Against Intellectual Monopoly

was not pressed by the Russian government until
40 years later." No-longer-controversial facts about Tesla are reported in various
places, including Johnston (1982) and Lomas (1999), and then continuing on with
http://www.pbs.org/tesla/ll/ll_whoradio.html (accessed February 24, 2008) and the
many other sites that in recent years have rediscovered Tesla, the genius that the
patent system ignored.

    39. Jackson (1897), quoted in Hong (2001), p. 17; it is also referenced in Burns (2004).
    40. Hong (2001), p. 23.
    41. Hong (2001), p. 13, emphasis added.
    42. As reported at http://www.pbs.org/tesla/ll/11_whoradio.html.
    43. Ibid.
    44. The details of the story of Glenn Curtiss and the Wright brothers can be found in
the excellent book by Shulman (2003).
    45. Brock (1981) provides a detailed and certainly unbiased (better said, biased, but on
the other side) history of both the telegraph and the telephone industries that make
up the telecommunications industry in the title. As the author seems to believe
that monopoly pricing, cartels, stealing of inventions, political favors, and all the
legal tricks that come with them, are business tools that any good entrepreneur
should master and possibly adopt, he does not spare us the gory details. The book
was written before U.S. Congress ruled that Bell had stolen the telephone invention
from Antonio Meucci; hence, Brock reports only that Bell's patent was filed two
hours earlier of an equivalent one by Elisha Gray that described the same invention.
This, obviously, makes the whole thing even more entertaining in retrospect, as
it proves once again that big simultaneous inventions are more the rule than the
exception, and that big simultaneous stealing is also part of the feasible set (on
the latter, see http://www.esanet.it/chez_basilio/meucci_faq.htm, accessed February 24, 2008). Historical details about Antonio Meucci can now be found everywhere; for the U.S. Congress resolution, passed on June 16, 2002, see http://www.
guardian.co.uk/international/story/0,3604,738675,00.html (accessed February 24,
2008).
    As for the television, another "business is business" description can be found in
the paper by Maclaurin (1950). Maclaurin somehow recognizes that television was a
classical case of simultaneous invention, which was solved partly by forcibly pushing
out of the playing field some of the inventors, and partly by building a monopolistic cartel among the survivors. Like every good follower of Schumpeter, though,
Maclaurin concludes that the waste of productive capacity this involved, and the
monopolistic pricing it generated, were good things. What is good for RCA is good
for America, it seems. For different renditions of Philo T. Farnsworth's contribution
to the invention of television, see the sharp booklet by Roberts (2003) or the longer
and more romanticized biography by Schwartz (2003).

     

NINE
The Pharmaceutical Industry
    It is often argued that the best case for the existence of patents is in the
pharmaceutical industry. The fixed cost of innovation is large, with estimates
of the average cost of bringing a single new drug to market as high as $800
million in year 2000 dollars.' Patent protection is more limited in the
pharmaceutical industry than in other industries: because of the lengthy
gap between discovery and approval of a new drug, the effective monopoly
protection is estimated to last only twelve years - plus the three- to fiveyear extensions as allowed by the Drug Price Competition and Patent Term
Restoration Act (known as the Hatch-Waxman Act) of September 1984.2
Indeed, according to the industry surveys mentioned in earlier chapters,
the only industry in which patents are thought to play an important role in
bringing new products to market is the pharmaceutical industry.
    The pharmaceutical industry is worthy of special consideration also for
another complementary reason. The technology operated by the pharmaceutical industry - the chemical and industrial processes through which
medicines are produced, packaged, and shipped - seems to fit the hypothesis of constant returns to scale almost perfectly. That is, the cost of shipping
the ten-millionth container of medicine is about the same as that of shipping
the first. From that come the many complaints about the pharmaceutical
companies not shipping medicines to poor countries - even poor African
consumers would be willing to pay the few additional cents needed to