The trouble with patents is that they block people out of using the latest technologies and techniques. Sometimes, that means one manufacturer can offer things their competitors cannot. Sometimes, it means that firms can effectively block technologies that would otherwise compete with them. The question, then, is how to encourage innovation without permitting such barriers.
One idea that comes to mind is state support for innovators: invent something useful, and the state gives you a lifelong pension with a value proportionate to the value of the invention. They then distribute it for everyone to use for free. The size of the pension could be based on the number of dollars that get spent implementing your idea, with larger amounts for innovations that people really pour money into using. The state could fund the system with higher taxes on businesses and consumers. Consumers benefit because best practices spread more rapidly, and the market overall benefits because firms are less able to undertake anti-competitive behaviours.
There is, of course, the issue of pre-existing patents. One way to deal with that would be to take the age of the youngest patent holder, calculate a maximum plausible remaining lifespan, and decree that all existing patents will expire at that point, including those held by corporations. There is also the issue of dealing with international patent agreements. Indeed, that and the entrenched interests of firms that hold lots of valuable patents are probably the major forces that would block any such reform. That being said, implementation difficulties aside, it does seem possible that this would be a better system than the current practice of granting a time-limited monopoly on use to patent owners.
The problem with pensions for patents is that patents are not developed by individuals, but by corporations. If you think corporations are made up of individuals, this is true but ignores capital investment – breakthroughs are only possible on the basis of investment by others in those individuals. If you make the pensions available to the corporations that produce the patents, and “with larger amounts for innovations that people really pour money into using”, then how exactly would the pension system differ from the existing patent system? It seems the only difference would be the state rather than the market would determine how profitable some invention has been.
In general, I’m not convinced that patents do any good. They are almost always only possible on the basis of extensive public investment, i.e. 30 years of state research into high tech electronics.
People working for corporate research facilities could have contracts that specify that some, or even all, of the pensions they earn would go to their employer. This would be to compensate companies for things like lab facilities, capital investments, etc. People could negotiate all sorts of contracts, with different payment schemes.
When such people invented things, it would thus create a revenue stream for the other party to the contract for the lifetime of the researcher. The biggest differences would be: (1) other companies could use the new inventions and techniques immediately (2) Companies would not need to worry about infringing on patents (3) Patent revenues would only last for human lifetimes.
The downside is that the value of a lifetime pension might be far less than the value of a patent as they exist now.
Look at how much it costs to build a fab for manufacturing processors. It might be that a transition to a patent system as described above (or scrapping patents) would snuff out such capital intensive research. The same might be true in pharmaceuticals.
The cost of forbidding firms from holdings patents worth billions might be stagnation in research areas like computers or medicine.
Blog index >> Intellectual property
Although I’m not a libertarian, I also don’t think this type of additional government interference is something we should seek. The government is notoriously bad at managing business, or even spending money efficiently.
What about patent holders being obligated to license their technology to interested parties, instead? There could be some sort of fee schedule as a guideline that all parties would be bound by.
Mandatory licensing could achieve many of the same goals, in terms of fostering competition and preventing firms from blocking up-and-comers.
My thinking on this was partly prompted by the allegation that oil companies have bought up patents on battery technologies, so as to prevent electric vehicle manufacturers from using them.
Incidentally, there isn’t really anything especially libertarian about current patent law. It lets private actors use the power of the state to enforce their control over certain technologies. It reminds me of a section from a Bastiat essay:
Mr. Protectionist was going to resign himself sadly just to being free like everyone else, when suddenly he had a brilliant idea.
He remembered that there is a great law factory in Paris. What is a law? he asked himself. It is a measure to which, when once promulgated, whether it is good or bad, everyone has to conform. For the execution of this law, a public police force is organized, and to make up the said public police force, men and money are taken from the nation.
If, then, I manage to get from that great Parisian factory a nice little law saying: “Belgian iron is prohibited,” I shall attain the following results: The government will replace the few servants that I wanted to send to the frontier with twenty thousand sons of my recalcitrant metalworkers, locksmiths, nailmakers, blacksmiths, artisans, mechanics, and plowmen. Then, to keep these twenty thousand customs officers in good spirits and health, there will be distributed to them twenty-five million francs taken from these same blacksmiths, nailmakers, artisans, and plowmen. Organized in this way, the protection will be better accomplished; it will cost me nothing; I shall not be exposed to the brutality of brokers; I shall sell the iron at my price; and I shall enjoy the sweet pleasure of seeing our great people shamefully hoaxed.
A real libertarian wouldn’t allow Mr. Protectionist to use the state’s resources this way. Our patent system does, in the hopes that it will keep people from keeping inventions secret indefinitely.
I am much like Tristan in wanting to do away with patents, but in the absence of anything else to spur innovation its what we’ve got at present. (I don’t know if it could ever be empirically proven, but is it man’s natural curiosity, or the profit motive that drives him to innovate?)
I would also add that patents as they exist now are overly broad… they should be narrower in focus… but this is a problem with an overworked and understaffed patent office that permits these broad patents.
In addition to mandatory licensing, really, its the vague concepts that get patented that harm innovation. I would go so far as to require a working prototype having to be built to stop the patent trolling that goes on today and then have the patent granted applicable to that specific implementation only… if you can do the same general thing using different techniques, then you should be safe from being sued. Not so today.
I would remove certain things from being patentable (DNA, software algorithms to name but a few).
I’d limit the lifespan of patents as well…
GE sucks up government money, invests in secret stuff that we’re not allowed to know about
By Cory Doctorow on politics
Jason sez, “GE bought a patent for a device called a Stamet Pump that was developed with significant taxpayer money by DOE and then refused to share the device with other firms or the public at large. DOE argued unsuccessfully that the patent should be part of the public domain. This device has tremendous potential in aiding gasification of certain types of coal, something that would pave the way for carbon sequestration from coal-fired power plants. DOE argued with GE execs that they should either release the technology to the public domain or license it to multiple other firms in the interest of the public, since it was funded with public money. Also intriguing in this story is that the state of Wyoming has partnered with GE to build a $100 million gasification test center using this technology–Wyoming is chipping in half of the money from federal funds that were released to the state after a long battle by coal-friendly legislators. Wyoming released the documents detailing the partnership with so many pages blacked out because of “intellectual property, commercial, and trade secrets” that no one can figure out the answer to questions like “what does Wyoming get for its $50 million?” GE and Wyoming decided to start a new test center after DOE officials, upset at GE’s selfishness, pulled the plug on other gasification research based on the device and instead shifted their funding to a competitor who would presumably be more willing to share the fruits of taxpayer research dollars.”
Economics focus
What’s mine is yours
May 28th 2009
From The Economist print edition
When should firms be required to share their intellectual property with rivals?
ECONOMIC policy is rarely uniform on either side of the Atlantic, but the differences in some cases are exaggerated or soon narrowed. That is true of antitrust policy, where there has been a great deal of convergence. The European Commission’s trustbusters tend to take a more cautious view of big global mergers, but the way such tie-ups are assessed is very similar to American practice. In the policing of cartels, the commission has adopted many of the methods and models of its American cousins.
On one antitrust issue, though, the transatlantic gulf has been unusually wide: how to deal with firms with a market share so large as to dwarf their rivals. In high-tech industries, such as computing and telecoms, the power of network effects encourages firms to settle on an industry standard to ensure that gadgets and software are compatible. That gives the owners of the winning standards, such as Microsoft, a great deal of market muscle.
That kind of dominance creates a tension between property rights and antitrust principles. American competition authorities have been loth to compel dominant firms to grant rivals access to their private property, whether physical (as in the case of telecoms networks) or virtual (as with computer code). In their view intellectual-property rights have to be upheld to induce firms to innovate. Patents and copyrights are the rightful prize for new inventions. Trustbusters should be wary of compelling firms to hand over their business secrets in the name of competition.
JULY 15, 2009
Fighting Climate Change With Patents
So a representative of the Brazilian government, Haroldo Machado Filho, this week told a World Intellectual Property Organization conference in Geneva that leaders should consider the possibility of allowing “compulsory licensing” for green technologies. This would be a new loophole in international intellectual property rules that would allow developing-country governments to break patents “for the public good”; such a loophole already exists for pharmaceuticals. In a similar vein, Indian Climate Change Minister Shri Ramesh asserted late last month that access to intellectual property for low-carbon technology is a “global public good.” This kind of thinking lays the intellectual groundwork for patent violations down the road.
Could this strategy be used in reverse? Patent absurdly carbon-intensive processes, then try to block people from using them.
For instance, patents on extracting usable fuels from shale oil.
Who is copyright for?
By Cory Doctorow on Copyfight
Here’s Google’s senior copyright counsel, William “Patry on Copyright” Patry, with a pithy little zinger about the idea that copyright law is made for creators:
While one hears, constantly, corporate chieftains claiming that they’re out there fighting for the creators, we all know that is b.s.: the creators are merely an expense item on a balance sheet, to be reduced as much as possible. We also hear politicians make similar paeans to creators, yet when was the last piece of legislation that was passed that benefited creators at the expense of corporations? When was the last time you heard a government official suggest such a thing?
Licensing Dispute Threatens Future of Skype
“eBay is faced with the prospect of having to close down the hugely popular VoIP app Skype due to its reliance on proprietary code still owned by Skype’s original founders, who are threatening to pull the plug on the licensing agreement they have with eBay.”
Developing new drugs
Reds under our meds
Aug 27th 2009 | NEW YORK
From The Economist print edition
Could health-care reform in America stop innovation in pharmaceuticals?
THE number of Americans denouncing their president’s plans for health-care reform as unvarnished socialism would presumably rise dramatically if Barack Obama decided to institute price controls for drugs. Yet a study published this week in Health Affairs, an industry journal, suggests he should do exactly that.
Governments around the world are struggling to cope with the rising cost of health care, and of drugs in particular (see chart). Many rich countries have resorted to price controls, and some on the American left advocate them noisily. But drug firms maintain that America, where they are free to price patented pills largely as they please, is the engine of global pharmaceutical innovation, while price-controlling Europeans are free riders. That, says PhRMA, the industry’s lobby based in Washington, DC, is because price regulations seen in other rich countries “chill innovation, impede patients’ access to the newest cutting-edge medicines, and trigger innovators to relocate to countries with more progressive public policy.”
The new study, written by Donald Light, a visiting professor at Stanford University, claims that European drug firms are more innovative than American ones, in spite of price controls. That flies in the face of an influential paper published in the same journal in 2006, which examined the geographic origins of drugs registered between 1982 and 2003 and concluded that favourable public policies had helped propel America to the top of the list. PhRMA has rushed to denounce Mr Light’s study, insisting it gives a “distorted picture” and understates the impact of “home-grown innovation”. (One of the authors of the earlier paper, Henry Grabowski of Duke University, has also taken issue with Mr Light’s findings.)
Who Owns Our Low Carbon Future? Intellectual Property and Energy Technologies
Chatham House Report
Bernice Lee, Ilian Iliev and Felix Preston, September 2009
Ensuring access to climate-friendly technologies at affordable prices is a critical issue for international public policy – and one that cuts across economic, legal, security and geopolitical concerns. To keep the rise in average global temperatures below 2C, global greenhouse gas emissions must peak before 2020 and be reduced to 50-85 per cent below 2000 levels by 2050. Achieving these ambitious targets requires a critical mass of low carbon investment, innovation and deployment that meets mid- and long-term goals. The implications for corporate strategies and business models are profound.
This report examines two issues: patent ownership of climate-friendly technologies, and the rate of technology diffusion. A polarized debate continues between proponents of strengthening intellectual property rights (IPR) regimes to encourage innovation of climate technologies on the one hand, and those calling for more IP-related flexibilities to ensure access to key technologies by developing countries on the other.
Patents as financial assets
Trolls demanding tolls
Sep 10th 2009 | NEW YORK
From The Economist print edition
Intellectual property comes of age as an alternative investment
Others are longer-term holders, pejoratively referred to as “patent trolls”, who are looking for an income stream from collecting royalties. Ugly they may be to those they harass, but lazy they are not. Such investors typically undertake exhaustive analysis of the relevant technologies and the firms that may be using them. Negotiations with those they deem to have breached a patent can be tortuous. Even by the standards of alternative investors, this is esoteric stuff. But the returns can be handsome and, with a broad enough portfolio, fairly predictable.
2009 Nobel Ribosome Structures — Patented
‘The announcement of this year’s Nobel Prize in Chemistry is the latest reminder that fundamental components of biology are being increasingly, and aggressively, patented. A commentary, from yalepatents.org, focuses on the research and subsequent patents, held by Yale and Thomas Steitz, one of this year’s laureates.’
Patent Claim Could Block Import of Toyota’s Hybrid Cars
“Paice is a tiny Florida company that has patented a way to apply force to a car’s wheels from an electric motor or internal combustion engine. Paice thinks that Toyota is infringing on its technology, and is going after the automaker in court. The legal spat became much more serious for Toyota this week, when the US International Trade Commission decided to investigate the matter. In the worst-case scenario for Toyota, the commission could ban the hybrid Camry, third-generation Prius, Lexus HS250h sedan and Lexus RX450h SUV.”
Apple, Others Hit With Lawsuit On Ethernet Patents
bth nods an AppleInsider story on a patent troll who has gotten hold of fundamental Ethernet patents and is wielding them broadly. Three guesses which US Appeals Court the lawsuit was filed in. “A Texas company has targeted a number of technology companies, including Apple, in a new lawsuit regarding a handful of computer networking patents issued in the 1990s. … 3Com Corporation was granted four patents from 1994 to 1998 pertaining to network adapters. Two deal with the automatic initiation of data transmission, and one addresses ‘host indication optimization.’ … The company’s Web site states that U.S. Ethernet Innovations was founded ‘to continue 3Com Corporation’s successful licensing program related to a portfolio of foundational patents in Ethernet technology.’ A press release from the company states that it is the ‘owner of the fundamental Ethernet technology developed and sold by 3Com Corporation in the 1990s,’ suggesting it purchased the patents. … In addition to Apple, the lawsuit names Acer, ASUS, Dell, Fujitsu, Gateway, Hewlett Packard, Sony, and Toshiba as defendants.”
The cellphone business is patented up to its eyeballs. Dumped at ground zero in the wasteland of owned ideas, newcomers typically have to pay as much as ten percent of sales to the old guard. Apple declined Nokia’s invitations to give it money, and as a result is now the target of a lawsuit filed by the Finnish manufacturer.
Microsoft Patents Sudo’s Behavior
“Just when you thought all was safe on the crazy patent front, Microsoft has come out of the obvious patent closet to file patent number 7617530, which basically duplicates the functionality of ‘sudo’ which is found in all Linux systems. PJ over at groklaw has a wonderful writeup on the entire fiasco.”
What’s wrong with champerty?
Let’s bring back barratry, maintenance, and champerty for patent lawsuits. Combine that with a limitation on the assignment of patents and a lot of patent trolls would be out of business.
This is what barratry, maintenance and champerty meant in England in 1916:
“Common barratry is the offense of frequently exciting and stirring up suits and quarrels between his Majesty’s subjects, either at law or otherwise. . . . Maintenance is an offense that bears a near relationship to [barratry], being an officious intermeddling in a suit that no way belongs to one, by maintaining or assisting either party with money or otherwise to prosecute or defend it. This is an offense against public justice, as it keeps alive strife and contention and perverts the remedial process of the law into an engine of oppression. . . . Champetry, campi-partitio, is a species of maintenance, and punished in the same manner, being a bargain with a plaintiff or defendant campum partire to divide the land or other matter sued between them, if they prevail at law, whereupon the champertor is to carry out the party’s suit at his own expense.”
2 William Blackstone, Commentaries on the Laws of England, 2311-16 (William Carey Jones ed. 1916).
These legal principles still exist today, for the same reasons
“But Jobs’ position ignores a deeper problem, one that many in the industry have long lamented: The system for patenting software is broken. As numerous researchers have pointed out, the U.S. Patent and Trademark Office grants software patents with alarming ease. As a consequence, every major tech company spends a fortune applying for, defending, and licensing patents with no purpose other than to keep rival firms’ patent lawyers at bay. In many cases, patents covering software rest on dubious legal and philosophical grounds.
The multitouch patents are a prime example. Neither Apple nor any other company should be able to claim ownership of such a basic and far-ranging tech concept. I’m not predicting that Apple will lose its suit—it may well win, or force a favorable settlement. But that’s exactly the problem: The fact that a company can hold up the entire industry over something as fundamental as an improved user interface is the best argument yet that the patent system is in desperate need of reform.”
“What’s more, it’s clear that Apple did not come up with the concept of multitouch. Jeff Han of the New York University Media Research Lab showed off a multitouch display at the TED Conference early in 2006, long before anyone outside Apple had seen the iPhone. Tom Cruise showed us one in Minority Report in 2002. And Microsoft was working on its multitouch Surface computer at the same time Apple was working on the iPhone; indeed, Microsoft was awarded a patent in May 2006 for a device that “may be configured to receive multiple concurrent touchscreen contacts.” That was months before Apple won its first multitouch patents.
The obvious problem with allowing firms to claim ownership over concepts is that it limits competition. Imagine if only one Web browser was legally allowed to use a multitab interface. Would browsers be as good as they are today, when every company can compete over the best, fastest, most-intuitive implementation of tabbed browsing? Probably not.”