2013-09-21

Patent fees are not like property tax

Thinking of patents as property?

There’s a constant debate when it comes to patents and copyright laws. Do they fit in a general category of property rights? Are they like property at all? [+]

I can’t hide that my opinion has been influenced by the writings of Richard Stallman, who’s been challenging the status quo for over two decades. I’ve summarised in French some of his publications on the subject. [hide]

Current developments in patent law, especially in the US, have given rise to concerns about the harm they might do to innovation which they seek to guide incentives. This has been more than obvious in the case of software and patent trolls.

Some people, instead of fixing what’s inherently wrong with patents, are trying to find some minor fixes. Recently it has been proposed to make the patent fees vary depending on how much the patent is “practised” by the holder.

I stumbled upon this article (which might be a good idea, although I think it misses the larger picture) while reading patentlyo this afternoon:

Post-grant patent maintenance fees offer an easy mechanism for shifting patentee behavior. In the US, patent holders must pay a maintenance fee three times during the life of an issued patent. I think of the fee as akin to property tax. When a real-property owner fails to pay the property taxes, the state forecloses. In the patent system failure to pay the maintenance fees similarly results in the property right be taken from the non-payer.

I couldn’t resist to take this opportunity to give a small excerpt of how little value I think this analogy to property bears with thinking about patents.

Earlier this year, I attended a small seminar on “comparative perspectives of patent laws” which introduced itself with some American literature on general theories of property. [+]

Apart from the criticism that follows, I have to say it was a very interesting seminar and comparative legal studies are often good ways to self-questioning one’s views. The introduction also featured Barry Field, “the Evolution of Property Rights” (1989) worth reading as a whole for explaining patterns of emergence of property rights, but maybe also for the historical account of UK patent hero James Watt. [hide]

We were given to read Harold Demsetz, “Toward a Theory of Property Rights” (1967). This is not the only attempt at trying a general theory of property law that encompass patents and copyright. But this one is interesting for some of the analysis it brings regarding the interaction of individuals, the law, and the State; which is at the centre of patentlyo’s thinking of patent fees akin to property taxes.

In this theory, patent laws aim at modifying behaviour by internalising externalities. Yes, this is an economic theory… Later in the text, about the concept and role of property rights, the author outlines two ways for enrolling people in the military. In the first one, where people are free to join or not, the State tries to buy people in with providing for education, salaries, etc. In the second one, people are drafted by default, so they can only buy a way out of the army. For the author, there’s a kind of dynamic from no-property to property, once we have a system that creates benefit of internalising that’s higher than the cost of excluding people of the benefit. (In the second system, the State gets all the benefit).

Property and rights

This thinking in terms of property theory is nonsense to me, just like saying the patent fees are akin to property tax. What’s the connection exactly? Is anything the State is creating a tax for to be understood in terms of a property logic? Then, I’ll say that the patent fees are like the tax on cigarettes. Just like taxing cigarettes try to discourage people from smoking, the patent fees try to discourage the patent holders from keeping on their patents too long instead of unleashing the benefits of the invention to everyone.

That’s absurd, just as absurd as Demsetz’s theory of thinking as military drafting in terms of property. Who’s owning what exactly? When I was trying to answer that question while reading Demsetz, my conclusion was that Demsetz thought of a property right in owning oneself. But you don’t “own yourself” in the sense that most people give meaning to the verb owning. You are free to do things, you are responsible for your actions.

There’s some kind of confusion between having the freedom to do something that impacts other people, and having a right of property on something. It’s usually much more helpful to think in terms of rights and freedoms in general and try to think what’s the subject/object of a “right”. [+]

If you don’t know what I mean here, because this is just a blog post and I’m not thinking it through, I’m trying to draw from the distinction made by Kant between personal rights and “real rights” (I’m not even sure this is how it’s translated in English). [hide]

This is to me the original flaw that’s also inherent to thinking of patent fees akin to property tax; not acknowledgeing the fundamental difference between the objects of a right (a patentable invention, a house) for which there are rights as such (a patent, a property right).

The patent fees do not serve the same purpose as the property tax. The first one is a reminder that patents are privileges granted by the State in exchange for everyone else’s freedom to use the patented invention; while the property tax is not designed to put an end to the property right when it is too costly for society’s benefit.

Thinking of patent law in terms of property brings confusion.