Rethinking Patents: From ‘Intellectual Property’ to ‘Private Taxation Scheme’

Rethinking Patents: From ‘Intellectual Property’ to ‘Private Taxation Scheme’

in KRITIKA: ESSAYS ON INTELLECTUAL PROPERTY, vol. 1, pgs. 1-16 (eds. P. Drahos, G. Ghidini, H. Ullrich), Edward Elgar 2015 

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Tracing back to the Venetian patent law of the 1400s the motivation underlying the grant of the patent was to encourage inventorship and contribution to society. Today patents have become a financial commodity treated much as any other asset of a business. Despite the evolution of the social construct in which ideas become financial assets, the public narrative of intellectual property (IP) and patents remains focused on the concept of the individual inventor and the encouragement of creative activity. The narrative is a valuable one from the standpoint of large industrial and post-industrial organizations. If an individual expends his or her effort in generating a new idea, he or she should reap suitable rewards for the contribution to society.

A patent generally gives its owner the right to prevent third parties from exploiting that same invention or creation. As a reward or encouragement, it empowers the patent owner to secure a ‘producer surplus’ above that which would be provided in a purely competitive environment. The producer surplus in favor of the patent owner reduces the funds in the hands of consumers, and consumer expenditures in favor of other producers. The patent owner benefits from a government-mandated right to exclude. Patents are, in essence, a private right to tax, although a tax that is dependent (in most cases) on the willingness of consumers to pay it.

There is a fundamental question regarding the allocation of a monopolistic private tax to large industrial and post-industrial organizations: that is, does the power to collect a monopoly tax entail public responsibilities? 

The underlying theme of public discourse is ‘no’. That is, the financial asset (i.e. patent) is regarded as freely alienable property that may be used as the owner deems fit, subject only to the general restrictions on uses of property. So, for example, there is no apparent limitation on the level of private tax that may be collected, and no concept of progressive taxation such as might ordinarily be adopted by a government taxing authority. Moreover, there is no restriction on what uses may be made of the tax. Unlike a government that is typically constrained concerning the areas in which it might make expenditure, the recipient of the private monopoly patent tax is free to make whatever use of it is deemed appropriate.

This essay addresses a fundamental issue, that is, the basis on which public discourse concerning patents takes place. One way to begin to shift towards legislative responsibility is by changing the language of the discourse. Patents are not ‘intellectual property’. They are ‘private monopolies’ established by legislatures. They should be subject to regulation as such.