Thursday, April 26, 2012

Software Patents and "Rent Seeking"

"Rent Seeking" is a term in economics used to denote the effort of those with "political" power, that is, the ability to leverage the violence of the state, to use that leverage for personal gain.

Inspired by the recent article on the subject, I'd like to give my own perspective on the issue.

While most of us think of "rent" only as paying one's landlord for the use of their property, this common use of the term is not as far from the more technical "economic" term as it seems at first. Let it stew for a while, see if it doesn't make sense.

When first proposed that the United States have a system of temporary monopoly grants to authors and inventors, this was not done in a vacuum. The experience of England, with tight "copyright" vs. central Europe with lax "copyright" was living memory. The "Statute of Anne" was only enacted 4 years before Benjamin Franklin was born. The printing business outside of tight "copyright" flourished, while censorship, the real reason for the invention of "copyright" in the first place, was doing it's job very nicely indeed, suppressing the flow of information and making a few people very wealthy.

Let me give you a little bit of background on the Constitution for the United States that was left out of your history books. Those arguing for a more powerful central government to replace the one established by the Articles of Confederation were not altruists. They were not contriving for the benefit of others, they were trying to re-establish British merchantilism, this time with themselves in charge.

They knew very well the benefits of "Copyrights" and "Letters Patent" to those who held them. Basic merchantilism: By leveraging the violence of the state, they achieve concentrated benefits while distributing the costs to others.

Later, the same idea would manifest in the Fugitive Slave Act.  The falling economic benefits of slave owning (the failing business model) were compensated by requiring others (the distributed costs) to capture and return run-away slaves (the concentrated benefits) to those who were able to leverage the violence of the state in their favor.

So here we are today. The Microsoft, AOL, Sony, Time Warner, RIAA and MPAA (the failing business model) use their leverage over the violence of the state (campaign contributions, lobbying, lucrative book deals, etc.) to constantly increase the scope and duration of Copyright and Patent law (the distributed costs) to protect their profits (the concentrated benefits).

Even Al Jazeera has weighed in on the subject, with their story "Patent Wars, A New Kind Of Competition"

The reason we find ourselves in this situation today is that some very smart people didn't say "censorship" and "privilege" when justifying Copyright and Patent under the new, more powerful government authorized by the Constitution for the United States. They said, "We just want 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!!!"

See? We're doing it for YOU!

But let's be clear here. This was NOT done after any study showing that authors and inventors actually benefit from such monopoly grants. This was not done with any effort to understand the negative repercussions of such monopoly grants (Bastiat's "That which is Unseen"). And, today, the scope of Patent and the duration of Copyright have expanded to extents that make the term "limited", which is central to the authorizing Constitutional clause, a joke.

Unlike Copyright, which when applied to software means "you cannot re-use my code", a software Patent means "you may not do this thing that I have done." Software Patents also did not exist prior to 1966, but that's perfectly understandable. They didn't really take off until 1998, and writing code has become a minefield since then. There is simply no way to know if what you are doing isn't in some submarine patent somewhere, just waiting to pop up and fire a legal torpedo.

Software Patents are a fantastic example of the destructive nature of intervention: Companies who own them do not use them to innovate, that's already been done. They use them to suppress others from using their own means to achieve the same or better results. Software patents retard innovation, while sucking up vast wealth in legal proceedings, in the eternal quest to concentrate benefits to the few, while distributing the costs over the many.

At this point I would present you with two links to scholarly works on the subject of Copyright and Patent law, and their effects, Boldrin and Lavine's "Against Intellectual Monopoly", and Kinsella's "Against Intellectual Property" (scroll down, so you get your choice of formats including audio book). Both of which, just like Benjamin Franklin's invention which he refused to patent, that we know of as the "Franklin Stove", are available gratis.

The only people who really benefit from Software Patents are the lawyers. Remember what I said about "rent" being "payments to the real owners"?

Maybe Shakespeare was right, after all.


I would like to add this Google Tech Talk, which points out several contradictions in the patent system:

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