Thursday, November 5, 2009

Patent Twit of the Week and the Patent Twit's Response

By Kevin Carson at the Center for a Stateless Society:

Gene Quinn, a patent lawyer and IP-hawk, has recently challenged the anti-IP movement — in the tone of a belligerent drunk announcing he can lick anyone in the bar– to back up its contentions with facts and arguments. Such facts and arguments are lacking, he taunts (in an Eric Cartman voice?), for the obvious reason that none exist.

When people like Stephan Kinsella call his bluff, Quinn generally manages to weasel out of it. Most recently, Quinn was scheduled to debate David Koepsell, but at the last minute cancelled because he (ahem) got sick. Quinn, in lieu of the original debate format, later participated in a pathetic exchange of soundbites on the Laura Flanders show.

The weightiest of Quinn’s “unanswerable” points is the supposed insufficiency of marginal cost-based pricing for recouping high R&D costs.

Quinn’s argument assumes an obsolete industrial model, and ignores the extent to which the capital-intensiveness and overhead cost of innovation itself are themselves affected by IP. Patents can tip the balance between alternative business models, promoting an artificially high-capitalized, high-overhead, bureaucratic model of R&D.

Patents are one way of dealing with R&D cost. But another way is modular design, which economizes on development cost by reusing the same R&D effort for a particular module or platform over a wide family of products.

Open source, P2P design models may also be considerably cheaper because they are more agile (see Eric Raymond, “The Cathedral and the Bazaar”); for example, homebrew CNC machine tools generally achieve Factor 10 or Factor 20 cost reductions over their proprietary equivalents.

Patents also tip the balance toward less agile forms of production in another way: the legal process of securing a patent is an enormous outlay that can only be amortized by large-batch production.

And the process of gaming the patent system diverts R&D dollars into some very wasteful avenues. For example, most drug R&D cost goes, not to developing the version actually marketed, but to securing patent lockdown on all the major possible variants (so a competitor won’t market a rival drug).

Artificial property rights are a source of additional capitalization costs and overhead.

Also, studies have shown that the total productivity benefits from the cumulative effects of incrementally tweaking designs, and all the other Hayekian stuff that goes with a tinkerer observing a technology in operation and fiddling with it, outweigh those from major generational leaps. So an IP regime that incentivizes major generational leaps, while erecting transaction costs against derivative development, seems of questionable benefit.

Defenses of both patents and copyright based on the inadequacy of marginal cost pricing to recoup up-front outlays are wrong-headed in another way.

The only effect of abolishing IP is to do away with monopoly rents from design or content ownership as such. It doesn’t affect the rents that result from the transaction costs of setting up production, or from being first to market and knowing one’s market better than the competition.

These things, which all fall under the head of what Chris Anderson calls “freemium,” are sources of value that would exist even without rents from IP as such. So it’s still possible to make money from being first mover, and from the authentication advantages that come with being identified as the product’s developer; you just can’t make as much money from it.

High among “freemium” services, for the majority who value time and convenience along with bare price, is authenticity: buying a copy that’s certified to be complete, defect-free, and in the format you need.

And in general, the person who originally develops a product is likely to have a better knowledge of his market, and be in a better position to profit from an ongoing relationship with his market as he develops products geared to their particular needs — especially if he also serves the market through customization and customer support.

Shakespeare worked without copyright, which meant he made money by actually performing the plays with his theater company. That meant, in turn, that he got lots and lots of little piles of money from keeping on writing plays and performing them, instead of collecting a big pile from a one-hit wonder.

BTW: Most of Shakespeare’s work was done on the folk culture model, with heavy reliance on mashups from other storytellers, and hence would be illegal under modern copyright law.

In the realm of physical production, the first company to develop a new product will have first-mover rents for the time it takes to duplicate the process. After that, it will have rents from customer goodwill. That goodwill will include the common sense assumption that the company will be best at offering upgrades to a product it originally developed, and will probably be the most reliable source of customer support.

To sum up: the producers who find themselves being driven out of business by competition based on marginal cost are generally the corporate dinosaurs who CAN’T survive without monopoly rents on IP, because they really are too stupid to think of any other way to make money.-Gene Quinn: Patent Twit of the Week

Arrogant statist jackass Gene Quinn had a response, nicely summed up by Stephan Kinsella:

I don’t mean to be cruel. But poor Quinn’s post on his site about this is so appallingly inept, it displays such a lack of intellectual acumen and facility in the rudiments of intelligent discourse, that one can only feel embarrassed for him. I’m going to be charitable and assume that his strength lies in patent law. It seems to me that Quinn is doing this all as a schtick for getting clients. It’s just heat and noise to him, a way to flash and make casual onlookers think he’s involved and knows what he’s talking about. It’s a way to make clients think he’s passionate about their cause, in some political sense. But it’s not serious argumentation.

Quinn seems to think it's some kind of an argument to attack those he disagrees with by pointing out that they "are the same ones that think all laws are illegitimate and that the consensus opinion is that income taxes are illegal". He asks: "Do you want to be associated with such lunacy or trust the economic future of the US to the positions of those who think the government is illegitimate?"

Yes, Gene, those of us who have broken free of state brainwashing do indeed think that the wars in Iraq and Afghanistan are "illegitimate" as you put it. That the destructive and cruel War On Drugs is illegitimate. That the destruction of the economy by deficit spending, incentive destroying taxation and the creation of fiat money is illegitimate. And on the economy, nothing could be funnier or more ironic than Quinn's line about the economy and who do you trust? as we head into what may be another Great Depression, created, of course, by that very same government that Gene Quinn wants us all to trust so much.

To pro-state shills like Quinn, it's lunacy to refuse to love Big Brother and to fail to fall in line like a good little unquestioning sheeple.

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