Whose Property?

This is ridiculous.

Yesterday I wrote that a strong respect for property rights, and especially economic property, was essential for economic growth. That’s been the case from time immemorial. If the State or some bully can wantonly expropriate the fruits of your labor, you’re less likely to work hard. It’s one reason the Soviet economy suffered after massive collectivization in the ‘30s.

In the current knowledge economy, intellectual property is critical to long-term success. Knowing how to organize and present information so that people can make timely, informed decisions is critical to any enterprise’s success. It’s one reason why web site design has become a major part of most businesses. And patents are fundamental part of intellectual property: witness Google’s purchase of Motorola Mobility for its 17,000-plus patent portfolio.

And the US is particularly focused on technology, innovation, and patents. Indeed, our Constitution establishes intellectual property as a fundamental right, granting Congress the authority to grant patents and copyrights in Article I Section 8. It’s one reason the US economy has been an engine for innovation for over two centuries. But there can be too much of a good thing.

There are over 250,000 patents that potentially affect the iPhone. Apple thinks that the Korean manufacturer Samsung has infringed on many of these with its Android-based smartphone. Among the items for which Apple seeks redress are the rectangular shape of the phone, the way information scrolls down the screen, and tapping feature for zooming in and out.

Sometimes a successful patent lawsuit can hold off competitors for years, as the Wright Brothers did in the airplane business in the early 20th century. On a micro-basis, that may make sense—but it’s shoveling against the tide. Eventually, innovation spreads. And the waste of time and energy is a shame.

Douglas R. Tengdin, CFA
Chief Investment Officer
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