Tuesday, June 14, 2011

Copyrights And Patents: Handed Down By The Aristocracy?

Granting patents was a way for the State to raise money without having to impose a tax. Dispensing them also helped secure the loyalty of favorites. The patentee in return received protection from competition. This was great for the State and the patentee but not for competition or the consumer.

In today’s system we’ve democratized and institutionalized intellectual property. Now anyone can apply. You don’t have to go to the king or be his buddy. You can just go to the patent office. But the same thing happens. Some companies apply for patents just to keep the wolves at bay. After all, if you don’t have patents someone might sue you or reinvent and patent the same ideas you are using. If you have a patent arsenal, others are afraid to sue you. So companies spend millions of dollars to obtain patents for defensive purposes.

Large companies rattle their sabers or sue each other, then make a deal, say, to cross-license their patents to each other. That’s fine for them because they have protection from each other’s competition. But what does it do to smaller companies? They don’t have big patent arsenals or a credible countersuit threat. So patents amount to a barrier to entry, the modern version of mercantilist protectionism.

What about copyright? The roots literally lie in censorship. It was easy for State and church to control thought by controlling the scribes, but then the printing press came along, and the authorities worried that they couldn’t control official thought as easily. 

So Queen Mary created the Stationer’s Company in 1557, with the exclusive franchise over book publishing, to control the press and what information the people could access. When the charter of the Stationer’s Company expired, the publishers lobbied for an extension, but in the Statute of Anne (1710) Parliament gave copyright to authors instead. Authors liked this because it freed their works from State control. Nowadays they use copyright much as the State originally did: to censor and ban books.

Quite the interesting read on how patents and copyrights can stifle growth. My foray into the business world taught me certain valuable lessons, one of which was the fact that whomever had the most to spend on lawyers usually won a copyright or patent fight.

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