Introduction

For almost two decades, the patent system has been under extensive stress from all branches of the federal government. The patent system has been transformed by new legislation,REF regulatory actions by agencies,REF including a new administrative tribunal known as the Patent Trial and Appeal Board (PTAB) that is canceling thousands of patents,REF and numerous decisions by the Supreme Court of the United States. These systematic changes have affected all aspects of patent rights, such as infringement remedies,REF licensing,REF and what types of inventions and discoveries are eligible for patent protection.REF Inventors, universities, and companies that invent, develop, and commercialize the new innovations that drive economic growth and higher standards of living now face extensive uncertainty. Even worse, the changes wrought have mostly eliminated or restricted patent rights, especially in the high technology and biotechnology sectors of the U.S. innovation economy.REF

The United States patent system was once the “gold standard” among world patent systems.REF David Kappos, former Director of the U.S. Patent and Trademark Office (USPTO), said 10 years ago that the U.S. patent system was “the greatest innovation engine the world has ever known.”REF Patented innovations drove the Industrial Revolution in the 19th century, the computer and biotech revolutions of the 20th century, and the mobile revolution of the early 21st century.REF Now the U.S. has eviscerated the reliable and effective patent rights that were a key ingredient in the fuel that powered the innovation engine that drove these past technological and economic revolutions.REF

The nadir of the U.S. patent system today has prompted a significant bipartisan patent reform movement in Congress to reverse course and restore the patent system to its previous gold-standard status. Several bills have been introduced in recent years to restore the traditional right of patent owners to stop patent infringement with injunctions, to reform the PTAB, and to restore the rights of innovators to have their inventions and discoveries arising from their productive labors secured by property rights (patents).REF All of these bills are expected to be reintroduced when the 119th Congress convenes in January 2025, and Congress should consider enacting them all into law.REF

Bipartisan support for patent reform also means that there is bipartisan opposition to this important work to restore the U.S. patent system to its historical function in the innovation economy. Unfortunately, some advocates for property rights, limited government, and the free market misunderstand the nature and function of patents. Instead of property rights that spur investments to create innovations and then enable new business models and other commercial innovations to deploy these new technologies in the marketplace, they see innovation-stifling monopolies. They fail to recognize the unique innovation of the Founders that patents in the U.S. would not represent royal grants of monopoly privileges, but instead would properly secure property rights in inventions.

This Legal Memorandum describes this mistaken opposition to patents by friends of liberty and property—an error committed primarily by libertarians—and how some tech entrepreneurs and tech commentators have embraced it. It then surveys the historical and economic evidence that patents are property rights that are key to a thriving free market and growing innovation economy. In essence, patents secure the same exclusive rights as all property rights, and this is why they are a legal launchpad for the commercial innovations and economic growth that have made the U.S. an economic powerhouse and global tech leader.

The (Libertarian) Skepticism of Patents

Patent skeptics who are right of center are typically libertarians. Of course, there are leftists who oppose intellectual property, such as the self-styled “copyleft,” but they oppose intellectual property given their opposition to property as such. Pierre-Joseph Proudhon, the early 19th-century anarchist and socialist, infamously declared, “Property is theft!”REF This proposition applies to property rights in inventions just as much as it applies to property rights in land.

It is more surprising to many people—and understandably confusing—that advocates for individual rights and the free market view patents as unjustified monopolies that violate rights, stifle innovation, and impede economic growth.REF Of course, there are exceptions, such as Representative Thomas Massie (R–KY), who has been described variously as a disciple of Senator Rand Paul, a libertarian, and libertarian-adjacent.REF Representative Massie is also an innovator and patent owner, which means that he understands firsthand the vital function of property rights in inventions as a launchpad for a growing U.S. innovation economy.REF But Representative Massie is the exception that proves the rule.

Among famous libertarian economists and theorists, Murray Rothbard is arguably the most influential when it comes to the anti-patent views prevalent among libertarians today. Rothbard argued in his 1962 treatise Man, Economy, and State that a “patent is incompatible with the free market” because it prevents someone from using an invention that one independently created and did not steal from someone else.REF Because individuals should have a property right in what they create through their own productive labor, Rothbard concluded: “Patents, therefore, are grants of exclusive monopoly privilege by the State and are invasive of property rights on the market.”REF Libertarian law professor Tom Bell makes this same point with more rhetorical color: “Because it gags our voices, ties our hands, and demolishes our presses, the law of copyrights and patents violates the very rights Locke defended.”REF

Rothbard, Bell, and other anti-patent libertarians argue that patents lead to undesirable results. As “monopoly privileges” that violate the rights of property and contract, they conclude, patents stifle competition, free markets, innovation, and economic growth. They argue that patents are like other government-created monopolies, such as Amtrak or the U.S. Post Office. Another infamous example is the monopoly on phone service that the federal government granted to AT&T before a federal judge broke up this monopoly in 1982.REF “Patents don’t help the little guy,” writes libertarian commentator Jeffrey Tucker. “They help the big guy who is already successful beat back the competition.”REF

Silicon Valley Embraces Patent Skepticism

One easily finds strong strains of this libertarian critique that patents are monopoly grants that crush innovators and stifle economic growth among many Silicon Valley tech entrepreneurs and commentators. Silicon Valley entrepreneurs are not wholesale libertarians, but they are often identified as libertarians, at least when it comes to their views about regulations of tech or free speech. It is perhaps more accurate to describe them as “libertarian-adjacent,” but for ease of reference, “libertarian” works as shorthand.

Big Tech companies like Google, Intel, Amazon, Apple, and Facebook created a narrative that nefarious “patent trolls” were “stifling innovation” with patents.REF During the Obama Administration, Google had hundreds of direct one-on-one meetings with the President in the White House, and the critique that patents stifle innovation became ascendent.REF President Barack Obama even did a Google+ chat in 2013 in which he complained about patent trolls targeting and harming entrepreneurs,REF and he was the first President in modern memory to devote precious time in a State of the Union address to calling on Congress to enact “patent reform” so companies could “stay focused on innovation” instead of “costly, needless litigation.”REF

The message that patents stifle innovation also became prominent among tech commentators and entrepreneurs. Tech commentator Mike Masnick, for example, has written that “patents are not just a bad proxy for actual innovation, but often antithetical to innovation.”REF Masnick also claims that “[t]he idea that patents create jobs is simply not supported by the evidence at all.”REF

Well-known Internet and other Silicon Valley entrepreneurs have voiced similar claims that patents stifle innovation and economic growth. One notable example is Mark Cuban, an early Internet entrepreneur who made millions in the 1990s and many people know today because of his role on Shark Tank, in which inventors pitch new products and services to Cuban and other venture capitalists. Despite his role on Shark Tank, in which an inventor having a patent serves a key role in influencing the decision by the panel of venture capitalists to invest in an invention, Cuban is a well-known patent skeptic. He has repeatedly declared his patent skepticism on his Blog Maverick. In one entry posted more than a decade ago, for example, Cuban wrote: “I think 99pct of the time, [patents] are anti-competitive, corruptive, impede creativity and innovation and can kill small businesses.”REF

Another example is Elon Musk, whose first successful Internet company in the 1990s made him millions before he co-founded PayPal with Peter Thei, and later revolutionized electric cars (Tesla), reusable rockets (SpaceX), and social media (X, formerly known as Twitter). Musk has tussled with Cuban on X over Cuban’s support for DEI (diversity, equity, and inclusion), but Musk appears to share Cuban’s skepticism about patents (although he has moderated this view recently).

In 2014, Musk announced in a now-lost posting on Tesla’s blog that Tesla was giving up all its patents. In his characteristic style, his blog posting was titled, “All Our Patent Are Belong to You.”REF (This was a reference to one of the first Internet memes based on a poorly translated English caption in a 1991 Japanese videogame, Zero Wing, that stated, “All your base are belong to us.”) Although Tesla was not in fact abandoning its patents, it was starting a new patent licensing policy,REF but the blog generally reflected the libertarian critique of patents: that they are barriers to competition and innovation. Musk wrote that, in the “spirit of the open source movement,” he was removing the wall of patents in the lobby of the Tesla headquarters. “Technology leadership is not defined by patents,” he wrote. “[T]hey serve merely to stifle progress, entrench the positions of giant corporations and enrich those in the legal profession, rather than the actual inventors.”REF

Musk reiterated these points a few years later in an interview with Jay Leno and posted a brief clip of the interview on X in November 2024.REF In this brief clip, Leno is marveling at the technological and mechanical brilliance of the Raptor engines Musk is showing him in the SpaceX factory, and Leno asks whether they are protected by patents. Musk says they are not, as he “does not care about patents.” Patents are “used like landmines in warfare,” he further explains, because “[t]hey don’t actually help advance things.” He then made his now-famous dictum that has been quoted or repeated often since then: “Patents are for the weak.”

More recently, though, Musk has moderated this skepticism. In the November 2024 X post in which he reshared the video of his exchange with Leno about patents, Musk wrote that “[o]nly patents for things that are super expensive to prove work, but are then easy to manufacture (like stage 3 drug trials) have any merit.”

It is revealing that Musk thinks patents may be justified as necessary monopoly grants to incentivize investments in inventions based on massive up-front investments in research and development (R&D) that take place over many years, such as the billions of dollars and decades of R&D to create new drugs.REF Since Musk is primarily an innovator and successful entrepreneur, not a political theorist, he likely does not have the deeply ideological, anti–intellectual property commitment that many libertarian theorists and economists have. His proven success as an entrepreneur and businessperson best explains Musk’s prominence as an informal policy adviser to President Trump, who announced shortly after the election that Musk and Vivek Ramaswamy will co-chair the new DOGE (Department of Government Efficiency).

U.S. Has Secured Property Rights in Inventions

The success of the patent system as a key driver of the U.S. innovation economy for over 200 years has been demonstrated repeatedly by economists, historians, and legal scholars.REF The patent system was central to the successes of the Industrial Revolution in the 19th century, the pharmaceutical and computer revolutions in the 20th century, and the biotech and mobile telecommunications revolutions in the 21st century. This is the same historical and economic evidence that economists have collected and analyzed between successful free markets, flourishing economies, and the protection of property rights generally in a legal system governed by the rule of law. Similarly, patent systems that secure reliable and effective property rights to inventors consistently and strongly correlate with successful innovation economies.REF

But this conclusion depends entirely on what a “patent” means. In feudal England, a “patent” was a monopoly granted by the Crown. A patent—more precisely, a letter patent—was the official legal instrument by which the Crown exercised its royal prerogative power. In the 16th century, Queen Elizabeth I explicitly embraced a domestic industrial policy of enticing continental tradesmen and other skilled artisans to England by offering them commercial monopolies if they set up shop in the realm and began to practice their tradecraft for the benefit of English subjects. The Crown awarded these royal grants of monopoly privileges with “letters patent.”REF

The provenance of U.S. patents is thus found in these early grants of royal monopoly privileges. This is no different from the provenance of property rights in land. Real estate also was born of grants of royal privileges in exchange for fealty, services (such as providing knights for war), and taxes.REF

Given this historical basis for modern patents, it has become a cliché for judges to remark that the patent system created by the Founders in the U.S. Constitution was “written against the ‘backdrop’ of English patent practices.”REF This is undeniably true, but if one said in the early American Republic that a “patent” secured under federal law was the same thing as the Crown’s grant of monopoly privileges, one might have been tarred and feathered.

The U.S. patent system was as much a part of American exceptionalism as all other aspects of the new American Republic. For example, the patent system was—and is—created through statutes enacted by Congress, the people’s representatives, not through the discretionary powers of the Executive. These laws set forth the legal rules for securing patents to inventors, among other significant legal issues. Once patents are issued, like title deeds issued by the federal or state governments, they are interpreted by courts of law either when challenged as invalid or when asserted against someone accused of infringement. (The creation of the PTAB in 2011 to cancel patents by administrative fiat, and the Supreme Court’s approval of the PTAB, is controversial precisely because of this challenge to the rule of law. Moreover, patents, like all property rights, are capable of being transferred, sold, or otherwise commercialized in a myriad of ways in the marketplace. In sum, there have always been policy debates and peripheral legal disputes about the scope of patent rights, but U.S. patents were always defined and secured under the law as property rights issued to inventors, not as personal grants of monopoly privileges.

In 1813, for example, Chief Justice John Marshall explained that the “constitution and law, taken together, give to the inventor, from the moment of invention, an inchoate property therein,” and that “this inchoate and indefeasible property in the thing discovered commences with the discovery itself, and is only perfected by the patent.”REF A unanimous Supreme Court held in 1824 that a patent secures to an “inventor…a property in his inventions; a property which is often of very great value, and of which the law intended to give him the absolute enjoyment and possession.”REF

An anonymous note following an 1871 court opinion in a patent case published in the Federal Cases Reporter explicitly distinguished between an English and American patent. An English patent is a “privilege” conferred by a “grant by the crown,” and the patent owner’s “right has been regarded [as] a personal privilege, inalienable unless power to that effect is given by the crown.”REF In the U.S., the note’s anonymous author further explained, a patent is “defined as an incorporeal chattel, which the patent impresses with all the characteristics of personal estate….”REF An “incorporeal chattel” is technical legalese for what we now call simply “intellectual property.” In sum, U.S. patents were property rights, not monopoly privileges, and courts secured patents under the law and Constitution as property rights.REF

Success of the Patent System as a Driver of Economic Growth and Innovation

The innovative and historically unique approach of the U.S. in securing patents as property rights has had significance far beyond this legal classification. As economists are wont to point out, property rights are the launchpad of economic activity, economic growth, and flourishing societies. For example, Hernando de Soto’s research has demonstrated how clear legal rules governing title recordation and for transferring these property rights are closely connected with economic activities and growth.REF In The Mystery of Capital: Why Capitalism Triumphs in the West and Fails Elsewhere, de Soto recognized that the economic benefits of clear rules governing title recordation and property transfers apply equally to patents as to real estate.REF Many people miss this point about patents in de Soto’s analysis, including many libertarians who value de Soto’s economic and empirical work.

Similar to the developing countries in the 20th century that de Soto studied, the U.S. was a developing country in the 19th century compared to England, France, and other older countries. Unlike the countries in the 20th century that were the subjects of de Soto’s analyses and that failed these prerequisites of clear title recordation and clear legal rules, the early U.S. patent system implemented these basic legal requirements of reliable and effective property rights. The U.S. did this precisely because it defined patents as property rights, as opposed to monopoly privileges granted at the discretion of the government according to the vicissitudes of economic policy goals.

Dr. Zorina Khan, an award-winning economist, has demonstrated that reliable and effective property rights in innovation—patents—were a key factor in thriving markets for technology in the United States in the early 19th century. Dr. Khan writes in Democratization of Invention that:

[P]atents and…intellectual property rights facilitated market exchange, a process that assigned value, helped to mobilize capital, and improved the allocation of resources…. Extensive markets in patent rights allowed inventors to extract returns from their activities through licensing and assigning or selling their rights.REF

Other economists have identified important features of robust innovation markets in 19th-century America. These economic activities were made possible by reliable and effective property rights. They include, among other things, an increase in “venture capital” investment in patent owners, the rise of a secondary market in the sale of patents as commercial assets, and the embrace of economic specialization through the invention of licensing business models.REF

Given the ubiquity and success of the licensing business model in the global innovation economy, it is perhaps understandable that advocates for property rights, limited government, and the free market may not grasp how this is made possible by property rights in inventions—patents. Far from being impediments to technological and commercial innovation, patents spur and facilitate these achievements. Since patents are property rights in the U.S., inventors have been able to take advantage of specialization and division of labor in the free market; these are the key features of successful markets and economic growth first identified by Adam Smith in his Wealth of Nations.REF Thus, inventors who obtained title to the fruits of their productive labors—patents—could use their property rights to enter into contracts and other commercial deals in dividing their property to maximize value in the production and commercial distribution of their new products and services.

One ubiquitous example today of this value-maximizing economic activity born of the property rights in new innovations is the franchise business model. Today, people associate franchises with fast food restaurants, but it is in fact an intellectual property–based licensing business model in which someone who owns the patents (as well as trademarks, copyrights, and trade secrets) contracts with other people (intellectual property law calls these “licenses”) to produce, distribute, and sell to customers their products and services secured by these intellectual property rights. Early American patent owners were the people who invented the franchise business model, as they licensed other people to make and sell their inventions. They embraced the division of labor and specialization that Adam Smith recognized as essential to a successful free market—they invented, other people manufactured, and other people engaged in commercial or retail sales to consumers.

Many famous American inventors developed this innovative licensing business model to distribute their new innovations efficiently in the marketplace. They included, among others, Charles Goodyear, inventor of the process that makes rubber a staple product;REF Samuel Morse, inventor of the first successful telegraph and its dot-and-dash transmission code (known by the eponymous name Morse Code);REF Alexander Graham Bell, inventor of the telephone;REF and, of course, Thomas Edison, inventor of the first successful lightbulb, movie cameras, record players (the first ever recording and playback of voices), and many other innovations.REF

These innovators also created new corporate forms and cross-licensing agreements in 19th-century America, all of which are historical precursors to Tesla’s announcement in 2014 of its new cross-licensing policy.REF One of the most significant innovations was the invention of the patent pool in 1856 by several companies and one individual inventor who owned all the patents covering different components of the first commercially successful sewing machine.REF A patent pool is a cross-licensing agreement among multiple patent owners when their respective patents cover individual components of a single product sold in the marketplace. Patent pools efficiently resolve overlapping legal claims and facilitate commercial activities by authorizing all patent owners in a single agreement to make and sell the consumer product or service. Since 1856, patent owners have created thousands of patent pools. Today, hundreds of patent pools facilitate the commercialization of a myriad of products and services, including Lasik eye surgery; digital songs and videos (MP3 and MPEG); 4G and 5G telecommunications technologies used in automobiles; USB connectors for digital devices; and many others.

Successful companies in the modern innovation economy, such as Qualcomm, IBM, and Microsoft, have flourished as commercial firms through their respective patent licensing business models. These companies exemplify an economic truth: Patents do not stifle innovation, competition, or economic growth. Patents promote innovation and facilitate innumerable commercial activities in the free market, as demonstrated by their role in ultimately creating an unprecedented, flourishing U.S. innovation economy for the past two hundred years from the Industrial Revolution to today’s mobile revolution.REF

Another valuable function of property rights as transferrable assets in the marketplace is that patents can be sold as economic assets themselves, called “secondary markets” in economics, or they can used in other secondary forms of economic activity, such as serving as collateral for loans. This is exactly what happened in the growing American economy in the 19th century as poor inventors lacking capital used their titles (patents) as the basis to secure financing or to fund other activities, including even selling percentages of ownership shares in their patents to fund lawsuits against larger commercial firms that chose to infringe their property rights (called “third-party financing” today).REF For example, Samuel Morse, who was an artist and professor at New York University in the 1830s when he began his experiments to create a telegraph, sold percentages of ownership shares in his patent to fund his research and development of his invention.REF

Today, this is called venture capital financing, and property rights in inventions (patents) continue to play a key role in helping innovators to secure this essential financing for their start-ups. Economists have now proven that a start-up with a patent more than doubles its chances of securing venture capital financing compared to a start-up without a patent, and this patent-based start-up has a statistically significant increased chance of success in the marketplace compared to other start-ups without patents.REF Beyond the confines of economic and historical studies in academic journals, most people see this function of patents in Shark Tank, in which Mark Cuban and the other venture capitalists often base their decision to invest in a new invention on whether there are patents on the products.

In this important sense, “patents are for the weak.”REF For undercapitalized innovators, such as sole inventors, start-ups, small businesses, and universities, patents are essential property rights in securing their exclusive control of their products and services—these property rights are the basis for obtaining financing, creating licenses, and engaging in other commercial activities to develop and commercialize their innovations. Since these innovations often disrupt—and ultimately put out of business and displace—established firms, these property rights secure them from predatory infringement practices by companies that seek to protect their now-obsolete products and services. Libertarians and Internet entrepreneurs claim that patents are only tools of market incumbents that seek to stifle technological or economic progress.REF To the contrary, patents are for the weak precisely because these are the vital property rights by which technological and innovative progress are facilitated by disruptive innovators.

All of these commercial innovations and activities confirm de Soto’s insight that a “good legal property system is a medium that allows us to understand each other, make connections, and synthesize knowledge about our assets to enhance our productivity.”REF Dr. Khan’s research confirms de Soto’s insight in demonstrating the economic significance of securing patents as property rights in the early American Republic: “The development of trade is predicated on recognized rights of property…. Patent Office assignment records and law reports both reveal that an extensive and deep market in patent assignments and licenses functioned during the antebellum period.”REF

Finally, Dr. Stephen Haber at Stanford University reviews the economic and historical evidence in his article “Patents and the Wealth of Nations” and concludes that there is a “causal relationship between strong patents and innovation.”REF Dr. Haber defines a “strong patent” as a property right that is enforceable in courts of law and transferrable to other people, similar to de Soto’s and Dr. Khan’s definitions. In this way, a strong patent facilitates specialization and the division of labor in new markets for innovations, as described earlier in the inventive and commercial work of Edison, Bell, Goodyear, Morse, and others in their patent licensing business models. In his empirical study of countries with patent systems with these two features of strong patents and the gross domestic product of these countries, Dr. Haber concludes that “there are no wealthy countries with weak patent rights, and there are no poor countries with strong patent rights.”REF

According to Dr. Haber, this establishes the same presumptive burden on behalf of patents that is established by the same overwhelmingly positive correlations between other private property rights and economic growth: Those who claim otherwise bear the burden of proof to show the contrary.REF This is correct. For example, no empirical study has ever demonstrated that a patent-owner’s request for an injunction to stop a defendant’s infringement of its property rights has resulted either in consumer harm or in slowing down the pace of technological innovation. Given the well-understood function of property rights, such as patents, in promoting both innovation and economic growth, a heavy burden of proof rests on those who insist to the contrary that patents stifle innovation and economic growth.

Conclusion

President Abraham Lincoln famously said of the U.S. patent system that it “added the fuel of interest to the fire of genius.”REF He knew of which he spoke, as President Lincoln is the only American President to have received a patent for an invention (granted to him in 1849).REF Lincoln’s poeticism about the patent system has been confirmed by the facts, although these rigorous economic and historical studies have been expressed in more technical terms of social scientists. There is a consistent, strong correlation, if not a causal relationship, between property rights in inventions (patents) and growing innovation economies and flourishing societies. This is unsurprising, because it is part and parcel of the same relationship that economists, historians, and social scientists have long identified between reliable and effective property rights and economic growth.

Unfortunately, this key function of patents is widely misunderstood today, just as the key function of all property rights is generally misunderstood. But advocates for property rights and the free market, such as libertarians and many people who are influenced by their critiques of patents, are also confused about patents. They mistakenly argue that patents are unjust monopolies that should be abolished, at worst, or monopoly grants made necessary only by the practical realities of prompting people to invent, at best.

The promise of property rights certainly spurs people to invest and create new valuable assets, but property rights do more than this. They are the key means by which individuals transact in the marketplace with their creations and inventions. The farmer is not only incentivized to grow crops by the promise of a property right in the fruits of one’s labor; the farmer can then transact with other people in the marketplace. He can contract with a railroad to transport his fruits to a company with which he has contracted to process them efficiently into edible foodstuffs. The processer can contract with a wholesaler to distribute the foodstuff to grocery stores, and ultimately the grocery stores sell inexpensive frozen dinners, bottled or canned fruit, and other necessaries to consumers.

Through licenses and other commercial mechanisms invented over the centuries by patent owners, the patent system facilitates the production, distribution, and retail services in markets for new products and services. If patents are secured as property rights in a political and legal system with stable institutions like the USPTO and courts of law that are governed by the rule of law, then they will continue to serve as essential factors in the successful growth of innovation economies and flourishing societies. The U.S. has demonstrated to the world over the past two centuries that patents facilitate technological and economic progress. We should do everything we can to keep it that way.

Adam Mossoff is a Visiting Fellow in the Edwin Meese III Center for Legal and Judicial Studies at The Heritage Foundation.