"On the Internet, this essential separation of private and public space has been utterly undermined... and dividing lines are becoming ever more blurred. We now have public spaces lacking in enforcement mechanisms and transparency and private spaces inadequately protected from surveillance and the misuse of data." #QotD

"The distinction between public and private affairs, res publicae und res privata, is essential for the functioning of social spaces. The concept of the “res publicae” as “space concerning us all” led – and not only etymologically – to the idea of the republic as a form of statehood and, later, as a legitimate space for democratic policymaking.
    "On the Internet, this essential separation of private and public space has been utterly undermined, and the dividing lines between public and private spaces are becoming ever more blurred. We now have public spaces lacking in enforcement mechanisms and transparency and private spaces inadequately protected from surveillance and the misuse of data. Data protection is one obvious field this conflict is playing out on, and copyright is another."
          ~ Stefan Herwig & Lukas Schrier, from their (translated) post 'EU and Article 13: The Dystopia That Never Was and Never Will Be'
.

Quote of the Day: On slacktivists' shortsightedness

"In fact, the computer or smart phone in your hand, which has so profoundly shaped the world view of your contemporaries, would not exist without the very systems you hope come crashing to a halt so that you can presume to 'fix' them. …
"[D]o you even know what’s in an iPhone...? Five metals that have to be mined in places like Chile, Peru, South Africa, [the Congo] and Australia; eight rare earth minerals, nearly all of which are mined in China; human labour performed in conditions of varying degrees of decency and depravity around the world; global shipping protected by international navies; stevedore and trucking and other labour regulated by various local unions or other systems of commerce; and a staggering array of international trade agreements and treaties, all so you can have a device on which you may tweet that you hope we have a 'total system collapse.' Really?"
~ David Newhoff, from his ‘Open Response to [Pirate Bay's] Peter Sunde’

#TPP : Mooching on drug producers and consumers

Annette King, Jane Kelsey, and Uncle Tom Cobley and all have denounced what, they say, “the TPP will mean with regards to life-saving drug costs.” It’s unfair, they say, that drug companies should have even the five years recognised by the TPP to make the most from selling the many future life-saving drugs that wouldn’t have existed without them.

Is it not too much to recognise where all these life-saving drugs actually come from that everyone takes so much for granted?

And to acknowledge that we in NZ are, to be blunt, mooching on the people who develop and pay for them.

As Jason Potts says of similar folk in Australia, Don't Complain About TPP Pharmaceuticals, We Already Free Ride Off US Consumers:

These folk present themselves as fighting for the public health care system by holding firm in an intellectual property battle against big greedy US pharmaceutical companies who want provisions that will cost sick Australians [and NZers] hundreds of millions of dollars. The media optics are clear about who is on the side of good and who is on the side of evil in this fight.
    But biologics are extraordinarily expensive, difficult and risky to make. All the huge costs are upfront, with very small marginal costs. The spectacular economics of a few blockbuster drugs need to be set against the enormous costs, and often losses, of the many stages of testing and developing safe and effective new biologics.
    So who pays for this?
    The reality is that the US healthcare consumer pays for most of this - this is why the US spends a much larger fraction of its GDP per capita on healthcare (about 17.4 percent) than Australia (about 9.8 percent) [and NZ (about 8.7 percent).
    Let me put that more starkly – Australian healthcare consumers are free-riding on US healthcare consumers. Sick people in the US are paying more so that sick people in Australia can pay less. That's the issue here. This is about fairness and Australia doing its part to pay its share of the cost of developing life-saving drugs that benefit everyone in the world.

Let’s put it more starkly for NZ readers: Spending on healthcare in New Zealand is the second lowest per person among a group of developed countries. New Zealand healthcare consumers are free-riding on US healthcare consumers and producers. Sick people in the US are paying more so that sick people in New Zealand can pay less. That's the issue here.

Is it fair that the folk paying for and producing life-saving drugs are given so little recognition, either legally.morally or financially?

Talking intellectual property

It's long and it's not perfect, but this interview with occasional NOT PC guest poster Dale Halling is a fascinating ramble around some of the thornier and least understood elements of patent law, copyright and the validity of intellectual property -- the key to which (as with all property) is not whether or not something tangible is produced, but whether or not a new value is brought into the world...

Inventor of the Day: The Man Who Saved Hearts

Pause a moment to say a silent thank you to the man who transformed difficult heart surgery into something routine, and gave a life-saving invention to millions worldwide suffering from artherosclerosis, or blocked arteries.

Anyone with a family member who’s had heart trouble—or anyone reading this in that condition—will have reason to give thanks to Dr Julio Palmaz, whose invention now resides in the chest of thousands of New Zealanders, all of whom may not be alive otherwise.

A native of Argentina, Dr Palmaz is the inventor of the first commercially successful cardiovascular stent, at least half a dozen of which are installed every day in routine surgery in New Zealand hospitals.

Palmaz’s work on the stent began in earnest in 1978

when he heard a presentation by Andreas Gruentzig, the inventor of balloon angioplasty, at a conference in New Orleans. Gruentzig described his process of opening vessels through a catheter, but he also spoke of the procedure’s limitations, and how vessels could still close up afterwards. Palmaz had an idea then to put a scaffold of sorts inside the vessels, to hold them open and keep them from occluding.
    Palmaz wrote up his ideas in a paper, and began working on creating prototypes of an implantable stent, using simple materials such as copper wire and a soldering iron. He modeled the mesh for his stent after metal lathe with a structure of staggered openings, a piece of which he just happened to find lying on his garage floor. The design was just what Palmaz had been seeking—something collapsible that would stand up once inserted and remain rigid.
    Palmaz succeeded in creating a model that he was able to test in animals, including pigs and rabbits, with promising results; he also began shopping the device around to medical companies, but the response was lukewarm. However, he persevered.

In 1983, Dr Palmaz moved to the US, where, working with partners who provided the necessary capital injection,

He eventually succeeded in creating a prototype of a stainless steel, insertable mesh stent that could be expanded once inside the body to hold a blood vessel or artery open and allow blood to flow more freely.

The Palmaz stent was finally introduced for commercial use in 1991, after the further injection of $100 million of capital by Johnson and Johnson, who bought the patent outright in 1998.

The stents saving lives today are the product of Dr Gruentzig’s first insights, Dr Palmaz’s ingenuity and hard work, the capital injection of his partners, and the further development by Johnson and Johnson—and by competitors eager to gain entry to this new market. Without their ingenuity and hard work, and their capital, many millions of people worldwide would not be enjoying the lives they are today.

For which all of them, I’m sure, would like to join me in saying “Thank you.”

Here is a short video tribute to the great man…

… and here a short interview:

[Images from HG Cardio, Valley Heart & Vascular, and M.I.T.]

‘Patent Trolls’ vs. Legal Trolls

The problem today is not that so-called “patent trolls” are able to mooch off valid patents; the real problem, writes guest poster Dale Halling, is that “legal trolls” are able to mooch off today’s poorly defined, sloppily written, wrongly conceived and inconsistently enforced law. Fix that, and patents can be defended properly once again.

There has been a lot of media attention about so-called patent trolls.  I am intimately familiar with these issues, but the characterization is incorrect.  There are Legal Trolls, some of whom specialize in patents, but they prey upon the same problems that infect every part of our legal system and so there is nothing unique regarding patents.  As happens so often, the government creates one problem and then people see the symptom and propose more improper government policies, which causes even more problems.

Legal Trolls Gaming the System

I had a small software start-up that was contacted by a Legal Troll.  The troll had selected our company because our website suggested it was in a somewhat similar space to the patents they were attempting to enforce.  I analysed the claims and it was clear the company was not practicing the patented invention.  When I contacted the troll however they were unwilling to review either the case or the claims.  They did not appear to be interested in the truth.  Our company decided it would rather die litigating than take a license they did not require.  We also worried that taking the license would make the company harder to be acquired later.

Another case that illustrates the point happened before the term “troll“was even invented.  A patent counsel for a large Fortune 500 company received a complaint for patent infringement of over 30 patents.  Under the CAFC rules at the time, the company would have had to spend at least $300,000 on opinions simply to respond to the complaint.  A couple of days later the troll offered to settle for about $100,000, knowing full well that both the costs and time constraints made this a great hold-up game.  The company’s patent counsel was so pissed off about this clear extortion that he refused to give in and found there was a cross-licensing agreement that gave his company the right to use the patents.  Nevertheless, this was an attempt to extort the company for a quick Christmas bonus, and all that happened to the troll on this shakedown was they had to eat crow and suck up some minor legal fees.

These situations arose not because of patent laws that protect the legitimate rights of inventors, but because of our overly burdensome federal litigation system—and because Rule 11 sanctions are almost never enforced against legal trolls.  So the reality is that these Legal Trolls have been using both the complexity of the law and the absurdly lenient standard for pleading to extort money from companies since at least the 1970s.  These Legal Trolls use for their purpose medical malpractice law, product liability law, securities laws and virtually every other area of poorly-written law on the books.

In the case of the medical malpractice lawsuits relied on by trolls, 90% of those that go to trial fail—if those being sued ever take it that far. Even at this failure rate, with low costs and enough targets, the odds work in their favour.  In a rational case you would expect about a 50% failure rate, otherwise it should be in the interest of the parties to settle.

Here for example is an article, describing the latest holdup "innovation" by securities plaintiff attorneys: holding up listed companies’ annual meetings with fatuous claims of omitted information and mishandled proxies.

But, the biggest Legal Troll of them all, however, is the government—who uses environmental laws to extort money from companies, OHSA rules to extort money from employers, IRS procedures and the unreadable tax codes to extort money from producers … and many others.

America’s Environmental Protection Agency (EPA) regularly demands people comply with their arbitrary ruling or face bankrupting daily fines.  One example of this, Sackett v. EPA, eventually made it to the Supreme Court.  The EPA has not only given itself the ability to assess this fines separate from a court or a trail, but they have argued successfully that they do not need to get a warrant to investigate a person.  This case is hardly unique.  In fact EPA administrator Al Armendariz admitted the EPA purposely terrorises companies to force compliance among subsequent targets.  He compared it to the Romans, who, when they conquered a village they would crucify five people arbitrarily to ensure compliance from all.

The Securities and Exchange Commission refusal to define the crime of “insider trading” is the perfect example of ill-defined law.  Accusing people of “insider trading” has been the favourite political stepping stone for attorney generals out of New York.  See for examples Rudolf Giuliani and Elliot Spitzer.  How can you be charged with a crime the government won’t define?  How do you know if you violated the law?  How can you even have mens rea—an intent to commit a crime, when you don’t even know for sure what the “crime” is? 

The securities laws are really just politics disguised as law—and on this, see also anti-trust laws, described best in the title of Harold Fleming’s Ten Thousand Commandments: A Story of the Antitrust Laws.

Fixing the Problem

Clearly, we have a problem with legal trolls not with patents.  So how do we fix the problem?  (I will ignore how to fix the abuses of our government—a much bigger problem than this one).  First,we need to clearly define what we mean by Legal Troll.  I would define a Legal Troll as any group that uses the complexity of the legal system to make a profit when they know their case is dubious.  Based on this definition there are two main components:

1. the cost and complexity of the legal system, and
2. baseless lawsuits.

In an attempt to promote justice our legal system reduced the requirements for pleadings, and provided a wide-open ‘discovery’ process.  These are the two main reasons why lawsuits are so expensive.

The requirement for a good faith investigation of the facts before filing a complaint should clearly be made stricter;   it is utopian thinking however to assume that judges are ever going to enforce this.  Making the Rule 11 type sanctions a private right and award, instead of judge-applied, would be a solution here—balancing the risks of filing frivolous lawsuits.  In addition we might want to consider a loser-pays type of rule.

The discovery process itself should also be time limited and page limited.  Discovery should not be used as a fishing expedition. 

Another problem is that we have an overworked Federal Judiciary—in part because we do not have enough federal judges, but mainly because we have had an ‘over-productive’ legislature federalising too many crimes and regulations. 

And on the patent level itself, we really should have judges who have technical backgrounds and who have themselves passed the patent bar. Something too often recognised in the breach than in the observance.

The truth is we do not have Patent Trolls, we have Legal Trolls.  And the biggest Legal Trolls of all, both as causal agents and practitioners, are governments.

Dale Halling is a rarity among bloggers. In addition to his law degree, he hold a BS in Electrical Engineering and an MS in Physics. He is an attorney specialising in intellectual property, and the author of the book “The Decline and Fall of the American Entrepreneur: How Little Known Laws and Regulations are Killing Innovation,” and co-author of the Hank Rangar novels ‘Pendulum of Justice,’ and ‘Trails of Injustice.’

New Zealand to Outlaw Patents on Software

Guest post by Dale Halling 

According to Kiwi Blog, which calls this “A good move from the Gov’t on patents,” there is a new Patent Bill that will prohibit patents on software.

Logically, this suggests that there is something special about software that is incompatible with patents. In order to determine this, we first have to have a clear understanding of what software is and what a patent is.

A patent is a property right that a person earns by creating a new invention. But what is an invention? An invention is anything created by man that has an objective result. This definition clearly delineates that inventions are not things in nature, or things occurring naturally. An invention, also, is not everything created by man. For instance, a painting or a song are creations of man, but they do not have an objective result. Songs and paintings fall into the category of aesthetic creations. Their goal is to elicit a subjective response and people will react differently.

An invention has an objective result. For instance, a controllable heavier than air powered craft, such as the Wright brothers invented has the objective result of controllable powered flight. Software is a set of written instructions that are converted by a compiler (interpreter) into a wiring scheme that opens and closes transistors. Software that is not converted into instructions is just a bunch of bad writing.

Now that we have a clear definition of a patent and of software, we can examine whether there is something special about software that would cause it to not be patentable. The written instructions of software do not have an objective result, not unless they converting into a wiring scheme. Therefore, software code is not patentable. No country has patent laws that apply to software code. The way this is normally stated is that software per se is not patentable.

If this was all the New Zealand bill was proposing, we could stop here. But all indications are that the proposed law would not allow patents for inventions in which software was used to wire an electronic circuit. As any electrical engineer knows and software developer should know, solutions to problems implemented in software can also be realized in hardware, i.e., electronic circuits. The main reason for choosing a software solution is the ease in implementing changes, the main reason for choosing a hardware solution is speed of processing. Therefore, a time critical solution is more likely to be implemented in hardware; while a solution that requires the ability to add features easily will be implemented in software.

Software is just a method of converting a general purpose electronic circuit (computer) into an application specific electronic circuit. If software is not patentable it leads to absurd results. For instance, if I design a pacemaker using logic circuits, it is patentable. However, if I use a microcontroller to do the exact same thing, it is not patentable.

Software per se is not patentable. Executed software is just a way of wiring an electronic circuit. Electronic circuits have objective results, are a creation of man and therefore an invention. There is no logical reason to distinguish between software-implemented inventions and other inventions. This bill is based on emotion or an anti-property rights agenda or both.

Dale Halling is a rarity among bloggers. In addition to his law degree, he hold a BS in Electrical Engineering and an MS in Physics. He is an attorney specialising in intellectual property, and the author of the book “The Decline and Fall of the American Entrepreneur: How Little Known Laws and Regulations are Killing Innovation.”

DEBATE: Patents are enforceable property rights, yes or no?

Adam Mossoff and Jeffrey Tucker, two of the leading lights on opposite sides of the understanding of intellectual property rights, square off in print to make their case.

Patents are NOT enforceable property rights, says Tucker.

If patents for inventions were part of the free market, to make and sustain them would not require legislation, constitutions, bureaucracies, filings, armies of attorneys, and years of litigation. They would exist in the same way regular property rights exist.

Apparently Jeffrey has never noticed the laws, bureaucracies, filings and lawyers that underpin the title deeds to his house—or the years of litigation sometimes required to renovate it.  And despite invoking his name, he has failed to notice that Ludwig Von Mises was not an opponent of intellectual property*, and fails to understand (as Mossoff explains) “that property rights are not fundamentally justified as a solution to disputes over ‘scarce’ goods.”

To begin the moral justification for property rights from the economic concept of scarcity leaves unanswered the questions, “Why is producing values morally justified” and “Whence do values come?” Of course, property is a moral standard for resolving disputes, but this is only a logical corollary of the moral justification of property rights: The fruits of productive labour should be secured to their creators.

Mossoff also points out the mistake made by

[s]ome libertarians [who] assert that historically patents were statutory (monopoly) grants that were distinguished from “common law” court decisions that secured property rights in land, but this is myth masquerading as history (see here and here). We should reject it for the same reason we reject historical myths like the “robber barons,” because each uses a false account to bootstrap a normative argument. In fact, in the early American republic, courts secured patents as fundamental property rights: Judges created and applied to patents the same legal doctrines used to secure real estate, expansively protected patents, and provided constitutional protections to patents (see here, here and here).

They were right to do so.

At root, the justification for property rights is a justification for all types of property rights, such as farms, buildings, factories, oil and gas, radio spectrum, corporations, and inventions, among others. All “property” arises from the fact that one must produce the values required for a flourishing human life. (Here, “value” is not an economic concept, it is a moral concept, referring to those things a person produces to live a flourishing life.) Thus, the “right to property” defines the sphere of freedom necessary to create, use, and dispose of these values… [T]he genius and success of Anglo-American property law is that it recognized that property rights secure values, not physical objects. American courts have long recognized that “property ... may be violated without the physical taking of property” given any act that “destroys it or its value.” (In re Jacobs, 98 N.Y. 98, 105 (1885).) This is the meaning of the natural rights metaphor that property rights secure the fruits—i.e., the use and profits—of one’s labours.

With this understanding, it’s possible to understand his main point:

All property is fundamentally intellectual property, because the human mind is the ultimate root of the values we produce to live flourishing lives—and all of these values are justly secured as property rights to their creators… All property rights secure, in the words of [Ayn] Rand, “a man’s right to the product of his mind.”

That, in  nutshell, is the fundamental basis of all property, from  rights in water, chattels, land, spectrum, corporations and credit right through to rights in inventions and compositions.

* * * * *

* Mises points out that without copyright and patent protection, musicians, authors, and inventors are in the position of having to bear all the costs of production and invention while the benefits go to others.

John Locke vs. Ayn Rand on IP and more!

Guest post by patent attorney Dale Halling. Feedback is welcomed.

This paper is exploratory not definitive. Comments and input is greatly appreciated. My interest in the comparison between Rand and Locke started when I wrote my book The Decline and Fall of the American Entrepreneur, spurred on by reading the excellent book The Power and the Glory: The Key Ideas and Crusading Lives of Eight Debaters of Reason vs. Faith, by Burgess Laughlin.

In my opinion, John Locke is often misrepresented by both his supporters and his detractors. (I freely admit I have neither the time or energy to review Locke’s original writings in depth at this time, so your input here is appreciated.)

Charles Murray suggests Ayn Rand’s ideas are just a rehash of Locke, Nietzsche, and Adam Smith.[1] I reject this out of hand. Nietzsche’s uberman certainly influenced Rand’s [early] fictional characters, but while she maintained her respect for Nietzsche's concept of the noble soul (“the noble soul has reverence for itself”) as her philosophical ideas matured she completely rejected Nietzsche’s explicit philosophy. Adam Smith’s book Theory of Moral Sentiments, written before his Wealth of Nations, is not at all consistent with Rand’s ideas, and the two books do not even appear entirely consistent with each other. As a result, it is hard to pin down Smith on his ethics and epistemology.

The differences between Rand and Locke are more subtle.  My book mainly discusses patent law in terms of Natural Law or Locke, because that is the historical basis for the founding of the US and US patent law. Readers of my blog State of Innovation may wonder what this has to do with patent law. My answer is everything, since this is about the fundamental basis of property rights.

Metaphysics
In my opinion, all philosophers fall either into the camp of Aristotle or of Plato.

Metaphysics is the base of all philosophy. The starting point.  It is the study of existence as such, and where we see the philosophical differences between the two plainly. Like Rand, Aristotle argues we can trust our senses, that there is only one existence, and the existents within it have identity—or in other words, as Rand stated it, A is A.  Plato’s metaphysics on the other hand says there is more than one plane of existence (with this one being less real), that our senses cannot be trusted to understand what we see, and in fact that we can never have any real understanding of “the real world.”

In the realm of metaphysics, Rand and Locke are both Aristotelian.

Some people may object that Locke advocated there was a deity. Locke did appear to make somewhat contradictory statements on God and faith, but he was writing at a time in which you could have your head cut off for being on the wrong side of a religious debate. Locke appeared to be a Deist (a Deist believes in god or a deity that created the laws of the Universe and has no effect thereafter):

His philosophy on human progress proposed the following:
a) human beings can progress by acquiring knowledge,
b) reason and action are subject to natural law, and
c) the mind (as consciousness) is subject to scientific inquiry (Smith, 1997).[2]

Epistemology
Epistemology is the study of knowledge—the branch of philosophy examining how (or if) we can know anything.  John Locke’s epistemology was one of Reason. Reason is the means of integrating and conceptualizing perceptions by means of logic. It is distinguished from “rationalism” which begins with “revealed truths” and then applies a logical system derived from these ungrounded starting points. This is itself usually distinguished from “empiricism,” which holds that man’s only source of knowledge is his senses without any recourse at all to conceptual thinking. (The logical positivists did us all one favour at least in showing that all logical systems are based either on an observation, or on an assumption—such as Euclidean geometry’s idea that a straight line goes on forever and two parallel lines never intersect.)

Some people argue that Locke was an empiricist.[3] Locke was attempting to use the techniques of science to analyse ethics and political philosophy. (Note that he also defined the metaphysics and epistemology used by science.) People who argue that Locke was an empiricist usually argue that modern science is based on empiricism. Based on the definition given above, this is incorrect. Science builds on observation, but it is highly conceptual and many discoveries in modern physics are derived from following the logical consequences of theory. For instance, the Higgs Boson particle was first predicted by following the mathematics of field theory, and may now (eight decades later) have been verified by experiment. Based on the definition given above, Locke was not an empiricist either. He is widely quoted as having said “logic was the anatomy of thought,” which would be highly inconsistent with empiricism.

Ayn Rand’s epistemology was also one of Reason. One difference between Rand and Locke can be seen in Rand’s refutation of philosopher Immanuel Kant’s attempts to limit reason, and to argue that emotion is a valid path to knowledge. Locke came before Kant however, and therefore could hardly have commented on Kant and the philosophy he unleashed on the world.

Rand spends a lot of time explaining how concepts are formed and how they relate to the real world, or to specific instances. An example is reproduced below:

The same principle directs the process of forming concepts of entities—for instance, the concept “table.” The child’s mind isolates two or more tables from other objects, by focusing on their distinctive characteristic: their shape. He observes that their shapes vary, but have one characteristic in common: a flat, level surface and support(s). He forms the concept “table” by retaining that characteristic and omitting all particular measurements, not only the measurements of the shape, but of all the other characteristics of tables (many of which he is not aware of at the time).[4]

It is my understanding that Rand is explaining in modern language the concepts of Aristotle, or refining them. This seems basically consistent with John Locke’s epistemology.

Ethics
This is where we see the major differences between Rand and Locke. In my brief survey of Locke’s ethics, I found two competing concepts for Locke. One is his ideas about Natural Rights, and the other is a hedonistic perspective on ethics. Locke’s hedonistic perspective on ethics is in conflict with Rand’s concept of “rational selfishness,” and I would suggest in conflict with Natural Rights.

Locke’s hedonistic ethical views start with the idea that people naturally want to maximize their pleasure and minimize their pain. Locke’s Natural Rights starts with the idea that moral laws are divine, but he does state these divine laws are discoverable by reason. This second part makes it consistent with his deist metaphysics. He does not seem to reconcile these two competing ethical systems.[5] I will focus on Locke’s Natural Rights ethics.

Locke’s formulation of Natural Rights starts with his concept of man’s rights in a state of nature.[6] In a state of nature a man owns himself. Since he owns himself he has a right to defend himself. Man also has a right to those things he creates, which is where the right to property comes from. From these concepts the moral repugnancy of slavery follows as well as most of traditional criminal law, contracts, and property law. Locke does not explicitly state that man is an end in himself like Rand, however ownership in one’s self certainly implies this. To the extent we focus on Locke’s Natural Rights, Rand and Locke are not in conflict and I would suggest Rand’s ideas are a refinement and provide a deeper insight. Like Relativity and Quantum Mechanics expand our knowledge over Newtonian physics, but are not in conflict with it.[7]

Ayn Rand’s ethics starts with idea that human life has value and ethics is the actions necessary to allow man to live. By “live” she does not mean mere existence, but thriving. Everything else she derives from an evolutionary point of view.[8] In Galt’s speech she states,

There is only one fundamental alternative in the universe: existence or nonexistence—and it pertains to a single class of entities: to living organisms. The existence of inanimate matter is unconditional, the existence of life is not: it depends on a specific course of action. . . . It is only the concept of ‘Life’ that makes the concept of ‘Value’ possible. It is only to a living entity that things can be good or evil.

From this evolutionary individualistic basis (“There is no such thing as a collective brain. There is no such thing as a collective thought … or a collective stomach”) she focuses on man and his unique tool of survival, which is his mind.

In order to sustain its life, every living species has to follow a certain course of action required by its nature. The action required to sustain human life is primarily intellectual: everything man needs has to be discovered by his mind and produced by his effort. Production is the application of reason to the problem of survival.[9] (Emphasis added)

It is reason that requires an ethics of individuality, where each person’s life has value separate from the species. This is not true of other organisms.

Man’s mind is his basic means of survival—and of self-protection. Reason is the most selfish human faculty: it has to be used in and by a man’s own mind, and its product—truth—makes him inflexible, intransigent, impervious to the power of any pack or any ruler. Deprived of the ability to reason, man becomes a docile, pliant, impotent chunk of clay, to be shaped into any subhuman form and used for any purpose by anyone who wants to bother.[10] (Emphasis added)

Thus Rand ends up with an ethics in which each individual person is their own end. The exercise of their mind is the means by which they attain values to live. In order to achieve their values they must not only think but act. In order for this to be true, man must own himself, which is the starting point of Locke. The main difference between Locke and Rand is that Rand starts with a scientific or metaphysical basis of the nature of man to derive her ethics. Locke starts with the assumption that each man owns themselves, but Rand proves why this must be true.

Her starting point is that every living organism must value its life or go extinct. Note there are ethical systems that do not value human life, so this cannot be taken as a given. We will explore these more later. The second biggest difference between Rand and Locke is she shows the central place of reason and the mind in man’s existence. Evolution had not been discovered at the time of Locke, so he could not use it to develop his ethics. Another major achievement of Rand was to debunk the supposed is-ought dichotomy.

In answer to those philosophers who claim that no relation can be established between ultimate ends or values and the facts of reality, let me stress that the fact that living entities exist and function necessitates the existence of values and of an ultimate value which for any given living entity is its own life. Thus the validation of value judgments is to be achieved by reference to the facts of reality. The fact that a living entity is, determines what it ought to do. So much for the issue of the relation between “is” and “ought.”[11]

This issue was supposedly first raised by David Hume who lived after John Locke died. As a result, this was not a problem which Locke could address. In fairness to Hume, Rand starts with one assumption or observation in order to solve this problem, mainly that a living entity has to value its own life. As I pointed out earlier it is impossible to have a logical system that is not based on at least one assumption or observation.[12]

I have suggested that a deeper understanding of these issues can be had by understanding that evolution is the application of the second law of thermodynamics (entropy) to living organisms. Note I am not the first person to suggest that evolution and entropy are related. Applying entropy concepts to living organisms is fraught with potential logical errors. I have attempted to avoid them in my writings, but in passing these around I have found that even my most ardent supporters found them a little difficult to get through. My most well received post along this line is Sustainability isn’t Sustainable. My other posts on point can be found below.[13]

Life is a fight against entropy. Entropy as applied to economics is the concept of diminishing returns. It shows that inventions are the only way to overcome entropy – production without invention leads to the Malthusian Trap. As a result, this idea is consistent with Rand’s idea that the mind and reason are the primary means of survival, but refines this to the understanding of the critical role of inventions.

Why is this important? Because the intellectual battle today is against those people who have combined an incorrect interpretation of entropy with Kant’s emotion-driven epistemology. These people do not believe human life is valuable, in fact they believe humans are evil because they believe we accelerate the entropy of the Universe. Other living species do not harness and use energy (outside their physical body) so they do not accelerate the entropy of the universe and therefore are not evil. These people advocate the death of at least five billion people as a moral good. The basis of their morality is founded on a flawed understanding of entropy and physics. For more information see  The Pseudo Scientific Basis of Environmentalism. Defeating this evil philosophy intellectually is vital to anyone who values human happiness.

Property Rights
Locke formulation of property rights is based on the Labour Theory of Property which, commonly stated, says that when you mix your labour with natural resources you obtain property rights in your creation. This has been purposely mischaracterized and attacked by Locke’s opponents. Adam Mossoff has an excellent paper on point entitled  Locke’s Labour Lost. Locke’s concept of property is that your productive effort creates a property right in the thing you created. One problem or misinterpretation of Locke’s theory of property rights is that labour means physical labour. This is most likely a mischaracterization, but leaves open the question of whether intellectual property such as patents is property.

Rand’s theory of property rights argues that they derive from your right to life.

The right to life is the source of all rights—and the right to property is their only implementation. Without property rights, no other rights are possible. Since man has to sustain his life by his own effort, the man who has no right to the product of his effort has no means to sustain his life. The man who produces while others dispose of his product, is a slave.[14] (Emphasis Added)

Rand’s understanding that man’s mind is the most important tool for survival impels her to put intellectual property rights as primary:

Patents and copyrights are the legal implementation of the base of all property rights: a man’s right to the product of his mind.[15] (Emphasis Added)

Ayn Rand’s more detailed understanding of man leads to the primacy of man’s mind and reason as his tool of survival. This leads to a deeper understanding of property rights and the primacy of intellectual property rights. My refinement of Rand’s ideas leads to the primacy of property rights for inventions.

Conclusion
Locke and Rand are not in conflict philosophically, but Rand provides the more coherent ethics, one based on the fundamental nature of man and living organisms. Rand’s main difference in her epistemology is to dispense with the need for a deity, even one whose only effect was to create the world, and her tackling of Kant’s emotion-based epistemology provides a path out of the philosophical thickets he created.

I see the relationship between Rand and Locke as the difference between Algebra and Analytic Geometry, or between Newton and Einstein (with the full awareness of the intellectual stature being made by that comparison).  The difference is one of refinement, not of opposition.

I believe that Rand’s ethics can be further refined by understanding how entropy and evolution are related. This leads to a slightly different understanding of property rights, but more importantly provides a direct argument against the religion of environmentalism and the related Malthusian argument that we are running out of natural resources .

---

NOTES:
[1] Noted in “Ayn Rand's Critics,” Capitalism Magazine, by JAMES VALLIANT, http://capitalismmagazine.com/2011/08/ayn-rands-critics/, accessed 3/20/13.
[2] RESEARCH ON JOHN LOCKE'S INFLUENCE ON THE PHILOSOPHY OF DEISM DURING THE AGE OF ENLIGHTENMENT, Robert Waxman, http://www.robertwaxman.com/id85.html, 3/18/13.
[3] “The Empiricist John Locke,” http://nmalbert.hubpages.com/hub/The-Empiricist-John-Locke, 3/18/13.
[4] “Concept-Formation,” Introduction to Objectivist Epistemology, 11–12
[5] “Locke's Moral Philosophy,” Stanford Encyclopedia of Philosophy, http://plato.stanford.edu/entries/locke-moral/, accessed 3/20/13.
[6] The state of nature concept has been much maligned by Marxists and others. They have purposely distorted his argument into an anthropological statement. This clearly was not Locke’s intent and shows an intellectual dishonesty on the part of Marxists.
[7] For those people who do not know, Relativity and Quantum Mechanics are in complete agreement with Newtonian physics except in the realms of very fast systems, very high gravitational fields, and very small distances. This is part of how we know they are correct.
[8] It is surprising that Rand was indifferent on the idea of evolution. Her ethics is clearly based on the same concepts. I believe the reason for this is she was worried it would lead to erroneous ideas about Determinism.
[9] “What Is Capitalism?” in Rand’s Capitalism: The Unknown Ideal, 16
[10] The Comprachicos,” in Rand’s Return of the Primitive: The Anti-Industrial Revolution, 84
[11] “The Objectivist Ethics,” in Rand’s The Virtue of Selfishness, 17
[12] This is a favourite argument of Christians. They believe it shows morality is impossible without God. This is inconsistent with both Locke and Rand.
[13] “The Science of Economic Growth” 1-3, http://hallingblog.com/the-science-of-economic-growth-part-1/, http://hallingblog.com/the-science-of-economic-growth-part-2/, http://hallingblog.com/the-science-of-economic-growth-part-3/; and
”The Pseudo Scientific Basis of Environmentalism” http://hallingblog.com/the-pseudo-scientific-basis-of-environmentalism/ .
[14] “Man’s Rights,” The Virtue of Selfishness, 93
[15] Rand, Ayn, Capitalism: The Unknown Ideal, Signet, New York, 1967, p. 130.

Death to those who say ‘death to patent trolls’ [updated]

David Farrar says “Death to Patent trolls.” David Farrar is an idiot.

Thomas Edison was a “patent troll.”

So was Nikola Tesla.

So was almost every great inventor in the last 200 years*.

So is any inventor who licenses their invention rather than produce it themselves.  Unlike the ignoramuses who attack them, these people aren’t trolls. They’re benefactors:

Adam Smith wrote that the division of labour is a critical way of increasing a nation’s wealth.  Only if inventors can be paid for inventing, can they specialize in their profession.  The only way inventors can be paid just for their inventing is if people respect their property rights.  Note that Edison almost never practiced his inventions.  He licensed almost all of his inventions and sued if people would not pay.  Edison was not paid even a small percentage of the value he created in this world.

Ignoramuses argue that the people suing businesses these days aren’t inventors, they are (quotes Farrar) “tech-world parasites that buy up troves of intellectual property, not so that they can make a product, but so that they can turn around and sue successful companies for patent infringement with the aim of nabbing a quick and profitable settlement.”

Well, no they’re not.  They’re folk who in buying the rights to inventors’ intellectual property allow them the wherewithal to practice their craft, and help improve our lives.

Patent trolls, suggests Farrar, have “infested the courts over the last decade.”

Well, no they haven’t. 

Judge Michel,  former head of the CAFC, the US court that hears all patent appeals, points out that the number of patent suits filed each year has remained constant at less than three thousand.  Only about 100 of these suits ever go to trial.  In a technology based economy with over 300 million people and 1 million active patents this is trivial.

Farrar’s cut-and-past hit job “argues” these “trolls” target small start ups. Well, no they don’t.

The reality is that so-called “Trolls” sue large entities much more often than small businesses.

In short, the ignorance about patents and the attacks on them are based on little more than envy, bullshit, ignorance and emotion. 

Patents are property rights, and inventors are entitled both to protect their property, and to licence or sell their rights in it to whomever they choose.

As patent attorney Dale Halling argues, “The reality is the [manufactured] patent troll/ litigation crises is a very clever marketing ploy by large multinational companies that want to be able to steal inventors’ technology.

* * * *

* ‘“An astonishing two thirds of all America’s great inventors in the nineteenth century were actually NPEs” (Non-Practicing Entities).  But today’s modern Luddites would call these great inventors trolls.’
Quote from the excellent book Great Again by Henry R. Nothhaft with David Kline. Comment by Dale Halling.

UPDATE: David Farrar responds to this post, arguing “not every person who patents something they don’t produce is a patent troll.” [Emphasis mine.]

But patent trolls [says Farrar] don’t actually come up with inventive ideas. Their inventive idea is to just file a patent over anything they can think of, even if it is not a true invention. Once they get the patent, they’ll find victims who will pay them a fee rather than go to court to get the patent over-turned.

Now this is odd for several reasons. It’s odd because the answer to Farrar, whose copy-and-paste posts normally contain most of the post from which he copies, is in the paragraphs of the post he didn’t copy: that what he calls “patent trolls” are folk who provide the wherewithal for inventors to invent without needing to manufacture, market and sell the results of their inventions themselves—for “only if inventors can be paid for inventing, can they specialize in their profession… [and] in buying the rights to inventors’ intellectual property [these folk] allow them the wherewithal to practice their craft, and help improve our lives.”

Furthermore, if what is “dreamed up” is just “anything they can think of,” if it is not “a true invention,” then why has it been granted a patent,* and more importantly why is it the parasite’s wish to use it? If it is not in any way a “true invention,” then why do they find it so damned useful they wish to steal the idea?

It’s also odd because he earlier claimed the patent trolls weren’t themselves inventors. Now he claims they are, just not inventive inventors.

Even more odd, Farrar then goes on to object to Judge Michel’s fairly telling point, above, that “patent trolls” have not “infested the courts over the last decade”—as Farrar claimed in his earlier post that they had. But Farrar’s answer is to argue that we don’t see these cases because “they don’t go to trial.” In which case, it’s impossible to see how they can be infesting the courts.

So a lot of oddness in one short post.

There is certainly an infestation about however, an infestation about which to be on guard: it is the general animus against intellectual property by folk often only too keen to take from others what they have neither earned nor paid for.

The desire for the unearned is legion. The arguments against so called “patent trolls” is just one of its latest and less attractive manifestations.

* * * *

*Yes, there are foolish patents granted, but this is an argument for improving the Patent Office, not to demolish patents altogether.

The High Cost of Invention Theft

Guest post by Dale Halling 

Edwin Armstrong is the inventor of FM radio, the Regeneration receiver, Super Regeneration, Superheterodyne, and much else.  This creative genius’s life was however wasted fighting RCA, who blatantly stole his patents for FM, and the Federal Communications Commission (FCC), who arbitrarily moved the FM radio range from 44-50 MHz to 88-108 MHz (where it is today) just to destroy the network of radio stations Armstrong had built up. 

If not for this arbitrary decision, Channel 1 on U.S. TV would be at 44-50MHz. This is why Channel 1 does not exist. 

The failure of the government to protect property rights and the arbitrary power given the FCC kept all of us from enjoying FM radio decades earlier, arbitrarily destroyed the investment of hundreds of people, and diverted Armstrong from inventing—which undoubtedly deprived us of other great inventions. 

Edwin Armstrong's struggle encapsulates everything that is wrong with the United States today.

Here is a great article on this genius of radio communications: Edwin Howard Armstrong (1890 to 1954).

Of course the anti-patent crowd does not believe in genius, at least in the technical arts.  Economists argue that someone would of come up with these inventions because of market demand.  (How? Somehow?) This is absurd. First of all there is no “market demand” for something that does not exist. (Did you know you wanted an iPad before Steve Jobs invented it?) Second, all macroeconomic evidence shows that in the absence of property rights for inventions, technological change is glacially slow and mankind falls back into the Malthusian Trap.

This is not somewhere we want to travel.

Dale Halling is an American patent attorney and entrepreneur, and the author of the book The Decline and Fall of the American Entrepreneur: How Little Known Laws are Killing Innovation.
Read his regular thoughts at his State of Innovation blog.

“Scarcity” – Does it Prove Intellectual Property is Unjustified?

Guest post by Dale Halling from the State of Innovation blog.

Too many people today don’t understand property rights—even those people whom you might think would be most likely to.  Cato, Reason and the Mises Institute are just three out of many whose otherwise good work in many areas is undermined by their complete ignorance on property rights, especially intellectual property rights.

As Dale Halling explains, their error lies in their misunderstanding (or in some cases abject disinterest) in the derivation of property rights. “They have adopted the Utilitarian point of view that property rights are just an efficient way of allocating scarce resources.”  But this is not the justification for property rights, simply a beneficent consequence.  Cato, Reason, the Mises Institute et al confuse consequence for cause, and in so doing obliterate that which they should be defending.

Adam Mossoff explains has talked extensively on this nonsense, explaining that Jeremy Bentham’s ideas are at the root of these “libertarian” attacks on Intellectual Property.  “Bentham’s basic philosophy was Utilitarianism, i.e., the so-called ‘greatest good for the greatest number.’ Bentham argued the justification for property rights was scarcity and conflict resolution, not natural rights… This is the philosophical point of view used by the Cato Institute, the Von Mises Institute et al to attack patents and copyrights.”

The packaging of utilitarianism and property rights is a complete mess. Bentham himself was an opponent of rights altogether, famously calling them “nonsense on stilts,” so it’s no surprise that today’s Benthamites find themselves opposed as well.

The fact is however, as Mossoff explains, Utilitarianism’s ‘greatest good for the greatest number’ never even achieves its purported goal; its end result is always some form of  totalitarianism. “The reason for this [summarises Halling] is that utilitarianism is merely a justification for short term actions. Once something has been produced, it always looks like the greatest good is to redistribute the creation.” That this sounds like the underlying ethic of every socialist “workers paradise” ever invented is no accident; in fact it is the same ethic in theory, and leads to the same result in prcatice: poverty and coercion. Redistribution of already-produced creations might sound good to the unthinking, “however, this is clearly only true in the short term. In the long term it is clear that this always destroys the economy, rights, and rights-holders.  Stealing the product of one’s mind (mental labor is labor) is no different than banning free speech. It stifles the mind, which source of all economic progress (values).”

The confusion over the status of Intellectual Property must be repaired. Which means the package deal of using utilitarianism to ‘justify’ rights must be untangled. Craig Biddle explains very simply the correct derivation of rights here, wiping away several dangerous confusions in the process. And Dale Halling discuss the historical and theoretical fallacies behind the scarcity theory of property right here in this Guest Post. Enjoy!

The confusion over the status of Intellectual Property must be repaired. Which means the package deal of using utilitarianism to ‘justify’ rights must be untangled. Craig Biddle explains very simply the correct derivation of rights here. And Dale Halling discuss the fallacies behind the scarcity theory of property right here:at my post Scarcity: Does it Prove Intellectual Property is Unjustified and Scarcity -2 and Scarcity -3.  Mossoff points out that  (IP).

Scarcity – Does it Prove Intellectual Property is Unjustified?

A NUMBER OF ALLEGED SCHOLARS [1] have recently suggested that the logical basis for tangible property rights is scarcity.  Property rights efficiently allocate these resources and avoid conflicts between competing rights of individuals.  These scholars argue that ideas and invention are not subject to scarcity and therefore intellectual property rights should not exist.  These arguments seem to be particularly prevalent among libertarians, including the Cato Institute the Von Mises Institute and the open-source community.

Tangible property rights include real property rights in land and buildings and personal property rights in things like cars and furniture.  Tangible or physical property is scarce since it can only be owned by one person at a time and it takes resources to create.  According to this theory, intangible or intellectual property such as patents and copyrights, and software in the case of the open source community, is not scarce so can not be accorded property rights status.  Intangible property can be owned by multiple people without excluding others from the same property, which according to them is the defining characteristic of property..  According to Tom G. Palmer for example, a proponent of this “scarcity” theory of property:

          It is this scarcity that gives rise to property rights.  Intellectual property rights, however, do not rest 
         on a natural scarcity of goods, but on an “artificial, self created scarcity.”[2]

Scarcity however is neither the historical nor logical basis of private property rights.  The historical justification of property rights is based on the right that a person owns himself.  If you do not own yourself, you are a slave.  If you own yourself then you own the fruits of your labor, physical and mental.  This is commonly referred to the “natural rights labor theory of property.”

In the pre-capitalist era, private property existed de facto, but not de jure, i.e., by custom and sufferance, rather than by right or by law.  In law and in principle, all property belonged to the head of the tribe, the king, and was held only by his permission, which could and often was revoked at any time, at his pleasure. [3]  [This is the basis of the fee simple title which is still issued these days in NZ, a legal fiction that remains as a vestige of this tradition that is unfortunately these days becoming a reality again all too quickly.]

The labor theory of property provided the first foundation of property rights as opposed to respecting property simply as a custom.  As a result, the scholars who suggest that property rights are based on scarcity are incorrect historically.

DESPITE THIS HISTORICAL INACCURACY, some of these alleged scholars might still argue that “scarcity” is still nonetheless a better theoretical framework for the justification of property rights.  But this is still not true.

The natural rights labor theory of property explains why slavery is immoral.  If you own yourself, then no one else has the right to own you.  It also explains why murder and manslaughter are immoral, why stealing is immoral, why assault and battery are immoral and why we have laws against all these actions.  The natural rights labor theory defines how property should be allocated and how people come into possession of property morally and legally.  The labor theory explains all of our basic criminal law and all of our basic property laws. 

But what does scarcity explain?  It offers no justification for why slavery, murder, manslaughter, assault and and theft are immoral, except that they are “inefficient at allocating resources.”  Thus, all of these crimes would be allowed if they were efficient at allocating resources.  [In effect, as Bob Jones one joked, their only argument against Hitler’s extermination of millions of human beings would be the size of his gas bill.]

The “scarcity” theory does not explain why these wrongs are wrong. But nor yet does it define who has ownership in any particular property, nor why they should have this ownership in property recognised.  It merely explains that private property ownership is an efficient manner in allocating scarce resources, then ignores completely the question of who is entitled to enjoy these rights.

The “scarcity” theory is neither complete nor accurate.

On top of that, it also requires the additional assumption that it is “preferable” [why? because we said so, that’s why] to have efficient allocation of resources. So it is neither complete, nor accurate, and in addition it begins begging other questions it also fails to answer.

IN SCIENCE, THE THEORY that has the greatest ability to explain the widest number of facts is considered to be the correct or better theory.  Here the “scarcity” theory of private property fails to integrate at all the facts it needs to explain while requiring additional assumptions it can’t explain.

It fails to recognise how a resource is created; it has no basis for explaining how a resource should be initially distributed; it does not explain how property law determines ownership; and it has no power at all to explain criminal law.

Trading scarcity for the labor theory of property is like trading the theory that “what goes up must come down” for Newton’s Law of gravity.  The fact of the matter is that the proponents of scarcity have confused cause with effect.  A system of private property results in efficient allocation of resource, but it is not the reason for private property – it is the effect of private property.

Dale Halling is an American patent attorney and entrepreneur, and the author of the book The Decline and Fall of the American Entrepreneur: How Little Known Laws are Killing Innovation.
Read his regular thoughts at his State of Innovation blog.

“Don’t steal music”– Townshend

Illegal downloaders of Rihana and Lady Gaga were pinged overnight by the Recording Industry Association of New Zealand (RIANZ), who asked Internet Service Providers to send copyright infringement notices to 42 customers that the association has accused of internet piracy.

The first of many such notices that will be sent out as a reward for stealing music.

Almost at the same time, The Who's Pete Townshend used his inaugural John Peel Lecture in Salford, England to attack illegal music downloaders as thieves, which they are, and Apple as

a "digital vampire" that is "bleeding" artists and "destroying copyright as we know it.”

Townshend, who first began dreaming about the internet back in 1971, urges Apple's iTunes “to use its power to help new bands” in a similar manner to the late John Peel, and the independent record labels he helped champion.

But he reserved the greater part of his ire for today’s bedroom pirates who demand a right to the fruits of his and his colleague’s labour without paying for it.  Townshend, who has deservedly earned a small fortune from royalties, concedes that many a creative person much earlier in their career than he “would prefer their music to be stolen and enjoyed than ignored.”

“ This is the dilemma for every creative soul – he or she would prefer to starve and be heard than to eat well and be ignored.”

It is not them he blames (far from it) but the thieves, the pirates, the the music “fans” who illegally download music and starve those they claim to admire. Says Townshend, accurately:

They may as well come and steal my son's bike while they're at it… I wonder what has gone wrong with human morality and social justice."

Here’s The Who:

The Who - Music Must Change 1979  (posted by IvorTheEngineDriver)

America Invents No More

“Sure, free riders can have a great run, up to the
point that they run out of creators to steal from.”
- Lawrence Ebert, IPBIZ blog

You might be aware that the American Senate recently passed what it calls the “America Invents Act”—more accurately described by some as the America Invents-No-More Act, “which will stifle U.S. innovation, growth of new American businesses, and long-term job growth in America.” In short, it is a disaster.

This legislation should more appropriately be called the ‘Leahy-Smith Trade Secret Protection Act of 2011,’ because it will encourage and reward keeping America’s innovation and new discoveries secret.  This concept of secrecy attacks the very foundation of our patent system put into place by our Founding Fathers.

In response, our regular Guest Poster and patent specialist Dale Halling explains what real patent reform would have looked like, and why.

I have written a number of times on what real patent reform would actually accomplish.  One of the major problems with our patent system is that your rights stop at the border.  This is different than any other property right.  For instance, if I drive my car across the border into Canada, I still own my car.  If I drive my book across the border into Canada I still own both the physical version of my book and the copyrights to my book.  But, if I drive my invention across the border I no longer own my invention.  This situation existed for copyrights 150 years ago and it was recognized that there was no logical reason for copyrights to end at a countries border and it discouraged the publication of domestic authors.  The same is true of patents.

I suggest a system of reciprocity in which an inventor who obtains a patent in Canada, for example, has patent rights in the U.S. and vice versa.  This would decrease the duplication of efforts across patent offices around the world and significantly reducing the present backlog in the U.S. patent office.  More importantly, it would increase the value of a patent and increase the chance of obtaining funding for technology startups.

A friend of mine, Jim Lauffenburger, explains in practical terms why this important.  His company has found trade secrets to be a much more useful tool, because of the lack of patent reciprocity.

It is interesting that in my company, EM Microelectronics, the best method for protection is definitely keeping a secret, not filing for patent protection. (And keeping those secrets is extremely challenging and difficult.)

Why, you ask?
Because we are unable to enforce patent protection in Asia, and unable to prevent literal copying.

We spend man-decades of highly skilled (and expensive) engineering time to design a new IC. The IC goes into mass production in some successful product. It gets rapidly reverse engineered in Asia. Nearly direct copies of the part soon appear, and can be priced at only silicon-cost, without the huge development costs.

We visited several of these Asian “design centers” to ask them how they do it, under the guise of possibly utilizing their services. But even that guise was not really necessary, because they were proud of their “design method”: They do a layer-by-layer stripping and micro-photographs, and create a direct schematic from that. They convert the digital logic into standard cells, and then re-Place-and-Route using “their own IP” (the standard cells). For the analog portions, they use the layers as-is, but rotate or flip them 90 degrees so that it looks different. Then end result is what they claim is their own IC and their own IP, and it looks quite a bit different from our ICs. But, during that entire process they were simply “turning the copy crank”; not actually designing anything from concept.

Fighting this copying at a trademark level won’t work (it looks different). Fighting this at a patent level is extremely time consuming and expensive.

Thus, the only way to fight it is to try to hide features and make very special implementations that don’t work correctly in a layer-by-layer copy. (This of course, is very difficult, and expensive, and MUST be kept fully secret.)

This shows (to me) once again, that most of our law (and society) only works if the we all generally agree on the moral and ethical basis undergirding our actions and laws. Once that is lost, chaos follows. (And “messes get created” by all the reams of laws generated to try to make up for the lost ethical basis.)

While Jim’s company has made a logical decision under the present law, part of the reason for having a patent system is to encourage the spread of technical information.  Trade secrets inhibit this dissemination of technical information and slow down technological and economic progress.  The America Invents Act does nothing to solve this problem.

Google, Motorola Mobility and the Patent Wars

Guest post by patent specialist Dale Halling

Google agreed to acquire Motorola Mobility for $12.5 billion.  Most people believe the main motivation for Google was to acquire Motorola’s patent portfolio of over 17,000 patents and patent applications.  The comments on this deal encompass all the insanity around the  Patent Wars.  Below I will discuss some of these issues

Business Deal
Is this a good deal for Google?  Does it make economic sense?  In buying Motorola, Google gets a company that has been in the forefront of mobile communications since its inception. 
    The biggest risk is that Motorola is a bit bureaucratic.  They were slow to develop CDMA phones in the 90s and never completely recovered.  Motorola has been hardware focused, when the industry is clearly being driven by software advances now. 
    The main reason for acquiring Motorola is to get their patents and leverage them into freedom of action in the Android market space.

Innovation and Paying for Patents
There are numerous people complaining that Google’s $12.5 billion is being spent on patents instead of being spent on engineers and products.  Actually, spending money on patents IS spending money on engineers.  Engineers created the inventions and the patents just provide legal title to the inventions.  When companies spend money acquiring patents they are spending money for the development of inventions and therefore engineers. 
    If inventions are not protectable, companies do not spend more on engineers they spend less.  They just take other people’s inventions, rather than paying for internal or external development. 
   In fact, you can trace engineering salaries and employment to strong patent laws.  Countries with weak patent laws either have very few engineers or their salaries are fairly low or both.
    New products are the result of inventions.  Increases in our level of technology are what make us wealthy.  When people pay for patents (inventions) it does not discourage innovation, instead it encourages other people to innovate.

Too Many Overly Broad Patents being Issued?
There has been a lot of wailing about too many over broad patents being issued.  This whining is coming from the same people who complained about Amazon’s one click patent, which was upheld after numerous challenges.  Why did Barnes and Noble get a 10x increase in online sales (after copying Amazon’s one-click technology) if the one click patent was not innovative?
    All objective measures of patent quality have been increasing for years.  For instance, the metrics of GDP-per-patent, R&D-dollars-per-patent, and number-of-citations-per-patent have all been on the increase.  For more information see my post Patent Quality Nonsense.
    Do some bad patents get issued?  Absolutely and some of my clients have been affected by this.  However, most people making the claim that there are too many bad or overly broad patents do not even know that the scope of a patent is determined by its claims.  They do not know that claims cannot be read like prose, they have to be read like an equation where every word has to be given meaning.

Litigation Explosion
    Many people see this acquisition as just another outgrowth of the numerous frivolous patent cases being filed.  However, the facts do not support this point of view.  Judge Michel, former head of the CAFC, the court which hears all patent appeals, points out that the number of patent suits filed each year has remained constant at less than three thousand.  Only about 100 of these suits ever go to trial.  In a technology based, $14.5 trillion economy with over 300 million people and 1 million active patents- THIS IS A TRIVIAL NUMBER.

Solutions
Are there any problems with our patent system?  Absolutely.  The underfunding of the patent office causes inventors to wait years and even up to a decade to receive their patent. 
    But, more specifically to the Google/Motorola case, the wireless smart phone space needs a more efficient method of clearing patent rights.  I suggest a non-profit entity similar to ASCAP, which clears copyrights for musicians and composers.  For more information see my post Patent Wars a Market Solution.
    Finally, for those worried about the poor, small company who had a great idea for an app and are now scared they may find themselves embroiled in a patent lawsuit- GET A PATENT CLEARANCE OPINION before you develop.

Dale Halling is an American patent attorney and entrepreneur, and the author of the book The Decline and Fall of the American Entrepreneur: How Little Known Laws are Killing Innovation.
Read his regular thoughts at his State of Innovation blog, and his other Guest Posts here.