“Thoroughly researched and documented, this book should be read by all who are concerned about the decline in America’s competitiveness in the world market.”
—Alex Kozinski, Chief Judge, U.S. Court of Appeals for the Ninth Circuit

A menace is threatening technological innovation in America: the menace of patent trolls. Their modus operandi: Patent trolls make money—big money—through litigation, rather than by creating and selling products or services themselves. Typically, they acquire an overly broad patent and then lie in wait as the market for the patented product or service develops and becomes lucrative. Then they threaten legal action against firms they claim have violated their patent rights, often the most innovative companies in America. The cost to the U.S. economy is staggering, as Independent Institute Research Fellow William J. Watkins, Jr., explains in his new book, Patent Trolls: Predatory Litigation and the Smothering of Innovation.

From 1990 through October 2010, lawsuits initiated by patent trolls destroyed wealth valued at more than $500 billion. One cause of the problem is that trolls have discovered a jurisdiction where it’s especially desirable to file a patent lawsuit: the Eastern District of Texas, where the local rules are plaintiff friendly, the rocket docket keeps defendants on their heels, and an undereducated jury pool leads to Texas-sized damage awards (judgments in the hundreds of millions of dollars are not unheard of). But a more fundamental problem that patent trolls exploit is the outmoded nature of the U.S. patent system: the United States Patent Office issues patents for a uniform term of 20 years, even though the pace of technological innovation is faster in some industries than in others.

How might we slay the patent troll and thereby spark a renaissance of innovation? Reducing the patent term in sectors with shorter product lifespans, such as computer hardware and software, would help by denying trolls the use of older patents to shake down new inventors, Watkins explains. In addition, policymakers should consider creating a patent court system that would weed out junk claims. Watkins also recommends that we learn from the example of Europe, where laws restrict the number of product categories eligible for a patent. If and when lawmakers and courts adopt the numerous sensible reforms that Watkins proposes, the U.S. economy will become a much more welcoming place for the world’s most creative and productive minds, enabling the pace of innovation to quicken and greater prosperity to follow.

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Patent Trolls: Predatory Litigation and the Smothering of Innovation, by William J. Watkins, Jr.

Exposed: How the Explosion of Patent Litigation Threatens the U.S. Economy In the New Independent Institute Book (Bloomberg BusinessWeek; Yahoo! Finance; others, 8/18/14)

Audio Interview: William J. Watkins, Jr. on Patent Trolls, (XMSatellite’s “Innovation Navigation” 6/18/14)

[A slightly different version of this post first appeared in the August 19, 2014, issue of The Lighthouse. For a free subscription to this weekly newsletter of current affairs, public-policy analysis, and event announcements, enter your email address here.]

Walmart has a new take on retail clinics. These newly launched clinics will charge patients $40 for a visit – but only $4 for Walmart associates. Anybody, with or without insurance, can go into one of these clinics and be seen by a qualified health professional, without the usual paperwork. Although the mega-retailer has operated clinics in its stores for a few years now, the new ones are different in a couple of ways.

First, Walmart’s previous clinics were collaborations with local hospitals, which had “mixed success.” So, it appears to have decided to go it alone. I am not surprised. Can you imagine a company like Walmart, which succeeds in an unregulated industry with ruthless price competition, trying to negotiate a deal with hospital executives? The communications challenges must be almost insurmountable – sort of a Mars and Venus situation.

When hospitals acquire primary-care medical practices, they don’t end up reducing costs and increasing transparency. On the contrary, they use the acquisition to charge higher, hospital-sized fees to patients and insurers. That is exactly the opposite of what Walmart is trying to achieve.

Second, Walmart looks to be rolling out these clinics in states that have not expanded the number of residents dependent on Medicaid (such as South Carolina). Obamacare itself is not responsible for the growth of these clinics. Rather, the failure of Obamacare to significantly reduce the number of long-term uninsured Americans is a cause of renewed investment in these clinics.

Insurance is irrelevant to these clinics, which post and accept cash payments directly. Walmart and other businesses outside the government-medical complex increasingly understand that there are opportunities outside those bureaucracies, and healthcare enterprises that operate free of the dead hand of Obamacare can take care of their customers without getting bogged down in the old system.

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For the pivotal alternative to Obamacare, please see the Independent Institute’s widely acclaimed book: Priceless: Curing the Healthcare Crisis, by John C. Goodman.

You know your presidential popularity must be tanking when a state legislature has to pass a mandate requiring students to study about you in school.

Recently the California State Legislature passed a new law (AB 1912) requiring the Instructional Quality Commission, which helps oversee the state’s Common Core standards, to consider revising the social studies framework to include a section on the significance of President Obama’s election in the context of voter discrimination. Co-sponsor Sen. Holly Mitchell (D-Los Angeles) explained that it’s important for students to learn about “overcoming our nation’s past to elect our first black president.”

In spite of its back-to-school timing, this new law likely has a lot more to do with future elections than ones in the distant past. Throughout the summer the president’s job approval ratings hit all-time lows hovering around 40 percent nationwide (here, here, and here). In California, Obama’s approval rating slipped 10 points overall to 52 percent since the beginning of the year. The declines were even deeper among his base who’ve given him high approval ratings in the past: down 15 points among women, 14 points among registered Democrats and voters under 40, and 12 points among nonpartisan voters. Meanwhile the approval rating for the State Legislature is inching its way back up to roughly 42 percent according to some polls, 35 percent according to others.

If elected officials in California really wanted to overcome the past, they’d give students of all backgrounds better education options today. Consider grade four reading proficiency. Researchers pay particular attention to student proficiency in this subject because if students cannot read well by this point they will continue falling farther and farther behind in this and other core subjects.

According to the latest data from the National Assessment of Educational Progress (NAEP), also known as the Nation’s Report Card, just 53 percent of California White, non-poor fourth graders (those not eligible for federal free or reduced-price lunches) scored proficient or better in reading. That figure drops to 31 percent among non-poor Hispanic fourth graders, and plummets to a shocking 14 percent among non-poor African-American fourth graders —just one percentage point higher than their peers who are from impoverished families.

Thus large majorities of California students are not proficient in elementary reading in spite of spending well over $10,000 per student.

If California lawmakers were serious about helping students overcome the past, then today they’d enact statewide parental choice programs that empower parents to choose the public, private, virtual, or home school of their choice. More options—not more mandates—are what California students and families really need.

Any time a Republican politician suggests that there is anything positive in Obamacare, the media are eager to declare that this means the Republican establishment is backing away from repealing the Affordable Care Act and wants to “fix” it instead.

This, of course, is what most businesses and their lobbyists would prefer take place. They would agree with what the Kaiser Family Foundation insists in its consistent drumbeat of monthly polls, including its latest finding that “over half the public has an unfavorable view of the Affordable Care Act (ACA) in July, up eight percentage points since last month,” but that a “majority continues to prefer Congress improve ACA rather than repeal and replace.”

The latest exhibit is a report in the Wall Street Journal that U.S. Senator Bob Corker (R-TN) thinks that “we could build on the exchange concept.” What? Build on a legacy of bloated and broken IT contracts, which swallowed up billions of dollars (including $655 million on three state-based exchanges that shut down after a few months of operation) and failed in so many different ways to enroll people properly?

“Building” on those failures would be a strange way to “fix” Obamacare. Fortunately, a member of Senator Corker’s staff has told me privately that the senator meant nothing of the sort.

A recent news item suggests that if offense possibly can be taken, it will be taken.

We have just been treated to studied outrage at the nicknames of the NFL’s Washington “Redskins”, Florida State University’s “Seminoles” and MLB’s Cleveland “Indians.” As my friend and colleague Randy Holcombe reminds us in a recent blog, the moniker of the “New York Yankees” may be more offensive to southerners than any of those names.

News reports now suggest that a small cadre of faculty members at the University of Mississippi want to ban the use of “Ole Miss” as the school’s nickname owing to its “racist” origins. Never mind that a survey conducted by the university itself found that a majority of respondents reported that “Ole Miss” was nothing more than convenient shorthand for “The University of Mississippi” (and it fits better on football helmets and baseball and basketball jerseys).

What is the origin of “Ole Miss”? Slaves coined it, in reference to the wife of the planter to whom they were bound. If the planter and his wife had a daughter, she was called the “young miss.” The term, hence, did originate in the slave culture of the cotton south, but its racist connection is indirect insofar as it grew from the linguistic usages of the slaves themselves. (Truth in advertising: Until 2011,  I was on the faculty at the University of Mississippi for 23 years; I am a Rebel as well as an Aggie.)

Slavery and “Ole Miss” are anachronisms, but history happened and cannot be expunged by linguistic revisionism, unless we are willing to establish an Orwellian Ministry of Truth that erases our collective memory. Ole Miss already has banned the Beauregard (“Rebel”) flag and “Colonel Reb” as its on-field mascot, substituting for them a black bear having no historical context other than a possibly apocryphal bear-shooting visit to the state by Teddy Roosevelt.

The University of Utah just reached an agreement with the “Utes” allowing the school to continue to use its nickname in return for a promise of college scholarships earmarked for members of that tribe of Native Americans. I suspect that a payoff in cash or in kind likewise is the underlying goal of individuals and groups opposed to “Ole Miss.”

Obamacare’s most significant effect is an expansion in the number of people dependent on Medicaid, the joint state-federal welfare program for low-income people. Kaiser Health News points out that this expansion is threatening the existence of free clinics. Some clinics are signing up for Medicaid, while others are closing:

“We used to say … ‘wouldn’t it be great if we no longer had uninsured and we could close our doors and go out of business,'” said Michelle Goldman, CEO at the Eastern Panhandle Care Clinic in Ranson, W.Va., which is one of the free clinics now also taking Medicaid. “But the truth is we like the work we do and enjoy helping this population and believe we still have a lot to offer them.”

While a few free health clinics have shut their doors in Arkansas and Washington, most expansion-state non-profit free clinics are reassessing their business strategies. Medicaid offers the potential to give their patients better access to specialists, diagnostic testing and hospital care, and that’s created a sense of unease for operators of the clinics that for decades have played a key role in the nation’s health-care safety net.

“These changes have caused some real disruption in the free clinic sector trying to anticipate what it means for patients who continue to need our services, and how we can sustain ourselves,” said Marty Hiller, senior consultant with Echo, a consulting firm that works with free clinics. “It’s been a tremendous upheaval.”

The nation’s loosely organized network of free clinics have come a long way since the 1970s when most were made up of volunteer doctors and nurses working a day or two a week in church basements. Today, about 1,200 free clinics serve about 6 million patients, according to the National Association of Free and Charitable Clinics. Their increasingly modern facilities look much like private medical offices that serve patients with insurance. They often use electronic medical records, pay administrative staffs and nurse practitioners, and run their own pharmacies.

Unlike the nation’s community health centers, which receive billions in federal funding and are a key part of the health law’s push to expand access to health care, free clinics have traditionally relied on private donations, and state and local assistance. Community health centers, which also treat poor patients, charge patients above the poverty level on a sliding fee scale and are paid a higher Medicaid fee than private physicians.

The assertion that Medicaid dependency increases patients’ access appears unfounded: Medicaid patients have terrible access to physicians. It does not appear that access to care has changed for these patients – at least in the short term. However, the change in cash flow means that the clinics are now more accountable to the federal government than private donors and local government. That will likely increase the bureaucratic burden and decrease quality of care in the long term.

Photo credit to Gage Skidmore

“Let the American youth never forget that they possess a noble inheritance, bought by the toils, and sufferings, and blood of their ancestors; and capable, if wisely improved, and faithfully guarded, of transmitting to their latest posterity all the substantial blessings of life, the peaceful enjoyment of liberty, property, religion, and independence.” —Justice Joseph Story

Last week, I had the pleasure of attending the Young Americans for Liberty (YAL) National Convention as an official representative of the Independent Institute, which served as a Silver Level Sponsor. Attendees came from all 50 states and from over 200 universities. This gathering brought together over 300 cream-of-the-crop student leaders and activists to George Mason University School of Law’s campus for four days of training and lectures.

As noted by YAL staffer Bonnie Kristian, “They are really into liberty. Some of them might even do something about it.” In all my interactions with these students throughout the entire conference, I can confirm this description is absolutely true. As I explained what the Independent Institute can offer them in academic resources and professional opportunities, droves of students eagerly signed up for our mailing list (although our offer of a free book raffle may also have played a role…), purchased books, and grabbed free swag.

The energy and enthusiasm was contagious, and the effects definitely rubbed off on the older speakers and guests. Prominent figures including constitutional attorney Bruce Fein, best-selling author Thomas Woods, libertarian evangelist Jeffrey Tucker, and former Congressman Ron Paul gave well-received speeches and intermingled freely with their many admirers. This was all but the tip of the iceberg. There was something for everyone at this convention. A small sampling of the topics covered over the course of four days included the latest controversies surrounding the NSA and Edward Snowden (whom the students overwhelmingly supported), defending free speech on campus, and exposing the evils of occupational licensing.

As varied as these issues are, the main theme was Liberty. The prospects of liberty triumphing and becoming mainstream are especially promising when the attitudes of Millennials are taken into account. Kristian and many other astute observers point out that:

Freedom is popular. A recent Reason-Rupe poll confirmed what we’ve seen at YAL for a while: Millennials are the most libertarian generation yet. Yes, libertarian, not liberal.

As the poll showed, two-thirds of young Americans (ages 18 to 29) think the government is wasteful and inefficient. Nearly as many (63%) understand that government regulations favor special interests, not the general public. Strong majorities favor cutting government spending, regulations, taxes, and overall size.

Millennials are also uniquely pro-liberty on social issues like marriage and the drug war, with a majority agreeing that the government shouldn’t dictate what we eat, smoke, or drink. They are also very suspicious of both major parties, with more than half identifying as political independents.

#YALcon14 trended on Twitter (see here for the top 20 tweets) as students, speakers, and sponsors alike highlighted the most exciting parts.

By the weekend’s end, when it was time to fly back to California, I felt honored to play my small part in supporting the next generation of youth activists. Speaker after speaker reminded these students that it is up them to fix what is wrong with this country today and with the right amount of principle and dedication, they have every means to pull it back from the abyss. Despite the immense challenges faced by Millennials, ranging from an increasingly regulatory environment to the out-of-control surveillance state forced upon them by a broken two-party system, a sense of optimism prevailed among the student attendees that were at the Convention.

Since YAL launched its inaugural Convention six years ago, the numbers each year have only grown bigger and bigger. Freedom is popular, and that is reflected among the increasingly diverse attendees who came to this Convention as well as other libertarian events I’ve attended. The future of liberty looks bright indeed as long as this crowd flourishes.

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Disclosure: I was a YAL intern from Fall 2012 through Spring 2013 and worked closely with Bonnie Kristian on communications.

Medicaid, which provides health-related welfare benefits to low-income individuals, is jointly financed by the federal and state governments. Before Obamacare, the split was 50/50 for rich states, but low-income states got more dollars. This mechanism is called the Federal Medicaid Assistance Percentage (FMAP). So, if California spent $50 on Medicaid, the federal taxpayer would chip in $50. However, for West Virginia, the split is $28.65/$71.35. That is, for every hundred dollars spent on Medicaid, only $28.65 is spent by the state, and $71.35 comes from federal taxpayers. These dollars are not appropriated by Congress: They just roll out on auto-pilot, as calculated by the FMAP.

Just think of the perverse incentives this gives state politicians and bureaucrats. Every policy that lifts people out of poverty, and away from dependence on Medicaid, causes the state to lose federal funds. That is why so many right-thinking people want to change the federal financing of Medicaid into a block-grant program. Could the incentive be even worse? Of course! There is an “enhanced” FMAP for children. This eFMAP is up to 30 percentage points greater than the regular FMAP. California has to spend only $35 to draw $65 of federal funds, for a total of $100. For West Virginia, the figures are $20.05 and $79.95. Is it any wonder that advocates of Medicaid expansion tend to focus on health care “for the children”?

Hospitals, which lobby consistently for expanded Medicaid dependency, are part of the problem. They long ago figured out that if they lobbied states to tax them, more than enough money would flow back to the hospital. It works like this: The state taxes the hospital, the money recycles back to the hospital in Medicaid payments, and it picks up federal dollars on the way back. Hospitals are the only businesses that lobby for tax increases on themselves!

Governments often misuse language to build emotional and patriotic support for their policies.  This Orwellian use of language is clearly evident in the way that US government policy uses the words “war” and “peace.”

Everyone is well aware of the US military invasions in Iraq and Afghanistan.  Initiated during the Bush administration and continued through the administration of Nobel Peace Prize winner Obama, the US enlisted the assistance of other countries (but both invasions were mainly undertaken by the US military) to bomb those countries, occupy them with ground troops, and overthrow their governments.  There was no declaration of war in either case.  Those invasions of Iraq and Afghanistan, and the subsequent occupation by American troops, were called peacekeeping operations.

When we bomb other countries, invade them with our troops, and topple their governments, that is what we call peace.

Meanwhile, we refer to many of our domestic policies as wars.  We have a war on drugs, a war on poverty, a war on terror, and lesser wars like the war on obesity, the war on smoking, and the war on coal.  The list could go on.

In the post-Cold War era, everyone knows the US is the World’s policeman, or the World’s bully, depending on one’s point of view.  But when we impose our preferences on people in other countries through the use of military force, we call that peace.  In war, one side fights another, and linguistically, our peacekeeping missions are telling people that we are helping them out by destabilizing their governments and killing their countrymen.

At home, the language of war invokes images of a patriotic effort to fight an enemy, whether the enemy is poverty or obesity or coal, and invokes images of treason for those who dare to speak out against the nation’s efforts to fight its enemies.  Offering support to the opposition in one of our wars is unpatriotic and treasonous.

By misusing language in this way, words lose precision in their meanings.  When bombing people is peace and providing food to poor people is war, those words that are misused for their emotional connotations no longer refer to clear concepts.  In both cases, the Orwellian language does serve a clear purpose.  It builds support for the state, and facilitates its foreign and domestic policies.

To follow up on the superb “Creepy Uncle Sam” videos satirizing Obamacare (see here and here), the new “Something Creepy This Way Comes: Creepy Uncle Sam Obamacare Care-nival” has now gone viral on the Internet:

For the pivotal alternative to Obamacare, please see the Independent Institute’s widely acclaimed book: Priceless: Curing the Healthcare Crisis, by John C. Goodman