One of the first questions investors ask an entrepreneur when considering an investment in their company is whether they have any intellectual property (IP) in the form of patents or copyrights. Substantial investments are often required in research and development to create products before than can be sold for a profit. And as the value of a company is determined by those profits (Valuation) IP protects competitors from undermining them by simply copying their products without expense. Yet, what justifies IP? Can anything be patented? For how long should IP be protected? What is the incentive and motivation value of IP? These are the questions this essay will address.
The term “Intellectual Property” (IP) contains the very definition and justification for it in the name itself; it is the property of the intellect that produced it. Everything that is produced is produced by someone through the use of their rational faculties to produce it, their mind. No manna falls from the sky nor rises from the earth that isn’t produced by someone who applied their intellect to produce it. Even food, which grows from the ground, is a product of the intellect. From the first farmer who planted a seed to the invention of genetically improved seed strains, fertilizer and advance farming methods to improve crop yields, they all arose from the human intellect (Sustainability vs Innovation: Past, Present and Future). By virtue of the fact individuals invented them; those inventions are theirs. They are their property, which demands the same protection as any property belonging to an individual. This is the fundamental justification for IP rights, a right to the protection of property of the intellect.
“Patents and copyrights are the legal implementation of the base of all property rights: a man’s right to the product of his mind.”
Ayn Rand
Still there are those who claim there should be no IP rights as they only serve the interests of the individual and their company, not the interests of society in general. Arguments against IP are based on collectivist, “common good” justifications; the greatest good to the greatest number. Even some Libertarians oppose IP rights based on the utilitarian argument that they restrict the rights of others to innovate, which doesn’t benefit society. But to claim that an entrepreneur has no right to protection of that which they created in the form of Intellectual property is as unjust as claiming they have no right to any other property they own, such as food, clothing, housing and the like. An assault on IP rights is an assault on property rights, which is an assault on the very concept of individual rights itself.
“Without property rights there are no rights”
Ayn Rand
The collectivists are wrong because there is no such thing as a common intellect that produced anything. As there are only individual intellects, it is only the individual who can claim a right to the products of their own intellect. Such claims of society’s collective rights is an assault on individual rights based on Altruism, the idea that sacrificing the rights of the individual for the benefit of the “common good” is a virtue. For Objectivists IP justification is based on Individualism (Individualism vs Altruism), the rights of individuals to possess all the products of their intellect.
“Individualism holds that a civilized society, or any form of association, cooperation or peaceful coexistence among men, can be achieved only on the basis of the recognition of individual rights—and that a group, as such, has no rights other than the individual rights of its members.”
Ayn Rand
The utilitarian argument that IP limits innovation by locking it up is also false. In fact IP inspires new innovations that benefit everyone. IP forces other innovators to differentiate and surpass previous innovations. Without IP protection, copying rather than innovating would be the norm creating stagnation, as it would undermine all the incentives and motivations of those who innovate. An entrepreneur would not pursue the development of an innovation they could not benefit from. This is not because they are being selfish or greedy but because rationally they would simply invest their time and efforts in something else that would benefit them more. Moreover, as patents have value their owners wish to capitalize on, they can be and most often are sold or licensed to others, not simply held. Through licensing to others IP supports innovation as others incorporate that IP into their innovations, thereby enhancing not limiting innovation.
Utilitarianism definition: “the system of thought that states that the best action or decision in a particular situation is the one that brings most advantages to the most peopple”
Cambridge Dictionary
In a free market, where intellectual property rights are protected, they are of significant value to a company. They secure future profitability, the foundation of a company’s value (Valuation). Failing to protect them can result in the failure of the entire company for the entrepreneur. During the CoVid19 pandemic, for example, there was a great deal of pressure, even from the World Health Organization, to waive CoVid19 vaccination patents. It was deemed the needs of the society to deal with the pandemic should override pharmaceutical companies’ rights to their patents and the profits that accrued from them. But this is a collectivist idea that fortunately was not supported by most governments that secure IP rights. They recognized the harm to the future development of vaccines would have been significant; but more importantly, it would undermine all rights in general if governments could override them whenever they decided it suits them.
“The collectivists seem to realize that patents are the heart and core of property rights, and that once they are destroyed, the destruction of all other rights will follow automatically, as brief as a postscript.”
Ayn Rand
Another subtle but significant point most entrepreneurs applying for a patent fail to realize is that the government does not “grant” IP rights when an entrepreneur applies for a patent or copyright. It merely confirms they have a right to claim the IP and legally secures that IP right from others infringing on it. Historically, as in Great Britain for example, this was not so. Such rights were granted by the crown in the form of monopolies to favored individuals who supported the crown, and in return paid tithes back to them for the grant.
“The government does not “grant” a patent or copyright, in the sense of a gift, privilege, or favor; the government merely secures it—i.e., the government certifies the origination of an idea and protects its owner’s exclusive right of use and disposal.”
Ayn Rand
Therefore counter to what Barrack Obama stated, “If you got a business, you didn’t build that, you didn’t make it on your own” and the general attitudes of many who oppose IP rights, the U.S. was the first country to establish intellectual property rights imbodied in their constitution. This is consistent with the Objectivist’s view of IP rights as being the inherent right of the individual that created the intellectual property. As such, IP is not granted by government; it is secured by it.
“Congress shall have the Power…To promote the Progress of Science and useful Arts, by securing for limited Times to Authors and Inventors the exclusive Right to their respective Writings and Discoveries.”
Article 1, Section 8, Clause 8
But can anything be patented by an entrepreneur? Here it is important for the entrepreneur to differentiate between a discovery and an invention. A discovery of something that already exists in nature cannot be patented as nothing new has been created. It already existed in the metaphysical world and as such the discoverer cannot claim to have created it per se. It is only the creation of something new in the form of an invention or process, not the discovery of something that exists that constitutes the basis for claiming a right to protection as IP.
Take the Human Genome Project for example. The Supreme Court of the United States in 2013 ruled that human genes cannot be patented in the U.S. because, as they declared, DNA is a “product of nature.” The Court decided that because nothing new is created when discovering a gene, there is no intellectual property to protect, so patents cannot be granted. To do so would be the equivalent of issuing a patent to Isaac Newton for defining the laws of gravity. There are untold inventions that resulted from applying the discovery of Newton’s laws of gravity that are patentable as inventions. And there are and will be many medical products resulting from discovering the human genome. But neither the discovery of the human genome nor the discovery or the laws of gravity are patentable.
“It is important to note, in this connection, that a discovery cannot be patented, only an invention.”
Ayn Rand
The debate over how long a patent or copyright should endure is again a debate between the philosophies of Collectivism versus Individualism. Collectivists, as noted above, would claim there should be no patents or copyrights as the benefits to society outweigh the rights of the individual. Individualists would claim patent and copyrights should endure for the lifetime of the individual that produced them.
Oddly enough, in the U.S., copyrights endure as a general rule for the lifetime of the author plus 70 years. Yet a patent in general lasts for only up to 20 years. In a world when innovations supersede each other at a rapidly growing pace 20 years is usually a sufficient period of time for the entrepreneur to accrue the financial benefits of a patent they own. In fact in some tech markets simply being “first to market” is sufficient to assure success without a patent for the relatively short period of time a piece of technology may be of value.
“By the very nature of the right on which intellectual property is based––a man’s right to the product of his mind––that right ends with him.”
Ayn Rand
Finally, an Objectivist entrepreneur values patents and copyrights for their financial value but also because they value the products of their creative ambitions as being theirs. Without IP protection they would not only loose the financial incentive to create them but also the motivation to do so. They do not create products for the benefit of some collective common good. They create products because they know they can and want to, pursuing their passion for productive achievement. For the Objectivist entrepreneur IP is a recognition of the fact they have created something new, that didn’t exist before, that is of value to them and hopefully to others; and that no one else has the right to make that claim but them. They take pride of ownership in their IP as it is an acknowledgement of their virtue as a productive achiever.
“The patent system…added the fuel of interest to the fire of genius.”
Abraham Lincoln