About September 2014
Public choice economics is sometimes referred to as “politics without romance.” Rather than telling stories about politicians’ virtues or their disinterested avocations, it suggests that politicians are more or less like everyone else. They’re self-interested. They like to make things easy on themselves. And they suffer from all the same cognitive biases we do.
These claims may sound cynical, but they explain a great deal about politics. Why does everyone rail against special interests, while special interests never seem to go away? Public choice says it’s because when a well-defined group stands to get a very large benefit, that group will organize and put in the effort to win it. Meanwhile, if the costs of that benefit fall on a large, poorly defined group, and if the costs are spread thinly enough, the afflicted group won’t find it rational to act. Special interests are the first kind of group; taxpayers are the second - which is why politicians so often only hear their side of the story.
This month’s lead essayist, Eli Dourado, is the Director of the Technology Policy Program at the Mercatus Center. Dourado argues that patent holders are a concentrated interest, and that public choice economics can explain their behavior.
That doesn’t necessarily mean that nothing patent holders want is legitimate. But it does mean that we can expect their lobbying to be far more effective than that of the general public If patent policy errs, he suggests, it’s likely to be in their direction. After all, what are the costs of a bad patent policy? Less innovation - a cost that’s almost impossible to notice. Dourado’s essay tells the story of the Federal Circuit, the court that has for the last thirty years increased the severity of our patent law. He uses its example to argue for a new research program in intellectual property, one that applies the insights of public choice economics to the design of patent law and the institutions that oversee it.
This month’s response essayists will offer a variety of opinions on Dourado’s argument. They are Professor B. Zorina Khan of Bowdoin College, Professor Christina Mulligan of Brooklyn Law School, and Professor John F. Duffy of the University of Virginia School of Law.
- The True Story of How the Patent Bar Captured a Court and Shrank the Intellectual Commons by Eli Dourado
Public choice economics warns of regulatory capture - a scenario in which the regulated actors use lobbying to get favorable rules and regulators. When an industry writes its own rules, the rest of us may suffer, and Eli Dourado argues that that’s exactly what has happened in U.S. patent policy. Here, he tells the story of the Court of Appeals for the Federal Circuit, which for the last three decades has had exclusive appellate jurisdiction over patents. The Federal Circuit has tightened the law again and again, in what Dourado identifies as a classic case of regulatory capture.
B. Zorina Khan challenges Eli Dourado’s story of regulatory capture: The substantial growth of patent issuance in recent years is due overwhelmingly to an influx of foreign inventors, not to a flawed U.S. patent system. That system is neither broken nor even very different from its historical norms. Throughout our history, it has served us well, even if outsiders sometimes find it hard to understand. We should therefore resist any sweeping changes to it.
John F. Duffy likens software patents to medical patents. At one time, medical patents were considered unethical, but nowadays, they are considered an important tool for spurring innovation in a field that otherwise might not get much of it. Software patents are very similar, he argues, and they should not be abolished. Yet some reforms in the patent system make sense to him, including ending the complete centralization of patent cases in the Federal Circuit. Duffy takes issue with several of the empirical studies that lead essayist Eli Dourado uses to make the case for software patent abolition - these, he contents, do not show that total abolition would yield good outcomes. He suggests some reforms that this evidence may support instead.
Christina Mulligan tackles the problem of patents and innovation by looking at two different philosophies of law: In one approach, rules predominate. Rules are clear, simple, and easily enforced, but they may over- or underinclude problematic behaviors. In the other approach, standards predominate: Standards express in much more detail what constitutes good and bad behavior, but applying them can be costly for everyone involved. The choice between these two philosophies of law will always to some degree depend on the situation at hand. In this case, she favors a rule, which would be to end software patents. The costs of forming standards here are simply too high, she argues.
Conversation to follow through the end of the month.
Related at Cato
Blog Post: “Protectionists vs. Patent Trolls,” by K. William Watson, October 10, 2013
Article: “Specialist Patent Courts Are a Part of the Problem,” by Timothy B. Lee, August 19, 2011
Commentary: “Patently Absurd - Copyright Law Can Meet the Needs of Software Developers,” by Timothy B. Lee, October 3, 2011