It's Constitutional: Exploring the Economics of Invention


Story posted November 02, 2006

Bowdoin Associate Professor of Economics B. Zorina Khan recently received one of the highest honors of her profession — the Economic History Association's Alice Hanson Jones Biennial Prize for an outstanding book on North American economic history. The Democratization of Invention:Patents and Copyrights in American Economic Development, 1790-1920 (Cambridge University Press, 2005) offers a sweeping, and astonishingly well-researched view of the intellectual property patterns that shaped the American democracy.

Khan recently sat down with Bowdoin Associate Director of Academic Communication Selby Frame to discuss the book, intellectual property rights, and the creative "machinery" behind America's industrialization.

SF: From the first pages of your book you propose a frankly inspiring conclusion: that "a belief in the ability of democracy and technology to enhance the common good has defined American society since the founding of the Republic." That's a very sweeping observation, and yet you spend the remainder of the book proving this point with detailed original research on patent systems, patent laws and litigation, copyright laws, and even a geographic analysis of invention - straddling several continents and centuries. How did the broad schematic for this book come together?

Khan

BZK: I wrote the first draft of the book when I was on sabbatical in 1999-2000. I'd initially worked on many different individual areas — copyright law, patents, women inventors and so forth. They were all motivated by very specific questions. In general, economists don't think in terms of grand theories. We focus on testable hypotheses and those tend to be narrow and well defined.

But when I started writing the book it was a revelation, because for the first time I realized that all of these different pieces I had been working on were part of a larger coherent whole. An overarching view of the world emerged from behind disparate aspects of the research, that was not entirely my view of the world. It was the view of the 19th century and it reflected the motivation behind this nation's modernization. This framework ensured the consistency of patents and copyrights and legal policies. The ultimate results proved how prescient the framers of the Constitution were.

SF: Yes, you discuss how the very first article of the Constitution included an intellectual property clause that mandated Congress 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."

BZK: I believe that the U.S. Constitution is basically an economic document. It created a blueprint for American society to follow which, as we now know, was in part responsible for the U.S. becoming the world's foremost industrial power.

SF: In fact, the book seems to be predicated on the idea that America's financially accessible, democratic patent system — as opposed to those found in Britain and Europe and elsewhere - is directly responsible for our rapid rise to worldwide economic dominancy.

BZK: Well, yes, this is the overarching question of the book: To what extent does the design of patent systems matter? How much do important inventions respond to material incentives? What is the extent to which ordinary people can make contributions that are going to generate productivity growth and economic change?

"The U.S. purposefully created patent and copyright rules that were market-oriented and democratic. A houswife can patent as much as a senator."

One of the ways in which we can contrast the U.S. and European models is to look at the types of inventions emerging from the 19th century. In Europe, they valued the literary and artistic over the pragmatic. The oligarchic structure of European societies and its bias toward elites were replicated in their intellectual property institutions. They had extremely high patent fees, for instance. Whereas, the U.S. purposefully created patent and copyright rules that were market-oriented and democratic. A housewife can patent as much as a senator. American democracy was based on the belief that ordinary individuals have the ability to make decisions that are going to be good for themselves and good for everyone else. That is very much the underpinning of a free-market economy.

SF: I realize as you're speaking that I don't actually understand the basics of American patent and copyright laws, which are rather fused in my mind under the general heading of 'intellectual property.' Can you illuminate the differences?

BZK: Basically, patents protect new and useful inventions for a limited time, while copyrights simply protect independent expression. American patent and copyright laws are quite different from each other, and in fact, were the opposite of European laws. We have always had very strong patent rights to encourage inventors; at the same time, we had weak copyrights, and placed great value in the Fair Use Doctrine, which allows unauthorized access to copyrights.

Whereas in Europe, they thought that only very special and privileged people were able to create inventions that could be valuable. And for that reason they thought of patents as monopolies that had to be doled out to special individuals. They weren't that concerned about encouraging patents, but with copyrights they felt that you had to protect the elite and their contributions, so they had extremely strong copyright doctrines. European authors' rights have developed today into Moral Rights that exist even after the person has sold the item. The bundle of rights that go along with Moral Rights are far greater than in the U.S. copyright system.

SF: What do you mean?

BZK: If you buy a piece of furniture in the U.S., once the person has sold you the furniture, it's yours. You can put your feet up on it, put it next to radiator, chop it up, whatever you like. That is the First Sale Doctrine, meaning, once the person has sold the item they have completely ceded any property rights. With Moral Rights, that is not the case. When the owner sells the item he still has some rights that extend beyond the sale. For instance, there is a right of what is called integrity — which means that if you buy a copyrighted item, the creator can extend his property rights beyond the sale and require, for instance, that once you buy the work you can't use it as a coat hanger.

SF: But how can the Right of Integrity be enforced? It's not as if there are police on arts patrol. How do you enforce copyrights in a free society?

BZK: Well, any property right consists of three elements: one is the right to use, one is the right to exclude others from using, and the third is the right to "alienate" or sell. That's the economic legal analysis of property. It's not necessarily true that all property constitutes property you can use. So that's one element that might be absent. And there are things you can't sell — you can't sell your child or your vote, for instance. So, the fundamental element of property is the right to exclude. If you've got copyrightable products where it's difficult to exclude others, then you can make the argument that this is not a true property right. The question then becomes, to what extent do you allow the police power of the state to overcome this fundamental problem? And I think in the U.S. today that we're verging too much toward this view that we should use the police power of the state to go beyond people's privacy, into their homes, to try to enforce copyrights even when it's detrimental to society.

SF: And of course these issues of copyright can become even more complex when you look at them from the point of view of educational institutions.

BZK: That's exactly right. Think about movies. When professors at Bowdoin show movies they have to make sure that only someone who is enrolled in the class gets to see the movie, they have to get permission, and I am sure they have to pay some sort of fee to get access. But that ought not to be the case. Bowdoin is an educational institution that is expanding public welfare through learning and that is the ultimate objective of the copyright law: to promote learning — not to protect the profits of publishers. So someone who is quite conservative about property with regard to patented inventions might come across as very radical in their interpretation of copyright laws, especially if that person is an economist who is weighing the costs and benefits of granting exclusive rights.

SF: That strikes me as coming as close to a personal statement of belief as a social scientist could come.

BZK: Well, my research interests span law, economics, technology, history, literature, so it is hard to say that there is one thing that encapsulates all of that. But ultimately I am an economist, and economists do believe that the most effective social policies are ones that try to maximize social welfare. And the policy of strong patents and weak copyrights is one that increases social welfare.

SF: I would guess that this issue of "weak" copyright law, particularly as it applies to music and videos, is a hot topic when you talk about your research with students?

BZK: Certainly, the copyright piracy issue is something people get very excited about because there is so much interest in music publishing and movies and illegal downloading. In my class I frequently ask, 'How many of you have downloaded material without paying?' and about 90 percent of the class will raise their hands. Then I say, 'How many of you would mug an old lady?' and nobody will raise a hand. Still, they don't accept that downloading might actually be more criminally liable than mugging a little old lady.

"Students don't accept that downloading might actually be more criminally liable than mugging a little old lady."

Students have this view that the norms have changed — and I think for good reason. The extent to which you can make private property out of copyrighted materials is much lower than for patents. So, copyright much more approaches the notion of a pure public good than patents do. Given that it has this public character, it's quite understandable that students don't feel they are doing something criminal, even though "pirates" could be jailed and fined a quarter of a million dollars for doing this.

SF: To me, one of the most interesting ways you have sliced the data is your research on geographically driven invention, particularly as it relates to women inventors. Those in the prairies or edges of civilization.

BZK: The frontiers, yes.

SF: And that push-pull between women's property rights and invention and how they affected each other.

BZK: Yes, when you are researching you have to be flexible and go where the story leads you. Initially I started out writing a paper on women inventors and then I came upon this statement by suffragists, who said that one of the reasons why women weren't very inventive was because of the laws. The laws at that time prohibited married women from owning their own property, or keeping their own earnings, or even from starting businesses or signing contracts. When I read that I thought — there's a testable hypothesis.

So the paper completely changed to being a paper about married women's property rights, and the extent to which women responded to the incentives that were created by legal reforms that gave them the ability to keep their property and returns for themselves.

As I began to research, I saw that women were quite active in patents, and that their patenting patterns were similar to men - except in one area: More rural women were getting patents than were rural men. Women in frontier regions were particularly inventive, designing ingenious mechanisms to make labor easier, far from towns and cities.

I think one of my favorite inventions is one that an American housewife created that allowed her to churn butter at the same time she was rocking the cradle. Another frontier woman created a see-saw for her kids in which the see-sawing motion washed her clothes at the same time. A similar invention is actually being profitably marketed in developing countries today.

SF: I think it's a wonderful testament to your work that this book has received this prize from the Economic History Association and is stirring up such widespread interest across disciplines — law, history, gender studies. Is it gratifying to have your work so well received?

BZK: You know, when I do my research I am perhaps too oblivious to the question of whether this is something that matters to other people — I do research because this is something I myself want to find out. So it is very reaffirming to discover that it is not only fun and interesting and important to me, but that other people think so as well.

SF: Well, congratulations on the success of your book and for taking the time to talk with me about it.

BZK: It was my pleasure.

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