What Do ‘Happy Birthday’ and the AIDS Drugs Have in Common?

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2015-09-24 – Tuesday I wrote about a hedge fund manager who bought the rights to the drug Daraprim and immediately jacked the price up over 5000% (since partially rescinded).

Another piece of bought-and-sold intellectual property was in the news the same day. It was not a drug, but rather was a song: the “Happy Birthday” song. On Tuesday, a Los Angeles court ruled that “Happy Birthday” is in the public domain and that, Warner Music Group, which bought the (now invalidated) rights to the song in 1988 could no longer collect licensing fees from people who perform it for money. They were collecting $2 million a year.

* * *

Article I, Section 8 of the U.S. Constitution provides:

The Congress shall have power … To promote the Progress of Science and useful Arts, by securing for limited Times to Authors and Inventors the exclusive Right to their respective Writings and Discoveries.

This is the clause that gives rise to our modern patent and copyright laws. You might notice from this language that the idea behind patents and copyrights is to give valuable exclusive rights to “Authors and Inventors.” You might notice from these stories that no authors or inventors were involved.

These two cases (and many others like them) involve traders, not authors or inventors.

So how do we get from trying to protect creative genius to protecting (or not, in the case of “Happy Birthday”) the rights of people who merely buy and sell derivative rights?

The problem is that the main way for authors and inventors to profit from their constitutionally protected exclusive rights is to sell them. So it’s really not a bad idea that they be permitted to do so.

What’s happened in recent years, though, is that the “limited time” for which the constitution authorizes these exclusive rights have been expanded beyond human lifetimes. This and other factors have made intellectual property a trader’s right rather than an author/inventor right.

An author or inventor can sell their right for $1,000 and the traders can make millions or billions.

It’s no wonder that the brightest kids in the country are lining up for jobs in the trading world rather than putting in the work to create something new.

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