The Folies of Rent-Seeking

In economics the term rent-seeking is used to define actions where economic rent is sought by manipulating the social or political landscape instead of mutual trade. The classic example of this practice are patent trolls, companies that either buy or register patents for ideas they have no intention of manufacturing so they can sue another company that does attempt to manufacture a good that is covered by said patents. This has become very easy in today’s environment because almost anything is allowed to be patented including software and business models.

Microsoft has just be smacked upside the head because a judge has determined the Xbox 360 S violates the patent of another company and has recommended an import ban on the console:

An administrative law judge for the International Trade Commission issued a recommendation that the commission ban 4GB and 250 GB Xbox gaming consoles from import to the United States. The recommendation(PDF) was released to the public on Monday, and would punish Microsoft for infringing against some of Motorola’s patents. The patents permit video transmission and compression on the console and between the console and its controllers.

Right now it’s up to the International Trade Commission (ITC) to either agree with the judge and order the import ban or disagree with the judge and overrule the ban. Of course this case is really payback for the import ban Microsoft got enacted against Motorola:

The US International Trade Commission today ordered an import ban on Motorola Mobility Android products, agreeing with Microsoft that the devices infringe a Microsoft patent on “generating meeting requests” from a mobile device.

Payback is a bitch, especially when dealing with rent-seeking. Instead of spending money on research and development to introduce newer and better products for consumers to buy Motorola and Microsoft have instead opted to sink money into costly court battles. It is becoming more common in the business world to rely on suing violators of held patents to make money instead of selling goods and services, in fact an entirely business model has developed around the process.

The patent system is a mechanism used by the state to grant monopolies over ideas. Ideas, not being scarce resources (in other words if I tell you my idea I haven’t lost my idea, we both have it), should not be artificially restricted through the state’s monopoly on violence. Unfortunately the state does grant monopolies on ideas and they do enforce those monopolies through force. Instead of fostering an environment of innovation as the founders of this country believed they were doing when implementing the patent system, an environment of liability has been created. Innovation has taken a backseat to lawsuits, after all suing somebody is still a cheaper and less risky process then researching and developing new products.