Patently Strategic - Patent Strategy for Startups
Patently Strategic - Patent Strategy for Startups
Why Patents Exist with Professor Adam Mossoff
Why do patents exist in the first place? What function do they serve in society? And what is their historic origin story? In this month’s episode, with the help of Professor Adam Mossoff, we zoom way out, turn the time dial back a bit, and focus on the genesis of patents.
There’s a special kind of magic that happens when individual incentives align with societal good. Abraham Lincoln, who believed that the creation of the patent system was only surpassed by the discovery of America and the invention of the printing press in terms of the three greatest advancements in human history, once said, “The Patent System added the fuel of interest to the fire of genius.” The recognition and protection of mental labor and the fruits of the mind as natural property rights enabled any inventor – big or small – to profit from their discoveries and partner with those possessing the resources necessary to scale and bring new products and services to the marketplace. The exchange of this protection for an enabling public disclosure enhanced society and accelerated the pace of innovation by facilitating the open exchange of information and created the greatest free library of science and technological information in the world. And because the economy grows and society flourishes when innovation is encouraged, society was transformed in the 19th and 20th centuries as demonstrated by the scientific and technological revolutions that define our modern society and by virtue, created the greatest hockey stick graph in history.
But somewhere along the way, we lost sight of this. Patents became a victim of their own success. Their impact on society, the economy, and innovation became both ubiquitous and too often unseen at the same time. This episode is the start of our effort to help undo this collective societal amnesia about the significance of patents.
** Episode Overview **
- CliffsNotes Patent History, from conceptual origins in Ancient Greece through the pre-revolutionary English system and the origin of the word "patent", itself.
- The U.S. Patent System, its democratization of invention, and its significant break from its predecessors, championed and breathed into existence by the collective wisdom of the likes of George Washington, James Madison, and Thomas Jefferson.
- Embedded in Democracy. The prominent role patents played in the Federalist Papers, the Constitution, the first ever State of the Union Address, and as the third ever act of the first Congress.
- Innovation Bridge or Blockade? How the differences in the U.S. system played out internationally across the Industrial, chemical, pharma, biotech, computer, and mobile revolutions.
- Trolling the Founders. How the fundamental virtues that made the U.S. system unique and proved successful over its history have now tragically become the primary attack vectors used by its opponents.
** Connect With Our Guest **
You can follow Adam on Twitter at @AdamMossoff, where he posts regularly on patent and innovation policy, including his excellent “this Day in Innovation History” tweets.
** Follow Aurora Consulting **
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Th
00:00 Good day, and welcome to the Patently Strategic Podcast, where we
discuss all things at the intersection of business, technology, and
patents. This podcast is a monthly discussion amongst experts in the
field of patenting. It is for inventors, founders, and IP
professionals alike, established or aspiring. And in this month's
special pre Independence Day episode, we're talking about why patents
exist.
00:24 And we're doing so with the help of distinguished guest and friend of
the podcast, Professor Adam Mossoff. There's a special kind of magic
that happens when individual incentives align with societal good.
Abraham Lincoln, who believed that the creation of the patent system
was only surpassed by the discovery of America and the invention of
the printing press.
00:41 In terms of the three greatest advancements in human history, once,
said the patent system added the fuel of interest to the fire of
genius. The recognition and protection of mental labor in the fruits
of the mind as natural property rights enabled any inventor, big or
small, to profit from their discoveries and partner with those
possessing the resources necessary to scale and bring new products and
services to the marketplace. The exchange of this protection for an
enabling public disclosure enhanced society and accelerated the pace
of innovation by facilitating the open exchange of information and
created the greatest free library of science and technological
information in the world.
01:21 And because the economy grows and society flourishes when innovation
is encouraged, society was transformed in the 19th and 20th centuries,
as demonstrated by the scientific and technological revolutions that
define our modern society, and by virtue created the greatest hockey
stick graph in history. But somewhere along the way, we lost sight of
this. Patents became a victim of their own success, their impact on
society, the economy and innovation became both ubiquitous and too
often unseen at the same time.
01:51 To help in doing our part in starting to undo this collective societal
amnesia about the significance of patents, we're going to zoom way
out, turn the dial back just a bit, and focus on why patents exist in
the first place and why they still matter now more than ever. We start
this episode by looking at the evolution of the idea with a brief
history of patents, from their conceptual origins in ancient Greece,
all the way up through the prerevolutionary English system and the
origin of the word patent itself. We then heavily focus on the history
of the US.
02:21 Patent system, its democratization of invention, and its significant
break from its predecessors, championed and breathed into existence by
the collective wisdom of the likes of George Washington, James
Madison, and Thomas Jefferson. We examine the prominent role patents
played in the Federalist Papers, the Constitution, the first ever
State of the Union address, and as the third ever act of the first
Congress, and how loudly this signals the undeniably inextricable link
between the Founders notions of the core principles of democracy and
the societal good that comes from innovation and intellectual property
protection. We look at how these differences played out
internationally across the industrial, chemical, pharma, biotech,
computer, and mobile revolutions, and we do so through the lens of the
most controversial and fundamental question in the patent debate,
which is whether patents promote innovation or hold it back.
03:11 We bring it all to the present by discussing how the fundamental
virtues that made the US. System unique and proved successful over its
history have now tragically become the primary attack vectors used by
its opponents. We're still very fortunate to be doing so with the help
of Adam Mossov.
03:26 You might remember Adam from his involvement and exceptional insights
shared in our Patent Wars episode earlier this season, as we'll get
into much more shortly. If you cared all about patents early US
history with the impact that private property rights have had on
innovation and economic prosperity, then you're in for a treat. We
couldn't ask for a better historical tour guide or contemporary
ambassador for this very important topic.
03:48 Adam is a wellspring of knowledge in this domain and makes the history
come to life and connects it with modern times in ways I could only
wish all of my history professors had. This is someone who absolutely
lives and breathes the past, present, and future of patent law. For
those less familiar, Adam is a professor of law at Antonin Scalia Law
School at George Mason, where he teaches a wide range of courses,
including property patent law, trade secrets, trademark law, remedies,
and Internet law.
04:14 Adam is an expert on patent law and innovation policy. He's been
invited five times to testify before Congress on legislation
addressing patent law and innovation policy, and his research has been
relied upon by the Supreme Court, the Court of Appeals for the Federal
Circuit, and by federal agencies. His writings on IP law have also
appeared in the Wall Street Journal, Forbes and the New York Times.
04:36 You can follow Adam on Twitter at adam Mossoff, where he posts
regularly on patent and innovation policy, including his always
informative on this Date in Innovation History tweets. If you can't
tell, we're big fans of Adam's and think this episode makes for a
great time. To share that, we're introducing a new regular podcast
segment to help keep you informed on the significant events in the
patent world.
04:56 Particularly those events that pertain to the battle that rages on
between the ragtag group of rebels fighting to restore our patent
system to its former gold standard against the all too powerful forces
spending billions to destroy the ladder they once climbed up. On this
segment that we're calling the Moss Off Minute will build on our
Patent Wars episode and features short conversations with Adam,
providing updates and quick takes on movements in patent reform,
significant court rulings, innovation policy happenings, and
occasional Star Wars references. For our first installment, Adam
briefly reacts to both the recent Amgen decision as well as the EU's
proposed regulatory regime for standard essential patent licensing.
05:33 Here's Adam now with the first ever Mossov minute. The big news in the
biopharmaceutical space and patent law was the Supreme Court's
decision in Amgen v. Sanofi this past spring.
05:46 There was a real concern, a legitimate concern, that the Supreme Court
was going to throw out a long standing practice of innovators to use a
type of claim in their patents to claim their invention that is
referred to as a genus claim. It's a very broad claim. It's a type of
claim that has always existed.
06:10 Samuel Morse's patent, even the parts of it that were upheld by the
Supreme Court were genus claims. So the Wright brothers was a genus
claim. This is a key part of a patent document to drive innovation.
06:22 It's been a key part of the way in which the United States has been a
leader, an innovator itself in patent law, in providing inventors and
innovators the ability to receive secure and reliable protection for
their property rights and their new inventions. And the Court was
essentially being asked to overthrow these claims, to throw them out
of pat law. In fact, the attorney for Sanofi explicitly said that
during oral argument that genus claims should be thrown out.
06:56 Thankfully, and luckily, the Supreme Court did not do that. It did not
say that genus claims are inherently invalid or suspect or anything of
that sort. Unfortunately, it did side with Sanofi in this case in
limiting and restricting Amgen's patent.
07:17 In this case, on it, it's the biotech patent. But thankfully, it
essentially reiterated, I think, what was long standing law. It talked
about the Morris case and Alexander Graham Bell's invention and the
case that arose out of that.
07:35 And I think it essentially reiterated that the Court should continue
to follow existing practice when it comes to both claiming and with
respect to enablement and written description requirements, which was
specifically what the case was about. But at the end of the day, it
really addressed the way in which innovators could obtain full
protection for their inventions. It would have been helpful if they
had sided with Amgen.
07:58 It would have been a much clearer signal to innovators. But given that
they were being asked to throw out genus claims, and given the tenor
of the US. Supreme Court's patent law decisions over the past ten or
15 years in which they have been rolling back patent rights,
eliminating and narrowing the scope of patent protections provided to
innovators in the United States.
08:22 The decision actually was somewhat of a welcome relief of at least the
Court stepping back from that precipice that it usually is more than
willing to jump off of in past decisions. The other big news in the
global innovation economy was the surprise leak of a proposed draft
regulation that the European Commission in the European Union, the EU
is considering, in which it would impose, will create, and then
impose. This massive regulatory regime to be imposed upon the
licensing and litigation of patents that cover standardized
technologies like WiFi and things of this sort.
09:13 The concern about this regulatory regime is that it would impose
essentially price caps on licensing activities. It would use patent
counting for essentially determining what should be your licensing
royalties and impose many other costs and hurdles on innovators to
both license and ultimately necessarily litigate against infringers
their patents that cover standardized technologies. These are called
standard essential patents in patent law wonkish terminology.
09:49 And this is a real concern because the issues have been litigated in
courts and the courts have been developing in Europe and elsewhere a
fairly robust set of laws and have been developing the evidentiary
rules for what counts as legitimate licensing. This is exactly what
you would expect in evidence based policy making. It's ground up it's
courts receiving evidence, hearing arguments and then ruling on the
basis of the law.
10:20 Given the evidence presented in this instance, then the implementers
of these technologies who were heaven unhappy with the court rulings,
decided to go to the regulators and legislators in the EU to make
arguments that are largely rhetoric based about so called patent hold
up and ambush and monopoly pricing by patent owners. And while the
policymakers and legislators may not have any ill will or bad intent,
they're not constrained by rules of evidence and due process the way
courts are. And there so they're more susceptible to being
unfortunately misled by that type of rhetoric.
11:04 And this is what has happened in this case. It's very significant. It
could potentially impact the very foundations of our kind of modern
high tech global innovation economy, especially the mobile revolution,
because these are patents that cover five G and things of that sort.
11:20 And moreover, it's going to be abused and exploited by China. China
will then point to this and say see you're doing this and we can do
this too. They have been abusing their patent system and their
antitrust laws to benefit their own domestic companies like Huawei and
HTC.
11:37 And they will exploit these types of developments in Europe and if it
occurs in the United States as well, to their own advantage,
continuing their own abuse of their laws for their own domestic
industrial policy purposes, on top of the continuing theft of
innovation from the west as well. We'll be including the audio from
these updates in each monthly episode. But in an effort to reach an
even wider audience, we're also going to be trying our hand at
publishing these and other great interviews and explainers as short
form videos on Instagram reels, YouTube shorts and even TikTok.
12:12 Well, at least that is until the Chinese government bans us for
speaking openly about IP theft and the fate of a technological future
defined by an authoritarian regime actively engaged in human rights
violations. But I digress. You can check out these shorts and follow
us at aurora patents on all three platforms and be on the lookout next
month for some great analysis on the recently reintroduced Patent
Eligibility Restoration Act and the newly introduced Prevail Act.
12:35 Now, without further ado, here's our conversation on why patents exist
with Adam Mossoff. All right, well, thanks for joining us today, Adam.
It's good to be here.
12:45 Josh, in one of the interviews that we did with you for the patent
reform episode, you also said something then that made me realize that
you're a pretty good person to talk to about all of this. Beyond the
extensive work that you do currently in modern patent law and
innovation policy, you got started in this world with a really massive
deep dive around its history. Could you tell us about your academic
research into the primary source materials and what your motivation
launching for doing that was, yes, I've always loved history.
13:24 And in fact, I was doing a lot of study of a very specific, actually,
area of history even before I went to law school called intellectual
history. And in my formal studies in philosophy I was actually doing a
lot of research and kind of historical development and evolution of
natural law philosophy starting with the presocratics in ancient
Greece thousands of years ago kind of tracing its evolution and
development up to the Romans and Cicero and up through, then Quinas
and the high Middle Ages and the Renaissance and then its evolution
into natural rights theory in the 17th and 18th centuries. And so it
always been very interested in history and delving into kind of
primary historical documents and records to trace intellectual
development and the evolution of ideas.
14:22 And so when I became interested in the history of patents, it was just
very natural for me to kind of take that skill set that I'd already
developed in graduate school and transfer it over to my study of
patents. I was actually kind of prompted, really to start the study of
history in patent law largely, I think, as a result of two things. One
is, broadly speaking, our common law system, we rely very much on
history as just a matter of legal argumentation.
14:58 Appealing to historical sources is the default rule, so to speak, for
what lawyers do. In Anglo American legal practice, it's the only time
where it's entirely acceptable to say, well, they were doing it
before, so it's okay to keep doing it now. The very thing that we tell
our kids they're not allowed to say is a totally acceptable argument
to a judge and then closely related to that first point.
15:33 The second point is then is that when I first started doing my work as
a legal academic, I was starting from the perspective that patents are
property rights. And I was receiving a lot of pushback, especially
from legal academics. So this was back in the late 1990s and early
aughts, and they were telling me, oh, this whole idea of intellectual
property as property is a modern idea.
16:01 This is new. So you're the radical item. You have to justify why
treating intellectual property as property needs to be done.
16:09 And I would always say to them, Why is it new? And they kept saying,
well, because Thomas Jefferson said that patents are on property. I
became really interested in the history through those exchanges
because I noticed that people like Mark Lemley and Larry Lessig and
many other prominent professors were kept referencing the same one or
two sources, the most prominent one being Thomas Jefferson. This
letter he wrote in 1811 to an inventor.
16:42 And so I said, well, this is all really interesting. Let me look at
the historical record. And given my background and my training, I
said, I'm going to go look at the original historical sources.
16:54 So I'm going to go read all the patent decisions in the 19th century,
and I'm going to read all the original treatises, and I'm going to
read the articles in court opinions, even from the 18th century
earlier. And what I found through doing this historical research and
kind of tracing the evolution of the development of the way people
have been thinking about patents is that actually these claims that
patents were originally viewed as monopolies, at least in the American
context, were not correct. And this, of course, leads to one of my
more famous articles, which is actually titled, who Cares What Thomas
Jefferson Thought About Patents? Covering the patent privilege in
historical context.
17:35 So it's kind of those two factors, the general reliance on history,
which explains why the intellectual property professors were citing to
Thomas Jefferson and others, because they were just following this
kind of classic norm of citing to historical sources. Of course,
they're engaging in what legal historians refer to as law office
history, which is not the true use of history, but the lawyer's use of
history, where you selectively find any particular historical source
or case that happens to support a preconceived policy position you
have. In this instance, they thought patents were monopolies, and so
they were just looking for sources to support them in historical
record, where I actually was like, I don't know what I'm going to
find.
18:18 When I started my historical research, I thought maybe Thomas
Jefferson was his views did reflect the dominant view at the time.
That's one of the really fun, cool things about doing historical
research. It's a bit like mining.
18:32 I sometimes refer to being in the law mines. You never know what
you're going to find when you start digging and reading the original
sources. You have to keep an open mind about it.
18:40 You have kind of a supposition or a theory that tells you what you
think you might find, but you have to be really be honest and remain
committed to what the actual factual sources are actually telling you
as you're reading them. It's a lot of fun. There's another whole new
layer to it, too, which is the intellectual context of the earlier
period is often very different from what we're reading.
19:02 What you know now, one historian referred to doing historical research
as a bit like visiting a foreign country, which makes it very
dangerous, especially because you're reading text in English, but
words don't even necessarily have the same meaning. In fact, that was
my article. Who cares what Thomas Jefferson thought about Patents? The
subtitle is rediscovering the patent privilege in historical context.
19:27 Because what I found was that people were finding the word privilege
in the historical record and were reading it out of context, imposing
kind of a modern interpretation or sense on that term as opposed to
the actual meaning of that as a legal term of art within this kind of
broader kind of natural rights defined theory of civil rights and
natural rights in the 18th century and 19th centuries as defined in
our Constitution. As represented in our constitution, in the
privileges or immediates clause in article four, and in privileges and
immediate clause in the 14th amendment. So this next question, I kind
of want to tarantino this a bit and kind of work back from the ending.
20:10 You mentioned private property rights. And we're going to come back to
that for sure because I don't think it could be any more important to
this conversation. But I do want to go back in time first for some
context and hopefully give listeners kind of a Cliff Notes like origin
story on the history of patents.
20:29 And while I do know that this sounds like the sort of question that
could be a remedy for people with insomnia, I do think it's a really
important concept, because the concept of a patent hasn't always meant
the same thing, it hasn't always had the same motivations, and it
certainly hasn't always had the same the same outcomes. Right. Patents
didn't start in the US.
20:52 Or even in England, did they? Right. Well, I mean, the term patent
even comes from England's letters patent open. This legal device that
is used was by the Crown and which actually the United States still
has as the way to start property rights.
21:12 All even property rights and land start with an originally a patent
grant from the government, because it's the way you kind of start the
legal protection of something. If you step back even more from the
framing of patents, the recognition that you can incentivize people
with an exclusive grant. You know, regionally, a monopoly type
protection goes all the way back to ancient Greece, where individuals
would petition the various city state governments for various monopoly
protections as a way to incentivize and or justify I spent all this
time creating this, please give me protection in it.
22:05 And that will ensure I have a reward for the benefit that I'll give to
everyone as a result of having created it. And so that's what you had
in ancient Greece and then Venice is the first country or country,
city, state, that in the Middle Ages, the high Middle Ages at the
right of turn of the Renaissance that really kind of institutionalizes
this practice. So it's no longer like a one off petition by a
particular individual.
22:37 They actually enact a statute that provides for various exclusive
rights to people who kind of create new novel technologies. For those
who know about the Renaissance a little bit, you'll know that a lot of
our early technologies were coming out of Italy. Italy was kind of the
fountain head of the Renaissance in art and machinery, leonard DA
Vinci, our Renaissance man, still to this very day.
23:06 He did everything painting machine, concepts of modern tanks and
helicopters and everything. Early Silicon Valley? Yes. Or early US.
23:22 Massachusetts. Boston was the first. Really? Silicon Valley.
23:27 United States was the Massachusetts Boston area. So they create a
statute where they set forth various statutory conditions, or if you
really have created something new and you get a set period of time if
you meet these requirements. Those are very often identified as the
first patents because they kind of reflect various features that we do
now have, although they were still very different from what we have
now.
23:53 But they reflect various key features, one of them being that they
were institutionalized, meaning they were set forth in a law, that the
law set forth various requirements to apply to inventors. It provided
for an exclusive term, and it had to be something that was new. That
is often identified as pretty much the very first patent system that
you might be able to identify as a patent system, although that's
speaking still a patents in a very generalized, abstract sense,
because what the United States eventually has as patents is still
vastly different from what you even had in Venice or even in England
after that.
24:43 And then I guess the next big step, since this is just supposed to be
the Cliff Notes version, of course, is then the development in
England, where the English crown was very interested, as it just does
a matter of economic policy, of kind of promoting the economic
development of the realm at that time. England was more of a backwater
type country than the rest of the continent in the 15th and 16th
centuries. And so the crown uses its royal prerogative to issue
letters, patent open letters.
25:20 This is law French. So just patent means open. And following French,
they put the adjective after the noun.
25:27 So it's really an open letter in standard English and to entice people
from the continent to comments, start practicing new manufacturers and
other technological skills in the realm. And so the English crown says
if you come to England and start in England, a new practice. And
they're referred to as inventors at that time because an inventor just
meant new to the realm in English at that time, didn't mean new to the
world, just meant new to the realm.
26:03 So it could be something that you've been well known and already being
practiced in Europe, meaning the continent. But just as long as you
come to England, we'll give you a 14 year period of monopoly where you
have this protection from the Crown, where if anyone starts to compete
with you, you can actually go to the Privy Council, which is the
Crown's Court, and have it get an order for them to stop. And of
course, an order from the Crown is a pretty serious deal.
26:35 Right. So if you violate that, you get thrown in the Tower of London
and worse things happen to you after that, potentially. So this
carried a lot of force.
26:46 And of course, letters Payton were used not just for enticing
manufacturers. I mean, as I said, this was kind of the standardized
legal mechanism by which the Crown exercises prerogative. So this was
how the Crown also granted franchise grants to create markets, local
markets, which had to have the authority of the Crown to exist.
27:05 And then they were monopolies. So when Crown created a market, you
couldn't create a competing market. They can use this to create
bridges, to incentivize people to create bridges, and also inns and
highways and all sorts of other things that kind of affected the
economic development of the realm at large.
27:25 And of course, the Crown, this being an exercise of the prerogative as
kings and queens are won't to do, at least in old of yesteryear, they
tend to use unrestricted, unrestrained powers. I know we're all
shocked to hear that. That's the breaking news to come out of this
one.
27:46 Yes, exactly. I'm like, oh my God. Instead of granting these grants to
people who were bringing new manufacturers over to England, queen
Elizabeth starts to give them to court favorites.
28:08 And some of the more kind of infamous ones were playing card
monopolies, where they've been playing cards for a very long time. And
she grants one to a man called Darcy, who is just a court favorite.
And of course, he then starts to shut down other people making playing
cards.
28:27 This leads to and becomes part and parcel of the constitutional
conflicts, actually. So patents played a very key part of what were
wide ranging constitutional conflicts in the 17th century. England in
the 17th century is a period rife with conflict, where they are
defining and slowly imposing limits on the Crown.
28:49 And this is kind of pre natural rights revolution. So they're largely
fighting over what was then defined as the traditional rights of
Englishmen. And at that time, the traditional rights of Englishmen
were defined.
29:00 You could practice your trade, you had a traditional right of it being
Englishman, you could practice your trade. And so if the Crown gave a
monopoly that shut down your trade, the Crown was claiming a
prerogative to do something that violated your traditional rights of
being an Englishman. It's kind of cool that patents were kind of
caught up in these broader constitutional debates in England about
what's the scope of government power and what are the limitations on
the government, and what defines legitimate authorized government
action.
29:32 And through a few early court cases in the early 17th century, they
try to impose some limits on the Crown. King James, who follows Queen
Elizabeth, continues to abuse letters patent. So eventually Parliament
steps in and passes what's called the statute of monopolies, 1623,
which is a statute that limits the Crown's ability to grant letters
patent and limits them to the first and true inventor for only 14
years.
30:03 That's pretty much all that it sets forth has a few other things. If
you wonder why we have trouble damages for willful infringement,
that's because in statue monopolies, if you can show that a person was
deliberately infringing your letter patent, you could get trouble
damages again. Because why? Because of history.
30:23 That's what they did in 1623. So we're still doing it to this day.
Now.
30:31 Again, inventor in that term didn't mean inventor the way we mean it
now. It meant just new to the realm. If someone was bringing something
from the continent to England, you could still get a patent under the
statute of monopolies.
30:45 But that still doesn't cure the problems. Patent disputes are still
being viewed through a lens of this is a letter patent, so they're
still being for instance, disputes with them are still being resolved
by the Privy Council, which is the Court of Prerogative of the Crown's
prerogative not through the common law courts, the King's Bench and
the Court of Common Pleas. So this doesn't happen until the 18th
century, where eventually the Preview Council cedes jurisdiction to
the common law courts.
31:17 The common law courts then develop the specification requirement. You
have to describe your invention. This is when you start to have in the
18th century sorry, it's the 18th century, 17 hundreds 18th century.
31:36 And the 18th century is when the common law courts then take over and
they develop through common law adjudication specification
requirements. They develop what we now patent lawyers know as the quid
pro quo, this kind of contract theory, you're receiving a patent in
exchange for disclosure of the invention, teaching the art. But
through this process in England, they're still viewed and viewed as
kind of being these personal monopoly grants, or at least they're no
longer being defined as monopolies per se.
32:04 They're now being recognized as property rights because that was the
domain of the common law courts, but they're still being recognized as
personal property rights. So this is still a grant from the Crown and
it's a personal grant to you. So it wasn't a full property.
32:18 Right. So if the Crown gives you something today, king Charles would
gives you something, it's for you. So if he gives you Josh something,
you can't give it to Ashley, you can't give it to me.
32:31 He gave it to you. And if you try to give it. Away.
32:35 That's not possible, right? In old kind of Seinfeldian terms, there's
no regifting of the patent. If you got the patent, then you had to set
up the manufacturing facility. You had to do all the
commercialization.
32:53 You couldn't license it to other people. You couldn't transfer it. You
couldn't create a market around it.
32:57 You couldn't use it for venture capital financing and things of that
sort, at least in the sense of the modern development of this
commercialization function of patents. This is all kind of what the
United States embraces, because we in the United States say, no
patents. We're going to treat these like property rights, because we
really have rejected this notion of a royal prerogative grant in any
way, shape, or form that's personal to someone.
33:25 This is purely a property right. In fact, early courts recognize this
is why, for instance, the power to authorize the protection of patents
is not placed in the executive. So if they really were following the
English model, the founders would have made it part of article two,
but they put in article one the power of Congress as the
representatives of the people to protect their rights.
33:50 That was a key aspect of that. And part and parcel of that was also
defining in the statutes that these are, in fact, property rights.
They didn't call them property rights, but they said you had the right
to use, make, and dispose of the invention starting in the very early
1790 statute, the very first one that's enacted.
34:09 And those were the key features of what makes something a property
right. And therefore, in many respects, the patent system reflects
what we talked about earlier, the declaration independence, the
recognizing the rights of individuals and true split from England and
kind of embracing kind of the protection of individual rights. In this
instance now, the rights of inventors, we embraced a true invention
standard.
34:35 So still, like in England, even at that time, it didn't have to be new
to the world, just had to be new to England. And we said, no, it has
to be new to the world. You actually have to be the inventor of it.
34:46 You have to be the creator of it. So it becomes very much imbued with
this lockhean notion of you have engaged in productive labor, mental
labor, which is even more your own labor than even your physical labor
is. And that's what creates this entitlement that you have to have a
right protected by the government, and that right is a property right,
and that's key and essential to a free and flourishing society.
35:15 Yeah. Thank you. Sorry.
35:19 You asked a long question. No, that's okay. That's quite all right.
35:25 But that split from England is a really great segue to kind of where
I'd like to go next. So we go from ancient Greece to Venice to
England, and we're kind of up to we got a statue of monopolies, and
we've got to have this seeds of what we recognize as a modern patent
system, but we still have a ways to go. So income, those troublemaking
Americans, right? These early Americans, they're on the heels of
they've just won the Revolutionary War and they're busy forming a new
government.
36:00 And it's pretty cool. They're literally starting from scratch, and
they're getting to work out the here's what I would do if I could
start my own country conversation that many of us would sort of love
to have. But it's not in the hypothetical on Twitter or cocktail party
conversation.
36:18 The stakes could simply not be higher. Right. They had just fought a
bloody revolution, and now they're trying to come up with enduring
political structures and trying to jump start trying to jump start an
economy, right, because they want this thing to last.
36:35 And so there are clearly a lot of really important decisions to be
made. But interestingly, right towards the top of that list for them
is securing intellectual property rights to promote innovation. Could
you talk a little bit about how that played out? Sort of like from the
Federalist Papers on? Yeah.
37:00 So it is kind of pretty cool to realize how innovative the founders
were, not just kind of in their broader embrace of natural rights
philosophy and other theories that had been developing at the time.
Like, they all had read Montesquieu. Montesquieu is the person from
whom they learn about really, truly the separation of powers,
principle and federalism and things of this sort.
37:33 They're true political pioneers, but they were also innovative
pioneers, even in patents, as I kind of mentioned. But they weren't
just deducing from on high like, oh yes, Locke tells us, productive
labor, and this means property. The founders were very practical
people.
37:53 They were practical statesmen. They weren't philosophers. They weren't
writing treatises and philosophy.
37:58 They were writing practical works on how you have a government, how
you get institutions started. And so it's very revealing. And we've
lost the sense of the significance of this that they put into the
Constitution in article one, section Eight, clause Eight, that
Congress is authorized to protect.
38:20 It doesn't even use, by the way, the words patents and copyrights,
just as the exclusive right to our authors and create inventors. And
this is the very first time that the protection of what we now call
intellectual property, that phrase didn't evolve until a few decades
later in the United States is put into a country's founding document
that in and of itself is tremendously significant and hugely
important. It wasn't even debated.
38:58 Madison's notes from the Federal Convention of 1787 at the convention,
you know, in Philadelphia over that summer, where, you know, they
wrote the the Constitution, you know, when the you know, when the
clause was proposed, madison notes that it was adopted without debate.
So there's almost no there's nothing on it from the convention. What
happens otherwise? Well, I mean, they debated a lot of stuff.
39:26 There's notes behind me on my bookshelf. His book. That book is this
big.
39:30 But it was very interesting that this was something they didn't
debate, that a lot of them recognized that this was something that was
important and in part, they recognized was important from their
experiences. So, for instance, George Washington was himself what we
now call an angel investor. So he personally funded inventors to work
on inventions, especially some people working on steamboat
technologies.
40:07 But also what a lot of people don't know is that two very significant
early American innovators and creators actually went to the
Constitutional convention to tell them, we have been unable to get
effective protection of the rights of our creations. So one of them
was Antenna Webster, who had come up with his first American
dictionaries. Why? It's.
40:33 Webster's Dictionary. Very famous. And he had been going around to
various states and registering it for copyright, because a lot of
states had adopted copyright statutes at that time.
40:47 By the way, those copyright statutes were explicitly lock in. They say
in their preambles that the creation of the artist is a product of the
labors of the mind. It is theirs, and they have a right to the fruits
of their mind.
41:04 But he was having to go to each state and get protection directly. And
every state had variations in their copyright statutes. And this was a
dictionary that was being sold throughout all 13 states at that time.
41:22 So it was a national product. And John Fitch, who was one of the early
steamboat inventors, of course, Robert Fulton is the one who we all
recognize as the inventor, the steamboat, because he's really the
inventor of the first practical steamboat. He's the one who figures
out the actual steamboat technology that works.
41:43 Just like Thomas Edison. It was actually not the inventor the of light
bulb. He's an inventor of the first light bulb that actually works.
41:48 There were a lot of light bulbs before him that just didn't work as
well. And Fulton was the same way. Fitch Robert Fitch was john Fitch
was an early steamboat pioneer.
42:02 In fact, he actually demonstrated his steamboat on the Delaware River
to the convention delegates. So they actually took a break from just
debating and writing the Constitution to go down to the Delaware.
Fitch does a demonstration for them of his steamboat.
42:19 But one of his points for his demonstration was, notice my steamboat
goes between two states here, goes between Delaware and Pennsylvania,
right? And both of those states have different laws with respect to
this. And so it was made very clear to the founders very early on that
people like Webster, people like Fitch, were going to be the
fountainhead of the United States. These were the innovators and
creators that were going to create a self sufficient, growing economy,
what we now call our innovation economy.
42:56 And they needed to be protected. And that the types of products and
services that they were going to be inventing were not just products
and services that they invented and therefore they had a right to
them, but they had to be nationally protected because the products and
services were going to be used on a national level. So this wasn't
like a farmer in Virginia who was only selling his corn in Virginia.
43:17 This was someone who was going to be moving a steamboat between
Virginia and Pennsylvania and New York or selling a book, a dictionary
in all the states. And so this had to be a national protection. This
had to be protected at a national level.
43:36 And in fact, this is the last sentence in federalist number 43 where
Madison comments on the patent Copyright clause. In fact, that's the
longest commentary, public commentary we have by a founder, by a
framer, I should say, because Jefferson is not a framer. He was in
France at the time.
43:55 But is the five or six sentences that we have in Federalist Papers
number 43, where Madison says at the very end of it, he says the
states cannot provide effectual protection for inventions and artistic
works, and so it has to be protected at the national level. And this
is after, of course, he gives his fundamental justification, policy
justification, that these are actually fundamental property rights. He
also says that it's basically self evident right, that these things
would, I think, scarcely be questioned because the utility of this.
44:39 So that's his first sentence in federalist number 43, which is about
the powers delegated to Congress more generally in article One,
section Eight. So article One, Section Eight, is the section of the
Constitution where Congress is authorized to all of its powers that it
has has no other powers outside of that section. So that's where
Congress can create an army and a navy, it can create a post office,
it can declare war, it can print money.
45:07 And by the way, this is where patents, copyrights are put right. This
is on par with the creation of an army and a navy to protect our
rights as a country. This is where Congress is given the authority to
borrow money.
45:15 This is where Congress is given the authority to create courts. The
only court that is mandated by the Constitution is the Supreme Court
in the United States. All of the courts are created by statute, by
Congress.
45:33 So they're creating the courts to resolve our disputes. This tells you
how significant patents and copyrights are viewed by the founders.
Federalist 43 is part of a couple of essays where he's just kind of
giving short little summaries and descriptions of these various
powers.
45:55 And one of them is article one, section eight, clause eight which is
the Patent and Copyright Clause or sometimes called the Copyright
Patent and Copyright Clause. And the very first sense of this is the
utility of this power will scarcely be questioned, which shows you
Madison's failure of imagination, but also how deeply baked into them,
that this was self evident and didn't warrant a whole lot of
conversation. Well, there's an ex sentence.
46:24 He says, the right of authors at common law has already been
recognized in England. And by the way, what he means there is that the
copyright is a property, right? And then he says the very next
sentence, he says, the rights of inventors are justified on the same
grounds, even though they were statutory in England, not at common law
and statute of monopolies. And then the very next sentence he says, in
both cases, both cases being pats and copyrights, the claims of the
individual and the public good fully coincide, which is this really
important recognition of the Founders that protection of the core
rights of life, liberty and property is not just in the interests of
the individuals.
47:09 This is the basis of how you have a flourishing society and that they
viewed them as intimately linked and going hand in hand. And this is,
in fact, I think, captured beautifully by the Declaration of Pendants
that Josh referenced earlier, where Jefferson says the right to life,
liberty and the pursuit of happiness. And they really meant that.
47:29 Now, they saw property as necessarily part of that logical
progression. So he was kind of jumping over property not because he
was downplaying it in any sense. He was just getting to the ultimate
goal, because for them, they didn't think of property, individual
rights as being some type of kind of abstract moral duty that had zero
connection to one's life.
47:53 They viewed this as fundamentally part of what it means to not just
live a happy life as an individual, but that all of the happy lives as
individuals add up to a flourishing society that is peaceful and
growing and successful. The proof is in the pudding. This is what, you
know, what we've had.
48:14 And and so this is clearly how they're viewing patents, through this
framework that they viewed all rights, and particularly property
rights through that this was something that was key and necessary,
that the good and the practical go hand in hand. And this is
something, by the way, that is deeply part of Western philosophy,
reaching all the way back to the Greeks, right? So going back to
Aristotle, the whole point of living a good life, the whole point of
virtue, is, in Aristotle's terms, eudaimonia, which used to be
translated as happiness, but that in English doesn't really capture
fully because we think of happiness as more of a feeling and can be
fleeting. So it's now translated more precisely as flourishing, which
captures more broadly that kind of happiness over the long term and
all senses of it, not just physical success, but also kind of
spiritual and emotional achievement.
49:18 And that's what protection of rights leads to and secures for us. And
they clearly viewed patents as part of this, why they put in the
Constitution. They saw this as connecting deeply with the success of
individuals and the success of our country.
49:34 Literally the only place the word right appears in the Constitution.
Yes. Which is significant.
49:41 It's hugely significant. Yeah, it's tremendously significant, right.
Because pre bill of Rights.
49:46 So the Constitution is written in 1787, before the Bill of Rights is
adopted in 1790. It's the only place where the word right is ever
you'll ever find. So flash forward a little bit.
50:02 We've got a Constitution in place. Washington is delivering the first
ever State of the Union. It's a pretty short address, but what's one
of the things he asks Congress to do immediately pass patent copyright
statutes.
50:18 Again, because, like I said, he was an innovator himself. He
understood the importance of innovators as driving of the US. Economy,
of helping make us an economically independent country and ultimately
being a key to our success as a flourishing society.
50:42 And as I said, he understood this through his own kind of investment
activities. Washington wasn't an inventor. Jefferson was an inventor.
50:49 And he understood this as well, which is why he was also put on the
first committee to review patent applications. But Washington also, he
deeply understood the importance of this as well. The first recipient
of multiple patents is a man named Oliver Evans, who received a whole
slew of different patents.
51:12 And he, like, the very first recipient of the very first patent.
Samuel Hopkins licensed his patents, and one of his patents was on a
new process of manufacturing. And Jefferson.
51:27 I'm sorry. Washington has a mill at Mount Vernon. In fact, you can
still visit that mill still there.
51:35 And at the mill, he wanted to use Evans process. He was president at
the time. Now, in England, when the government grants a patent, the
government officials have an automatic it was called at that time, the
Crown's, right? Or the crown's privilege.
51:53 Essentially, what the Crown giveth the ground, can use it and take it
the way. So the idea was, yeah, I've given you this privilege, and
it's my privilege to give, so I get to use it, too. That's part of
what needs to be a privilege.
52:07 Right? It's like, what do we as parents have kids, right? The dad tax,
right? I'm going to take a little bit of your food. We talk about this
often. Yes.
52:11 I'm going to have a little sip of your soda. But the United States
immediately said, no, these are property rights. We have to respect
these.
52:25 And so Washington, as President, enters into a license agreement with
Evans to use his patent in technology in his mill. Like I said, he
could have, as a government, as the President used it and claimed, I'm
the President. I'm using it as president.
52:44 It's helping as president. But even then, he was George Washington.
There were tons of debates, and he was starting to be attacked by some
of the political opponents.
52:54 But he was revered. And if he just took evans pat and started using
it. Evans wasn't going to sue him.
53:00 Right. This is George Washington right. It shows you his commitment to
this, his own personal belief in the importance of what patents
represented.
53:13 That he was willing as an individual to license Evans patent on this
manufacturing process that he then used at his mill while Washington
was president. So our government isn't known to move super quickly.
You could argue that was a design feature of the whole thing.
53:33 Study some of the founders. So Constitution is 1789, ish first, State
of the Union is 1790. How soon do we have a patent statute? So the
very first patent statute is the Patent Statute of 1790, copyright
Statute of 1792, some of the very early, very first legislation.
53:55 So as you said earlier in his first address to Congress, president
Washington said you need to enact patent and copyright legislation. I
always like to tell people congress spent months debating about what
they were going to call President Washington. Did they call him His
Excellency, His Highness, Mr. President, his Honorable President and
they immediately enacted the patent copyright clauses because it was
in the Constitution they're authorized to do it.
54:24 It was recognized as a key and important feature of what they needed
to do in order to get their country going. Even while the founding
generation was starting to split between the Democratic Republicans
and the Federalists, this crossed party lines and they recognized that
this was essential to what it meant to have a successful country.
Truly remarkable, isn't it? We're talking about something that's a
product of the minds that gave birth to the, to the country.
55:03 And you know, it's, it's, it's embedded in the founding documents. It,
it's, it's a focus of the early debates. It's like, it's the concept
of intellectual property protection, even if they wouldn't have called
it that at the time.
55:17 It was so inextricably linked with their concept of democracy and a
pro growth economy that it was there from the beginning. I think
that's hugely profound when we talk about the significance of, of
patents mattering, you know, today that, you know, part, part and
parcel with democracy and with a pro growth strategy. It was right
there.
55:49 And I don't know, I just kind of building on what you said already,
but I think that's huge. Yeah. So historians refer to have a phrase
called American exceptionalism.
56:06 It captures this kind of radical break that the founding era
represents. Even Americans went through a radical transformation in
how they thought of themselves and how they thought of rights and the
nature of government. Tween approximately 1750s and 60s, where they
still thought of themselves as British subjects.
56:37 They thought of themselves as British subjects. We have the rights of
Englishmen. The Crown is our protector of our rights.
56:47 They were imbued with Lockheed philosophy at that time. But Locke was
still being in England especially kind of translated through the prism
of British common law and the unwritten British constitution through
the Magna Carta and the notion that Magna Carta gives us due process
which is somewhat of an historical myth created by this whole
revolution in the 17th and early 18th centuries in England. Because
where they take these ideas from natural rights theory of limited
government due importance and fundamental point of due process and
protection of rights of life, liberty.
57:22 And they say, oh yeah, that's what was always the when we talked about
the traditional rights of Englishmen, that's what we meant. Even
though that's not really what they were talking about if you go back a
couple of hundred years. So Americans in the 1750s and 60s still
thought of themselves as British subjects by 1776.
57:41 They are not British subjects anymore. They are not talking in terms
of the rights of Englishmen, they are talking in terms of natural
rights. The Declaration of Pendants announces that all men are created
equal and have the right to life, liberty and the pursuit of
happiness.
58:01 This kind of radical transformation is exceptional. It becomes
exceptional to the United States and to this very day it still
represents a very different mindset. It's come to dominate the rights
revolution much of how the world thinks.
58:15 But it starts in the United States and what a lot of kind of people
today don't remember because we're so caught up in the various
technical details and specific aspects of the patent system and the
particular details of the patent fights is the patent system was very
much part of American exceptionalism. It was not like this kind of
continuation of oh yeah, we were just taking this from England because
this is what we're doing. One sees this often in a lot of Supreme
Court opinions and professors articles.
58:49 There's always this throwaway line that oh yeah, the US just kind of
picked up the patent system from England. Well yeah, we did in the
same sense we picked up our government from England too. We had sects
of our government from England but we also changed a lot of our
government and we did the same in our patent system and I've mentioned
some of it the shift from a personal privilege grant to a property
right.
59:08 Property right means something is commercializable. But Josh, you
mentioned it too. They viewed the protection of patents as part and
parcel of the broader framework of the protection of the rights of
life, liberty and property through the rule of law and through the
institutions of government that are stable and are accessible to all
individuals and are defined by the rule of law and by due process.
59:38 So they were accessible to all individuals any person could invent.
You didn't have to be an aristocrat, you didn't have to be someone
with history. Any person could invent.
59:48 And so Sandal Hopkins and Oliver Evans, I mean, these were just
general, regular people, but they treated patents like they treated
the function of government to protect property rights and land in the
sense of it was very easy. To go to the county recording office and to
file your claim to claim to create a title V through a patent grant,
through the state government by showing I've been laboring on this
land. I'll file an affidavit this as I've been farming this land and
now it's mine, or through the Homestead Act, which is set up a very
specific process of farming and maintaining land for five years.
60:32 And then you would file an affidavit and things of the sort, and for a
few dollars you would then get the title deed and they replicated that
in the patent system for the exact same reasons. What creates the
right to the patent is the action itself of creating the invention.
And that is simply the job of the government to recognize that right
now the legal right doesn't exist until the government secures it, but
the moral claim exists.
61:03 This is what I found in the older cases. These are things people miss
because we've lost a lot of the framework in terms of art that they
use in the 18th and 19th centuries, early American legal scholars and
judges and Congresspersons thought in this term and distinction
between what they refer to as in Kuwait rights and Kuwait rights. In
Kuwait right were your moral rights, your rights of life, liberty,
property, contract rights that arose as rights.
61:36 And they were in Kuwait insofar as they weren't secured under the law.
And so the job of the law was to perfect your in Kuwait rights by
making them Kuwait, by then securing them under the law and making
them truly protectable to you through the institution whose job is to
protect your rights. And they provide that exact same framework.
61:54 So Chief Justice Marshall and others talk about the act of invention
as creating the incoate right to a patent, to which then the inventor
perfects by securing a patent and therefore making their right coate.
Josh, you're exactly right. This is this view just part and parcel of
having a government that protects all people's rights and protects
them equally and through institutions that are accessible to all
through due process.
62:26 You just hit on this thumb in talking about it not being remembered
how radical of a break the US system was from the English system. I'd
love it if you could elaborate more on the specifics of that
departure. What was unique about the early US system and how did it
solve some of the biggest problems that came with its predecessors we
talked about and particularly the English system.
62:46 Yeah. So I often contrast the US. Against English system and I make
English system look bad.
62:53 But the English system was good too, because you have to see what the
English system, what came before it. So each stage, the next stage is
better than what came before it. So the English were innovative and
very farsighted for their contacts, right? So in recognizing that we
have to take patents out of this kind of domain of pure,
unadulterated, willy nilly, arbitrary prerogative of the crown, put it
in a statute, define it, get it into the common law courts, and start
protecting it in some aspects, like a property right, making an
exclusive right that is, protectable to the person.
63:39 But like I said, it still had vestiges of this kind of royal
prerogative that it arose out of, by the way. But this is why, in very
many respects, why the Industrial Revolution starts in England, and
historians and scholars have recognized this. The evolution of steam
engine technology and many other technologies were protected by
patents.
64:04 These were significant advances over the types of personal privilege
grants or no protections whatsoever, or the kind of the guild system
protections that had existed through the Middle Ages and up through
some aspects of that time period before the English system wasn't
advanced, but it had limitations. And as I said, these vestiges of a
personal grant from the Crown. And so this meant, for instance, it
wasn't a full property, right, in the sense that you could
commercialize it.
64:38 And that's our kind of term. We taken commercial and turned it into a
verb. So what we mean by that means that you can use it as collateral
for a loan, right? So if you default on a loan, it gets transferred to
someone else, right? So if something's personal to you can't transfer
it to someone else.
64:53 So you can't offer it up as collateral for a loan if you default on a
loan. So it's not the basis for investments in what we now call
venture capital and things of this sort. You can't license it to other
people.
65:03 You can't transfer it to other people to say, okay, you manufacture it
and you sell it, and you do this. I'll just be the inventors. You
can't embrace the division of labor, which Adam Smith in The Wealth of
nations gloriously published in 1776, the same year as the Declaration
Independence.
65:20 I mean, talk about in this historical happenstance that just perfect,
right? Who recognizes in The Wealth of nations, right, that it's the
division of labor specialization which is the key to the vast value
creation, wealth creation you have in a society where people can
specialize and focus on particular trades and then trade with other
people and then therefore create massive amounts of wealth through
much more cheaper goods. The example he uses is a Pin, and he kind of
walks through, like how digging the ore out of the ground and carrying
that ore to a factory and having that ore worked and manufactured and
put into a pin. And then the pin taken to a wholesaler, and the
wholesaler distributed a realtor.
66:06 And through all of this, he says if you look at each of these steps,
if one person had to do it, the pin would cost. Hundreds and hundreds
of British pounds. He says it costs mere pence.
66:16 Right. And the reason why is because each of these people are
specializing in trading their labor and pan owners couldn't embrace
that. So, like James Watt, who eventually is recognized as the
inventor of the steam engine, even though he didn't invent the steam
engine, he invents the mechanisms that make fully practical and usable
the steam engine.
66:39 So he invents the condenser and the regulator. So the two shelled
condenser for condensing the steam back into liquid so that it can
then be transferred to be heated and steamed again. So there was
massive amounts of heat through the condensing process before, so it's
very inefficient and you're losing a lot of energy and making the
energy.
67:06 So if you got more energy going in than you got coming out, you don't
have an efficient process. But he also invents the regulator, which is
even more important, right, which is the automatic device that
prevents the steam engine blowing up from the pressure building up.
James Watt, he was like the equivalent of an academic researcher.
67:26 He wasn't a business person, he wasn't, you know, but so but he got
the patent, but the patent was for him. James Watt, so he had to team
up with Bolton, who was the businessman. He couldn't just transfer his
patent to Bolton because that's not what wasn't allowed in the 18th
century in England, because, yes, it's a legal property, right.
67:46 But it's a property, right, that comes from the Crown, so it's still a
personal privilege property type property. Right. That's why all the
lawsuits are Bolton and what for all the patent infringement lawsuits,
because the two of them were the kind of the co owners of this process
of ultimately putting this into practice.
68:08 It still had all of these vestiges. It also still had the vestiges of
this kind of prerogative process. So, as I mentioned earlier,
originally, disputes over patents were decided by the Privy Council,
which was the Special Kings Court, and patents themselves were issued
by the King's Chancellors.
68:31 So these things weren't written down, they weren't governed by
statutes, because this was still something that the Crown basically
decided, how I'm going to do this? And it was extremely expensive. And
basically, if you think of it, who had the access to the King's Court
and the massive amounts of money to pay for getting the Chancellor to
review your patent application and things of the sort. So this was
largely limited to the Aristocrats, or at least the nouveau rish.
68:58 And so your average British subject, your peasant and things of the
sort, they didn't really have access to the system in any meaningful
way. Yeah. Really a system for the wealthy in the elite.
69:12 Right. The established one of the things I think is super, because
that's the system it came out of because it came out of Queen
Elizabeth looking around her, saying, yeah, you Darcy, I like you,
you've been kissing my ass really nicely, so I'm going to give you a
patent grant. Yeah, exactly.
69:36 I think it's pretty cool because they went a step further though,
right? Beyond making it affordable for anybody. The language actually
said that patents could be granted to he, she, or they. So beyond not
just being opening it up, beyond the wealthy, this was a time when
women, people of color, couldn't own property or vote.
70:02 And we've opened up the patent system. Yeah, exactly right. So all of
this was building up to getting more into the nitty gritty details of
how significant of a break the US.
70:17 Patent system was from England and why it's part and parcel of
American exceptionalism. Because they really did shed all of these
leftover vestiges of the royal prerogative. As I said, they put the
authority to secure patents in Congress, not the Executive.
70:38 They would have put in the Executive if they wanted to continue to
follow these practices. Congress, as the People's Representative,
enacted a statute that applies to every individual. As you said, it
says he, she and they recognizing multiple inventors and women they
made, and as I said, they created processes.
71:03 So even when they created, even under the initial three person
commission that they created to review patent applications, it wasn't
this expensive process. And Jefferson and the other individuals who
were on the committee were setting out various procedures and
requirements for what people had to do to submit to them. And these
procedures were being written down and were being eventually and some
of them were eventually codified in the 1793 Patent Act.
71:31 And in fact, the Patent Office is the very first regulatory agency
that's created by the federal government. Because eventually they
said, look, the Secretary of State and the Secretary, this is too
much. We had too many other job responsibilities.
71:48 We can't be reviewing patent applications. So we need to put this in a
separate office that's run by an individual who's designated job to do
this, the Commissioner of Patents. But they created this office
through the prisma.
72:04 It has to be governed by the rule of law. So immediately the office
created regulations for how they're going to function and operate.
They set fee rates at very low levels.
72:15 They allowed anyone to apply. And historians have found patents that
have been were filed by slaves because they were an individual who
invented something and they filed for the patent, their name had to be
on the patent grant. There were some other cases of slave owners, like
lying and claiming to have invented something their slaves invented,
but they were lying.
72:43 And if they had been found out that those patents would have been
invalidated. It's only after the fact that we now know this. They
created the true invention standard like this really is.
72:54 It has to be novel to you. You actually have to be the inventor of
this. So if we find what we now call prior art.
73:01 This wasn't a term that really had that yet. But if you find prior art
in some obscure corner of the world, that counts. And there's a story
that Isaac Singer, when he was in his patent battles with Elias Howe
over and started the sewing machine war in the 1850s, that he
allegedly went so far as trying to find prior art in China to try to
invalidate house.
73:26 So they took it really seriously, and the courts recognize this. So
England continuing to also to follow the idea that this is not fully,
at the end of the day, rooted in kind of a lock in theory that you
produced to this. You're the inventor of it.
73:40 England followed a first to file system. You didn't have to be the
real inventor of it. You just had to be the first person to file for
the patent.
73:52 And Charles Goodyear, who's the person who invents the process for
making stable rubber as we now know it, he calls it vulcanized rubber.
Vulcanization meaning heating. It was a heating process with balding
chemicals.
74:10 He actually lost his patent in England because he made the mistake of
sending a chunk of his rubber to an English scientist at that time who
was also researching the project. His scientist reverse engineered his
process and beat him to the British patent office and filed for
patent. And when Goodyear filed for his patent in England and then
sued, saying, I get the right to the patent, the English courts were
like, you Americans.
74:35 You think you get the patent. You don't. This guy beat you.
74:38 You were first to file. And this was like written up in newspapers at
the time, and people really were angry about it. This is one of the
reasons why we break from England, because here we protect the real
rights of real inventors.
74:49 By the way, Charles Goodyear is your good example. He was just this
crazy guy. He wasn't rich.
74:54 He was actually very poor. He invented the process of vulcanizing
rubber in the kitchen. The story is he ruined his wife's pots and pans
because he was using his stove.
75:06 He was a destitute little person in this little town in Connecticut
coming out of nowhere. And he comes up, he finds the solution to
actually what was a vast technological and economic problem at the
time. In fact, the equivalent of hundreds of millions of dollars had
already been lost in people investing in other people's claims to have
solved the problem of creating this kind of stable product of rubber
that doesn't become brittle when it becomes cold and melt when it
becomes hot.
75:41 And he kind of came out of nowhere. In fact, when he first came out of
nowhere with his patent, people didn't believe it because there was in
the early 1830s, there was kind of this their own version of what we
know, our.com bubble. At the early at the turn of the 21st century
where people had invested in all these people who claimed to have
solved the problem and people had lost a lot of money.
76:02 And so when he kind of came out of nowhere with his solution, people
are like, I don't believe and published patent actually helped him
because he was able to say, look at my patent, you can read my patent,
you can make the invention. And he was willing to license other people
to make it and they were willing to take the risk and invest in it.
And the rest is history in terms of driving the industrial revolution.
76:24 So all of these features, as you said, the accessibility, allowing all
individuals to get it, the due process and the rule of law, all of
this was essential. In fact, a very prominent economic historian,
Zerina Khan, has come up with this beautiful phrase for the US. Patent
system.
76:43 She's referred to as the democratization of invention. And that just
kind of captures perfectly all of what I've been describing as typical
academic and lots of words and lots of details. And she has kind of
captured it perfectly with this phrase, the democratization invention,
which is the title of a book she published in 2005 in which she
describes some of these details.
77:05 Could you similarly talk about the elimination of the working
requirement? Because I think that's another huge piece to the
democratization. No spoilers, but just if you could talk about the
elimination of the working requirement. Yeah, so the working
requirement arose out of the original function of letters patent.
77:23 So this tool of the crown to promote the economic development of the
realm and the only way the economic development of realm is going to
get promoted is people actually come to the realm and start working
their trades, right? And so the idea of a letter patent originally
was, okay, I've granted you a monopoly. The condition of the monopoly
is you start working it because it wasn't that it was new, it was new
to the realm. So it could have been in books and used widely in
continental Europe.
77:52 But the point is we need to get the economy of England going and the
only way that's going to happen is if you work it. So this is my
enticement to you and my gift to you as the king or queen is to give
you a monopoly so that you have some time period to set up your trade
and profit from it. In the English realm, in the Commonwealth, for a
very long time in England, up through the 18th century, you had the
working what was called the working requirement.
78:24 If you didn't work your invention, you lost her letter paid. And this
starts to be displaced in the 18th century in England through the
recognition of the quid pro quo, the bargain theory that you are fully
describing your invention. And it's a new invention, so that anyone
who reads it can make and use it.
78:51 Then you don't have to work it because anyone who's making use it can
read it and figure out how to make it from there. This is what the US
picks up and says yes. So the patent is like a title deed and it fully
describes and defines the scope of your what is the asset to which you
have your property? Right in and insofar as you properly describe it.
79:19 And in modern terms enable someone how to make and use it, then you
have fulfilled the requirement of showing that you actually have come
up with this invention and you have made it available to people. This
is again part and parcel. You can also see why also this privilege
grant that had to be worked by, for instance, James Watt personally,
right? Why he had to work it personally is because it was all
connected to the working requirement.
79:48 Because again, this was the part and parcel of it being a personal
privilege grant where the US says, no, this is a property right, the
value of it is the new invention. And like any property right, then
the value of it is you go out into the marketplace with it and like
Charles Goodyear, who never manufactured rubber, he tried for a little
bit and gave up because he just was very bad at it. And so he
recognized actually I should just let other people do it and fund my
research efforts.
80:13 And he was crazy about rubber and that's all he really wanted to do
anyway. The patent becomes the basis for licensing activities where
then anyone can read the patent and say, okay, I know what your
property right is, I know what your invention is. And this is
essential to my understanding of then that this is something new and
valuable and I'm willing to enter into a commercial agreement with you
to manufacture it and to sell it.
80:30 And this is eventually what we start to call it the bargain theory.
You disclose your invention. This is really, then, the ultimate
culmination of the slow process over several hundred years that starts
in England where we move away from trade secrecy and a guild system
and monopoly grants directly from the government as the basis for
protection of new inventions and new technologies, where people then
have the ability to secure full legal property.
81:12 Right. Protection in new inventions and through that property right,
protection like any other property right, where you can go to a county
recording office and read anyone's title deed to know exactly what the
needs and bounds are of their property and where their property is
located. You can go to the patent office and read the patent and fully
know what that property interest is.
81:37 And that then is the value of the patent because then the person who
reads it can invent off of it. I can enter into a license agreement
with you because I know what you're trying to sell me. You're not just
trying to sell me the Brooklyn Bridge.
81:52 You're actually trying to sell me something that you actually have a
property right in. And this becomes part and parcel of actually how we
promote the progress of useful arts, because a lot of people think in
terms of, oh, the point is that we're just dangling this little carrot
of a monopoly or to inventors to get them to invent. They disclose it,
and then we all are just waiting for it to fall off the patent term
for it to fall into the public domain.
82:17 And that's actually not what is really the core function of the patent
system. It's that disclosure function from the get go and the
licensing and property rights that follow from that during the patent
term. That's what facilitates the fast distribution of new innovations
through society, growing our innovation economy, helping create a
flourishing society as historically has happened.
82:39 And so patents really are not a blockade. They're a facilitator of
access. They're a promoter of access to technologies.
82:46 And also because the person who invents something, then the next
person says, I have a new way of doing that. And if insofar as it's
new, they can get a patent on it. And then what they do is they turn
around and they get a license from the original patent owner because
the patent owner wants to make money, even more money off of that.
83:02 And this is why, to this very day, billions of dollars daily are
traded over intellectual property assets. To be frank, the founders
weren't thinking in these terms. They had bigger problems to deal with
in terms of getting our government going.
83:25 But this shows you, again, how incredibly intricate and integrated it
all is. You create a system where you say, these are property rights.
This is what it means to have property rights.
83:35 You protect them within a system, the rule of law with stable and
political, legal and political institutions that anyone has access to
as a citizen. And it creates all of these what economists call dynamic
efficiencies, all of these unintended benefits, all of these
unintended additional values, creation that just make individuals
better off and society better off. And anyone who knows the history of
invention, innovation, also knows that's just the story of history of
invention, right? Most inventors don't even know the real value of
their inventions.
84:16 Dr. Irwin Jacobs the inventor of what is CDMA technology, and people
may not know that, but that's two G, three G, four G, five G. The G is
just the generation, right? So that is the digital transmission
technology that is the foundation of the entire mobile revolution.
Vince that 1988.
84:36 And he has said many times, he's like, we were just thinking in terms
of trying to make video conferencing easier for, you know, easier for,
you know, for businesses. We had no idea, like, that, you know, we
were going to be creating these devices that, you know, you could
check your email and watch movies and share videos of cats riding
roombas and all sorts of stuff or stories. I always like to tell is
Alexander Graham Bell thought one of the really cool and important
uses of his telephone service would be for people to listen to
concerts so that you could run wires from concert halls.
85:14 So people didn't all have to go to concert halls because they're only
so big anyway. So people could run wires from concert halls and people
could listen to music in their homes through this telephonic device.
And Thomas Edison thought that one of the primary functions of the
phonograph would be for people to record messages.
85:38 So instead of writing long letters, you would use the phonograph
record essentially a version of a recording voicemail message for
someone and give the phonograph to someone and they would take it to
the other person and they would play it back and listen to it, right?
So he thought of as a way that people would transmit information,
business persons would more easily and efficiently communicate with
each other. What actually happens? Actually, the telephone becomes the
device by which business people actually more efficiently and easily
communicate information to each other. And what does the phonograph
become? The phonograph becomes the record player becomes the device by
which people listen to music in their homes.
86:17 So even the inventors don't even realize where their technologies are
going to and how it's deployed in the marketplace? No. It's amazing,
isn't it? And that's what I really love, that phrase, democratization
of invention and consequently innovation. Because if you're trying to
build a giant's shoulders to stand on, the best way to do that is to
open up that process to the masses and get the biggest volume of
disclosure and iteration amongst the largest group of people, right?
And so when you look at these things in totality, when you create a
system that's accessible to everyone and you eliminate working
requirements so that people don't have to have factories or
marketplaces to sell things, and you introduce a transferable
property, right? To build a bridge from the smallest inventor to the
folks who have the real capital to do this thing.
87:11 And you unleash it on so many people that there is this massive
amounts of disclosure. So there's the intentional invention and then
there's sort of the things that we run into indirectly like you were
talking about. It's amazing the thrust of that.
87:29 When you put all those pieces together, the sum is truly greater than
its parts. Beautifully stated, Josh. Perfectly stated too.
87:38 Yes. And the founders were forward looking in other ways too, that I
haven't even mentioned, for instance, in England being very much about
following past practices and traditions, modifications on their edges,
but primary. That's the very nature of an unwritten constitution, by
the way.
88:02 The founders are the creators of what we now call constitutionalism
which is this idea of having a written foundational document that we
call the constitution that starts with the founders of our country.
That before, you know, before the United States, that really doesn't
exist in, in the world the, the way that we now have it, where now
today, like, you think, like it's insane not having a foundational
written document. It's how much they radically they change the world.
88:28 In England, you could only get patents on machines or the products of
machines or what we call manufacturers. Whereas the United States
recognized in the very first patent act in 1790 that one of the things
you could get a patent on was what we now call process. They called it
an art at the time, but so a process.
88:49 In fact, the very first patent that issues to Samuel Hopkins is a
process patent. It's a patent on a process of making potash. That
patent would not issue in England, because in England, you couldn't
get patents on processes.
89:02 They didn't view those as patentable inventions. They were thinking in
terms of very kind of concrete things, a machine like steam engine or
the byproduct of a machine, a shoe or something. And we said, well,
no, but the process has to be invented, too.
89:17 And that's a valuable value creation itself. And this is really true,
because at the end of the day, this is me now stepping back into
philosophy mode. Everything has to be invented for humans.
89:28 We're not born into this world with instincts the way that lions and
tigers and others are, right? The lion doesn't need to learn gazelle's
food. It just knows it right. We have to learn what is food and what
is not.
89:44 And not just that. We're not born with instincts like don't eat the
poison berries. We have to learn this by watching someone at one point
eat a poison berry and they die.
89:53 And then we're like, okay, don't eat those, right? Eat the other
berries. Eat the bottle, big cherries. And then we have to learn
processes of how to make food, how to grow cherries, how to grow
wheat, how to grow I mean, the husbandry and the process of farming
itself, for instance.
90:14 These are processes. We have to learn this. And these are inventions
in and of themselves.
90:19 And it was very far reaching and forward looking of the founders in
the first congress to recognize that is a protectable invention in and
of itself. And it's that kind of forward reaching, forward looking
approach, right? We are creating the legal system for the new values
that are going to be created that we can't even conceive of yet. That
is the reason why then the United States becomes the protector and of
the new biotech innovations in the 20th century and becomes the
protector of the new computer and innovations in the late 20th century
as well.
91:00 In fact, as I identify as an historical pattern, the industrial
revolution happens starts in England, finishes in the United States,
the pharmaceutical revolution starts in Germany. So it's the Bayer and
all these companies were originally were dye manufacturers through the
chemistry revolution of the late 19th century. When you have
Mendelssohn and finally agreeing on scientists, finally agreeing on
the atomic theory as the foundational structure of matter and the
table of elements Mendelson's, invention, you can start getting
incredible new practical applications of it.
91:46 And one of the very first ones is discovery working of dyes and from
dyes figuring out chemicals that actually affect people and make
people better like aspirin comes from there soon core that all happens
in Germany and medicine is Russia, but it ends the United States, it
shifts to the United States. In the 20th century, that historical
pattern disappears. By the end of the 20th century, the biotech
revolution starts in the United States, the computer revolution starts
in the United States, the mobile revolution starts the United States.
92:20 And so we are now no longer finishing the practical applications of
more fundamental scientific revolutions. We are actually the source of
both the scientific and the practical application in real world
innovation in society and that is being facilitated. And Josh, your
beautiful phrasing of it is the patent system is serving that bridge
from the individual inventor in the lab and in the garage to the
marketplace.
92:50 And so now our researchers and our discoverers are getting funding
upfront at that early research stage because they're going to get a
patent. Because that patent is going to serve as the property, right,
as the basis for contracts and commercialization activities and
licenses to then deploy in the marketplace. Yeah, absolutely.
93:08 And I think that kind of answers honestly my next question, which was
just the fundamental debate around pads, has always been whether they
promote innovation or hold it back, right, bridge or blockade. And
certainly some of the earlier systems we talked about weren't
necessarily economic accelerants. You could argue that it was like
early croning capitalism to some extent with some of the stuff that
was going on in England and whatnot.
93:36 But how do you feel economists and historians look at the economic
innovation impacts of America's experiment in this sort of
democratizing of the patent system? Yeah, that's a great question.
It's a great way to end our kind of conversation because patents have
always been intellectual, property more broadly have always been
controversial because what property rights have always been
controversial even in the founding era and there are philosophers
starting to attack it. Pierre Joseph Prudone writes his track and
friends, his track is called what is property? And he's the person who
famously said what is property? Property is theft.
94:18 Prudone is one of the intellectual fathers of Marx. So Marx is
basically a mixture of prudonian, anarchist, socialist thinking and
hegelian thinking. So he very innovatively combines these two into
what becomes known as Marxism.
94:40 And this is all occurring at the same time. That we're talking about,
the founder is setting forth protection of individual rights and
private property, not just in land, but in new inventions. And so
patents have always been controversial.
94:51 They've always been attacked as being monopolies and stifling
innovation and stifling people and being antidemocratic and people.
Samuel Morris, the inventor of the telegraph, electromantic telegraph,
and the code that goes on it that we now call Morse code named after
him, but he's primarily the inventor of the telegraph in which his
code worked, but the two went hand in hand. He got patents on both.
95:15 Actually. The person that he ended up in massive litigation with,
O'Reilly, when he copied Morris's telegraph, he called his competing
telegraph line the people's line. This is the 1840s, right? So this is
always this notion, I'm bringing it to the people and stopping these
monopolists from hoarding it and stifling the dispersal of all of this
great new technology and new values.
95:48 So it's always been controversial. And unfortunately, as I mentioned,
with the 1790 Patent Act, it cut across party lines both between
Federalists and and what were then the Republican Democrats, the
Jeffersonians, that that know you, they wanted to protect patents and
copyrights. Opposition to patents cuts across party lines, too.
96:09 So you have people on the left who are opposed broadly to property
rights, also oppose property rights interventions. That's not
surprise. But you also have people on the right libertarians, and this
is even true historically, not all libertarians, but some view patents
as all these are these monopoly grants.
96:29 They're clamping down on ideas, and this is preventing the free
market. And they view them through this old lens of kind of the royal
monopoly grants of which they originally were. And unfortunately, that
creates sows a lot of confusion because you have people who normally
nominally stand for the free market and for property rights, saying IP
is not a property right, and joining with leftists oftentimes and
filing amicus briefs and things of this sort where they both argue
that the patent should be rolled back and they should be, or ideally
eliminated.
97:03 In their mind. The problem with a lot of these approaches and the
general tax is, you know, a lot of them start from the premise, well,
intellectual property, it's weird. It's it's something different.
97:20 You know, you people who are trained in economics, oh, it's not
rivalries, and it's not exclusive like land is and things of this
sort, all these things. So it's an OD thing. So all of that adds up to
a very simple point.
97:33 It starts from the presumption that intellectual property is guilty
until proven innocent. So it starts from the presumption you can't
have it unless you can prove it does lead to innovation. You can show
causally.
97:45 We have to have that study. You hear this constantly from scholars.
You hear this from government officials all the time.
97:52 Oh, where is the study that shows causally? The link between having. A
patent and x percentage of innovation or x percentage of economic
growth in society. I push back against that at what a philosopher or
economic would call the meta level, right? Which means I question the
very foundational assumption of that, of that, of that request or of
that demand, because we don't have any evidence that protection of any
specific right causally is linked to innovation and economic growth,
including property rights and land.
98:32 You will search in vain for the economic study, which proves without a
doubt holding constant for every what economists call confounding
variables, all the various things that could influence it, right? That
proves with absolute certainty, as a matter of causality, that having
property rights in land leads to economic growth and x number of
property rights leads x amount of percentage of economic growth. There
is no study. What we have are massive amounts, massive amounts of
correlations and historical evidence and historical development that
if you protect property rights, it leads to economic growth and
successful societies assuming other things like rule of law, stable
and political legal institutions, equal protection, due process and
things of this sort.
99:26 So that's what we have and that's all that we ask for, because that's
all you can show. And it's important, right? The founders didn't say,
oh, until we have the empirical study, we can't create the United
States of America to show that the rights of life, liberty and
property are going to be right. They knew already, having observed
even their limited time period in the 18th century.
99:47 But also, if you read the Federalist Papers, they are imbued with
history. I mean, the founders were students of human history. They
knew all about all the Greek city states and the sweet, and the Swiss
city states and the various Venetian city states and everything that
had happened over the span of the past 2000 years.
100:11 And they were bringing that knowledge to bear in their thinking about
how to create a government. And a lot of what that history told them
was the protection of rights is fundamental to having a flourishing,
successful society where you write it down in a constitution, you have
the rule of law, you protect equal protection of rights and things of
that sort. Now, they weren't perfect, they made mistakes.
100:34 We know that there are errors in the constitution. But when you look
at where they were coming out of and what the rest of the world was
still doing at that time, they were incredible achievers. And we
should recognize that achievement for what it is.
100:48 And patents are the same. Patents are the same. They're the exact
same.
100:53 The exact same historical and broad economic evidence or correlation
of countries that protect patents and other intellectual property
rights, including trade secrets and trademarks. But the broad array of
intellectual property, when you have the rule of law, when you have
stable legal and political institutions as part of the rule of law,
equal protection and due process. When you have patents added to that
mix, just like with regular property rights and land and farms and
things of that sort, you have economic growth and innovation,
repeated, consistent, strong both historical correlations and even
recent economic study correlations, strong correlations, the exact
same strong correlations we see with other property rights.
101:48 In other words, patents are property rights, just like the founder
said. Therefore we treat them the same as any other property. Right
now we think, oh, these are weird property rights because they came,
they're like new.
101:59 Well, yeah, and they're relatively new because they arose and they're
correlated with the Industrial revolution. They helped make the
Industrial Revolution, they helped make the Biotech revolution, as
Ashley mentioned earlier in the computer revolution. But all property
rights are relatively new at some point or other, right? So if you go
to the founding period at that point, the types of property rights
that we now think of as kind of old and established and totally taken
for granted, like property rights and land, those are relatively new.
102:30 Those property rights as they existed and were protected as property
rights, really only existed for a couple of hundred years at that
point, fully as we now know them. And there's tons of other types of
property that exist and types of legal institutions that exist now.
They're totally new that we don't say, oh, that's guilty until proven
innocent.
102:47 Like corporations, corporate forms and credit and rights of privacy
and even the broader sense of the right of free speech and things of
this sort. Right. So the newness of something doesn't mean it's
suspicious or problematic.
103:04 It shows that it's part and parcel of what the last 200 years has
represented to human existence, which is it's an unveritable miracle.
So historically, if you look at the graph of the past 4000 years of
relatively modern human existence, human growth, as Joshua show, is
flat. It's relatively flat.
103:28 And then all of a sudden you get to the 19th century and it's like
starship that just went up. It doesn't blow up, it goes straight up.
Starting in the 19th century.
103:38 Greatest hockey stick graph ever. I know, and it's incredible. And
what happens in the 19th century? You could say what's industrial
Revolution? Yeah, but what was the foundation of the Industrial
revolution? The foundation of this revolution was a property rights
system, an intellectual property right system, the rule of law, the
limited government, full democratic access to government in the
protection of individual rights of life, liberty and property,
including intellectual property.
104:09 All of this adds up to and this is kind of I'm sorry for being a bit
long winded on this, but all of this adds up to the point that this
kind of idea that patents blockade innovation from my perspective, if
you hold the full context of what we understand about property rights
generally in the history of even just the past few hundred years.
There's just nothing that supports this view. And it's really revealed
by the fact that they always have some anecdote.
104:39 Well, I know of someone or something that was stopped from doing
something. It's like, well, I could come up with same anecdotes about
regular property. I teach real property cases to my students every
year about guys who chase kids with iron pipes off their property,
right.
104:53 And things like that. It's like we don't there oh, my god. Property
rights and land is a threat to children.
105:01 If you just hold context and really view intellectual property,
recognize intellectual property is a property right, like anything
else. And thus, it's what's facilitated access. It's what's
facilitated innovation.
105:13 It's what's facilitated not just people inventing, because people have
always been invented. It's what's actually facilitated the deployment
of inventions, the creation of innovation out of inventions, and the
ability for everyone from the inventor to benefit from the fruits of
their labors to the society itself. All the people who could never
have conceived of that product, could never have conceived of the
various business mechanisms, the factories, the complex disaggregated
supply chains that make our smartphones now globally and everything
else to benefit from those things.
105:47 And that's incredible. It's just this idea that patents represent this
kind of trade off. Oh, we blockade access because we grant these
exclusive rights that prevent access as the only way to incentivize
people to invent is pure, just, unadulterated ideological theory that
people are imposing on the facts of the world and on the facts of how
our actual economy and society have been functioning.
106:20 And to kind of tie it all back, to go back to our original discussion,
and so the people who take that framework really are starting from the
premise, my theory says your facts are wrong. That just can't be the
case. Now, I understand why a lot of people are confused, because so
many people have been saying this for so long, it's become
conventional wisdom.
106:40 But I think it's really important to kind of start from that original
premise that don't even try to argue it on those terms because it's a
mistaken theoretical framing that we don't argue and justify regular
property rights or the rights of liberty or the other types of rights
on these grounds. And patents are no different. And that was the great
insight of the founders.
107:06 Patents are no different than any other. Right? Yeah. True to
beautiful harmony between bargain theory and natural rights theory.
107:14 And it's impossible to know what our world would look like void of the
patent system that we have. But what we can definitely say is that
sort of explosive, the notions of patent systems goes all the way back
to ancient Greece, where we started, and we didn't see these kinds of
periods of explosive growth prior to we do know what the world looked
like before the US. Patent system.
107:40 And we talked about that sweet looking hockey graph with its first
data point starting right around 1790. Well, we can't say for sure
what the world would look like without our patent system. We know what
it's looked like with our patent system, and we know what it looked
like with prior iterations of patent systems that did not have the
democratization component.
108:00 I think you can draw a pretty strong conclusion. I mean, there are
more specific studies. I'm happy to talk about them.
108:08 I just don't want to talk about them with the mistaken premise that
I'm working from the premise that this overcomes the presumption that
patents are not proven already as being valid. But so, for instance,
Ashley mentioned the biotech revolution. So there's your kind of
classic example that really confirms the value of patents as property
rights, not as monopoly grants, because it is a little bit
anachronistic to say what they had in Greece as patents.
108:37 They really didn't, because patents today mean something different.
And so this is you have to be careful when you say, well, these kind
of precursor patents. Yeah, but then people get confused.
108:45 Well, what is the patent then? Is it these kind of early monopoly
grants? Is it sole monopoly grant? No. There was this break in 1790
with the first patent act, and that really is significant. But the
biotech revolution occurs in the United States.
109:01 And Ashley mentioned this earlier, and I referenced it because the
United States took the lead in recognizing as patentable these new
genetically modified organisms and new methods of kind of creating
what are called monoclonal antibodies, which is the basis for
diagnostic tests and genetic manipulation of DNA and things of this
sort. We took the position that this is actually patentable inventions
for the same reason the founders took the position that processes were
patentable inventions. The rest of the world hesitated because they
were like, oh, I don't know, this is like life, and this could lead to
Frankenstein and all sorts of stuff.
109:38 And so Canada and Europe and all the other countries that had modern
patent systems said, we're not going to protect this. And then there
was a period of about ten to 20 years where the United States was
providing reliable and effective and dependable patent protection, the
things that the rest of the world was not doing. The rest of the
modern world.
109:57 And where is the biotech revolution happening in the United States? In
fact, it continues to still happen in the United States. As a result
of this, to this very day, almost two thirds of all new drugs are
invented in the United States. There you go.
110:15 Other countries patent systems, or we revolutionized other countries
patent systems. By the late 19th century, other countries were like,
oh, my God, what's happening in the United States? And they kind of
looked at us and said, they've got that interesting patent system. We
maybe should start copying some aspects of that.
110:28 And they did not all aspects of it but they copied a lot. Most modern
patent systems have a lot of elements that we are the US kind of
innovated. And so you have other countries with same similar types of
patent systems but those protections were denied to biotech innovators
in the 1980s and look what happens in the United States, it happens
here.
110:51 Venture capital flows into biotech innovators know that if they spend
years of their life inventing, they'll be able to reap the fruits of
their inventive labors. Venture capitalists know that they can invest
in this. The whole startup economy arises in the biotech space because
of this spin outs from universities thanks to Baidol.
111:12 And there you go, right, exhibit A. But we don't have to have that.
That's like icing on the cake. We already have the evidence that's
just like the nail in the coffin for us because the actual and I
couldn't call the coffin that's the golden goblet that's already been
made by the patent system historically over the past 200 years for
sure.
111:39 I think the point I failed to make and then I promise I'll let you go.
The point I failed to make and one of the reasons why I wanted to talk
about some of the historical context stuff, why I thought it mattered.
And if this is totally off base in an illogical conclusion, feel free
to completely shoot it down.
111:54 But where I was going with some of that was there were earlier notions
of protecting an invention, whatever we want to call it, even remove
the language of the word patent or the language of the word
intellectual property. There were earlier concepts of protecting an
invention, but it wasn't until later on that the US added these other
democratized elements of sort of being accessible to all of being a
transferable property, right? Of eliminating the working requirement
that we saw a system that embraced protecting inventions with an
economic correlate in an innovative correlation potentially as well.
And one of the things that I find sort of almost offensive about some
of the modern arguments against patenting is that people immediately
go to patent trolls and we talked about this earlier but it's like
it's these virtues of the US system around accessible to all,
elimination of working requirement and transferability of the
property, right? That's essentially the sort of things that get cast
as trolling now for NPEs.
112:59 But these things were absolutely integral to the early success of the
system and were founding virtues of the system. So one of the things
that's like the biggest attack vector now was actually one of the
foundational virtues like these concepts of accessible to all and
transferable property rights and elimination of working requirements.
These didn't happen in courtrooms, these weren't the byproducts of
attorneys later on.
113:28 They weren't abused systems. This is the system as designed. And what
we saw that happened after that was explosive growth.
113:40 And so that's why I was kind of trying to juxtapose the virtues or
lack of virtues of some of the earlier systems. So some of the things
that were added to the US. System that I believe were key ingredients
to that economic and innovative acceleration that's now unfortunately
become the attack vector of opponents of patent systems.
113:59 Does that all kind of make sense? Yeah, you're right. I disagree with
you a little bit on the margins. You really framed it very beautifully
and very succinctly and nicely.
114:15 Patent troll is just a new variation of an old attack that has long
existed. In the 19th century, they called them sharks. That was
actually the term for the people who were buying and selling patents
and were suing people who were infringing their patents.
114:28 And back then, it was the railroad companies that were largely being
sued and established industries that were being sued by new
innovators. And they spent a lot of money lobbying to create this
narrative of patent sharks. And there were actually were bills
introduced in congress in late 19th century actually get rid of our
patent system.
114:47 Even so, these fights are old. They're old in the art, as we would
say, in patent law. And they were attacking the very virtues of the
system that you've identified, Josh, and you stated very beautifully.
115:01 The framing, the institutional features, and the procedures and the
various legal rules of what it means to protect a legal entitlement as
a property right are really key. This isn't merely an issue of, like,
labels or rhetoric. These words mean something, especially in the law.
115:24 And that's important because that provides a legal foundation or
platform, just like contracts and property rights more broadly do for
economic activity and for activities that lead to flourishing lives
generally. The only thing that I would slightly disagree with you on
is that it's not just those features. The founders were radical when
it came to inventions.
115:46 I don't really think that those earlier systems protected inventions.
Right. The term invention means something now that it didn't mean from
18th century on, 18th century going backward.
116:01 Invention just meant at that time something kind of new to a society.
It didn't mean something actually new as such, something that was
actually created by a particular individual. It could have just been
something that you brought from some other place, something you
brought from France to England, or something that you brought from
Sparta to Athens.
116:26 This modern notion of invention as being the actual creation of
something new. The US. Novelty requirement that we threw away in 2011
with the American vents act, which was very much animated by this
lockhean notion that the person who creates something in lockheed
metaphor terms, they've mixed their labor with the materials of the
world and they've created a right to it that was very much a US.
116:54 Innovation. And in fact, that very word innovation has also shifted in
meaning, as I said at the very beginning, too, to bookend, our
conversation. Sometimes reading historical documents is a bit like
visiting a foreign country.
117:10 And it's even more dangerous when that foreign country is writing in
the same language as you, because your presumption is, oh, all of
these terms mean the same thing. So the word innovation existed in the
18th century, 17th century, even the 19th century. But if you read
someone being referred to as being innovative in an 18th century text,
that was not a compliment.
117:30 That was actually a pejorative insult. It was a pejorative term to be
innovative meant was meant to be devious, to be scheming. Like
philosophers engage in innovation.
117:44 In fact, there's lots of writings by the founders where they're
referring to other founders. That's just him being innovative. And you
think, so complimentary.
117:54 It's like, no, that was like a whole body slam. Yeah. So, yeah,
innovation was a pejorative term.
118:08 Innovation. Its term is radically changed in 1940s by and I'm blanking
on his name. I'm never really good with names, except for inventors.
118:18 It was the head of Bell Labs. I'm blanking on his name at the moment,
but he went in the late 1940s, Bell Labs realized that they needed to
get the public behind them because they were starting to be attacked
by the US. Department of justice and antitrust attacks and things of
this sort.
118:37 So they realized, we need to let people know what we do. They went
kind of on an international or national I shouldn't say a national PR
campaign, where he goes around speaking science societies and legal
associations and stuff around the country, trying to describe what
they've been doing at Bell Labs, where they're inventing the
transistor, they're inventing microwave technologies. They're
inventing digital transmission technologies.
119:06 So much of the modern world has come out of the Bell Labs because it
was an invention factory. And he's like, the word invention doesn't
really fully capture what we do because inventions have always been
around. So what are we doing that's different? So he actually decides
that the term innovation kind of captures exactly what they're doing,
which is what Bell Labs was doing.
119:25 Bell Labs was taking inventions and making them real world products
and services that benefited people. So it wasn't just something that
some scientist was putting on a book. They were getting a patent.
119:37 They were licensing it. They were deploying it into the marketplace.
And he calls that innovation.
119:43 And it's because of that that innovation comes and they succeed in
their campaign. And it's because of that then you have what linguists
refer to as a linguistic shift. And innovation no longer means
something pejorative and negative.
119:57 It actually becomes positive. This is why my only disagreement with
you is on the margins, where you say there was some recognition of
protecting inventions in Greece and things of this sort. I mean, there
was some recognition that we in Athens needed newer stuff.
120:18 They may have had that stuff in Persia and in sparta. We want to get
that new stuff, too. Whether it comes from people actually here in
Athens directly ex nelio, or whether they steal it from Sparta or
what.
120:30 We don't care because we're trying to beat out Spargo and Persia and
even like in the statue of monopolies, where they refer to the first
and true inventor, which today we always first invent. No, they meant
the first person to bring something to the realm. They didn't mean
really something new.
120:52 They didn't really particularly care if it was new, if it actually
benefited the world writ large, is because they were still very much
thinking in terms of, well, this is about England beating out France.
It was still thought in terms of national economies and national
interests, national industrial, domestic policies. And again, this is
the insight and the wisdom and the radicalism of the American
exceptionalism of the founders.
121:19 Right. They really took seriously this universal notion of the natural
rights of individuals. Yeah, they were mistaken in some of their
applications of it, but these mistakes were eventually fixed.
121:32 But they did, at least at the theoretical level and at least in the
patent system, they understood this is a universalizable principle,
this applies to all people. And this is about making all people better
off, whether you're Americans, whether you're British, whether you're
French, this is about anyone, by dint of being human being, can invent
something. And just like anyone can become a farmer and farm till soil
and chop down trees and create a farm out in the wilderness, anyone
can invent something and that should be protected and secured to them.
122:12 You're right. And then all those other features are just as important
because it's all integrated. You can create a patent system, but if
you don't do so in a system that respects equal rights, has the rule
of law, follows statutes and provides due process, you can build a
patent system all you want, but nothing's going to come of that.
122:33 Eventually, it all goes together. And the features that you're talking
about, yes, are attacked today because they are virtues. And they were
virtues exactly.
122:46 Because also they were protecting and recognizing what it really meant
to have a new invention and recognizing the legitimate claim that an
individual has to that Lockheed metaphor that I always love the fruits
of their productive labors, which applies just as much to an inventor
as it does to a farmer or a machinist or any other craftsman or a
person who's practicing an art or trade. And is Abraham Lincoln so
beautifully said, who believed that the patent system was the third
greatest invention in the history of the world, that the patent system
added the fuel of interest to the fire of genius. And he knew of what
she spoke because he had a pat.
123:29 All right, awesome. Adam, thank you so much. Appreciate all of the
time and context and amazing historical education.
123:38 This is awesome. I hope I didn't go on too long at times. No, I get
too excited and caught up in all the details.
123:45 No, that's okay. There's so much there, and it's so hugely
significant. So we appreciate it.
123:56 Always a joy. Always enjoy to chat. Well, I give as good as I get.
123:59 I mean, your little write up that you sent me was fantastic. If you
and Ashley are going to put in such excellent productive labor
yourself, I'm just reflecting back on you on our wonderful
specialization in divisional labor, the, you know, the exact, you
know, value. And as a result, you know, we get really that's that's
what makes me excited and fun when interacting with people like the
two of you.
124:28 This was a great excuse, too, for me to do a little bit more of a deep
dive. And we've always just kind of an aside, I've always wanted to do
a History of Patents episode, but I wasn't never sure editorially how
to make that interesting to a broader audience. And then when you said
the thing about being a victim of their own success, it was like, oh,
my God, that's the answer.
124:50 That's why the history is relevant to today. Yeah, and it's true. You
can see in the 19th century, too, and all these people there is like,
yeah, properties is there.
125:10 They treat it like mana from heaven. It's all just raining down. We
just need to split it up.
125:20 And the person who hoards it is unjust and evil, and it's stealing
from other people. It all has to be created. Everything.
125:38 When I got a little philosophical and he was like, yeah, we have to
actually think of stuff and come up with it, because that's how we
live. That's our only competitive advantage, is our minds. This is
awesome, guys.
125:53 Yeah, gosh. Absolutely. All right, that's all for today, folks.
125:56 Thanks for listening, and remember to check us out@aurorapatents.com
for more great podcasts, blogs, and videos covering all things patent
strategy. And if you're an agent or attorney and would like to be part
of the discussion or an inventor with a topic you'd like to hear
discussed, email us at podcast@aurorapatents.com. Do remember that
this podcast does not constitute legal advice.
126:15 And until next time, keep calm and patent on.
