Guest Post by Charles Duan of Public Knowledge
The question of whether patents are monopolies is one of ongoing debate. But an important aspect of that debate is the correct meaning of the word “monopoly.” A change in the word’s meaning over the last few centuries can explain at least some of the differing opinions on the question.
Today, the word “monopoly” refers to a concentration of economic market power in a single firm or entity. But up through the early 19th century, that was not the accepted definition. In that time period, a monopoly was a government grant of an exclusive right, more akin to a franchise or government contract.
The leading definition comes from the English jurist Sir Edward Coke. (The commonly used style “Lord Coke” is incorrect for reasons given in note 3 of this brief.) Coke was the author of the English Statute of Monopolies and expounded upon the law in his 1644 Institutes on the Laws of England as follows:
A monopoly is an Institution, or allowance by the King by his Grant, Commission, or otherwise to any person or persons, bodies politique, or corporate, of or for the sole buying, selling, making, working, or using of any thing, whereby any person or persons, bodies politique, or corporate, are sought to be restrained of any freedome, or liberty that they had before, or hindered in their lawfull trade.
This definition carried over to America. George Mason, for example, objected to the proposed federal Constitution on the grounds that “the congress may grant monopolies in trade and commerce”—an objection that makes sense only if a monopoly is something that “the congress may grant.”
Under Coke’s definition, patents for inventions are almost certainly monopolies, albeit not “odious” monopolies. Colonial statutes of Massachusetts and Connecticut provided that “No monopolies shall be granted or allowed amongst us, but of such new Inventions”; the exception for inventions suggests that invention patents would otherwise have been proscribed monopolies. English and American cases also treated patents as monopolies, under this older meaning. See, e.g., Turner v. Winter, 99 Eng. Rep. 1274, 1276 (K.B. 1787) (“[E]very patent is calculated to give a monopoly to the patentee . . . .”); Wilson v. Rousseau, 45 U.S. (4 How.) 646, 678, 681–83 (1846). And of particular importance, the Framers agreed: As Walterscheid explains in detail, both Madison and Jefferson referred to invention patents as monopolies, but disagreed on how problematic the monopolies would be in practice.
To be sure, there were some who argued that patents for inventions were not monopolies, on the grounds that, being directed to new inventions that did not exist previously, those patents do not “restrain[] of any freedome, or liberty that [the people] had before.” This view, reviewed by Giles Rich in 1942, is perhaps subject to debate on the merits, but does not appear to take serious hold until the later 19th century—about the time that antitrust law and the modern definition of “monopoly” would have arisen.
And, more importantly, this older ground of debate has little to do with the modern question of whether patents are antitrust-style monopolies, which deals in considerations of market power or economic concentration. The modern question is interesting and important as well, but the authorities discussing the historical definition shed little light on the modern question, and vice versa.
This change in the meaning of “monopoly” from government decree to economic condition is likely familiar to many, but I had not seen it so far in my reading. The most recognition of the distinction that I can find is a footnote to a Federal Circuit opinion (by Judge Rich) noting “that ‘monopoly’ is used in different senses in patent and antitrust law,” but he gives no further explanation. And relevant today, none of the briefs in the Oil States case so far explicitly note the historical definition of “monopoly,” and at least one brief cites the modern definition in a historical context.