Clearing Up the Difference Between Utility Patents and Design Patents – Neither Is a Monopoly

Stuart K. Hayashi

 

A common misunderstanding is that a patent is a claim of ownership over the general idea for an entire product category. According to this misinterpretation, someone gaining a patent on her electric can-opener amounts to the government proclaiming that she now owns the  vague idea of “electric can-opener.” The same would happen if she gained a patent on her paperclip. From this comes a second misunderstanding, that the patent confers upon its owner a government-enforced monopoly over an industry. The patent holder would then be able to sue any other vendors who produce, without her permission, their own electric can-openers and their own paperclips. Worse, the patent holder would be able to sue these competitors successfully even if they arrived at their own designs independent of any observation of the patent holder’s model. 

 I have disputed those misunderstandings in previous blog posts (1, 2,3, 4, 5).

A patent is on a specific design of a feature or function of a product and does not impose a State-enforced monopoly on an industry or product category. A vendor can compete against any patent holder by coming up with a design that is similar but is not an exact duplicate.

Still, sometimes I get yet another response. This one comes less often from libertarian anarchists opposed to patent rights and more often from more commonsensical people who recognize the need for some form of intellectual property. The response is that there are two types of U.S. patents — design patents and utility patents. According to the rejoinder, it is true that a design patent is merely on a specific design only. However, the rejoinder continues, a utility patent really is a claim of ownership over a general idea, and it does grant its owner a government-enforced monopoly over an industry.

It is true that there are both design patents and utility patents. And it is true that there is a distinction between them. However, the distinction provided above is not accurate. Rather, the  purported distinction above comes from a misunderstanding of what a utility patent truly is and a misunderstanding of the extent to which enforcement of utility patents can be broader than it is for design patents.

In the end, both design patents and utility patents provide protection for a specific design feature. Neither claim ownership on a whole product category or industry.

I now will attempt to provide a more accurate explanation of the difference between design patents and utility patents. I will also try to explain how the mistaken conclusion that a utility patents provides its owner a monopoly originates from a misinterpretation of this distinction and of how utility patents are defined.

 

Design Patents
Design patents are on specific features directly observable by the senses. That is, for you to infringe on my design patent, units of your product have to resemble mine very closely in terms of how they look, feel, etc. For that reason, design patents are usually used to protect a design’s aesthetic qualities. One example is the design patent awarded to George Lucas for his Boba Fett action figure.

Note that the U.S. patent number is US  D264,109 S. The D following the US is important. By the end of the essay, we will return to why that is.

That a design patent is about protecting properties of the design that are readily perceptible is also visible in other instances. Consider the ones recognizing fashion-apparel-and-lifestyle mogul Ralph Lauren’s ownership over this cologne bottle and this bed. Their U.S. patent numbers are, respectively, US D 259,098 S and US D 319,932 S. 

Its sculptor, Auguste Bartholdi, even applied for and received a US design patent on the Statue of Liberty. That is US D 11,023.

It was not that Auguste Bartholdi expected that the U.S. federal government would enforce some monopoly on giant statues. Rather, suggests Kelsey Campbell-Dollaghan in Gizmodo it was that to finance the completion of the statue, Bartholdi sold small replicas of it as souvenirs. He did not want knockoffs of it being sold when he needed to recoup his investment. This is, again, because the design patent is intended to restrict the copying of the product’s aesthetic qualities rather than its operation and functionality. the 

Once again note the D subsequent to the US. That is a trait common to all U.S. design patents. You will notice a different numbering convention for U.S. utility patents.

 

Utility Patents
Speaking of which, a utility patent protects a specific design feature with respect to a unit’s practical functionality — its utility, hence the name. What is being protected is a specific combination of engineering principles as applied to a particular design feature in the utility patent.

As principles are more abstract than the appeal to the senses that are readily observable in a design patent, the aspects of a design that a utility patent protects can be interpreted more broadly than what is typical for a design patent.

As examples of utility patents, I will provide two that Jack Northrop had on his airplanes that were “all wing.” 

These patents on his airplanes did not award Northrop a government-enforced monopoly on the production of airplanes. What these patents did mean was that Northrop had civil recourse if the totality all the engineering principles he employed were being copied by yet another vendor against his consent.

Two patents Northrop had on this sort of product were US 2,406,506 A and US 2,650,780 A.

Note the absence of a D after the US in the U.S. patent number.

That is how, just by looking at the U.S. patent number, you can tell if it is a design patent or a utility patent. For design patents, there is a D or Des. directly following the US (see here for Des. appearing). For utility patents, that is not present.

 

Evidence That a Utility Patent Is Not a Monopoly
This is the summary. The protected design attributes of a design patent can be readily perceived by the senses. To determine if a vendor peddled a knockoff of the cologne bottle on which Ralph Lauren had a design patent, all you need to do is look at both Ralph Lauren’s cologne bottle and that other vendor’s. Ditto in instances where George Lucas accused a vendor of producing unlicensed knockoffs of the Boba Fett action figure. Most often, the desired effect of the design protected by a design patent is an aesthetic or artistic one.

By contrast, the protected design attribute of a utility patent is its particular arrangement of parts in order to employ specific principles of science and engineering. And the effect is a practical one. The effect of the design protected in a utility patent is one of utility. Because the engineering principles specified in the utility patent are more abstract and less readily observable than what is found in design patents, there is greater room for interpretation when it comes to how courts decide if someone’s utility patent has been violated. More often than with design patents, engineers and other experts with specialized knowledge pertinent to the industry in which the invention is used must be called upon to determine if a utility patent is infringed. This is why enforcement of utility patents are usually broader than it is with design patents.

And that a utility patent can be interpreted more broadly than a design patent is where the confusion comes from. The confusion becomes the misconception that a utility patent does give the holder of a utility patent a monopoly on an entire industry.

But here’s the reality. Below is a table I made of U.S. utility patents on electric can-openers. 

Note that the interval between every new U.S. utility patent on electric can-openers and the previous one is shorter than 17 years. That is, every U.S. utility patent listed was issued prior to the expiration of the previous one. That happened even though all of these are US utility patents on “the electric can-opener.” That is because no US utility patent ever gave a party a State-enforced monopoly on the whole product category or industry of “electric can-openers.”

We find the same pattern in U.S. utility patents for paperclips, another invention for which I made a similar table.

Despite utility patents being interpreted more broadly than design patents in the matter of enforcement, having a US utility patent does not give any party a monopoly on the general idea of for a whole product category. It is not a government-enforced monopoly over an industry.

On Friday, November 19, 2021, I added the section about the U.S. design patent on the Statue of Liberty.

Immigrants Don't Depress Wages

Supply and Demand Explain This


Stuart K. Hayashi





I keep hearing the cliché, from U.S. Sen. Bernie Sanders and alt-righters alike, that if a large number of new people enter the workforce -- often immigrants or people still in foreign countries but are hired by U.S. firms -- they will try to out-compete one another for jobs, either dragging down wages or causing massive unemployment. This cliché comes from T. Robert Malthus, Karl Marx, and a socialist named Ferdinand Lassalle (Lassalle coined night watchman state as a pejorative). I point out Jean-Baptiste Say -- the most pro-capitalism of all of the classical economists -- refuted this misconception with Say's Law of Markets. When I do this, anti-immigrationists call me a leftist. But someone who cites this Marxist cliché about "dragging down wages" has no business accusing anyone of leftism.

This is my 17-minute video explaining that.



This is my infographic about it:

If Trump Imposes a 15% Tariff, What You Pay in Taxes for an Import Will Be More Than 15%: Here's Why

Stuart K. Hayashi

If Donald Trump imposes a 15 percent tariff on items imported from China and Mexico, you will actually pay more than 15 percent in import taxes on each item.

The reason for this is that the tariff is not a tax that the customer, at the retail level, pays directly to the government. Rather, a vendor on the supply chain is the party that pays the tax directly to the government. In turn, that vendor passes the cost of that tax onto the customer. When the customer pays the tax indirectly, through the intermediary of a vendor, what the customer pays in taxes is in excess of the stated tax rate.

The difference can be explained by the difference between sales taxes and Hawaii’s general excise tax. A sales tax is charged only at the retail level, and the customer -- not the vendor -- pays it directly. Suppose you go to the store and pay for a one-dollar item, and the sales tax is 15 percent. You, as the customer, give $1.15 to the store. The store owner takes $1 for herself and then logs the 15-cent tax in a separate book.

Hawaii is different from most states in that instead of a sales tax, it has a general excise tax (GET). This is charged not merely at the retail level but on every level of the supply chain. However, even if the GET were charged only at the retail level, a 15 percent General Excise Tax would still cost the customer more money than would a 15 percent sales tax. This is precisely because the GET is paid directly by the vendor instead of the customer, and therefore the customer pays it indirectly.

Suppose I am a store owner and I want to obtain $1 for an item that you purchase from me. If I charge you only $1 for it, I will be taxed 15 cents on it and be left only with $0.85 for it. I want to obtain all of the $1. Therefore, I charge you what is called the rollover rate. When you want to purchase a $1 item from me, I charge you $1.18 for it. When I pay a 15-percent tax on that $1.18 I obtained from you, I pay 18 cents in taxes and keep the $1.

Thus, we see the following: if you as a customer are charged directly a 15 percent sales tax, you pay 15 cents in tax for a $1 item. If the vendor is charged directly a 15 percent tax, you pay 18 cents to account for the tax on a $1 item.

Because it is a vendor on the supply chain who pays the 15 percent tariff -- as opposed to the customer at the end of the supply chain paying it -- the customer will end up paying more than 15 cents on each dollar for the import.

Protectionists Steal Jobs

Stuart K. Hayashi



It is protectionists who wail about jobs being “stolen” from them who are the ones who express an entitled victim mentality and are trying to steal jobs.

Suppose I want you to hire me. Instead, you hire a Mexican because you judge that that Mexican will give you more “bang for your buck.” I wail that that Mexican “stole my job” when, in fact, the Mexican earned it from you peaceably.

I therefore run to the State and say the State ought to penalize you—by hiking your taxes—if you continue to purchase that Mexican’s services. The State agrees. To avoid that penalty, you fire the Mexican and hire me for that position.

I have, in effect, used the threat of physical force to obtain a job from you that that Mexican otherwise would have kept. I have used protectionist rhetoric and the threat of government-imposed force to steal from that Mexican a job that that Mexican had rightfully earned.

It's OK to Be 'Pro-Business' and 'Pro-Corporation,' Silly ^_^

Stuart K. Hayashi

You silly left-wingers think I am a "pro-business" shill for corporations! But I am "pro-market," not "pro-business" or "pro-corporation"!  I am for capitalism, and you mistake capitalism for something we both oppose:  corporatism.  Learn the difference!

That is a frequent rejoinder from libertarians. Marian Tupy of the Cato Institute employed it. Even some non-libertarians, such as the controversial YouTube vlogger Carl Benjamin (better known as "Sargon of Akkad"), have as well.  Some persons hostile to libertarianism, including Ralph Nader, do too.  For some years I employed that rejoinder as well in face-to-face conversations. I do so no longer.  Although I do not go around calling myself pro-"corporatism," I have dispensed with throwing around corporatism as a pejorative. It is unhelpful to apply the term corporatism to taxpayer-funded, governmental assistance to specific corporations at the expense of other businesses.



Yes, Mussolini Called His System "Corporatism," But That's Not Exactly What You Call "Corporatism"
First off, much of the way in which corporatism is used by libertarians and too many Objectivists is misleading. Libertarians often say that corporatism was coined by Benito Mussolini to describe his political-ecosystem system in which specific corporations were given government-enforced monopolistic franchises and cartels. If the government provides favors to multinational corporations like McDonald's or Monsanto, that is ostensively Mussolini's corporatism in action.  Even Robert F. Kennedy, Jr., who has expressed animus toward the Cato Institute, has offered that point on page 194 of this book.

But to say that U.S. government favors to business are forms of "corporatism" reminiscent of Mussolini is misleading. Both types of "corporatism" violate laissez faire, but they are dissimilar enough to place in separate categories.

When Mussolini called his politics "corporatist," he was describing something with important differences from the notion of the government favoring an entity like McDonald's or Monsanto. The "corporations" of Mussolini's corporatism were state-enforced monopolies that were confined to a single nation-state; they are not what one would presently call a for-profit multinational corporation.  Corporatist "corporations" were nominally private but Italians under Mussolini still recognized these entities as largely appendages of the government.

"Corporations" under Mussolini were comparable to electrical utility monopolies, the U.S. Postal Service, the Federal Reserve, and Amtrak. Analogous "corporations" under FDR's New Deal would be the Resolution Finance Corporation, the Federal Deposit Insurance Corporation, and the Tennessee Valley Authority. Also think of the Corporation for Public Broadcasting. Note that none of these are multinational or transnational organizations; because of their quasi-governmental status, they are confined to specific nation-states.

These are also the sorts of organizations that Adam Smith, Thomas Paine, and Andrew Jackson criticized when they spoke unfavorably of "corporations."  They meant large government-enforced cartels against which no independent party could compete legally; they meant guilds out of the Middle Ages, somewhat comparable to modern government employee unions. It is therefore disingenuous when leftists such as Noam Chomsky and Jeet Heer proclaim that Adam Smith's complaints of "corporations" imply that Smith would necessarily denounce multinational for-profit firms such as McDonald's.

 While employees of these organizations might bristle at being called government employees, their institutions cannot easily be confused with multinational corporations in the vein of McDonald's, Monsanto, Solyndra, Tesla Motors, and Goldman Sachs. This is the reason why Mussolini favorably compared his system of government to the New Deal -- a compliment that the architects of the New Deal did not reject.

Mussolini's "corporatism" is therefore distinct from a system where the government favors specific multinational corporations like McDonald's. Both systems are variants of statism, but it is misleading to say that governmental favors for McDonald's and other multinational corporations are an application of Mussolini's "corporatism." That is, if the political economy under Mussolini is what we call corporatism, then U.S. governmental favors to McDonald's and other multinational corporations is not corporatism.

And there is a more fundamental complaint.



Corporatism, As a Pejorative, Implies Modern For-Profit Corporations Are Generally Bad
If your term for a negative phenomenon is "X-ism," your use of X- as the prefix implies that X is the party or entity primarily to blame for the problem. That is even more apparent with the epithet corporatocracy. I say "statism" or "etatism" (actually, I coined governism) because I think that the State is the institution that is to blame for such initiations of the use of force on the part of government employees. Now we have this corrupt system where corporations that buy favors from politicians receive such favors and corporations that refrain from buying favors end up the target of governmental retribution. If we designate this as corporatism, then the implication is that corporations are the institution that is most to blame for the problem. Given that it is the politicians who are extorting favor from corporations, I find it unfair to insinuate that corporations and their owners are the most blameworthy institution in this scenario.

It is for similar reasons that I avoid bandying around scientism. Scientism is allegedly the phenomenon of people inappropriately trying to apply rational and scientific methods to areas of philosophy where reason and science ostensibly do not apply. For instance, if you try to say that facts can clue us in on the morally correct course of action, you are accused of scientism because reason and science supposedly cannot be applied to philosophic topics like ethics. The implication is that scientism amounts to being too sciency and corporatism is being too corporationy. I dispute Steven Pinker on several respects, but he is correct to repudiate scientism as the smear term that it is.

To illustrate, I object to farm subsidies. I do not agree with the farm subsidy program. But suppose the term I used for this phenomenon was "farmerism." If I referred to this oppressive situation as "farmerism," would it not immediately bring to mind the notion that farmers, and not the governmental regulatory apparatus, must be the main focus of blame for the practice?

I use statism because there is too much "State." I suppose one can turn this around on me, and say, "If you use statism, aren't you implying the State is inherently bad? Are you a Murray Rothbard anarchist after all?" I do not think the State is inherently bad. I do, though, think that when the government initiates the use of force, the government/State is the institution that must be looked upon with distrust. I suppose a more specific term would be initiation-of-the-use-of-physical-force-ism.



"Capitalism" Good; "Corporations" Bad?
I am aware of libertarian arguments that corporations are inherently bad. They say that corporations are evil because of the government recognizing that a corporation has limited liability, supposedly meaning that if a corporation's owner damages you and your property, you can only sue the corporation and not go after the owners' personal assets. These libertarians conclude that a corporation is therefore "a creature of the State."   Stefan Molyneux advances this idea. [Old link went here.  --S.H. on 24 Jan. 2018.]

I once fell for those arguments.  Yet it is actually not true that if corporate executives victimize you, you are unable to go after their personal assets in a lawsuit. If justice requires that you not only sue a corporation for its assets, but also seek redress by targeting the corporation owners' personal assets, such methods are available. That is called "piercing the corporate veil." Lawyers have told me that this is a more complicated process. Still, the possibility exists.  As a historical case study, Charles B. Matthews, a cofounder of the Buffalo Lubricating Company, filed a lawsuit against the Vacuum Oil Company (a subsidiary of Standard Oil) and filed personal lawsuits against Vacuum shareholders John D. Archbold and Henry H. Rogers.  Matthews did not win those suits, but it was entirely legal for him to attempt to lay claim to Achbold's and Rogers's personal assets as he also sued their corporation. I do not think the complications under the present legal system are sufficient reason to judge corporations as inherently violent institutions.

While I do not go around calling myself "pro-corporatism," I am unabashedly pro-corporation.

Moreover, if one is a libertarian who has general distrust for big institutions, then it does not make sense to assume that the word capitalism necessarily comes closer to describing the laissez-faireist position than corporatism does. Capitalism was coined as a pejorative in a manner very similar to the way in which libertarians and leftists apply corporatism as a pejorative. Contrary to Thomas J. DiLorenzo's inaccuracy (page 1 of this book), it was not Karl Marx, but a Marxist contemporary of Friedrich Engels' -- Werner Sombart -- who coined capitalism (see page 237 of Fernaud Braudel's Civilization and Capitalism volume 2: The Wheels of Commerce).

Sombart intended for the expression to be an insult. He said that people who agreed with him were "socialist" because they were social, and "communist" because they were for the "community" in their "commune." He then set up the alternative as a foil to that. If you disagree with Sombart, you are for "capitalism," meaning money-ism. Instead of being social, your priority is money and the factory machinery that the money purchases; you prioritize that over your fellow human beings, the workers. And who held all the capital? Big banks, big institutions, big corporations. In Sombart's time, to rail against "capital" was the same as to rail against "corporations." If you called yourself a capitalist, it meant you sided with capital over human beings, just as now libertarians and leftists tell us that to be a corporatist is to side with multinational corporations over human beings.

It is a testament to the horse sense of the American people that, rather than be cowed and intimidated by the insult capitalist, they took it as a badge of honor. Sombart's name-calling backfired. Americans rejected the idea that socialism is synonymous with "social" and that communism is synonymous with "community." Hence, even Americans who are actually rather hostile to the free market, such as Bill O'Reilly, consider socialist to be demeaning and think it is preferable to be pegged a capitalist.

That Americans are less intimidated by the term capitalism than corporatism, though, does not change that when you look at the roots of these words, capitalism does not have a meaning more suited to the anti-corporate libertarian's ideology than corporatism does.  That is why the Rothbard-influenced anarchist Kevin Carson pronounces himself a "free-market anti-capitalist."



Silly, It's OK to Be "Pro-Business"  😊
For reasons comparable to their contrived capitalism-corporatism distinction, I also hear libertarians defensively propound, "Stop calling me 'pro-business' or 'pro-corporation'!  I am 'pro-market'!  Get it straight!"  Steven Horwitz of Bleeding Heart Libertarians does this, as does the Cato Institute's David Boaz.  Mark Ehrenfeld says that University of Chicago economist Luigi Zingales thinks of President Donald Trump's policies as pro-business rather than pro-market. Even the Evonomics website, which is not friendly to laissez faire or libertarians, says this.

Again, these pundits mean that to be "pro-business" and "pro-corporation" is for the State to give preference to some businesses and corporations over others, subverting laissez faire by the imposition of government regulations, in the form of tariffs and tax-funded subsidies. But to refer to these measures as pro-business and pro-corporation is misleading. When the State affords privileges to some businesses and corporations, it forcibly detracts from the well-being of other businesses and corporations.

As a case study, one might say that it was anti-free-market but "pro-business" when George W. Bush and Barack Obama each placed tariffs against foreign steel.   Supposedly these U.S. Presidents were pro-business in how they advantaged domestic steel producers and domestic steelworkers unions. But they certainly were not pro-business in helping international steel producers. Insofar as international steel producers were concerned, such measures were anti-business.

Moreover, it was not preferential treatment toward the domestic U.S. businesses that consume steel, such as construction companies, which now had to pay higher prices for steel than they otherwise would. U.S. employees of steel-using companies outnumber U.S. steelworkers 50 to 1. As far as these U.S.-based steel-using firms are concerned, the steel tariffs are anti-business and anti-corporation. Therefore, it is not pro-business or pro-corporation for the State to give preferential privileges to some firms over others.

Suppose that someone got away with stealing because he was the governor's nephew. The governor's nephew would be receiving a privileged status from the State. Would it be accurate to say that the State's special treatment of the governor's nephew was "pro-human," because the nephew is a human, and therefore a human received special treatment? No, it would not be pro-human, because that special treatment allowed the nephew to victimize another human.

By the same token, government regulations that handicap some businesses and corporations over others -- handling them unequally under the law -- is not pro-business. To maintain a free market -- to have all businesses and corporations treated equally under the law -- is pro-business and pro-corporation, just as punishing murderers is pro-human.



Conclusion
Proclamations such as "I'm pro-capitalism and pro-market, not corporatist or pro-business or pro-corporation; learn the difference!" are not worth it. There is nothing in those sentiments to appreciate. I am liquidating the cliche. To value free markets and capitalism is largely to value business and corporations.



On November 30, 2016, this was updated to include the example of Luigi Zingales calling Donald Trump "pro-business" bu not "pro-market." On January 24, 2018, I replaced a link to a quotation from Stefan Molyneux. I should return to the topic of that in the future, because of its implications. 

Humans Stealing Jobs from Robots

Stuart K. Hayashi

In an article titled "Mercedes Boots Robots from the Production Line," Bloomberg Business reports,

Mercedes-Benz offers the S-Class sedan with a growing array of options such as carbon-fiber trim, heated and cooled cupholders and four types of caps for the tire valves, and the carmaker’s robots can’t keep up. 

With customization key to wooing modern consumers, the flexibility and dexterity of human workers is reclaiming space on Mercedes’s assembly lines. . . . 

“Robots can’t deal with the degree of individualization and the many variants that we have today,” Markus Schaefer, the German automaker’s head of production, said at its factory in Sindelfingen, the anchor of the Daimler AG unit’s global manufacturing network. “We’re saving money and safeguarding our future by employing more people.” . . . 

With manufacturing focused around a skilled crew of workers, Mercedes can shift a production line in a weekend instead of the weeks needed in the past to reprogram robots and shift assembly patterns, Schaefer said. During that downtime, production would be at a standstill.

The robots' union is not pleased.