Module  

Segue Way into and Overview/summary  of this module’s perspective and overriding argument

This module resumes the tale started way back in our second module, Digging a Ditch.

When we left that module, the Constitutional Convention had just approved Section XXXX and inserted it into the Constitution. The events that in large measure had raised Patent Law to such a high priority that it deserved its own Constitutional provision were based in the steamboat rivalries described in that module. Because of the design and custom practiced by Colonies/States) and the poorly-institutionalized national government that was the Articles of Confederation, technological innovation had long since departed from English common law and its “philosophy” regarding patents/innovation. In the United States the pervasive form of patent was was the granting of a state monopoly on the application of that technology, and in the case of the Articles a patent that was more of a commercial financing device (sale of granted western lands to secure venture capital) than a protection of an idea, process, or machinery-invention. This is what the First Congress and Secretary of State Thomas Jefferson inherited–along with an unresolved, steroidal and divisive steamboat innovation/commercialization/entrepreneurial battle/rivalry. That technology offered a plausible path to cross the Appalachians and settle the western interior. The political will to do so was in place. What was needed was a public innovation system sufficiently empowered to provide security across state market areas, and offered investors a reasonable future vision to justify their investment. That did not happen, however.

What little innovation/entrepreneurial infrastructure Jefferson set up previous to his not-too-friendly departure from Washington’s administration was ineffectual and broken from the get-go. The  paralysis and partisan realignment that frustrated Washington’s second administration shattered the fragile Federalist Tribe consensus. Whatever cohesion the Federalists had enjoyed was lost completely in the 1796 presidential election. Jefferson ran against a much-disliked Adams, and still somehow failed to muster the needed electoral votes. By accident, Jefferson wound up a very close second, and amazingly, because of the decision-structure of the electoral college in that period, Jefferson wound up as Adam’s Vice-President. The Adam’s administration, whatever the merits of Adams as a Founding Father and President, was a policy-making disaster–with Alien and Sedition Laws and foreign policy dominant. A little-known “Quasi-War” was fought with Great Britain, and the prospects of a sustained American Republic were under considerable stress–Adams spent what discretionary funds he had available on a direct military build-up.

Domestically, any Federalist effort to assert the federal government’s control over the “commanding heights of the American economy” was substantially limited. Instead much of it devolved necessarily to similarly all-too-limited State governments–most of which were wracked by their own version of the Jefferson-Adams partisanship. In the decades that followed an emerging agricultural and manufacturing capitalism incrementally defined itself, and very loosely regulated proceeded along its own unplanned, but semi-logical path–of unchecked creative destruction. Aptly summarized by Alan Greenspan, 19th Century capitalism “became the world’s greatest economy … The key to to America’s success [lay] in its unique toleration for ‘creative destruction’ [defined as] … reallocation of society’s resources from less productive pursuits to more productive ones–from spinning jennies to factories [from canals to railroads] … or from horse and buggies to motor cars” [99] Alan Greenspan adapted from his book, Capitalism in America: a History (2018), WSJ, “Review: the Great American Growth Machine, October 13-, 2018, C1. The lack of an effective national and state government innovation paradigm did not stop or end innovation (or mitigate its disruption), it simply left it to the aggregate of private decisions.

As far as ED is concerned, the failure to cement the primacy of the national government in leading a nationally-defined economic development agenda led to the decentralized State-driven, and later municipal Big City-driven economic development. In immediate jeopardy was Washington’s chief economic development priority/strategy (developmental transportation infrastructure and trans-Appalachian western settlement/city-building and the security its success would provide meaningful national defense sufficient to ensure national survival. The War of 1812 (the so-called Second War of Independence) was its natural conclusion. Developmental transportation infrastructure devolved to the States who eagerly fashioned their own DTIS policy agendas–supplemented meagerly (saving preferred Virginia) by the Tidewater Virginia dynasty national government. That story will be told in future modules.

Pre-War of 1812 state-led DTIS was a decidedly mixed bag–producing more failure, certainly more roads than canals. This was partially because transportation mode technology was incapable ofo crossing over the Appalachians–the steamboat was in limbo during these years. Combined with the fragility/instability of state governments, this inevitably meant what migration and settlement there was, continued by wagons and foot traffic over roads that were little more than trails with toll bridges over the more fearsome chasms. As we shall later see, a National Road was approved, surveyed, and construction followed (we shall pick up on this in a future module). Coastal trade, not interior hinterland development, remained central to economic bases.  Kentucky became a state in 1792, Tennessee in 1796, Ohio in 1803, but Indiana became a state only in 1816, Alabama, 1819–Michigan only 1836. The Erie Canal, the great disruptive transportation infrastructure, in the only coastal geography not fatally crippled by the Appalachians’s  elevated and rocky barrier, did not open for business until 1825-6. Washington’s dream, and his well-considered ED strategy, did not live up to its potential–in large measure because a reasonably proved mode of transportation technology, the steamboat, could not ply those short-mileage canals that were built, and could not safely be utilized in western territories and the Mississippi River. Internal Improvements proved to be a post-War of 1812 development.

Steamboat Technology and the Birth of Patent Policy in the Washington Administration

The reader aware of the 1790 on-goings/goings on between competing steamboat “inventors” (described in the above-referenced module), knew that the Articles patent process which lingered on into 1790 were: (1) hopelessly politicized and decentralized to the state level with competing state (and Articles) legislatures granting special “monopolies” which were incorporated into state-chartered corporations; (2) hopelessly interwove,  i.e. conflated, the technological “invention” (combustion engine) with a commercial franchise monopoly in a given state. Given the almost inevitable reality of the day, that meant competing, rival “inventions” diffused among the several states–which inevitably meant competing groups of investors, and a total lack of interstate commercial sanity. That an invention/innovation could never achieve national “scale” in this non-system of an innovation process was yet another given. Amazingly, the innovation environment that resulted from this almost libertarian non-system did not impede other inventions and innovation, which was simply able by brute productivity, profitability, market/investor power, with chutzpah and chicanery tossed in, to fabricate success in a innovative war of all, against all. During this period, one might remember, the factory, reverse engineered, i.e semi-stolen by Slater from England, evolved over these decades to establishing in their wake a compelling foothold over the American industrial economy.

Without going into any more detail, in a nutshell the steamboat, more precisely sustainable steamboat startups, did not appear until 1806-7-when Robert Fulton returned from France, found an investor, and obtained a New York state commercial monopoly on the Hudson River that, after a couple of decades, ran afoul of a Staten Island ferry boat entrepreneur (a fellow named Vanderbilt) and the State of New Jersey. That set the stage for Marshall’s Supreme Court decision, Gibbons v. Ogden (1824) that unequivocally empowered the national government to regulate “interstate commerce”–doing little, however, of resolving the problem of “protection” of an invention or technology.

So much for the overview–onto Jefferson as Patent Lawyer

The Patent Law of 1790 And Jefferson as Patent Lawyer

Technological innovation frequently is characterized by virtually simultaneous similar innovations/technologies in divergent geographies and countries. Typically an invention whose time has come, has many authors, each building on and stealing from each other. The Thirteen competing States thus had ample opportunity to grant conflicting monopolies to different prototypes–which is exactly what happened to rival steamboat innovations. Since Washington and his allies (which included fellow investors Madison and Jefferson) had a horse in the steamboat race, the steamboat rivalry was never out of top decision-makers mindset. So, as we start this module, the reader must know that Rumsey-Fitch (and others) steamboat rivalry is back–it never went away.

That rivalry hindered any hope of DTIS success–believed by many Federalists, including Washington, to be the central pillar of the nation’s first economic (and national defense) priority–settlement of the trans-Appalachian western hinterland using canals. In that strategy Washington and others had placed their hopes on a canal based on the steamboat combustion engine that would carry cargo and people upstream, against the current over the top and across the Appalachian Mountains to the rivers of Ohio and Kentucky/Tennessee, which connected to the mighty Mississippi River.

The matter was placed in the hands of Secretary of State Thomas Jefferson, newly-arrived in Washington from his previous position as Ambassador to France. Why did the State Department hold policy jurisdiction for a domestic matter such as Patent Law the reader may ask? Congress, in its infinite wisdom, located the Patent Office in the Department of State, along with a hodge-podge of other bureaucracies, which, given the minuscule size of the national government bureaucracy Congress simply dumped into State. Pressured by any number of inventors, investors, and Washington himself, Congress approved a patent law in April, 1790. It entrusted the matter to the Secretary of State’s office and its five person bureaucracy, the power to issue patents. The deciding body was a panel consisted of the Secretary of State, Treasury and the Attorney General. If approved by this august and presumably busy panel, the inventor paid a fee, and then was responsible to register formally his invention in each state at his own expense. It also required the Secretary of State to formally review each application and to formally notify each state if approved. Having little expertise in the technology, the panel ratified each application it received, semi-automatically. According, inventors vehemently complained that the process was incredibly expensive, lacked sanctions if violated, was impossible to enforce in any case, and hence was essentially worthless. Jefferson had arrived in DC, only the month before passage of the 1790 Act–thus unable to assume any involvement in Congress’s deliberations on the matter.

So Jefferson not only inherited the rival steamboat entrepreneurs (and their supporters and investors), but a slew of eighty or so additional requests for patents. From April 1790 until 1793, only 57 patents were issued by Jefferson.The original process devised by Congress was effectively still-born, unworkable in practice. All it did was stir up the steamboat patent war to new shrill heights. Rumsey since 1788 acquired two English patents and an alliance (which proved to be temporary) with James Watt in London. Rumsey still commanded an impressive array of Founding Father/Federalist support (did we mention that in 1788, when in Paris, Rumsey stayed with Ambassador Jefferson at his house?) [99] Thomas H. Cox, Gibbons v. Ogden: Law and Society in the Early Republic (Ohio University Press, 2009), p. 12. Fitch had stayed in-country and in his irascible manner remained in the faces of Congress, the newspapers, and viewers on the Susquehanna who witnessed his steamboat experiment with newer technology (not all of which actually worked). Congress and its 1790 Patent Law were probably his chief “victory”–and Fitch hated that as well. He attacked it vehemently.

Under pressure, apparently threw up his hands and expressed a probably sincere thought that patents were undemocratic in nature, drafted new legislation to “reform” the original process in February 1791. His bill was in many ways inferior to the failed original legislation, making the process even more costly and time-consuming–including registering the patent and publishing a newspaper notification three times in each district court in the nation. Fitch went hyperbolic that “he had no idea [how to] go to all the way from Kentucky to Cape Cod, and quite the Distance of Province of Maine“. Rumsey’s allies, for once, united with Fitch in opposing the “reform” [33] Thomas Cox, Gibbons v. Ogden Chapter 1. Paralyzed and somewhat frightened by the reaction, the august panel finally met, reviewed Fitch’s, Rumsey and several other steamboat applications, but then declined to hold a hearing on any, and stated the investors had best wait until Congress approved new legislation.

So in April 1790 Jefferson sits down at his desk and probably in seconds realized the 1790 Patent Law was not going to work–and so did its Panel. Thus Jefferson (1) secured permission from Congress to devise another, and in the interim  (2) deferred a decision on granting a steamboat patent until a new patent system was approved. With a steamboat patent in limbo, Rumsey continued his efforts to secure British capital and technological partnerships. Giving it his all, Rumsey died in London in 1792–literally while addressing the British Society of Arts on steamboats he suffered a stroke. Fitch meanwhile, frustrated (as always) with federal inaction waited for some decision that will come after Jefferson’s proposed legislation was finally approved by Congress.

So Where Did Jefferson Stand on Patents? Watch What He Does, Not What He Says!

Jefferson knew in advance to his arrival in Washington that patents were within his State Department purview. Before he left France he wrote Madison asking for a briefing on patent law and the new Constitution. That dialogue was unfortunate from our perspective because it opens up a really distracting, but critically-important discussion on the legal/philosophical underpinnings of patent law: the question of who in fact “owns/controls the invention and thus on what basis did the federal government have to award a patent to anybody? Sorry–can’t avoid it. These questions are still fundamental today. As we grapple with the Internet, we still fuss about whether, who, and what can be either regulated and just what patents can be valid (Qualcom is a case in point). Moreover these issues dominated, haunted is a better word, Supreme Court patent law deliberations since Gibbons v. Ogden. In 1836 the Court dipped its toe into the patent water, and has regretted it since.

Stated in my usual stultifyingly stupid simplicity how and who gets a patent revolves around a determination of whether a patent is a (natural law) individual right–and hence the property of the individual inventor/corporation (which BTW the inventor usually thinks of it)–or is a patent a temporal “monopoly” in the ownership and use of a technology/innovation. Does an inventor obtain a patent as an inalienable individual right, or a market monopolistic “privilege” granted by a government to accomplish desired social ends (prosperity, for example). The distinction pits natural law advocates against social contract proponents. When Jefferson asked Madison for advice, he was asking the right guy, because Madison had taken a position on the matter in Federalist No. 43 (Federalist Papers) and Madison was then viewed by most as America’s chief authority on the “original intent” behind the Constitution.  [99] Edward C. Walterscheid, Charting a Novel Course: the Creation of the Patent Act of 1790 (AIPLA, Q1, (1977, pp. 460-6) and Adam Mossoff “Who Cares What Thomas Jefferson Thought about Patents–Reevaluating the Patent Privilege in Historical Context” (92 Cornell Law Review, 953, 2007 http://scholarship.law.cornell.edu/clr/vol92/iss5/2.

Madison responded to Jefferson, but the response seemed to differ from his earlier written comments in Federalist 43–which in legal circles has resulted in much discussion of what he actually meant in Federalist 43.  Madison’s pithy several sentence reference to patent law in Federalist 43, was somewhat ambiguous in his intent–what question was he addressing. To many (myself included) he seems most focused on the question of whether states or the federal government should hold jurisdiction on patents. Madison in 43 clearly indicates patent law is a national, i.e. enumerated power, but his implied position on right versus privilege is not precise. We can sidestep this discussion because his letter to Jefferson makes very clear that Madison sees a patent as a privilege that can only be secured in this case by national legislation, i.e. government action, which grants “a monopoly”. The invention/innovation was the property of an individual to which he/she had a natural right, but the grant of a temporal monopoly of markets and the use of the technology was NOT a natural right, but a privilege made by government to accomplish a social end [99] (see p.997 Mossoff).

By focusing government’s authority to issue a patent on a grant of temporal (and inherent monetary/administrative and economic use of the invention) monopoly, Madison opened the Pandora’s Box of Jefferson’s myths and fears relating to monopolies. Is a “monopoly” a horrible thing in and of itself, or is a monopoly a useful tool by which one can achieve larger ends. As the reader might hazard, that question asked of Alexander Hamilton, sitting across the street in a Department more logical for patent jurisdiction than the State Department, may well have yielded a different answer than Jefferson’s? . The matter lay in Jefferson’s mind not Hamilton’s, however, and Jefferson’s views on monopolies, for example his position on the National Bank, are well known. Hence, Jefferson’s position on patent monopolies, famously stated in a 1813 letter from him to inventor Issac McPherson, are self-evident:

Stable ownership [of the invention] is the gift of social  law … (I)f an idea [invention], the fugitive fermentation of an individual brain, could, of natural right be claimed as exclusive and stable property … only if he keeps it to himself, but the moment it is divulged, it forces itself into the possession of everyone, and the receiver cannot dispossess himself of it. … He who receives an idea from me, receives instruction himself without lessening mine; as he who lights his taper at mine {a candle metaphor], receives light without darkening me. That ideas should freely spread from one to another, over the globe, for the moral and mutual instruction of man, and improvement of his condition, seems to have been peculiarly and benevolently designed by nature … Inventions then cannot in nature, be subject of property. Society may give an exclusive right to the profits arising from them, as an encouragement to men to pursue ideas which may produce utility, but this may or may not be done according to the will and convenience of the society, without claim or complaint from somebody. … the embarrassment of an exclusive patent’ [was justified only because}‘monopolies of invention [serve] the benefit of society [99] quoted from Massoff, p. 960-1, p. 554.]

So clear and so well-stated. The problem for us is the letter was written ten years after the 1793 Patent Law which Jefferson authored– nine years after Jefferson resigned from Secretary of State, and four years after Jefferson left the Presidency. Jefferson as he wrote the McPherson letter was a private individual, retired from public office. Does the McPherson letter actually and faithfully describe the Patent Law as proposed to Congress, and adopted by Congress in 1793. It does not! It seems that what Jefferson says on a matter in private, does not necessarily correspond to what Jefferson actually did when he was in office–and is not necessarily congruent with his making of public policy. In future modules this problem will be considered at some length, because currently many conflate incorrectly what Jefferson thinks privately on an issue in his advanced years explains how he acted on that issue when in office.

Jefferson quite obviously had second thoughts on the matter and his “reform bill”, sent to Congress in March 1792, outlined a federal patent policy and process that upon application for a patent by an inventor subsequent approval of the patent was near-automatic after some diligence for “originality”. The Act simply charged the Secretary of State with issuing a patent to any applicant “who complied with a set of prescribed formalities, swore his invention was original, and paid a fee. It broadened the [definition of what was eligible for a patent] to include any ‘new and useful improvement’ to an existing product … [and] left any claims of the novelty and validity of an invention for the courts to decide [99] https://www.sethkaller.com/item/1169-22424.99-Jefferson-Signed-Patent-Act-of-1793  The system he set up–obviously as broken and worthless as the one it replaced, only more so– lasted for the next forty years, during which patents were issued at annual rate of 600.

On top of this the inventor was still burdened with registering his/her patent individually in every judicial district in the nation, but also granted any potential offender to an existing patent a  valid defense that he/she was unaware of the older patent which, if asserted, permitted approval of the “violating” patent. The Act further specified that the patent itself was a “private intellectual property of their owners and that the public would not be allowed to view the [underlying] documents until the originals [the patent monopoly] expired. Patents could only be granted to American citizens (which in 1790 as it is today is an issue–Congress expanded in 1800 Jefferson’s language to include resident aliens] and federal patents were superior to any patent issued by a State previous to the ratification of the Constitution (which invalidated both Rumsey’s and Fitch’s state patent monopolies) [99] Cox, Gibbons v. Ogden , p. 14. If anything, Jefferson. The law allowed competing patent applications to each acquire a patent, and did not attempt to sort through the messy process of who invented what–in short overlapping patents further weakened the power and utility of the national patent protection still further. Jefferson’s patent process acted as if a patent was an individual property right, which if it survived the rigors of the approval process, was automatic–and easily violated by any competitor or rival.

Upon approval by Congress, Jefferson awarded patents to both Rumsey, now dead, and Fitch–and to two other rival steamboat patents which had emerged in the limbo period. Jefferson before he left the position of Secretary of State, less than a year, issued 57 patents–without any personal review.

Thomas Cox wonderfully summarizes the “patent/innovation” ecosystem that resulted from the 1793 Patent Law

Jefferson attempted to create a federal patent system based on republican principles, by which issues regarding scientific achievement would be better settled between gentlemen and the success of an invention was guaranteed by that invention’s superiority. More appropriately he left states as the logical spheres in which to defend intellectual property rights. Because the patent clause of the U.S. Constitution  provided only vague guidelines for the protection of individual property, American inventors defended their interests at the regional level through state granted monopolies [99] Cox, Gibbons v. Ogden, p. 16.

With incredible irony, the state-chartered corporation, which Jefferson hated with a passion, became the principal EDO for American innovation and technology application. That is what Fulton relied upon–and it set up the situation that led to Gibbons v. Ogden.

Fitch, giving up on America, went to France to acquire support and capital–and arrived just as the French Revolution executed Louis XVI–another example of his poor timing.  Unsuccessful he went to England, where Rumsey supporters, contacts of Benjamin Franklin in particular, fought him tooth and nail. Out of money, he hired on as a sailor and returned to the United States, writing an autobiography. Constantly on the edge of economic ruin, he was virtually penniless,  his “franchise” effectively ruined, and his circle of investors quite disillusioned. Poverty-stricken, and by this point mentally distraught, for the next five years he traveled from state to state trying to make his case,  and in 1798 his suicide resulted from a fatal combination of wine and opium [99]  Thomas H. Cox, Gibbons v. Ogden, p. 15.

My final thought involves Washington who obviously deferred to Jefferson in this matter for reasons I can only speculate. It could be he was preoccupied with other matters by this point, city-building, national defense, Indian affairs, and the internal ideological polarization of his administration. Perhaps after Rumsey’s death he no longer had a horse in the race?

Wrapping Up–Federalist Tribe Innovation “Eco-Non-System”

Without reading any further, the reader knows that whatever Mr. Jefferson, and the various federal patent laws described in this module did, they did not create a national patent process that protected and thereby stimulated and diffused innovation and invention. Caught, for example, in the Jeffersonian non-system was Eli Whitney’s 1795 cotton gin–which he patented with the federal government–only to see it reverse engineered by literally hundreds of tinkers without sanction, royalty, or penalty, so that in a handful of years (three) he and his investors went bankrupt.  Most of all the non-innovation system created a de facto innovation ecosystem determined by the aggregate interaction of a blossoming American capitalism, marginally checked by a  limited government, and placed in a geography that offered continental growth and opportunity for domestic and immigrant mobility  that produced special, decentralized-regional, almost unique semi-libertarian cast to 19th Century American ED and economic growth. The de facto innovation system that persisted through much of the Early Republic–until 1836 before it was initially reformed–remained politicized and decentralized, and could be successfully employed only when legitimized by its inclusion in state/national-chartered corporation.

In terms of economic development, this meant (1) was no  national innovation policy until the 1840’s, and (2) innovation policy was dominated by States, and the willingness of state legislatures to grant “commercial monopolies to an innovation” and their willingness to employ a highly controversial state-chartered corporation; (3) wreaked an enormous havoc on implementation of developmental transportation infrastructure–the chief post-1800 economic development paradigm. But most surprisingly  the Washington administration (Jefferson principally) unconsciously installed an innovation eco-system that, without intending to be so–or even sensing what it was doing–was roughly congruent Joseph Schumpeter’s central message: that innovation, entrepreneurship and creative destruction were among capitalism chief drivers of economic change and growth. Federalists failure to set up any effective national innovation or entrepreneurial structure/policy, and by so doing they left these drivers of capitalism mostly on their own, decentralized to states who had other priorities, and limited government at all levels that, while putting occasional speed bumps on innovation and entrepreneurism let the unconscious expression of capitalism create its own version of continental creative destruction. American innovation policy in particular was refereed during the 19th Century by a reactive federal and state Supreme Courts, and eventually by an emerging federal/state regulatory bureaucracy in the later decades of the century.

Much of this reaction was triggered by persistent “populist”, i.e. mass movements targeted against economic and political elites–which were most impactful when elites fragmented, as they usually did. Until these reactions were able to check behavior of a self-absorbed continental capitalism, creative destruction emerged almost naturally from a mostly-unrestrained capitalism. In that sense, an unrestrained American continental capitalism, with an spontaneous creative destruction dynamic, generated its regulating counter-reaction through populist movements and partisan realignments resulting in state/local policy system change, and subtly by a fragmentation of capitalism’s elites. That changed incrementally, but radically in the course of the 20th Century–and certainly the 21st when knowledge-based, entrepreneur-driven disruptive innovation, fostered by conscious action of government at all levels, has emerged as a dominating economic development paradigm.