Dibs

“Hey, I was first!” is how kids justify their claim to riding shotgun in the family car. Being early—almost first—is how adults justify their claims to land, despite the fact that just about everywhere any remaining original inhabitants do not own their homeland. And claiming to be first is how brainiacs stake a claim to some terrain in a field of knowledge.

There is a continuum of firsts in the human expansion of knowledge. Be the first to discover …

• new truth about nature, like quantum physics
• ways that the new knowledge can be useful, like lasers
• how to put together a device that performs that use, like a transistor
• how to refine the device so that it makes money, like a computer.

Those roles are always played by different people.

Along the way, any of those people can get a patent or copyright. Knowledge and land are two of the few things that humans get a title to (the third thing being vehicles, to get around on land). In the past, deeds were even called “patents”. But planting a flag on the field of knowledge does most discoverers little good; very few make any money from their patent or copyright. However, those who do, make fortunes (it’s a star system).

Is First Enough?

To most of us, enjoying exclusive rights to one’s location or one’s invention seems fair, and the latter perhaps as more so. We think of discovering knowledge as more creative than discovering land. With land, what’s tangible already exists. With making a new device, what’s tangible is brought into existence by the human. That act of creation, of introducing something new and solid into the world, makes inventing seem utterly worthy. And of course it is.

What lies behind our feeling that claiming an idea is fair is more reason than emotion. It takes mental ability to see how to, say, make a doorknob, which actually is a rather recent invention, patented in 1878 (a year before land reformer Henry George’s classic, Progress and Poverty). What makes claiming land seem fair is more emotion than reason. The territorial imperative is a basic instinct that all life feels. Even insects, plants, and bacteria have homes and compete for space and know what location belongs to another.

While land and knowledge are obviously different, there are similarities. Like land, truth always existed in reality; e=mc2 has always held sway in the universe. The logic needed to discover it has eternally been available. Two others published the equation slightly before Einstein. And humans who went on long voyages of discovery also employed logic.

Further, just as expanding dominion over territory depended on already ruling a home base, so every expansion of knowledge depended on the pre-existing base of knowledge. As Isaac Newton said, “If I have seen further than others it is because I have stood on the shoulders of giants.” Those shoulders belonged to thinkers like Copernicus and Bruno (who was burned at the stake).

So if being first is what counts, then truth, logic, and old knowledge already existed before any new discovery. Who’s entitled to the value that those pre-existing factors contribute? This is not to downplay the contribution of discoverers who deserve much credit. But patents and copyrights—costing a pittance—give them full credit, full remuneration, and no credit or remuneration to the necessary pre-existing factors. Winner—or “firster”, or fastest sibling—takes all, all the fame and fortune forever.

P&C & Equity

Is being first really a fair reason for receiving all remuneration exclusively? What about when there are many inventors, working independently, who nearly tie for first? What if the person who discovered or invented first was not the one who patented or copyrighted first? Snooze, you lose? Everything forever?

The history of science is filled with smart guys breaking through at almost identical times. Newton and Leibniz discovered / invented calculus nearly simultaneously. Same with Lavoisier and Priestly and oxygen. Same goes for Darwin and Wallace and evolution. Elisha Gray walked into the US Patent Office with a working telephone the exact same day as Alexander Graham Bell. In the early 1950s, Hilary Koprowski developed the first oral polio vaccine; for his later version, Albert Sabin is more famous in most of the world for eradicating polio than Jonas Salk. It’s like something was in the air, that a few antenna could pick up. Yet that was not enough.

Without getting fairer, patents and copyrights are getting longer. Bowing to investors, politicians extended patents from 17 years to 20. Application fees were raised, too, but not much. A title to an unsellable invention or to a quarter acre in Death Valley costs the same as a title to a hot new app or to a corner lot in midtown Manhattan. In those few latter cases, the gulf between filing fee and remuneration yawns like the Grand Canyon.

P&C & Efficiency

While patents and copyrights are remunerative, they might not be especially effective.

Money for nothing, especially mountains of mullah for nearly nothing, attracts speculators—another similarity between land and knowledge. While patents and copyrights were introduced as ways to encourage creativity, they do just the opposite. Big companies like IBM get literally thousands of patents each year, and little companies called “trolls” get bunches of patents, too. Not to use them, but so you can’t use the knowledge that they’ve staked out. Likewise, some investors stockpile land not to use the locations but to under-use them, then finally sell them when the sums they can fetch are in the stratosphere.

Patents and copyrights were justified as ways to protect inventors and artists, to make sure they get rewarded fairly. However, almost all inventors and artists are bad businesspeople or are too poor and desperate to have the leverage to negotiate a fair contract. Hence there are innumerable cases where recording artists make peanuts while record companies keep hundreds of millions from the sales, and of people like the inventor of the windshield wiper fighting Ford his entire working career to win the profit he was owed (he eventually won the case but lost his family in doing so).

And if you’re first to create something new and sellable, ironically, you don’t even need a patent or copyright. Rather than rest on your laurels of winning a patent or copyright and bask in that false security, leap into the market and get a huge head start on any competition. You’d nearly totally dominate sales, leaving only a tiny sliver of market share to latecomers.

Besides not being particularly fair or useful to either discoverers or society, or because they are, patents and copyrights do accumulate fortunes.

P&C Command Dollars

Like other major government-granted permits—utility franchises and corporate charters limiting liability—patents and copyrights also snuff out competition. Not having to worry about being undercut, holders of key patents and copyrights can jack up prices higher than they’d be in a competitive market. So tech stock gets inflated as do the fortunes of tech founders, turned into multi-billionaires instead of mere multi-millionaires.

Like those government-granted privileges—including deeds to land—patents and copyrights are worth a lot. How much?

A 1991 estimate for patents was only $4 billion—pretty paltry.

A 2007 estimate for copyrights was $1.3, yet even greater for the free use of copyrighted material.

An official 2012 estimate of IP’s share of the GDP was over $5 trillion, but includes the value of labor and capital, too, not just the monopoly protection conferred by P&C.

A 2013 estimate puts patents at over $5.8 trillion, almost half of the then GDP—that may be a bit over the top.

A 2015 estimate of patents calculated $2.3 trillion, perhaps the golden mean between the two above.

McKinsey& Company, which gets coverage in the Wall Street Journal (e.g., Jan 10, 2007) for tracking financial assets worldwide (totaling $140 trillion in 2005), estimates that as much as 80% of stock price is accounted for by those little pieces of paper allowing monopolies on knowledge. The US stock market is now about $22 trillion, so $17.8 trillion would the price of IP, and about $1.8 trillion would be the annual rental or leasing value of IP.

These estimates for so-called “intellectual property”, like the tallies for the worth of land, are not only wildly divergent but not easy to come by either. Because patents and copyrights can confer such awesome sums of money, holders of patents and copyrights likely prefer to not disclose how valuable their little pieces of paper from the government are, to evade the envy factor.

The scholar steeped in this stuff estimated the $2.3 t for a recent year. Add that to the $4.5 t for land, the $0.2 t for utilities, the $1 t for healing the environment, and we’re up to $8 t. That’s equivalent to the drop in global stock prices in 2016 January, to what’d it take to wipe out the US federal deficit, and to how much builders worldwide spend in one year on putting locations to better use.

While many, those eight trillions probably are an underestimate. Underestimate is what officials do. Getting clear is what they don’t do; officials refuse to parse both our returns and our spending along the lines of labor and capital in one category of human effort versus land and privilege in a separate category of built-in advantage. Even so, eight trillion approaches half of GDP without yet figuring in two more major sources of rents: finance and taxation. Ultimately we may see that the value of output is due less to anyone’s labor or capital, more to nature and privilege.