Suppose I discovered oil in my backyard. I would have a right to profit from my oil, right? (I'll ignore the little problem of mineral rights.) Now, suppose my neighbor discovered oil in his backyard a day later, and started competing with me, thus driving down the price. Which is mine: the oil in my backyard, or the profits from the oil? Would I have a natural (basic, inalienable, human) right to prevent my neighbor from selling his oil, in order to maximize my profits? Would the economy work better if I had that right? Would it be right for me (in any sense of "right") to buy legislation that prevented my neighbor from selling his oil? Can it possibly be right for me to preserve "my" hypothetical profits at the expense of his ability to use his oil?
A true story in the history of invention is that Alexander Graham Bell arrived at the patent office mere hours before Elisha Gray, both having worked long and hard to invent the telephone.
In a Communist society, Bell's patent would be taken away by the government, which would employ him on the assembly line in a state-run telephone factory, which would make five poor-quality telephones per week for the use of party officials.
In Western society, only Elisha Gray was forbidden from using the fruit of his labor and skill. Gray was forbidden by law from making devices that conflicted with Bell's patent. It took many decades before Bell's monopoly was broken by the government and long distance rates fell to reasonable levels.
Inventors should certainly be able to profit from the fruits of their inventions. This belief is said to be the reason for patents. But patents are not the only way to protect intellectual property, and they often prevent inventors from profiting. Patent industry insiders say that unless you can make a million dollars on your invention, it's not worth patenting -- because that's how much it takes to sort out a patent challenge.
Copyright and trade secret operate on different principles. Both of them protect inventors against direct copying, while preserving the rights of independent inventors of similar products. As we will see, copyright was used successfully for decades as the main protection for an entire industry of products, and this example may be relevant to molecular manufacturing.
If someone has put enough work into an invention to be deserving of profit, they have probably researched enough hard-to-steal details to maintain their business in the face of cheap knock-offs that are not grounded in a similar quantity of intellectual labor. If I invent the next telephone and dream of making a billion dollars, and my neighbor steals my trade secrets, I have legal protection with or without a patent. But if my neighbor develops and sells a similar product with her own independent labor and skill, has my neighbor stolen my work, or only reduced "my" imaginary profits?
The computer software industry flourished for quite a few decades without patent protection. There was no such thing as a software patent; programs were protected by copyright. Occasionally, with a lot of work, one company could duplicate the function of another company's program without actually copying their software (which would have been illegal). More often, people built on each other's basic ideas to produce entirely new products. The Internet, the personal computer, the spreadsheet, the word processor, and the graphical user interface were all developed in this period. From the early 80s to the mid-90s, software patents were phased in. I have not seen as much innovation since that time -- mainly just the web browser -- and I do not think this is a coincidence.
The software industry could never have created as much as it did without a broad pool of shared, unpatentable inventions to build on. Perhaps in a strong patent regime the first few inventors might have made more money -- but the many inventors, equally skilled and dedicated, who expanded on their discoveries would have been out of luck. Again, I am not advocating theft of inventions; the original inventors were free to keep details secret and to protect their programs by copyright. But the basic, elegant, mathematical ideas were free for anyone to discover and use.
In theory patents can be licensed, but in practice, licensing would have strangled the industry in red tape. Even today, most software patents are ignored -- often with the knowledge of their holders, including IBM, which is not known for being self-sacrificing. Everyone except a few jackals knows that software patents are a lose-lose proposition.
Products manufactured by general-purpose manufacturing systems will be designed more like software than like hardware. Is it possible that patent protection will not be the best type of intellectual property protection? Not only society, but inventors, would be impoverished by implementing overly broad patent protection. And it may even be that no patents at all is the best way to go, as it was for the software industry. Of course this has almost no chance of being implemented, at least in today's U.S. But Europe is still resisting software patents, so there may be hope for sensible policy there -- either no patents or at least fewer "category killer" patents.
NOTE: Between writing the above entry and posting it, I found time to track down a link that Nato Welch had posted to our blog in the discussion that inspired this one. He says his position is leftist. I don't see that: it doesn't sound political, just common-sensical. Anyway, I recommend his article as a very similar take on the issues.