Although the dot-com bubble has burst, the task of sorting through the debris is not yet complete. Over the course of the past decade, so many false, misleading, implausible and just plain stupid things have been said about the ”œinfor- mation economy” that it may take another decade for us to clear the air. Consider, for example, the term ”œintellectual property.” With any luck, this will go the way of ”œclicks and mor- tar” as just another terrible 1990s cliché. At very least, it should be dis- missed as a deeply unhelpful way of thinking and talking about the chal- lenges of an increasingly knowledge-dependent economy.
The use of the term ”œproperty” in this context is, of course, a metaphor. We exercise property rights over land, hous- es, cars, and various medium-sized dry goods. But no one actually exercises a property right over an idea, or a piece of information, in Canada or anywhere else in the world. The only rights that indi- viduals exercise over ideas are indirect: copyright protects the particular expres- sion of an idea, while patents protect the practical application of an idea. Neither is intended to transform the idea itself into property. Furthermore, no one actu- ally thinks that a state of affairs in which people exercised real property rights over ideas would be desirable. In fact, it would be economically disastrous.
Yet constant repetition of the phrase ”œintellectual property” has led far too many people to take this metaphor literally, to imagine that the system of property rights and markets used to organize an industrial economy might simply be extended, in order to structure an ”œinformation economy.” It suggests that we might someday like to buy and sell information, the way that we currently trade pork bellies.
To see what is wrong with this vision, one need only look at how the patent system is working (or rather, not working) in the software industry. Major firms pay out almost nothing in actual royalty payments, but spend millions defending themselves against ”œextor- tionary” patent infringement litigation. The SCO threat against Linux users is only the latest, most outrageous exam- ple. Adobe spent over $6 million, thou- sands of work hours and one full month of the CEO’s time just to defend itself against one such case. After several years of nonstop harassment, Adobe conclud- ed that patents ”œpromote stagnation rather than increased innovation.”
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The standard strategy for firms in this and many other industries is to accumulate as many patents as pos- sible, so that they can then barter patents with firms that might threaten them with litigation. According to the senior vice-president of Oracle, the firm ”œhas selectively been applying for patents which will present the best opportunities for cross-licensing between Oracle and other companies who may allege patent infringement.” In other words, Oracle is specifical- ly pursuing patents over processes cur- rently in use by other firms, just to defend itself from nuisance legislation. Not only is this sort of ”œpseudo- innovation” an incredible waste of resources, but it also creates the possi- bility of legal cartelization of an indus- try. When two firms cross-license one part of a shared process to one another, not only can they exclude all competi- tors, they also acquire the ability to engage in perfectly legal price-fixing. The problem is that patents and copyrights were never intended to function like property rights. Ideas are classic public goods. They are non- rival, in that one person’s use does not diminish anyone else’s, and they are almost perfectly nonexcludable. Thus the most efficient way to deliver them is in the style of classic public goods ”” to make them freely available to all.
Unfortunately, even though the most efficient way to disseminate ideas is to make them free, the produc- tion of ideas is not free. Thus we need to provide individuals with an incentive to produce them, along with the necessary resources. One way of doing so is through the classic ”œtaxation and state provision” model, which is how most university research is and should be produced. The other model is the ”œpatent and copy- right” model ”” we allow the inventor a temporary monopoly, along with the associated windfall gains, in order to provide an incentive for production.
No one imagines that such monopo- lies are desirable, or that the markets that result are efficient. Patents and copyrights are a necessary evil, to be tolerated only to the extent that they are necessary to secure the production of ideas. Unfortunately, all the talk about ”œintel- lectual property” seems to have govern- ments in both the United States and Canada confused about the purpose of these protections. The granting of copy- right extensions, for example, reflects a deep confusion over the purpose of these constraints. A copyright is not the expres- sion of a claim to ownership, it is simply a special license, like a taxi permit or a dairy quota, designed to manipulate the prices at which goods and services trade. So when we think about ”œintellec- tual property” issues, it is important to keep our eye on the prize. The end state that we want is an information commons, not an information econo- my. All of our policies should be aimed at shepherding ideas into the commons as expeditiously as possible.
