was unable to improve his own design, because the most efficient flywheel design was patented by another firm. The patents blocked the creation of the most efficient engine until they expired.

Similar things are happening with software patents today. IP companies are buying thousands of them and literally extorting "protection" fees from software developers. Apple recently purchased a few thousand patents it didn't intend to use, for $6 billion, in order to threaten these companies with an arsenal of patents of its own. If they sue Apple, Apple can sue all of the companies under the "protection" of IP collection companies. IP laws are in practice backfiring.

They prevent innovation even as they claim to promote it. They are very similar to minimum wage laws in this way, promulgating the idea that they are helping the poor, and in reality creating more unemployment and suffering for low-skill workers.

Inventors can still profit from innovation absent IP and copyright laws. If you invent a light bulb, simply create a private contract with a manufacturing firm to secretly create 10 million bulbs. When they hit the market, others will rush to copy them, but you will be first to market by months or years. You become wealthy, and others are not prevented from improving on your original design.

This is how Apple operates, and is primarily why they are so successful. They innovate secretly, flooding the market with a products that take competitors years to copy.

If you invent a bow and arrow in your cave, is it moral for the village-chief to tell me that I cannot build compound bows, a vast improvement on your design? IP laws seem to promote innovation, but they also block improvements on designs. The trade-off is between original innovation and incremental improvements. Without the laws, original innovation is still there, as is incremental innovation. With the laws, only original innovation continues.