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Book Review ~ Owning the Future by Seth Shulman

JANUARY 01, 2001 by JOSEPH S. FULDA

Houghton Mifflin Company • 1999 • 240 pages • $25.00

A book about high technology and the patent system might not engender expectations of captivating reading, but this book commands all the reader’s attention from start to finish. It is a masterpiece, elegantly written, well researched, and brought to life with the many vivid case studies that form the bulk of the book.

Based on Shulman’s amazing breadth of knowledge and on a wide variety of both journalistic and scholarly sources, interviews, press releases, and materials available on the Internet, this book is also remarkable for its range: It covers medical and surgical procedures (including gene therapies), pharmaceuticals, plant and animal varieties, agricultural genetic engineering, computer software, and computer databases—all in depth and in a mere 191 pages (plus bibliographic notes and an index).

What concerns Shulman in each of these domains are, to quote computer specialist Richard Stallman, first, invalid patents, and second, valid patents. The Patent and Trademark Office (PTO) has moved away from the venerable dictum that an idea cannot be patented, a move presaged by the 1870 abolition of the requirement that physical models be built and submitted with each application, to granting patents freely to ideas with mere hints of utility in the future. Notorious among these are patents for algorithms—laws of nature that are not patentable subject matter—cleverly disguised as implementations, while the rights that are actually awarded extend to all applications, present and future, of the algorithm.

The PTO has also long been issuing extremely overbroad patents in other knowledge-based areas—most of which would not stand up if challenged in a process that costs millions of dollars and that many small companies find unaffordable. Finally, patents are issued in all those fields where there is substantial “prior art” that has somehow escaped publication or the notice of the examiners: Many of these, too, would not withstand judicial scrutiny. But whether valid or invalid, patent holders build large portfolios of patented ideas (IBM holds thousands upon thousands!) and then extort royalties from companies seeking to use well-known ideas whose utility was only hinted at in the original patent application or which were not a part of the original conception. Shulman’s well-justified fear is the shrinking of the public domain, as the use of ideas must increasingly be licensed from patent holders.

Most large biotechnology and computer companies have large patent portfolios—and never mind that many of the patents are worthless—which are used not only to extract royalties but also defensively against other holders of vital patents who would otherwise demand royalties and now settle for cross-licensing arrangements, and preventatively so that other similarly situated companies are prevented from acquiring ownership of this intellectual capital. Thus most knowledge-based companies are in the position of spending a large chunk of their funds applying for and defending patents, fighting off patent-infringement claims by others, and simply paying royalties or reaching cross-licensing agreements when that is cheapest.

All this is imaginatively and thoroughly documented by Shulman in case after case and leads to the inevitable conclusion that, as inventive as our high-tech economy is, we are stifling innovation and wasting resources under a system originally intended to foster innovation. One wonders how much further along technologically we would be without all this rent-seeking activity.

The book’s rich historical and philosophical context is most welcome, but I find the book’s conceptual framework flawed, although the presentation has enough depth to enable the reader to reach his own conclusions.

Thus Shulman attributes all the problems mentioned above to a free market, because information must be shared to gain value while real and personal property lose value as they are shared, and information is not depleted by use, unlike tangible properties. But while this is all true, what he has so ably described is definitely not a free market, but a system of government-sponsored monopolies. Whatever one thinks of the framers’ utilitarian basis for intellectual property rights—well-founded or not well-founded—this system bears little resemblance to theirs. “Functional ideas” or “actionable knowledge” has replaced actual invention as the watchword: that is, it is discoveries and not inventions at all that are being patented. The government is just about handing out monopolies on the future applications of thoughts!

Nowhere is the difference in systems more evident than in the inventions of Thomas Edison, the record patent-holder with 1,093 patents, as compared to the discoveries of the “thinker, not tinkerer” record patent-holder of late, Jerome Lemelson (over 500 patents, second only to Edison). This is a story of contrasts too good to be retold here; it and others like it are alone worth the modest price of this book.

Owning the Future is a truly important book that deserves a wide reading.

Contributing editor Joseph Fulda is the author of Eight Steps towards Libertarianism (Free Enterprise Press).

ASSOCIATED ISSUE

January 2001

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