Jan 15th, 2013 by Jonathan Goff
I don’t think this counts as my monthly blog post, mostly because I’m linking to and commenting on someone else’s blog post, but here goes.
Michael Mealling (a fellow Masten Alumni gone entrepreneur) set out this year to do a blog post a day on his Rocketforge.org blog site. I really liked a post of his on debunking some of the myths surrounding the Columbus expedition. It’s a short blog post, but an even shorter summary is that the historical evidence shows that King Ferdinand and Queen Isabella didn’t actually finance the expedition, it was pretty much entirely privately financed. What Ferdinand and Isabella did was grant Columbus a 10 year patent on trade with any of the lands he discovered, and a title of nobility. The patent meant that Columbus got 10% of the gains of any trade with those lands he discovered, made by anyone under Spanish authority for the duration of the patent.
Now, here’s my random thought. I’ve seen lots of creative ideas about how to jumpstart lunar settlement by recognizing property rights of various sorts. Legal precedent from the US and the Soviet Union already pretty much says that if you mine something you can sell it, so that’s not the problem. The problem is that current lunar law makes claiming real estate very legally challenging. There are some creative solutions out there with knowledgeable space lawyers backing them, but there are equally knowledgeable space lawyers who disagree with them. I’m not taking a stand one way or another on their initiative, just saying it isn’t so obviously uncontroversial that it’s sure to succeed.
But what about a lunar patent? Basically setup some sort of requirement, and attach to it a special patent on any revenue derived from lunar surface activity or lunar ISRU for a certain duration by any entity under the jurisdiction of the patent-granting authority. For instance, if it was the US doing so, they might say that the first company to say:
- Setup a man-tended lunar base that has people at it for at least say 10 weeks out of a year
- Develop sufficient ISRU capacity to provide at least say 10 tonnes of LOX or LOX/LH2 to lunar orbit or L1/L2 per year
- And develop sufficient depot capacity in Lunar orbit, L1, or L2 to hold, store, and transfer that 10 tonnes of propellants to any commercial or government customers under US jurisdiction
Would get a patent for 10-15 years of some percentage of the revenue from all commercial lunar ventures, including ISRU ventures, tourism ventures, etc. that were operated under the jurisdiction of the United States. So, if say MoonEx won the race and set this up first, they’d get 10% of the revenue of any other US companies making money from lunar ventures for the course of the patent.
The neat thing you’ll notice is that this doesn’t require any claim of sovereignty or granting of land-rights up-front. The competitors would be landing and leveraging existing precedent to sell the results of their own mining/prospecting. The patent granting authority would just be using its preexisting authority to tax and regulate commerce among entities under its jurisdiction. My guess is that something like this might work under existing treaties no problem (any space lawyers who actually understand said treaties want to comment)?
Now, there’s some obvious flaws here. While this strongly incentivizes a race if you think you can realistically be first, it would put a damper on subsequent companies from the granting authority for the duration of the patent. This could create a perverse incentive where the US had the first lunar settlement, but it was say Russian or Chinese or Indian entities that take advantage of that because the 10% fee was too onerous for US companies to be competitive. So maybe there’s a way to strike a balance.
Here’s some variants to chew on:
- Make it a multi-level prize. Maybe first place gets a 10% patent, while the second place only owes 5% to the first place and gets a 5% patent on remaining competitors.
- Maybe make lunar-derived profits tax-free during the period of the patent, and make the patent not on gross revenue but on net revenue after cost of goods sold. That way instead of a 35% corporate income tax, they’re effectively paying a 15% tax split between patent owner number one and number two.
- Maybe partner with a few other like-minded countries that are likely to be involved in the race (say Japan, India, South Korea, UK, the EU, etc) to recognize this patent setup via a multi-lateral agreement of some sort. If you could get all of them to agree to a moratorium on corporate taxes from lunar businesses during the duration of the patent scheme, all the better. By pairing with several like-minded countries, this increases the value of the patent, while simultaneously increasing the value of additional non-US companies to also invest in the effort.
To be clear–I’m an engineer and entrepreneur, not a space lawyer. I think this would fly with existing regulations, but could be wrong. I’d love to get feedback from those wiser than I. I’m also a libertarian, and all sorts of public interventions like this scare me to some level. But really, if done right, I think something like this could work, and could enable the kind of private investment that enabled Columbus to make his journey of exploration.