Economics,  Politics

Why Intellectual Property is a Flawed Notion

If you talk to a mathematician about their theories, they will say that mathematics is a discovery rather than invention. If you ask a physicist about their theory, they will claim that they are discovering the nature of reality rather than inventing it. But if you talk to a technologist or a corporation about their ideas, they will claim that they are inventing these ideas, and hence they own them. How can one idea be an invention while another is a discovery? This post discusses the nature of ideas and why they cannot be owned, although they can be kept secret. In other words, ideas can be trade secrets but not published intellectual properties—meant to prevent others from accessing and using them.

The Definition of Intellectual Property

An intellectual property is used to prevent others from using your idea. This prevention is achieved by performing an idea disclosure through a patent. By telling others about your idea, and calling it a patent, you are informing others that they cannot use it. What is the point of informing others about an idea and then indicating they cannot use it? The intent is to litigate at a later time in case the idea is found to have been infringed—i.e. used by others. If you haven’t disclosed an idea, and someone discovers the same idea, you cannot prevent them from using it. The intent underlying disclosure is, therefore, to say exactly what you have discovered so that you can call it your “intellectual property”.

Contrast “intellectual property” with a “trade secret”, which is kept hidden if we don’t want others to use it. The Coca-Cola formula, for instance, is a trade secret rather than a patent. Patents, in modern intellectual property law, expire after a duration—e.g. U.S. patents expire in 20 years. A trade secret, however, can remain a secret perpetually, if it is not stolen or discovered independently.

The Use of Intellectual Property for Business

Intellectual property is used to create barriers to entry. As people move from one company to another, they can carry the ideas with them to the new company, and unless these ideas were patented, the originating company will lose its competitive advantage. To prevent such transfer of knowledge a company can keep its ideas as a trade secret, but such secrets are hard to protect. They can be known to a very few people, whose loyalty to the company must be guaranteed. If such loyalty is in question, a company protects its intellectual property through patents—i.e. claiming an idea’s ownership.

To avoid a patent, a competitor has to find a new method that does not infringe any of the claims mentioned in the patent. A patent typically has many claims—which are called “claims” because the entity patenting the idea is claiming their ownership by declaring these ideas. The situation is similar to a man walking into a deserted place and planting a flag or demarcating a boundary. Just the act of planting the flag or demarcating a boundary makes the land his or her “property”.

If someone is infringing any of the claims mentioned in a patent, the patent owner can sue the user of that idea. To avoid such litigation, businesses are careful to avoid stepping on other’s property and create their own property. In other words, nobody can walk inside the area that you have demarcated as your land by drawing a boundary. You just have to be the first to stake a claim.

The Misuse of Intellectual Property in Modern Economy

Suppose a company finds a new life-saving drug, and patents the drug design. Such patents could be either methods or molecular structures or both. Typically, the patent owner will also identify the functioning of the molecule—e.g. how it triggers or prevents some chemical reactions. If the drug is useful, and the threat of the disease significant, the drug company will use the patent to prevent others from creating a similar drug and create a monopoly to charge high prices for the drug.

In other words, unlike the widespread notion that capitalism and free market economy are used to create competition, the intellectual property laws provide a loophole in this competition: patents created using such laws are specifically designed to create monopolies rather than nurture competition. Once a monopoly has been created, it becomes harder for anyone else to create a viable drug that will not infringe on any of the original claims. Even companies who can produce a better drug for the same disease will not be able to provide that drug if it partially infringes on the original patent.

The original patent owner uses this monopoly to acquire competitor companies—because, after the acquisition, the acquired company can use the original patented design. Such acquisitions help the companies but they hurt the consumers because they increase the barriers to entry. An acquisition furthers the monopoly because, in addition to the original patent, even further improvements to the original drug are now patented, thereby making it even harder for someone to create a viable alternative. Over time, when enough patents have been acquired, it is incredibly difficult for any other competitor to even venture into that market, and the monopolization is now complete.

With such a strong monopoly position, the company can charge consumers whatever it wants, until the patent expires—e.g. after 20 years. This gives sufficient time to create new patents to create new monopolies through internal research and further through acquisitions. The capitalist system fosters free competition between the innovators as long as they don’t infringe each other’s ideas. But sooner than later—if you focus all your research in a particular direction—you acquire a monopoly in that area, which gives you the license to exploit the consumers by preventing others an entry.

Free Markets vs. Monopolies

The race in the modern capitalist system is to find those new lands where nobody has gone before. Simply by finding those lands, and marking them with their own flags, they become owners of those lands. But, because such an occupation would be worthless if nobody wanted to use that land, other people have to be incentivized to live on the new land. This is called advertising where people are coerced through fear, greed, and desire, to want to live on the newly occupied land. As more people want to live on such a land, the original occupier charges the renters more and more.

The competition between the companies is that they are struggling to attract the people to different lands. When competition intensifies, companies mutually agree to cross-license their patents—meaning that they are both going to sell each other’s lands to different people and try to attract as many consumers to live on the same land rather than fighting with each other over the land. But dare a newcomer try to use the same patent, and they would be slammed with litigation.

In other words, with patents, the free market competition gives way to closed-door monopolies in which newcomers would be penalized but those who have already monopolized parts of a certain area are allowed equitable rights to use each other’s properties to rent out to potential customers.

Can We Really Own Ideas?

Ideas exist before material objects—their instantiations—exist. These instantiations are created by adding more ideas to the primitive ideas. The original ideas are, therefore, “abstract” while their instantiations are “contingent” or “detailed”. Since the detailed ideas are produced by refining and detailing the original ideas, and the original ideas existed before we created some detailed ideas, we cannot be owners of the idea in full—because we did not create the original ideas.

Of course, we are indeed free to create new ideas, but the ingredients from which we create them are also not created by us. Consider for example a number 1023432, which is created from numerals. We can refine this number by adding more digits to it on the left—e.g. 9991023432. We did not own the original number (i.e. 1023432) and we did not own the numerals that are being added. Our contribution is limited to finding an appropriate sequence or succession of alphabets or numerals.

Even more fundamentally, the number 9991023432 exists eternally as a possibility and is therefore only discovered by us, rather than our invention. We can certainly instantiate this possibility into a real object, but by such an instantiation we are only the discoverers of the possibility, not its inventors. Just as someone can occupy a land that previously existed but was not known to others, similarly, by creating a number—such as 9991023432—we have only discovered a new land, not created it. As we saw earlier, this is the primary reason that mathematicians and physicists will say that they are only discovering the nature of reality rather than inventing it. There are hence no new ideas. All ideas always exist as a possibility which might not be known to many people. By discovering that possibility we don’t become its owner or inventor. At best, we can say that we discovered it ahead of others.

Trade Secrets vs. Intellectual Property

Once we have discovered the new idea, we are entitled to keep our discovery secret. We don’t have to advertise to the whole world that we found something new. We can use this new idea to create its instantiations—but the risk is that we would make this idea accessible to others. If we are prepared to divulge the idea through such instantiation, then we should also be prepared to allow them to copy it, and create further modifications or even newer instantiations of the same idea.

Intellectual Property Rights (IPR) prevent such an outcome with the sole purpose of monopoly creation, which is aimed towards extracting a profit out of something that we don’t truly own.

All ideas are “free” in the sense that anyone is welcome to discover and divulge them. Once the ideas have been divulged, others are free to copy and distribute unlimitedly. However, these ideas are not “free” in the sense that nobody is obliged to always disclose them. In that sense, we can keep our discoveries private and thereby create “trade secrets”, but if we decide to divulge our trade secrets then we cannot prevent others from using these divulged secrets—which patents attempt.

Use of Ideas in Academia vs. Industry

Academia allows people to publish their discovered ideas. Once an idea has been disclosed, it is freely available and can be used by anyone. We are only required—out of respect for the original discoverer—to quote their discovery in articulating the use of these ideas. A similar use lies is the case of “open-source software” in which the discoverer insists on the names of the authors to be retained, while not preventing others from using or modifying the software. If for whatever reason, the software is modified, it cannot be sold for a profit because it exists as an idea. You can, however, package the software and provide an instance to a customer and “service” that instance. A number of companies, therefore, build businesses around servicing open-source software.

The point is quite simple—we can create instances of the idea and our profits are limited to the value we are adding to the instance. We are not owners of the original idea, nor can we prevent others from creating instances—either similar to ours or different from ours. We are, however, entitled to a full ownership of the instances we have created, and profit from those instances. For example, a drug company should be entitled to sell the medicines it manufacturers but not prevent others from manufacturing the same drug—as a method explicitly designed to create a monopoly.

The effort that goes into creating good academic ideas is no less strenuous than the effort that goes into creating good industrial ideas that result in useful products. If the founders of quantum theory had patented the theory, then nobody could create electronics equipment. If they had kept the theory secret, then how could anyone build technology using that theory? Since they divulged the theory, a variety of technology can be developed today. By that token, how can the design of the electronics equipment be patentable when the theory on which it is based was not patented? Patents have no logical standing in the pantheon of ideas because they contradict the very principles of openness upon which they stand. How can the ideas that revolutionized the understanding of matter for the whole world be free, but one particular application of that understanding be owned?

Intellectual Property and Capitalism

IPR is an aberration of capitalism. We cannot own ideas because ideas always exist as a possibility and are only instantiated in our minds as insight or knowledge—i.e. a discovery. That insight only gives us a temporal priority in the discovery, not an ownership. We can continue to enjoy that priority, if we want, by keeping the discovery secret. If someone else discovers the same idea again, and discloses it to others, the priority of that discovery (in the vision of most people) would go to the person who discloses. But whether we choose to disclose or keep the idea secret, we have no legal “right” over that idea—in the specific sense of ownership and preventing others from using it.

We can own material objects—i.e. we can prevent others from using them. We can also assert our discovery of ideas—i.e. claim priority over others. But we cannot own ideas—i.e. prevent others from using them. IPR is specifically designed to create monopolies rather than free markets. And yet, it is rather amazing that we today consider it a part of the “free market” system.

If IPR did not exist, then the aberrations of capitalism—i.e. monopolies—would also not exist. Anyone could use the same idea to create a similar or better product. In fact, as Newton claimed to have “stood on the shoulders of giants”, new innovation would accelerate and any inventor has a very short-term advantage before a new inventor provides an even better product. The system would rapidly accelerate innovation and dissolve monopolies—if indeed that is what we truly wanted to do.

The reality, however, is that corporations are not fast innovators. If they divulge their innovations, and smaller players clone and improve them, they would be quickly outdated. They can survive not by fostering other innovators, but by preventing their innovation. Such patents are therefore appropriately called “barriers to entry” because they prevent competition. The fact that patents and IPR exist in a free market system is a testimony to the fact that this system is not what it claims to be.

Human Talent is Our Unique Trade Secret

As noted in an earlier post, if all ideas were “trade secrets” rather than “intellectual properties” the economy would drift towards free competition rather than monopolies. An artisan can produce the best silk or cloth because the art of creating such fine clothing exists in his or her family as a trade secret. A cook can produce immensely tasty food because the art of cooking can be passed from teacher to disciple. A musician can produce highly aesthetic creations because they learn the instruments and the art from their musical masters. Nobody needs to have a monopoly on art, music, food, or clothing because there are enough “trade secrets” that differentiate a provider from another.

When we are afraid that someone can clone our work to innovate faster, we are basically indicating that our invention is rather shallow and cannot stand the test of competition from others. We have mechanized life to an extent where the refinement in our actions has become easily replaceable. We are actively replacing the human crafts with machines and thereby commodifying and neutering human talent and sophistication. We then resort to IPR to assert our rights over ideas!

The value we bring is unique and irreplaceable—provided we can hone this skill and perpetuate it over generations. We can be known by this skill because it is so sophisticated and complex that it cannot be stolen—even when presented as a product to others. The talent in our senses, the creativity in our minds, and the judgment in our intellect is uniquely ours, although it is not our monopoly.