My wife and I, like yuppies we are, signed up for blood cord storage with NECBB when our baby was born a couple years ago. I get a bill every year for the annual storage fee. It’s usually $99.
This year I received a letter from NECBB, stating that the fee has increased from $99 to $124 a year, since they were threatened with a patent infringement lawsuit from someone who claimed the right to control any “type of procesing of umbilical cord blood.” So NECBB took out a license that costs each user about $2/month, hence the increase in price. It is most likely that NECBB never heard of the patentee and did not use any technology the patentee came up with, and that the patent may even have been invalid. But it’s cheaper sometimes to just settle and buy a license. After all, they can pass the costs on to me, and all their competitors will probably have the same price increase. So, my fees have increased by 25% for no reason whatsoever, except some other company filed years ago a document with the government. Nice.
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Hi Stephan:
Your note regarding Patents confirms again in my mind that patents are bogus and I’m bummed out to hear how it will affect consumers such as yourself. As an aside though, I’d like to quibble with you over the economics of the increased cost versus price of this service.
Although it may well be “…cheaper sometimes to just settle and buy a license” it does not follow that “After all, they can pass the costs on to me”. The question of passing costs on to customers is not that straight forward. Suppliers can attempt to pass the cost on to their customers, but assuming the $99 was the optimal equilibrium price before the increase in cost, it would have remained so immediately after this increase in costs. Therefore, the net result of an immediate price increase is that the marginal suppliers would loose marginal customers until they would have to either reduce their prices back to equilibrium, or else be eliminated from the market. Only after the supply of this service is reduced due to the loss of these marginal suppliers, can the price be permanently increased, but this will be due to a decrease in supply, not directly due to an increase in costs.
On the other hand, if suppliers can profitably immediately increase the price of their product, that means they were supplying below equilibrium price, and would have increased their price regardless of increases in cost.
(By the way, your great arguments on copyright eventually convinced me you were right.)
Paul, of course, it is true that the costs are not simply passed on to consumers. I realize this. It is as if a $24 annual tax is levied on the company. This results in lower profits for them and higher costs for me.
I suspected you realized this. It’s just that it is popularly held that when a supplier incurs an increased cost, at least some of that cost can immediately be passed on the consumer. However, as you knew, in fact in the short-term, the incidence of the cost must fall entirely on the supplier, and this cannot be altered except by an actual longer-term decrease in supply. And this is most likely to be realized through business closures.
My wife and I, like yuppies we are, found some land no one was using and borrowed money to build a house on it a couple years ago. I get a bill every month for the mortgage. It’s usually $700.
This year I received a letter from some guy, stating that the amount has increased from $700 to $2100 a month, since I now have to pay some arbitrarily set “rent” to the guy who claims to own the land. So this guy got an injunction in which the court ordered me to pay him fair market rent for the land, hence the increase in price. It is most likely that this guy never even set foot on this land and did not make any improvements to the land whatsoever, and that the original owner may even have been stole the land. But it’s cheaper sometimes to just settle and pay the rent. After all, the state will favor his claim over mine. So, my fees have increased by 200% for no reason whatsoever, except some other guy filed years ago a document with the government. Nice.
Georgist: It’s not being a yuppie to build a house on land. In fact, to build a house on someone else’s land is the opposite of yuppie.
And you would not get a mortgage on property that had not been cleared with a title opinion. Your example is just confused. A Georgist, confused? Hard to imagine.
>And you would not get a mortgage on property that had not been cleared with a title opinion. Your example is just confused.
I wasn’t getting a mortgage on property, if by property you mean land+building, I was getting a mortgage on a sum of money that I then used to hire people to build a house. My example makes a valid point; you prefer to nitpick its formulation.
>A Georgist, confused? Hard to imagine.
This is an unfortunate smear, since the Mises Institute has recently feature two daily articles portraying George in a positive light:
http://mises.org/fullstory.aspx?control=1592
http://mises.org/daily/1847
Georgist has the analogy correct. Kinsella is advocating intellectual property theft/squatting. Anyone who cannot understand the analogy is dense.
Kinsella called the patent laws stupid and without reason. How then would the market protect intellectual property? The market would refuse to trade with these thieves? Obviously Kinsella has no problem trading with thieves.
Completely unserious post on Kinsella’s part. At least link to a rational critique of Patent rights if you are going to impugn them.
“It is only when George strays from the subject of protectionism and free trade that he advocates some decidedly non-Austrian ideas. Although he advocated the total elimination of all taxes except for a single tax upon land, he suggested “a tax on legacies and successions” (p. 293). George was harshly criticized by Murray Rothbard for his “land value taxation” scheme.[3] And rightly so, for he considered “private property in land” to be a fetish (p. 265), and insisted that “all monopoly of land must be broken up, and the equal right of all to the use of the natural elements must be secured by the treatment of the land as the common property in usufruct of the whole people” (p. 262). But on his analysis of the protective tariff, George’s keen analysis was praised by Rothbard.[4] George’s trade illustrations using Robinson Crusoe (pp. 104–05, 135, 221, 233–38) remind one of Rothbard’s familiar examples of “Crusoe economics.”
The difference between a patent on a method of processing umbilical cord blood and a title to a piece of land is that only the latter is a scarce resource, where use by one precludes use by another.
First, processing blood is different from cold storage. It doesn’t require a license to put stuff in a fridge. Go into the blood storage business if you can make a buck.
Second, baffles me why people build something they can’t walk away from on other people’s property without a sufficiently long lease. In Washington State we have people putting fancy factory built houses in “mobile” parks without a lease and the lose when the land is sold. Same with people who build on Indian Reservation Lands and get upset when the Tribe refuses to renew the lease.
“The difference between a patent on a method of processing umbilical cord blood and a title to a piece of land is that only the latter is a scarce resource, where use by one precludes use by another. ”
Not quite: the method of processing blood was also scarce – it did not exist – before someone discovered it. Some libertarians like to advance the argument that if the original owner hadn’t homesteaded a piece of economic land, others wouldn’t know about it and be able to use it, so the homesteader deserves a perpetual title. If true, this argument would justify IP, because without a discoverer, people wouldn’t know about certain information, thus “justifying” a perpetual title to the creator.
The way i came to be finally convinced that no forms of IP are valid is by going back to the reason for the concept of property in the first place. If everything was abundant like air, property would have no meaning. The root and essence of property, it seems to me is its scarcity. So is an idea scarce? It is as long as you keep it to yourself and no one else comes up with it and publishes it. Otherwise, if you publish it, it is not scarce and it is not property. I originally liked Rothbard’s defense of copyright, but i think the above is more consistent with property. Of course, that doesn’t preclude creating contracts to keep an idea a secret. But that’s beside the issue of copyright and patents (IP).
–”Kinsella called the patent laws stupid and without reason. How then would the market protect intellectual property?”
It’s called “trade secrets”.
Keep in mind what patents are. A limited government-granted monopoly in exchange for the patented thing to be made public, free for general use after the patent expires.
Unfortunately, the US has expaned this from “tangible things” requiring a working physical model to include business processes and software (and, by fancy wording, pretty much anything intangbile). So, even if you are in favor of strict patent laws, I hope you can see that the current ones are quite dangerous and should be reformed. Patents on intangibles are not monopolies on specific implementations, but monopolies on ideas.
And keep in mind that the Patent office is about the only government agency that ever turns a profit. They get paid by application, but do not get punished for wrongful approvals, so it’s very much in their interest to rubberstamp everything passing through (cuts down on personnel costs and encourages continued filings; the courts are where the costs get paid).
Now, does this particular case have merit? Not enough information. If we had the supposed patent number, we could probably hazard a guess. Given the rise of companies filing ridiculously broad patents and threating all and sundry, there’s not really any reason to assume they’re acting in good faith. Assuming the article is portraying their claim accurately (that is, they really are claiming any method of processing), then the patent is clearly so over-broad as to be invalid.
>”Completely unserious post on Kinsella’s part. At least link to a rational critique of Patent rights if you are going to impugn them.”
I’ll do it. http://mises.org/journals/jls/15_2/15_2_1.pdf (please note the author)
in the information economy, there are certainly factors of production that ARE scarce. however, there are increasingly more elements that are non-scarce and inalienable. the ideas of property break down on those elements.
example…
a song as an idea, an intangible, is non-scarce and inalienable. when I have a song stuck in my head, you can have the same song stuck in your head without taking it from my head, and with no diminishment to the original song we both individually heard. the concept of property applied to these elements implies the idea that you are capable of interacting with my thoughts, “copying” the song, and then removing it from my memory.
a patent is a government-created scarcity on a non-scarce element. it’s justification to date has been to encourage new discoveries – a utilitarian justification, not a natural-rights justification.
having said that, you CAN apply contracts to the scarce elements by which non-scarce elements are delivered.
continuing example…
an opera singer establishes a contract with an opera-house that he will be allowed into their building to sing the song. in this case, his scarce labor is being contracted. in turn, the opera-house establishes contracts with customers (you and I) that they, too, will be allowed into their building to hear the song, provided that they do not bring audio devices to record it, no outside food or beverages, etc.
these contracts with a property-rights basis rely on no metaphysical acrobatics as the previous scenario does. these property rights have natural-rights justification in that they reflect the ultimate natural law of physical human interaction in such a way as to preserve every individuals’ natural rights.
Kinsella has discussed the refutation of applying any homesteading rights (perpetual or temporary) to “intellectual property” at length in that article from JLS. so, if you claim to desire a “rational critique,” you could spend 2 minutes of self-exploration.
luke: I am aware of Kinsella’s paper on the subject, and find the discussion of homesteading unconvincing. I would go into detail, but that would be beyond the scope of this blog post. I only wanted to show that Kinsella’s complaint about the unfairness of this license fee is either baseless or applies just as well to land squatting, since in that case, too, “my fees have increased for no reason whatsoever, except some other company filed years ago a document with the government”.
There may be a better argument out there why this license fee for the blood storage is unjust, but this isn’t it. But it’s not like Kinsella is going to make one here, since I just got this email from him:
“I think Georgists are nutball cranks, sorry. I don’t waste time in ‘serious’
debate with them, any more than I do with Galambosians or Scientologists.”
Well, now I know why that was emailed to me rather than posted here as an “intelligent and civil comment”.
I know, it’s probably not nice to post someone’s email without his permission, but it’s not like it’s his “intellectual property”, is it? Hasn’t Kinsella been estoppeled from objecting?
This may be my last post here. I’ve seen people get banned from the blog for offending the wrong people with their arguments.
Maybe everyone is not David K. Levin and Michele Boldrin (whom Stephan links to) also make an
hmm… looks like two of my links were eaten.
Stephan Kinsella.
rents for innovation without patents.
Follow up to my extraordinarily long posting.
I am certain that somewhere, within the FedGov patent office, there is a patent, of “my biology”, for lack of a better phrase. By one or more drug comnpanies and/or bio-tech companies.
Joseph Zack
My original post does not appear. So I’ll keep it short and sweet.
I ….forget about it.
I spend a half hour composing a response and it now simply doesn’t exist any more.
No doubt because I used the term “G_d D_nm” in realting a direct quote from a VA doctor.
Later.
The deletion was the BOLG’s lost.
Respects,
Joseph Zack
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