Muutokset

* kopioitu pdf:stä http://www.dklevine.com/papers/ip.ch.1.m1004imbookfinal01.pdf

== Chapter Luku 1: Introduction Johdanto ==

In late Vuoden 1764loppupuolella, while repairing a small korjatessaan pientä Newcomen steam engine-höyrykonetta, the idea of allowing steam to expand and condense in separate containers sprang into the mind of James WattWattin mieleen tuli ajatus erillisissä astioissa laajenevasta höyrystä. He spent the next few months in unceasing labor building a model of the new engineMuutamat seuraavat kuukaudet hän uurasti lakkaamatta rakentaakseen mallin uudesta koneesta. In Vuoden 1768elokuussa, after a series of improvements and substantial borrowinguseiden parannusten ja huomattavan lainanottamisen jälkeen, he applied for a patent on the ideahän matkusti Lontooseen hakemaan patenttia idealleen. Hän teki seuraavat kuusi kuukautta paljon työtä patentin eteen. August 1768 found Watt in London about the patent and he spent another 6 months working hard to obtain itSeuraavan vuoden tammikuussa se vihdoinkin myönnettiin. The patent was finally awarded in January 1769Tuotannon osalta ei tapahtunut juuri mitään ennen vuotta 1775. Nothing much happened, in terms of production, for a few years untilSilloin, in 1775yhteistyökumppaninsa, after another major effort supported by his new business partner rikkaan teollisuusmiehen Matthew BoultonBoultonin tuella, Watt secured an Act of Parliament extending his 1769 patent until the year sai parlamentin myöntämään patentille jatkoaikaa vuoteen 1800asti. The great statesman Suuri valtiomies Edmund Burke spoke eloquently in Parliament in the name of economic freedom and against the creation of unnecessary monopoly puhui parlamentin edessä kaunopuheisesti taloudellisen vapauden nimissä tarpeettoman monopolin luomista vastaan – but to no availilman vaikutusta. The connections of Watt’s partner Boulton were too solid to be defeated by simple principle¹ Wattin kumppanin Boultonin yhteydet olivat liian vahvoja tullakseen voitetuksi pelkän periaatteen avulla.

Once Watt’s patents were securedKun Wattin patentti oli varmistettu ja tuotanto aloitettu, a substantial portion of his energy was devoted to fending off rival inventorshuomattava osa hänen energiastaan kului kilpailevien keksijöiden torjumiseen. In Vuonna 1782Watt varmisti itselleen ylimääräisen patentin, joka tuli ”tarpeelliseksi sen seurauksena, kun [Matthew] Wasborough ennätti niin epäreilusti kehittää ensimmäisenä kampiliikkeen”.² Vieläkin dramaattisemmin 1790-luvulla, kun ylivoimainen ja itsenäisesti suunniteltu Hornblower-moottori saatettiin tuotantoon, Boulton ja Watt kävivät sen kimppuun koko oikeusjärjestelmän voimalla.³ Wattin patenttien aikakaudella Iso-Britanniassa höyrykoneiden yhteenlaskettu teho lisääntyi 750 hevosvoimalla vuosittain. 30 vuotena patenttien jälkeen lisää tehoa tuli yli 4000 hevosvoimaa vuosittain. Sen lisäksi höyrykoneiden polttoainehyötysuhde muuttui vain vähän Wattin patentin aikana, kun taas vuosien 1810 ja 1835 välillä sen on arvioitu parantuneen viisinkertaiseksi.⁴ secured an additional patentKun Wattin patentit raukesivat, ei koettu pelkästään räjähdysmäistä kasvua höyrykoneiden tuotannossa ja tehossa, mutta höyryenergiasta tuli viimeinkin teollista vallankumousta eteenpäin ajava voima. Seuraavan 30 vuoden aikana höyrykoneita muunneltiin ja paranneltiin, ja olennaiset keksinnöt kuten höyryjuna, made “necessary in consequence of höyrylaiva ja höyryllä toimiva kehruukone tulivat yleiseen käyttöön. Olennainen innovaatio oli korkeapaineinen höyrykone – kehitys jonka Watt esti strategisesti patenttiaan käyttämällä.Monet uudet parannukset höyrykoneeseen, kuten esimerkiksi William Bullin, Richard Trevithickin ja Arthur Woolfin, tulivat saataville vuonna 1804: vaikkakin ne oli kehitetty jo aikaisemmin, niitä ei voitu ottaa käyttöön ennen kun Boultonin ja Wattin patentti oli rauennut.Kukaan näistä keksijöistä ei halunnut samaa kohtaloa kuin Jonathan Hornblower. ⁵ having been so unfairly anticipatedIronisesti, sama patenttijärjestelmä, jota Watt käytti kilpailijoidensa murskaamiseen, haittasi myös hänen omaa työtään paremman höyrykoneen kehittämisessä. Olennainen rajoite alkuperäisessä Newcomenin moottorissa oli kyvyttömyys tuottaa tasaista pyörivää liikettä. Kätevin ratkaisu ongelmaan, jossa yhdistyi kampi ja vauhtipyörä, riippuivat rakennustavasta, jonka James Pickard oli patentoinut, mikä esti Wattia käyttämästä sitä. Watt teki myös itse useita yrityksiä tehokkaamman voimansiirron kehittämiseksi, ilmeisesti päätyen kuitenkin samaan lopputulokseen kuin Pickard. Patentin olemassaolo pakotti Wattin kehittämään tehottomamman ”aurinko ja planeetta” -vaihteiston. Vasta vuonna 1794, Pickardin patentin rauettua, by [Matthew] Wasborough in Boulton ja Watt ottivat käyttöön taloudellisesti ja teknisesti ylivoimaisen kammen.⁶ the crank motionWattin patenttien raukeamisen vaikutus hänen imperiumilleen voi myös tulla yllätyksenä. Kuten saattoi odottaa, patenttien rauetessa ”useita höyrykoneita valmistavia yrityksiä perustettiin, jotka käyttivät herra Wattin kehittämiä periaatteita”. Kuitenkin Wattin kilpailijat ”pääasiallisesti tähtäsivät ennemminkin halpuuteen kuin laatuun.” More dramaticallyLopputuloksena voimme havaita, in the 1790settä heitä ei suinkaan ajettu markkinoilta, when the vaan ”useita vuosia jälkeenpäin Boulton ja Watt pitivät hintojaan ylhäällä ja saivat silti enemmän tilauksia.”⁷superior and independently designed Hornblower engine was put into productionItseasiassa vasta sen jälkeen, kun heidän patenttinsa raukesi, alkoivat Watt ja Boulton todenteolla valmistamaan höyrykoneita. Sitä ennen he lähinnä keskittyivät suurten monopolististen rojaltien keräämiseen lisenssien avulla. Aliurakoitsijat tuottivat suurimman osan osista, ja Boulton and ja Watt went after him with the full force lähinnä valvoivat, kun asiakkaat kokosivat komponentit. of the legal systemSuuressa osassa historiikkeja James Wattia pidetään sankarillisena keksijänä, vastuullisena teollisen vallankumouksen alkamisesta. Faktat viittaavat toisenlaiseen tulkintaan. In contrast to Wattoli yksi monista höyryvoimaa kehitelleistä älykkäistä keksijöistä 1700-luvun loppupuoliskolla. Sen jälkeen kun hän pääsi askeleen edemmäs muita, who died a rich manhän pysyi siellä – ei paremman innovaation, vaan tehokkaamman oikeusjärjestelmän hyväksikäytön ansiosta. Eikä siitä, että hänen yhteistyökumppaninsa oli rikas mies, jolla oli vahvoja yhteyksiä parlamenttiin, the ollut ainoastaan pientä apua. inventor Jonathan Hornblower was not only forced to close shopOliko Wattin patentti ratkaiseva kannustin, joka tarvittiin tuomaan esille hänen sisäinen keksijänsä, kuten perinteisesti historiankirjat ehdottavat? Vai myöhästyttikö hänen oikeusjärjestelmän hyväksikäyttönsä kilpailun tukahduttamiseksi teollista vallankumousta vuosikymmenen tai kaksi? Vielä laajemmin, ovatko kaksi olennaista nykyisen immateriaalioikeutemme osaa – patentit ja tekijänoikeudet – lukuisine vikoineen, välttämätön paha jota meidän on ylläpidettävä nauttiaksemme keksimisen ja luomisen hedelmistä? Vai ovatko ne vain täysin turhia, jäännöksiä ajalta jolloin valtiot myönsivät rutiininomaisesti monopoleja suosituille ylhäisille? Tähän kysymykseen etsimme vastausta. but found himself ruined and in jailWattin tapauksessa vuoden 1769 ja erityisesti vuoden 1775 patentit todennäköisesti myöhästyttivät höyrykoneen laajaa käyttöönottoa: kehitys tukahtui kunnes Wattin patentti raukesi, ja hyvin harvoja höyrykoneita rakennettiin hänen monopolinsa aikana. Välittömästi patentin raukeamisen jälkeen tapahtuneiden keksintöjen määrästä voimme päätellä, että Wattin kilpailijat vain odottivat ennen omien keksintöjensä julkistamista. Tämän ei pitäisi tulla yllätyksenä: uusien höyrykoneiden, olivat ne kuinka paljon Wattin koneita parempia, piti käyttää erillistä lauhdutinta. Koska vuoden 1775 patentti tarjosi Boultonille ja Wattille monopolin kyseiselle idealle, monet muut sosiaalisesti ja taloudellisesti arvokkaat muutokset jäivät ottamatta käyttöön. Samalla tavalla, vuoteen 1794 asti Boultonin ja Wattin koneet olivat tehottomampia kuin ne olisivat voineet olla, koska Pickardin patentti esti käyttämästä ja parantamasta ideaa kammen ja vauhtipyörän yhdistelmästä. Prior to the start of Watt’s commercial production in 1776Näemme myös kuinka huonosti Wattin keksijäntaidot olivat huonosti allokoitu: huomaamme hänen käyttäneen enemmän aikaa lakijärjestelmän parissa muodostaakseen ja säilyttääkseen monopolinsa kuin hän käytti aikaa varsinaiseen koneensa paranteluun ja tuotantoon. Taloudellisesta näkökulmasta katsoen Watt ei olisi tarvinnut niin pitkään kestänyttä patenttia – on arvioitu että vuoteen 1783 mennessä – 17 vuotta ennen hänen patenttinsa raukeamista – hänen yrityksensä oli päässyt omilleen. Edelleen patentin raukeamisen jälkeen Boulton ja Watt kykenivät ylläpitämään huomattavaa markkinaosuutta, vain koska olivat ensimmäisiä, huolimatta siitä faktasta että heidän kilpailijoillaan oli 30 vuotta aikaa oppia tekemään höyrykoneita.there were 510 steam engines in the UVahingollista yritystä tukahduttaa kilpailua ja hankkia erityisiä etuoikeuksia kutsutaan taloustieteilijöiden piirissä ylivoiton tavoitteluksi (rent-seeking). Historia ja arkijärki ovat osoittaneet sen olevan laillisen monopolin myrkyllinen hedelmä.KWattin yritys jatkaa hänen vuoden 1769 patenttiaan on erityisen törkeä esimerkki ylivoiton tavoittelusta: patentin jatkaminen oli selkeästi tarpeeton antamaan kannustin alkuperäiselle keksinnölle, joka oli jo tapahtunut.Sen lisäksi näemme, most using the inefficient kuinka Watt käyttää patentteja työkaluna kilpailijoidensa, kuten Hornblowerin, Wasburoughin ja muiden innovaatioiden tukahduttamiseksi. Newcomen designHornblowerin kone on täydellinen esimerkki asiasta: se oli huomattava parannus Wattiin verrattuna, koska se esitteli uuden käsitteen ”compound enginestä” jossa oli enemmän kuin yksi sylinteri. Tämä, eikä Boultonin ja Wattin malli, oli pohjana höyrykoneiden kehitykselle sen jälkeen, kun heidän patenttinsa oli rauennut. Kuitenkin, koska Hornblower rakensi Wattin aiemman työn pohjalta käyttäen hyväksi ”erillistä höyrystintä”, Boulton ja Watt pystyivät pysäyttämään hänet oikeusteitse ja laittamaan tehokkaasti lopun höyrykonekehitykselle. Monopoli ”erilliselle höyrystimelle”, eli hyödylliselle innovaatiolle, esti samalla tavalla hyödyllisen innovaation, eli ”compound enginen” kehitystä, hidastaen täten taloudellista kasvua. These engines generated about 5Tällainen innovaation hidastaminen on klassinen esimerkki siitä, mitä kutsumme aineettoman omaisuuden tehottomuudeksi,000 tai IP-tehottomuudeksi lyhyemmin. horsepowerLopuksi, höyrykone otettiin käyttöön hitaassa tahdissa ennen Wattin patentin raukeamista. By 1800Pitämällä hinnat korkealla ja estämällä muita tuottamasta halvempia ja parempia höyrykoneita, when Boulton ja Watt's patents expiredvaikeuttivat pääoman kasautumista ja hidastivat talouskasvua. James Wattin tarina on vahingollinen tapaus patenttijärjestelmän hyödyllisyydelle, mutta me tulemme näkemään, ettei se ole epätavallinen. Uusi idea kehittyy melkeinpä sattumalta keksijälle kun hän on rutiininomaisesti toimimassa jonkin aivan toisenlaisen lopputuloksen saamiseksi. Patentti tulee vasta vuosia sen jälkeen ja se johtuu enemmänkin lainopillisen terävyyden sekä käytettävissä olevien resurssien käyttäminen ”hyvän onnen rattaiden voitelemiseen” kuin minkään muun. Viimein, kun patenttisuoja on hankittu, there were still käytetään sitä usein työkaluna taloudellisen kasvun estämiseen ja kilpailijoiden satuttamiseen.  only 2Vaikka näkemys, jota tässä esitämme, voi vaikuttaa ikonisoivalta, se ei ole varsinaisesti uusi,250 steam engines used in the U.Keikä erityisemmin alkuperäinen.Frederic Scherer, patenttijärjestelmän arvovaltainen akateeminen tukija, tutkittuaan Boultonin ja Wattin tarinaa, of which only 449 were totesi vuonna 1986 seuraavanlaisesti:the superior ''Jos patenttisuojausta ei olisi ollut olemassa, ... Boulton and ja Watt enginesolisivat varmasti joutuneet seuraamaan varsin toisenlaista bisnestaktiikkaa siihen verrattuna mitä he käyttivät. Suurin osa yrityksen voitoista oli saatu moottorien käytön rojalteista eikä valmistettujen moottorien komponenteista, ja ilman patenttisuojaa yritys ei olisi tietenkään kyennyt keräämään rojalteja. Vaihtoehtona olisi ollut keskittyä tuotantoon ja huoltopalveluihin päätulonlähteenä, joka itseasiassa oli käytäntö, the rest being old jota alettiin omaksua 1790-luvulla kun erillisen höyrystimen patentin raukeaminen alkoi lähestyä... On mahdollista todeta vieläkin varmemmin, että patenttiriitely 1790-luvulla ei suoraan kannustanut teknologista kehitystä... Boultonin ja Wattin kieltäytyminen lisenssien myöntämisestä muille moottorinvalmistajille erillisen höyrystimen valmistamiseksi selkeästi haittasi sekä kehitystä että parannusten omaksumista.''⁸ * * * Teollisesta vallankumouksesta on jo aikaa, mutta kysymys aineettomasta omaisuudesta on edelleen ajankohtainen. Tätä kirjaa kirjoitettaessa yhdysvaltalaistuomari James Spencer on uhkaillut kolmen vuoden ajan sulkea laajasti käytetyn Blackberryn viestintäverkon – patenttikiistan takia.⁹ Eikä Blackberry ole itsekään synnitön: vuonna 2001 Blackberry haastoi oikeuteen Glenayre Electronicsin, koska kyseinen yritys loukkasi Blackberryn patenttia, joka koski "informaation puskemista isäntäsysteemistä mobiilidatakommunikaatiolaitteeseen".¹⁰ Samanlainen sota on käynnissä tekijänoikeuksien puolella - Napster-palvelu suljettiin liittovaltion tuomarin toimesta heinäkuussa 2000 kiistassa koskien tekijänoikeudella suojattujen tiedostojen jakoa.¹¹ Tunteet käyvät kuumina kummallakin puolella. Jotkut tekijänoikeusvastaiset libertaristit käyttävät slogania “informaatio vain haluaa olla vapaana”. Toisessa ääripäässä suuret musiikki- ja ohjelmistoyhtiöt väittävät maailman ilman immateriaalioikeuksia olevan maailma ilman uusia ideoita. Osa tekijänoikeusväittelyn katkeruudesta heijastuu Stephen Manesin hyökkäyksessä Lawrence Lessigiä kohtaan: Newcomen ''Stanfordin lakiprofessorin ja median suosikin Lawrence Lessigin mukaan “liikkeen täytyy alkaa kaduilta”, jotta korruptoitunutta kongressia, ylikeskittynyttä mediaa ja ylihintaista oikeusjärjestelmää vastaan voidaan taistella. enginesVastoin Lessigin avautumista... “fair use” -poikkeukset nykyisessä tekijänoikeuslaissa... ovat niin ekspansiivisia, että melkeinpä ainoa asia, jota leikkaamalla-ja-liittämällä ei voi tehdä tekijänoikeuden alaiselle teokselle laillisesti, on kopioida merkittävää osaa siitä..¹²'' Varmastikaan Lessig ei ole nykyisen tekijänoikeuslain ystävä. Mutta huolimatta Stephen Manesin väitteestä, hän uskoo tuottajien ja kuluttajien välisten oikeuksien tasapainottamiseen: hänen kirjansa Free Culture puhuu jatkuvasti tästä tasapainosta ja siitä, kuinka se on menetetty nykyaikaisessa laissa.¹³ Kuten Lessig, monet taloustieteilijät ovat skeptisiä nykyisen lain suhteen - 17 huomattavaa taloustieteilijää, mukaanlukien useita Nobel-palkinnon voittaneita, jättivät kirjelmän Yhdysvaltain korkeimmalle oikeudelle kannattaakseen Lessigin haastetta tekijänoikeuden pituuden kyseenalaistamiseksi. Kuten Lessig, myös taloustieteilijät tunnustavat immateriaalioikeuksien roolin: kun lakimiehet puhuvat oikeuksien tasapainottamisesta, taloustieteilijät puhuvat kannustimista. Lainataksemme kahden huomattavan taloustieteilijän, Robert Barron ja Xavier Sala-i-Martinin oppikirjaa: ''Olisi hyvä antaa kaikki olemassa olevat keksinnöt vapaasti kaikkien tuottajien käyttöön, mutta tämä käytäntö epäonnistuu tarjoamaan... kannustimia myöhempiin keksintöihin. Vastakkain ovat olemassaolevien ideoiden käyttö ja innovatiivisen toiminnan kannustin.¹⁴'' Tosiaan, kun monet meistä nauttivat mahdollisuudesta ladata vapaasti musiikkia internetistä, me olemme myös huolissamme siitä, kuinka muusikko voi ansaita elantonsa mikäli hänen musiikkinsa on välittömästi jaossa ilmaiseksi. Vaikka keskustelu tekijänoikeuksista ja patenteista käykin kiivaana, on olemassa yleinen hyväksyntä sille, että jonkinlaista suojaa tarvitaan keksijöille ja luojille, jotta he voisivat nauttia työnsä hedelmistä. "Informaatio vain haluaa olla vapaana" -retoriikka vihjaa, ettei kukaan saisi ansaita omilla ideoillaan. Tästä huolimatta ei näytä olevan kovinkaan vahvaa vaatimusta, että samalla kun muiden on aivan hyväksyttävää kerätä oman työnsä hedelmät, keksijöiden ja luojien täytyisi tulla toimeen muiden hyväntekeväisyydellä. Kaikesta tunteellisuudesta huolimatta näyttää siltä, että kummatkin osapuolet ovat samaa mieltä siitä, että immateriaalioikeuslakien tarvitsee löytää tasapaino luomistyön kannustimien tarjoamisen ja olemassa olevien ideoiden käytön vapauden välille. Toisin sanoen, kummatkin osapuolet ovat yksimielisiä siitä, että immateriaalioikeuslait ovat "tarpeellinen paha" joka synnyttää uutta innovaatiota, ja erimielisyys koskee sitä, mihin kohtaa viiva olisi piirrettävä. Aineettoman omaisuuden puolustajat pitävät nykyisiä monopolituottoja juuri ja juuri riittävinä, kun taas sen vastustajat pitävät niitä aivan liian korkeina. Oma analyysimme johtaa erimielisyyteen kummankin puolen kanssa. Järkeilymme kulkee seuraavanlaisesti. Jokainen haluaa monopolin. Kukaan ei halua kilpailla omien asiakkaidensa tai matkijoiden kanssa. Tällä hetkellä patentit ja tekijänoikeudet antavat tiettyjen ideoiden tuottajille monopolin. Luonnollisesti muutamat ihmiset tekevät jotain myös vastikkeettomasti. Uusien hyödykkeiden luojat eivät eroa vanhojen hyödykkeiden tuottajista: he haluavat saada korvauksen vaivannäöstään. On kuitenkin pitkä ja vaarallinen hyppäys väitteestä, että keksijät ansaitsevat korvaukset vaivannäöstään siihen, että patentit ja tekijänoikeudet, eli monopolioikeudet, ovat paras tai ainoa tapa tuottaa se korvaus. Väitteet kuten "patentti on ''se'' tapa, jolla jotakuta palkitaan arvokkaan kaupallisen idean keksimisestä, ovat yleisiä bisnes-, laki- ja talouslehdissä. The total Kuten tulemme näkemään, on olemassa monia muitakin tapoja, joilla keksijöitä palkitaan, jopa huomattavan suuresti, ja joista monet ovat parempia yhteiskunnalle kuin se monopolivoima, jonka patentit ja tekijänoikeudet nykyisellään suovat. Koska keksijöitä voidaan palkita myös ilman patentteja ja tekijänoikeuksia, meidän tulee kysyä: Onko totta, että aineeton omaisuus saavuttaa halutun päämäärän, eli luo kannustimia uuden keksimiselle ja luomiselle, jotka puolestaan korvaavat niistä aiheutuvat haitat? Tämä kirja tarkastelee sekä todisteita että teoriaa. Johtopäätöksemme on, että luojien omistusoikeudet voivat olla hyvin suojattuja ilman aineetonta omaisuutta, eikä aineeton omaisuus kasvata innovaatiota eikä uuden luomista. Se on tarpeeton paha. * * * Tämä kirja kertoo taloustieteestä, ei laista. Tai toisin sanoen, tämä ei kerro millainen laki on, vaan millainen sen pitäisi olla. Jos olet kiinnostunut siitä, kuinka todennäköisesti joudut vankilaan tiedostojen jakamisesta internetissä, tämä kirja ei ole sinulle. Jos olet kiinnustunut siitä, onko hyvä idea antaa lain estää sinua jakamasta tiedostoja internetissä, niin silloin tämä kirja on sinulle. Huolimatta siitä, että tämä kirja ei ole laista, jotain taustatuntemusta laista silti tarvitaan ymmärtämään taloustieteelliset kysymykset. Tulemme tarkastelemaan taloustieteellisesti sitä, mitä viime aikoina on alettu kutsumaan "aineettomaksi omaisuudeksi", erityisesti patentteja ja tekijänoikeuksia. Itseasiassa on olemassa kolme erilaista aineettoman omaisuuden tyyppiä, jotka suurin osa lakijärjestelmistä tunnustaa: patentit, tekijänoikeudet ja tavaramerkit. Tavaramerkit ovat luonnostaan erilaisia verrattuna patentteihin ja tekijänoikeuksiin: niiden tarkoitus on identifioida hyödykkeiden, palveluiden ja ideoiden tuottajat. Kopiointi – mikä olisi tekijänoikeuden loukkaus – on hyvin erilaista verrattuna valehteluun – mikä olisi tavaramerkin loukkaus. Me emme tiedä hyvää syytä antaa markkinaosapuolten varastaa toisten identiteettejä tai naamioitua ihmisiksi, joita he eivät ole. Päinvastoin, on olemassa vahvoja taloudellisia hyötyjä siitä, että markkinaosapuolten annetaan vapaaehtoisesti identifioida itsensä. Vaikka voimmekin pohtia, onko välttämätöntä antaa Intelille monopolioikeutta käyttää sanaa "inside", on yleisesti ottaen hyvin vähän taloustieteellistä epäselvyyttä tavaramerkkien ansioista. Patentit ja tekijänoikeudet, kaksi tekijänoikeuden muotoa joihin keskitymme, ovat debatin ja kiistelyn kohteena. horsepower of these engines was Ne eroavat toisistaan suojan laajuudessa, jonka ne tarjoavat. Patentit koskevat erityisenlaista toteutusta ideasta – joskin viime vuosina Yhdysvalloissa on viime vuosina kiinnitetty yhä vähemmän huomiota erityisyyteen. Patentit eivät kestä ikuisesti: Yhdysvalloissa 20 vuotta patenteille, jotka suojaavat valmistustekniikkaa, ja 14 vuotta muotoa suojaaville. Patentit tarjoavat suhteellisen laajan suojan: kukaan ei voi laillisesti käyttää samaa ideaa, vaikka hän keksisikin sen itsenäisesti, ilman patentin haltijan lupaa.¹⁶ Tekijänoikeudet ovat skaalaltaan kapeampia, suojaten vain tiettyä yksityiskohtaista ja ainutlaatuista teosta – joskin samaan tapaan patenttien kanssa, skaala on laajentunut viime vuosina. Tekijänoikeus on myös paljon pidempi kestoltaan kuin patentti – tekijän elinikä plus 50 vuotta monissa Bernin sopimuksen allekirjoittaneissa valtioissa, ja – Yhdysvalloissa Sonny Bono Copyright Extension Actin ansiosta – tekijän elinikä olus 70 vuotta.¹⁷ Yhdysvalloissa tekijänoikeuksille asetettuja rajoituksia ei löydy patenttilaista. Kuten Stephen Manes aivan oikein tuo esiin hyökkäyksessään Lawrence Lessigiä vastaan, "fair use" antaa tekijänoikeudella suojatun teoksen omistajalle rajoitettuja oikeuksia käyttää sitä, tehdä osittaisia kopioita siitä ja myydä niitä, riippumatta tekijänoikeuden omistajan mielihaluista. Sen lisäksi tietyt johdannaisteokset ovat sallittuja ilman lupaa: esimerkiksi parodia on sallittua, kun taas jatko-osat eivät. Sekä patenttien että tekijänoikeuksien tapaukessa, taloustieteellisestä näkökulmasta, laki on kaksiosainen: oikeus ostaa ja myydä kopioita ideasta, ja oikeus kontrolloida kuinka ihmiset käyttävät omia kopioitaan. Ensimmäinen oikeus ei ole kiistanalainen. Tekijänoikeuslaissa, kun sitä sovelletaan teoksen luojaan, tätä kutsutaan usein "ensimmäisen myynnin oikeudeksi". Kuitenkin se jatkuu myös laillisena oikeutena muille myydä omistamiaan kopioita. Toinen oikeus sen sijaan on kiistanalainen, antaessaan aineettoman omaisuuden omistajalle oikeuden kontrolloida omaisuutta myynnin jälkeen. Tämä oikeus tuottaa monopolin – valtio velvoitetaan toimimaan sellaisia henkilöitä tai organisaatioita vastaan, jotka käyttävät ideaa tekijänoikeuden tai patentin omistajan kiellosta huolimatta. Aineettoman omaisuuden paremmin tunnettujen muotojen – patenttien ja tekijänoikeuksien – lisäksi on myös vähemmän tunnettuja tapoja suojata ideoita. Näitä ovat sopimukset, kuten shrink-wrap- ja click-through-ehdot, joita kukaan ei ikinä lue ostaessaan ohjelmistoa. Sellainen on myös perinteisin suojauksen muoto – liikesalaisuus – sekä sen sopimusoikeudelliset ja juridiset muodot kuten salassapitosopimukset. Kuten patentit ja tekijänoikeudet, nämä kaikki keinot auttavat idean alkuperäistä omistajaa pitämään monopolin siihen. 35Me emme tiedä yhtään legitiimiä argumenttia sen puolesta, että ideoiden tuottajat eivät saisi hyötyä keksinnöistään. Vaikka ideoita voisikin myydä ilman laillisia oikeuksia, markkinat toimivat parhaiten kun on olemassa selkeästi määritellyt omistusoikeudet. Ei ainoastaan keksijän omistusoikeus tulisi olla suojeltu, vaan myös niiden oikeudet, jotka ovat laillisesti hankkineet kopion ideasta, suoraan tai epäsuoraan,000 at bestalkuperäiseltä keksijältä. In 1815Ensimmäinen kannustaa keksimään, jälkimmäinen kannustaa keksintöjen leviämistä, fifteen years after the expiration of the Watt omaksumista ja parantamista. patentsMiksi kuitenkin pitäisi keksijöillä olla oikeus kontrolloida kuinka ostajat käyttävät ideaa tai luomusta? Tämä antaa keksijälle monopolin ideaan. Me viittaamme tähän oikeuteen "aineettomana monopolina", korostaaksemme, että se on tämä kaikkia kopioita ideasta koskeva monopoli, joka on kiistanalainen, ei oikeus ostaa ja myydä kopioita. Valtio ei yleensä ylläpidä muiden hyödykkeiden tuottajien monopoleja. Tämä siksi, koska on laajalti huomioitu, että monopolit luovat monia sosiaalisia kustannuksia. Aineeton monopoli ei eroa tässä suhteessa. Haluamme esittää kysymyksen, it is estimated that nearly 100luoko se myös sosiaalista hyötyä,000 horsepower was installed joka ylittäisi nämä sosiaaliset kustannukset. * * * in the The U.KS.Constitution allows Congress “To promote the progress of science and useful arts, while by 1830 securing for limited times to authors and inventors the exclusive right to their respective writings and discoveries.”¹⁸ Our perspective on patents and copyright is a similar one: promoting the progress of science and the horsepower coming useful arts is a crucial ingredient of economic welfare, from steam engines reached 160solving such profound economic problems as poverty,000to such mundane personal nuisances as boredom. The fuel efficiency From a social point of view, and in the view of the founding fathers, the purpose of steam engines patents and copyrights is not thought to have changed enrich the few at all during the period expense of Watt’s patent; while between 1810 the many. Nobody doubts that J. K. Rowling and 1835 it is estimated to Bill Gates have increased been greatly enriched by a factor their intellectual property – nor is it surprising that they would argue in favor of fiveit. After But common sense and the expiration U.S. Constitution say that these rights must be justified by bringing benefits to all of the patents in 1800, not only us.1Boldrin & Levine: Against Intellectual Monopoly, Chapter 1was there The U.S. Constitution is explicit that what is to be given to authors and inventors is an explosion in exclusive right – a monopoly. Implicit is the idea that giving this monopoly serves to promote the production progress of enginesscience and useful arts. The U.S. Constitution was written in 1787. At that time, but steam power finally came into its own as the driving force idea of copyright and patent wasrelatively new, the industrial revolutionproducts to which they applied few, and their terms short. In light of the experience of the next 30 subsequent 219 years steam engines were modified we might ask: is it true that legal grants of monopoly serve to promote the progress of science and the useful arts? improvedCertainly common sense suggests that it should. How is a musician to make a living if the moment she performs her music, everyone else can copy and such crucial innovations as give it away for free? Why would the large corporations pay the small inventor when they can simply take his idea? It is hard to imagine life without the steam traininternet, andtoday we are all jet setters. Is not the steamboat explosion of creativity and invention unleashed since the writing of the steam jenny all came into wide usageU.S. The key innovation was Constitution a testimony to the powerful benefit of intellectual property? Would not the high-pressure steam engine –development world without patent and copyright be a sad cold world, empty of new music and of marvelous new inventions? So the first question we will pose is what the world might be like without intellectual monopoly. Patents and copyrights have not secured monopolies on all ideas at all times. It is natural then to examine times and industries in which had legal protection for ideas have not been blocked by Watt by strategically using his 1775 patentavailable to see whether innovation and creativity were thriving or were stifled. Many new improvements to It is the case, for example, that neither the internet nor the steam jet enginewere invented in hopes of securing exclusive rights. In fact, such we ordinarily think of “innovative monopoly” as those of William Bullan oxymoron. We shall see that when monopoly over ideas is absent, Richard Trevithickcompetition is fierce – and that as a result innovation and creativity thrive. Whatever a world without patents and copyrights would be like, it would not be a world devoid of great new music and Arthur Woolf, became beneficial new drugs. available You will gather by 1804: although developed earlier these innovations were kept idle until now that we are skeptical of monopoly – as are economists in general. Our second topic will be an examination of the Boulton many social costs created by copyrights and patents. Adam Smith – a friend and teacher of James Watt patent expired. None – was one of these innovators wished the first economists to incur explain how monopolies make less available at a higher price. In some cases, such as the same fate production of music, this may not be a great social evil; in other cases such as Jonathan Hornblowerthe availability of AIDS drugs, it may be a very great evil indeed. IronicallyHowever, as we shall see, not low availability and high price is only did one of the many costs of monopoly. The example of James Watt is a case in point: by making use of the patent legal system , he inhibited competition and prevented his competitors from introducing useful new advances. We shall also see that because there are no countervailing market forces, government-enforced monopolies such as a intellectual monopoly are particularly problematic. While monopoly may be evil, and while innovation may thrive in the absence of traditional legal cudgel with which protections such as patents and copyrights, it may be that patents and copyrights serve to smash competitionincrease innovation. The presumption in the U.S. Constitution is that they do, but his own efforts at and that the benefits of more entertainment and moredeveloping a superior steam engine were hindered innovation outweigh the costs of these monopolies. Certainly the monopolies created by patents and copyright may be troublesome – but if that is the very same patent system he used cost of having blockbuster movies, automobiles and flu vaccine, most of us are prepared to keep competitors put up with it. That is the position traditionally taken by economists, most of whom support patents and copyright, at bayleast in principle. An important limitation Some of them take the original Newcomen engine was its inability view that intellectual monopoly is an unavoidable evil if we are to have any innovation at all; other simply argue that at least some modest amount of intellectual monopoly is desirable to provide adequate incentive for innovation and creation. Our third topic will be an examination of the theoretical arguments supporting intellectual monopoly, as well as counter-arguments about why intellectual monopoly may hurt rather than foster creative activity.deliver It is crucial to recognize that intellectual monopoly is a steady rotary motiondouble-edged sword. The most convenient solutionrewards to innovative effort are certainly greater if success is awarded a government monopoly. But the existence of monopolies also increases the cost of creation. In one extreme case, a movie that cost $218 to make had to pay $400,000for the music rights.¹⁹ As we will argue at length, theoretical arguments alone cannot tell us if intellectual monopoly increases or decreases creative activity. involving In the final analysis, the only justification for intellectual property is that it increases – ''de facto'' and substantially – innovation and creation. What have the combined use last 219 years taught us? Our final topic is an examination of the crank evidence about intellectual monopoly and innovation. Is it a flywheelfact that intellectual monopoly leads to more creativity and innovation? Our examination of the data shows no evidence that it does. Nor are we the first economists to reach this conclusion. After reviewing an earlier set of facts in 1958, the distinguished economist Fritz Machlup wrote ''“it would be irresponsible, relied on the basis of our present knowledge of its economic consequences, to recommend instituting [a patent system].”²⁰''method patented Since there is no evidence that intellectual monopoly achieves the desired purpose of increasing innovation and creation, it has no benefits. So there is no need for society to balance the benefits against the costs. This leads us to our final conclusion: intellectual property is an unnecessary evil. '''Comments''' We are grateful to George Selgin and John Turner, of the University of Georgia Terry College of Business, for pointing out a number of factual mistakes and imprecisions in 1780 by our rendition of the James PickardWatt story, which prevented Watt from using as ithad appeared in earlier versions of this chapter and in our 2003 Lawrence R. IronicallyKlein Lecture, published in Boldrin and Levine [2004]. In a recent article, Selgin and Turner [2006], Watt also made various attempts at efficiently transforming reciprocating into rotary motiontake issue with our interpretation of the facts and add a few additional ones that, reachingin their view, apparently, the same solution contradict our vision of James Watt as Pickarda primary example of an intellectual monopolist. But It seems clear, even from the existence references quoted by Selgin and Turner, that many students of a the Industrial Revolution share our view – more properly: we shared theirs.patent forced him to contrive an alternative less efficient mechanical deviceSelgin and Turner’s argument and facts do not, however, address the issues we raise about Boulton and Watt. Take their discussion of the “sun hypothetical “Watt sans patent.” Obviously Boulton and Watt fought hard for their patents, and planet” gearobviously they claimed innovation would have been impossible without them. It was only in 1794Our point is another: could they have made enough money to compensate their opportunity cost without the patent? All the evidence, including that reported by Selgin and Turner, after suggests this is the case. In fact they make our case quite convincingly: quoting F.M. Scherer they assert that seventeen years before the expiration of Pickard’s second patent expired they, Boulton and Watt, were already breaking even. In economics, “breaking even” means that your opportunity costs have been paid, and your capital has received the risk-adjusted, expected return, and Scherer is a distinguished economist. Whatever profits Boulton and Watt adopted made after that, were all extra rents due to monopoly power and, economically, not needed to pay their opportunity costs. So, we all agree that, at least for the final 17 years, the patent was not serving a useful economic purpose, hence it was damaging because it created monopoly distortions. '''Notes''' economically and technically superior crank¹ Lord [1923] p. 5-3.htm.

The impact of the expiration of his patents on Watt’s empire may come as a surprise as well. Despite the fact that “many establishments for making steam-engines of Mr. Watt's principle were then commenced” nevertheless “it would appear that the object principally aimed at was cheapness rather than excellence, for they fell short as to performance of the Soho ² Carnegie [Boulton and Watt1905] engines.” As a result we find that “Boulton and Watt for many years afterwards kept up their price and had increased orders.” In fact, it is only after their patents expired that Boulton and Watt really started to manufacture steam engines. Before then their activity consisted primarily of extracting hefty monopolistic royalties. Independent contractors produced most of the parts, and Boulton and Watt merely oversaw the assembly of the components by the purchasers. 2Boldrin & Levine: Against Intellectual Monopoly, Chapter 1In most histories, James Watt is a heroic inventor, responsible for the beginning of the industrial revolution. The facts above suggest a different interpretation. Watt is one of many clever inventors working to improve steam power in the second half of the eighteenth century. After getting one step ahead of the pack, he remained ahead not by superior innovation, but by superior exploitation of the legal systemp. The fact that his business partner was a wealthy man with strong connections in Parliament, was not a minor help157.

The evidence suggests that Watt’s efforts to use ³ Much of the legal system to inhibit competition set back the industrial revolution by a decade or two. The granting story of the 1769 andJames Watt can be found in Carnegie [1905], especiallyLord [1923], of the 1775 patents likely delayed the mass adoption of the steam engine: innovation was stifled until his patents expired; and very few steam engines were built during Marsden [2004]. Information on the period role of Boulton in Watt’s legal monopolyenterprise is drawn from Mantoux [1905]. From the number A lively description of innovations that occurred immediately after the expiration of the patentreal Watt, it appears that Watt’s competitors simply waited until then before releasing their own innovations. Also, we see that Watt’s inventive skills were badly allocated: we find him spending more time engaged in legal action to establish and preserve his monopoly than he did in the actual improvement and production as well of his engine. From a strictly economic point of view Watt did not need such a long lasting patent legal wars against Hornblower – it is estimated that by 1783 – seventeen years before his patent expired and many other – his enterprise broke even; so every dollar that came after was pure gravy. While the view of Watt’s enterprise we are proposing here may appear iconoclastic to many readers, it is neither new nor particularly original. Frederic Scherer, a strong and prestigious academic supporter of the patent system, after going through the details of the Boulton and Watt story, concluded how he subsequently used his 1986 examination of their story with the following illuminating wordsHad there been no patent protection at all,…Boulton and Watt certainly would have been forced status to follow a business policy quite different from that which they actually followed. Most of the firm’s profits were derived from royalties on alter the use public memory of engines rather than from the sale of manufactured engine componentsfacts, and without can be found in Marsden [2004]. That Pickard’s patent protection the firm plainly could not have collected royalties. The alternative would have been to emphasize manufacturing and service activities as the principal source of profits, which in fact was the policy adopted when the expiration date of the patent for the separate condenser drew near in the late 3Boldrin & Levine: Against Intellectual Monopoly, Chapter 11790s…. It unjust is possible to conclude more definitely that also the patent litigation activities view of Boulton & Watt during the 1790s did not directly incite further technological progress…. Boulton Selgin and Watt’s refusal to issue licenses allowing other engine makers to employ the separate-condenser principle clearly retarded the development and introduction of improvements. IndeedTurner (2006), who, the story of James like Watt contains most of the important elements of our argument against intellectual property. The new idea accrues almost by chance , do not seem to the innovator while he is carrying out a routine activity aimed at a completely different end. The patent comes many years after that and it is due more to a mixture of legal acumen and abundant resources available to “oil the gears provide any evidence of fortune” than anything else. Finally, after the patent protection is obtained, why it is mostly used as a tool to prevent economic progress and hurt competitorswas so.

The wasteful effort to suppress competition As both the Lord and obtain special privileges we have seen in Watt is one Carnegie works are out of copyright, both are available online at the very good Rochester site on the greatest dangers history of monopolysteam power www.history.rochester. It is commonly referred to as rent-seeking behavioredu/steam. Watt’s attempt to extend Later drafts of this chapter benefited enormously from the duration arrival of his 1769 patent is an especially egregious example of rent seeking: the patent extension was clearly unnecessary Google Book Search, which allowed us to provide incentive for the check so many original invention, which had already taken place. On top of this, we see historical sources about James Watt using patents as a tool to suppress innovation by his competitors, such as Hornblower, Wasborough and others. Finally, there is the slow rate at which the steam engine was adopted before the expiration of Watt’s patent. By keeping prices high and preventing others from producing cheaper or better steam engines, Boulton and Watt hampered capital accumulation and slowed economic growthwe would have never thought possible.

Intellectual property, as it is currently conceived, still has all these damaging social effects – because its enforcement has been strengthened, its term extended and its reach expanded, current law is much worse. While the randomness in ⁴ Lord [1923] gives figures on the procedure for obtaining a letter number of patent that characterized Watt’s period may have been reduced, it has not disappeared. It has shifted from the stage at which a patent is awarded to the stage at which it is litigated in court. A patent is now routinely issued to anyone that files an application with the USPTO. Anything steam engines produced by Boulton and everything – including such allegedly “new” Watt between 1775 and “useful” ideas as 1800, while the peanut butter and jelly sandwich – has been patented in recent years. ''The brutal legal fight, Cambridge Economic History of Europe'' [1965] provides data on the peddling spread of all kinds of influence from legal to legislative, 4Boldrin & Levine: Against Intellectual Monopoly, Chapter 1total horsepower between 1800 and 1815 and the complete randomness spread of it allsteam power more broadly. However, areKanefsky [1979] has largely discredited the Lord numbers, nowadays, characteristics of a different stage in the life of a patent. If the underlying invention which is good for anything, either dozens of people will claim to have invented it why we use figures on machines and horsepower from Kanefsky and sue the actual innovator, or the patent holder will sue anyone anywhere who has come up with something similar, or who has the funny idea of competing with himRobey [1980].

In addition to the corrupt rent-seekingOur horsepower calculations are based on 510 steam engines generating about 5, 000 horsepower in the legal suppression of innovation and U.K. in 1760. During the reduced economic growth attendant upon Watt’s monopoliessubsequent forty years we estimate that about 1, we may also add 740 engines generating about 30,000 horsepower were added. This gives our estimate that the total increased at a significant loss rate of personal freedomroughly 750 horsepower each year. These social harms are not the necessary evils that For 1815 weestimate about 100, as a society, must be willing to pay for innovative activity to occur. The opposite, indeed, 000 horsepower – that is true: they are unnecessary evils, a residual of the middle ages from which free market societies emerged, a holdover average of the days when governments figures Kanefsky and royalty granted monopolies to favored courtiersRobey [1980] give for 1800 and 1830. Another worldThis together with the 35, 000 horsepower we estimate for 1800 gives our estimate that the total increased at a fairer and more decent worldrate of roughly 4, is possible – that of competitive innovation000 horsepower each year after 1800.

EconomistsData on the fuel efficiency, beginning with Adam Smith – a friend and teacher of James Watt – have carefully documented the problems “duty,” of steam engines is from Nuvolari [2004b].monopoly. Because there are no countervailing market forces, government⁵ Kanefsky and Robey [1980] together with Smith [1977-enforced monopolies are particularly dangerous. Intellectual property is one type 78] provide a careful historical account of government-enforced monopoly. Never the less, economists have generally argued in favor detrimental impact of patents and copyright protection. Despite the many problems with government grants of monopoly powerNewcomen’s, the argument is thatfirst, without the promise and of monopoly that Watt’s patents and copyrights entail, there would be insufficient incentive to innovate and create. In later, on the case rate of adoption of Watt, steam technology. Apart from the argument goesbooks just quoted, he would never have invested information about the time Hornblower’s engine and effort its relation to come up with his invention without the prospect of a patent. But that case is weak. Even after their patent expiredWatt’s are widely available through easily accessible web sites, Boulton and Watt were able to maintain a substantial premium over the market by virtue of having been firstsuch as Encyclopedia Britannica, despite the fact that their competitors had had thirty years to learn how to imitate them. MoreoverWikipedia, when Watt first developed his ideas and models, it was far from certain that he would so on. Some details of Hornblower’s invention may be able to get a patent: at that time getting a patent of interest. It was an uncertain proposition – part patented in 1781 and consisted of the reason he had to lobby nonstop for a long time to get it. Indeedsteam engine with two cylinders, it may well be that significantly more efficient than the idea of obtaining a monopoly occurred to Boulton and Watt design. Boulton and Watt only after he finished challenged his invention – there is no evidence he gave any thought to , claiming infringement of their patent law during the development process. Finally, Watt had many competitors, such as because Hornblower and Wasborough; had he not invented the engine used a separate condenser, it seems virtually certain someone else would have come up with the idea in the 35 years between the time it occurred to Watt, and won. With the time his patents 5Boldrin & Levine: Against Intellectual Monopoly1799 judicial decision against him, Chapter 1finally expired. Why this is rather the rule than an isolated episode Hornblower had to pay Boulton and why the case Watt a substantial amount of money for past royalties, while losing all opportunities to further develop the protection of intellectual property is weak are two things we will argue through both theory and evidencecompound engine.This book elaborates on the idea that intellectual property is generally inhibiting to innovation, growth, prosperity and freedom. We argue that His compound steam engine principle was not only would innovation thrive in the absence of intellectual monopoly, but that we, as a society, would enjoy greater growth and prosperity in its absencerevived until 1804 by Arthur Woolf. We take the view point It became one of the average citizen-consumer when debating if a policy is desirable, not that of a would be monopolist. There is no doubt main ingredients in our minds the efficiency explosion that a handful followed the expiration of powerful monopolists would be worse off in a world without intellectual property; what matters is that everybody else would be substantially better offBoulton and Watt’s patent.

Our focus is on Watt’s low-pressure engines were a dead end for further development; history shows that high-pressure, non-condensing engines were the economics of intellectual property: patents, copyright, and downstream licensesway forward. We are not seeking to argue what might Boulton and might not be legitimate under Watt’s patent, covering all kinds of steam engines prevented anyone from working seriously on the current legal systemhigh-pressure version until 1800. This included William Murdoch, but to understand how new laws an employee of Boulton and institutions might be crafted to encourage growthWatt, innovation and creation. During those not so distant times in which tariffs and other protectionist prohibitions made free trade illegal and dangerous, economists arguing in favor of free trade did not insist that smugglers were carrying out lawful activities. They were breaking the foolish laws who had developed a version of the time high-pressure engine in pretty much the same way that people engaged in various forms of “piracy” these days are breaking current lawsearly 1780s. But He named it the “steam carriage” and was legally or not, barred from developing it by violating trade prohibitions smugglers were carrying out socially useful trades: consumers wanted Boulton and Watt’s successful addition of the goods and were willing high-pressure engine to pay for them; producers had the goods but were prevented from selling them by unjust legal restrictions; smugglerstheir patent, at although Boulton and Watt never spent a cost, allowed these two groups of people cent to tradedevelop it. In For the details of this story the reader should check the same way, while current day pirates may be violating existing intellectual property laws, they are also carrying out socially useful tradeson line site Cotton Times at http://www.cottontimes.co. Consumers are asking for cheap books, music, videos, and other products in convenient formatsuk/ or Carnegie [1905, and workers are willing to work to produce these goods at low costpp. By violating intellectual property laws, contemporary “pirates” are allowing these socially beneficial trades to take place140-141]. This is why we advocate changing these laws to make lawful and permissible what is already socially The “William Murdoch” entry in Wikipedia provides a goodsummary.This More generally various researchers directly connect Murdoch to Trevithick, who is why too, now considered the official “inventor” (in order to understand what intellectual property is and why it is socially damaging, some knowledge 1802) of the existing legal framework is neededhigh-pressure engine. There are three broad types of intellectual property recognized in most legal systems: patentsQuite plainly, the evidence suggests that Boulton and Watt’s patent retarded the high-pressure steam engine, copyrights and trademarkshence economic development, of about 16 years.

6Boldrin & Levine: Against Intellectual Monopoly, Chapter 1Trademarks are different in nature than patents and copyrights: they serve to identify the providers of goods, services or ideas. We are unaware of any economic rationale for allowing market participants to masquerade as people they are not, and there are strong economic advantages in allowing market participants to voluntarily identify themselves. While we may wonder if it ⁶ The story about Pickard’s patent blocking adoption by Watt is necessary to allow the Intel Corporation a monopoly over the use of the word “inside,” in general we have little dispute with trademarks. Patents and copyrights, the two forms of intellectual property on which we focus, differ in the extent of coverage they provide. Patents apply to specific implementations of ideas – although in recent years in the U.S. there has been decreasing emphasis on specificity. Patents are of relatively short duration: told in the United States, 20 years for patents covering techniques of manufacture, and 14 years for ornamentation. Patents provide relatively broad protection: no one can legally use the idea, even if they independently rediscover it without permission from the patent holdervon Tunzelmann [1978].

Copyrights are much narrower in scope, protecting only the specific details of a particular narrative⁷ Thompson [1847] p. They are 110 and quoted also much longer in duration – the life of the author plus 50 years for the many signatory countries of the Berne Convention, and – in the U.S. since the Sonny Bono Copyright Extension Act – the life of the author plus 70 years. In the U.S. there are limitations on copyright not present in patent law: the right of fair use allows the purchaser of a copyrighted item limited rights to employ it, make partial copies of it and resell them, regardless of the desires of the copyright holder. In addition, certain derivative works are allowed without permission: parodies are allowed, for example, while sequels are notLord [1923].

In the case of both patents and copyright, there are two important economic features. The first is what we call the right of sale⁸ Scherer [1984] pp. This is the right of a legitimate owner of intellectual property to sell it24-25. In copyright law, when applied to the creator this right is sometimes called the “right of first sale,” but the right of sale extends also to the legitimate rights of others, for example, licensees, to sell the idea⁹ U. The second feature of the law is the right to control the use of the intellectual property after saleS. This second right produces a monopoly – enforced by the obligation of the government to prosecute individuals or organizations that use the idea in ways prohibited by the copyright or patent holder. We emphasize that we favor the right District Court for Eastern District of sale. It is crucial that producers of intellectual property be able to profit from their 7Boldrin & Levine: Against Intellectual MonopolyVirginia Plaintiff NTP, Chapter 1inventionInc. While sales could take place even in the absence of a legal right, markets function best in the presence of clearly defined property rightsv. Not only should the property rights of innovators be protected but also the rights of those who have legitimately obtained a copy of the idea, directly or indirectly, from the original innovatorDefendant Research In Motion Ltd. The former encourages innovation, the latter encourages the diffusion, adoption and improvement of innovationsCivil Action Number 3:01CV767-JRS.

It is with the right of the owner of intellectual property to control how the purchaser makes use of the idea or creation that we disagree¹⁰ U. Because this right gives the owner a monopoly over usage of the idea and prevents buyers from using the intellectual property they lawfully purchased, we refer to it as intellectual monopoly to distinguish it from the right of saleS. Hence, intellectual property is composed of two parts: the right of sale, and the intellectual monopoly. The first gives the producer or any rightful owner of a copy of the idea the power to sell it to another party. The second gives the patent or copyright holder the right to control and limit the usage of the idea by any other person. The latter is not just a simple well-defined right of property. It establishes a monopoly that we do not usually allow producers of other goods. We will argue that this monopoly creates many social costs, yet has little social benefit. It largely redistributes income and wealth from the many that do not have it, to the “lucky” ones who have managed to obtain it.To foreshadow our argument, the original innovator has a natural first-mover advantage by virtue of initially being the only one to know of the idea or how to implement it. Furthermore, ideas are always scarce. The innovator can invariably use his first mover advantage and the scarcity of his idea to earn a profit. In the case of Watt, the first-mover advantage was extremely strong. Even after 31 years had been available for competitors to reverse engineer his invention, Boulton and Watt were still able to command a substantial premium over the market. They were able to do so for many years, by virtue of the special expertise that comes with having been first. Economic research shows that the same mechanism is at work, for example in the contemporary market for pharmaceutical products. Many years after a medical patent has expired, when cheaper generic drugs are available that are perfect substitute for the original product, the first innovator still retains a substantial degree of market power and still charges a higher price.In thinking about abolishing intellectual monopoly, it is important to recognize that even if existing copyright and patent laws were abolished, much of their impact could be recreated through private contracts. That is, in selling their idea, innovators 8Boldrin & Levine: Against Intellectual Monopoly, Chapter 1could require purchasers to sign a contract agreeing to make use of it only in ways approved of by the seller. Shrink-wrap software agreements are a simple and common example of this type of downstream licensing. Notice that private agreements could not completely recreate existing patent protection, since independent invention could not be controlled, which would already be a major step forward. On the other hand, copyright protection would effectively be increased, since current copyright law obligates the seller to allow fair use, and this could be ruled out in a private agreement. Indeed, the current legal situation is murky, since some sellers do attempt to eliminate fair use through downstream licensing agreements. In any case, to eliminate intellectual monopoly, it is necessary to go beyond merely abolishing patents and copyright to also limit downstream licensing agreements. Economists as a rule favor both freedom of contract and well-defined property rights. It may come a surprise that the two of us – two conservative economists – appear to be arguing the opposite. However, economists also favor competition over monopoly, and economists have come to learn and understand that competition does not fall from the sky; it is a system of organizing human economic interactions that requires nurturing and protection. The fact is that – like most free-market economists – we do not favor enforcing collusive contracts that are used to create monopolies – and this is what shrink wrap agreements are. Nor do we argue against property rights, which we view as essential to the smooth functioning of a competitive economy. Our argument is with intellectual monopoly. We favor the right of sale, the right to sell copies of ideas. We argue both that the original innovator should have that right, and that those who have purchased a copy of the idea should have the same right to sell what is now their copy of the idea. It is the monopolistic regulation of the right to use legally available technologies to make further copies of ideas after their lawful sale with which we disagree. When you buy a potato you can eat it, throw it away, plant it or make it into a sculpture. When you buy a potato you can use the idea of a potato embodied in it to make better potatoes or to invent french fries. Current laws allow producers of CDs, books, computer software or medical drugs to take this freedom away from you. It is this confounding of intellectual property with intellectual monopoly against which we arguePatent 6219694.

Everyone wants a monopoly, and all producers would impose downstream licensing agreements if they could. No one wants to compete against his own customers, or against imitators for 9Boldrin & Levine: Against Intellectual Monopoly, Chapter 1that matter. Under current law only producers ¹¹ United States Court of (certain) ideas do not have to do so. It is a long and dangerous jump from the assertion that innovators deserve compensation Appeals for their efforts to the conclusion that current patent and copyright protection is the best way of providing such reward. Statements such as “A patent is the way of rewarding somebody for coming up with a worthy commercial idea” abound in the business9th Circuit Court, legal and economic press. But there are many other ways in which innovators are rewarded, most of them socially better than copyright and patents.The U.S. Constitution allows Congress “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.” Our perspective on patents and copyright is a similar oneIn Re: promoting the progress of science and the useful arts is a crucial ingredient of economic welfare, from solving such profound economic problems as poverty, to such mundane personal nuisances as boredom. The question we shall focus on is whether intellectual monopoly is useful in promoting innovation and growth for the benefit of the average citizen, or if, as we shall argue, it stifles innovation and growth and it redistributes wealth from the “average guy” to a few protected individuals who are either in control of, or closely associated with, the big monopolies lobbying for intellectual property.Traditionally, economists have been skeptical of government intervention in markets, for example, through regulation or trade-restrictions. Economists are also skeptical of intellectual monopoly, and the economics literature in general suggests that existing protections should be reduced. In the case of regulation and free trade, economists also generally recognize that some regulation and trade-restrictions are desirable. They recognize, too, that allowing some intervention triggers rent-seeking behavior by would-be monopolists, and that as a result it is most practical to focus on eliminating government intervention. Alas, this is not yet the conventional view with respect to intellectual monopoly. Until recently, conventional wisdom held that markets could not function at all in its absence. As a result, many economists still believe that intellectual monopoly is an unavoidable evil if we are to have any innovation at allNapster.

Modern economic research, however, has shown that markets for ideas can function even in the absence of intellectual monopoly, and we shall see that markets for ideas and innovation function and function well absent intellectual monopoly. As a result, we take the same position on intellectual monopoly that economists 10Boldrin & Levine: Against Intellectual Monopoly, Chapter 1take on trade restrictions: although some modest amount of protection might be desirable in very special cases, it is more practical and useful to focus on the elimination of restrictions as a general rule. Similarly, while some modest amount of intellectual monopoly might be desirable in very special cases, it is more practical and useful to focus on the elimination of intellectual monopoly as a general rule¹² Stephen Manes [2004].

Our analogy between intellectual property and trade restrictions is not a purely rhetorical tool, nor a random comparison. For centuries, human innovative activity took the form of creating new consumption goods, new machines and new staples of food. But the transmission of ideas from one producer to another and across countries was not nearly as fast, standardized, and routinized as it is today. Creative human activity was focused on the creation and reproduction of physical goods and not on the creation and reproduction of ideas. Free trade of commodities was therefore key in fostering progress: the more competitors came in with shoes like yours, the more you had to improve on your shoes to keep selling them¹³ Lessig [2004].

This dialectic we used to call economic progress, ¹⁴ Robert Barro and, after a few centuries of intellectual debate and numerous wars, Western societies came to understand that restricting international trade was damaging because protectionism prevents economic progress. Since at least the late Middle Ages, the battle has been between the forces of progress, individual freedom, competition and free trade, and those of stagnation, regulation of individual actions, monopoly, and trade protection. Now that the intellectual and political battle over free trade of physical goods seems won, and an increasing number of less advanced countries are joining the progressive ranks of freeXavier Sala-i-trading nations, pressure for making intellectual property protection stronger is mounting in those very same countries that advocate free tradeMartin [1999] p. This is not coincidence290.

Most physical goods already are and¹⁵ ''The Economist'', in the decades to comeJune 23rd 2001, will increasingly bepage 42, produced in the less developed countries. Most innovations and creations are taking place in the advanced world, and the IT and bio-engineering revolutions suggest this will continue for a while at least. It is not surprising then, that a new version of the eternal parasite of economic progress – mercantilism – is emerging in the rich countries of North America, Europe and Asiawith italics added.

Economic progress springs from having things produced as efficiently as possible, so that they ¹⁶ Information on U.S. Patent Law can sell be found at the lowest priceU.S. Patent Office at www.uspto.gov/main/patents.htm. This wisdom applies In addition to both the things we buy utility and to those we selldesign patents, and 11Boldrin & Levine: Against Intellectual Monopoly, Chapter 1therein lies the trap of mercantilism. Most of us have learned that the surest way to make a profit is to “buy cheap and sell dear.” When there is adequate competition and everyone tries to buy cheap and sell dearalso a third class of patent, then the only way I can buy cheap and sell dear is for me to be more efficient than you. This generates incentives for innovation and progressplant patent. The trap and tragedy of mercantilism is when this individually correct philosophy is transformed into Like a national policy: that we are all better off when our country as utility patent, a whole buys cheap and sells dear. It was this myopic and distorted view of the way in which markets function that Smith, Ricardo, and the other classic economists were fighting against 250 plant patent lasts 20 years ago. At that time wheat producers in England wanted to restrict free trade in wheat so English producers could sell it dear.

¹⁷ The contemporary variation of this economic pest is one in which our collective interest is best served if we buy goods cheap and sell ideas dear. In the mind of those preaching this new version of the mercantilist credo, the World Trade Organization should enforce as much free trade as possible, so we Sony Bono Copyright Extension Act can buy “their” products be found online at a low pricelibrary.thinkquest. It should also protect our “intellectual property” as much as possible, so we can sell “our” movies, software, and medicines at a high priceorg/J001570/sonnybonolaw. What this folly misses is that, now like three centuries agohtml, while it is good to buy “their” food cheap, if “they” buy movies and medicines at high prices, so do “we.” This has dramatic consequences the Berne Convention on the incentives to progress: when someone Copyright can sell be found at high prices because www.law.cornell.edu/treaties/berne/. A useful discussion of legal protection from imitatorsfair use, including parodies, they will not expend much effort looking for better and cheaper ways of doing thingsis Gall [2000].

For centuries¹⁸ U.S. Constitution Article 1, the battle for economic progress has identified with the battle for free tradeSection 8. The U.S. In the decades to comeConstitution, the battle for economic progress will identifynot being copyrighted, more and moreis online at various places, with the battle against intellectual monopolysuch as http://www. As in the battle for free trade, the first step must consist in destroying the intellectual foundations of the obscurantist positionlaw. Back then the mercantilist fallacy taught that, to become wealthy, a country must regulate trade and strive for trade surplusescornell. Today, the same fallacy teaches that without intellectual monopoly innovations would be impossible. Our goal here is to demolish that glass houseedu/constitution.

12Boldrin & Levine: Against Intellectual Monopoly, Chapter 1NotesMuch of the story of James Watt can be found in Carnegie [1905], Lord [1923], and Marsden [2004]. The quotation about Wasborough is from Carnegie. Information on the role of Boulton in Watt’s enterprise is drawn from Mantoux [1905]. A lively description of the real Watt, as well of his legal wars against the Hornblowers – and many other – and of how he subsequently used his status to alter the public memory of the facts, can be found in Marsden [2004]. Lord [1923] gives figures on the number of steam engines produced by Boulton and Watt between 1775 and 1800, while the The Cambridge Economic History of Europe [1965] provides data on the spread of total horsepower between 1800 and 1815 and the spread of steam power more broadly. However, Kanefsky [1979] has largely discredited the Lord numbers, and the figures we quote on number of machines and horsepower are from Kanefsky and Robey [1980]. The 100,000 horsepower estimate for 1815 is the average of the figures they give for 1800 and 1830. These two studies together with that of Smith [1977-78] provide a careful historical account of the detrimental impact of the Newcomen’s and of the Watt’s patents on the rate of adoption of the steam technology. Data of the fuel efficiency, the “duty,” of steam engines is from Nuvolari [2004]. The story about Pickard’s patent blocking adoption by Watt is told in von Tunzelmann [1978]. ¹⁹ The quotation about the fortunes of Boulton $218 movie was Tarnation and Watt after the expiration of the Watt patents is taken information from Thompson [1847] p. 110 and is quoted in Lord [1923]. Scherer’s quotation about Boulton and Watt is from the pages 24-25 of Scherer [1984]BBC News, while Scherer [1965] is the source of the break-even point estimate reported a little earlier.As both the Lord and Carnegie works are out of copyright, both are available online at the very good Rochester site on the history of steam power wwwhttp://news.historybbc.rochesterco.eduuk/2/hi/entertainment/steam3720455. Later drafts of this chapter benefited enormously from the arrival of Google Book Search, which allowed us to check so many original historical sources about James Watt and the steam engine as we would have never thought possible beforestm.

Information on U.S. Patent Law can be found at the U.S. Patent Office at www.uspto.gov/main/patents.htm. The Sony Bono Copyright Extension Act can be found online at library.thinkquest.org/J001570/sonnybonolaw.html, while the Berne Convention on Copyright can be found at www.law.cornell.edu/treaties/berne/. A useful discussion of fair use, including parodies, is Gall ²⁰ Machlup [20001958].For the statistical evidence about leading drugs keeping a large share of the market long after generic imitators are allowed to enter see, for example, Caves et al [1991]The quote about patents being the reward is taken from The Economist, June 23rd2001, page 42, with italics addedp. 13Boldrin & Levine: Against Intellectual Monopoly, Chapter 1The U80.SHe nevertheless concluded that we should keep the patent system. Constitution, not being copyrighted, is online at various places, such as http://www.law.cornell.edu/constitution.We are most grateful to George Selgin and John Turner, of the University of Georgia Terry College of Business, for pointing out a number of factual mistakes and imprecisions discuss his position further in our rendition of the James Watt story, as it had appeared in earlier versions of this chapter and in our 2003 Lawrence Rconclusion. Klein Lecture, published in [2004[Luokka:Käännöstyöt]]. 14