November 17, 2008 1:33PM

Is Cato Asleep at the Switch on Copyrights and Patents?

In today's installment of Cato Unbound, Dean Baker calls libertarians to task for their failure to take a more skeptical stance toward the government-granted monopolies we call copyright and patent protections:

Their enforcement efforts have required terrorizing people for making unauthorized copies of copyrighted material. In a recent case, a single mother was fined several hundred thousand dollars for allowing her computer to be used to download 24 songs over the web. The entertainment industry has gotten the government to prohibit the production of electronic devices because they had inadequate protection against duplicating copyrighted material. They had a Russian computer scientist arrested when he visited the United States because he gave an academic lecture that explained how an encryption lock could be broken. They even went after the Girl Scouts for singing copyrighted songs without permission.

The extraordinary abuses that we see every day as a result of patent protection for prescription drugs and copyright protection should be sending libertarians through the roof, and perhaps it does. But, where are the libertarians’ research programs on alternatives to patents for financing drug research or alternatives to copyrights for financing creative and artistic work?

My area of expertise is information technology policy, so I haven't written much about pharmaceutical patents, but as a Cato scholar I've certainly spilled plenty of ink criticizing the excesses of copyright and patent law as it applies to information technology. Here is the study I did in 2006 criticizing the Digital Millennium Copyright Act, which was responsible for putting that Russian computer scientist in jail. Here is an op-ed I wrote for the New York Times last year pointing out that software patents have become an impediment to innovation in the software industry. Here is an article I wrote this summer for Reason magazine pointing out the problems the DMCA is creating for music consumers. And I've done dozens of posts at the Technology Liberation Front criticizing the recent expansion of copyright and patent restrictions. For example, in 2006 I did about 20 posts examining various software patents and pointing out how they were impeding progress in the software industry.

Moreover, we've written extensively about methods for producing creative works without copyright protection. These include free software, selling advertising, catering to core fans, selling security, and selling services. Cato published an excellent study in 2006 about the rise of "amateur-to-amateur" culture, which largely thrives outside the constraints of copyright. The growth of these alternative approaches to content creation suggests that in the future, copyright is likely to be less, rather than more, important than it was in the 20th Century.

With that said, I can't agree with Baker that all copyright and patent monopolies are illegitimate. Copyright and patent protections have existed since the beginning of the republic, and if properly calibrated they can (as the founders put it) promote the progress of science and the useful arts. Like any government intervention in the economy, they need to be carefully constrained. But if they are so limited, they can be a positive force in the American economy.

In the patent context, I understand that Baker advocates policies that would have the government more directly involved in rewarding specific innovations by giving cash prizes to innovators who solve hard technical problems. This post isn't the place to evaluate that proposal in detail, but let me just note two flaws that come immediately to mind. First, while rent-seeking is a problem with any government program, patents included, a prize system seems like it would be particularly prone to gaming by interested parties. The rules would almost certainly be designed so that the best-connected firms, rather than the most innovative firms, get the most prizes.

Second, even if such rent-seeking could be minimized, the more fundamental problem with a prize regime is that the most important inventions tend to solve problems that people didn't even realize they had until someone came along and found a solution. A scheme of government-funded prizes will be inevitably backward-looking, rewarding people for solving the problems that are regarded as important today, while neglecting problems that are less widely-recognized but may turn out to be more important in the long run.

Regardless, I agree with Baker that the copyright and patent systems have serious flaws, and I am glad to see scholars on the left advocating reforms. Indeed, one of the nice things about these issues is that they don't break down along predictable ideological or partisan lines. The DMCA was signed by Bill Clinton, and the most damaging changes to patent law were enacted by a Democratic Congress in the 1980s, so there's plenty of work to be done educating politicians on the left-hand side of the political spectrum. I think Baker will find the proposals in the copyright and patents chapter of the forthcoming edition of Cato's Handbook on Policy congenial, and I hope he'll forward it to his favorite members of Congress. Like him, I'm less interested in keeping score and more interested in promoting good public policy, regardless of the ideological label attached to it.