The Case Against Patents (2013)
pubs.aeaweb.org
pubs.aeaweb.org
My favourite patent of all time is Michael Jackson's smooth criminal patent:
https://mashable.com/2015/03/28/michael-jackson-shoe-patent/...
This is the patent system working as intended. A magician revealing his tricks. Tell us how you did it, and in exchange we promise to not compete with you for a while.
The patent system could work if patent clerks had the time to be a lot more discerning and reject any patent that is obvious or already known. But it takes a lot of work to do that and the deluge of patents makes it impossible to give each application sufficient consideration.
I think the general idea of patents is good, but perhaps it's impossible to execute it correctly.
Edit: Should have read the damn article. They address concern further below and also argue that patents are not revealing any secrets because pattent attorneys are not qualified to judge the merit of patents and because the way patents are written makes it almost impossible to reproduce their results, and sometimes patents are granted for utter nonsense, such as moving "through the fifth dimension".
Also, there may be a fundamental difference between physical inventions, where patents seem to make sense, and mathematical theorems (and computer algorithms), where patents do not make sense at all.
The negative opinion of patents around here comes from the fact that most people here are programmers and the vast majority of software patents are trash. I've seen very few patents on software that are not "obvious to anyone skilled in the art," patents on abstract mathematical concepts, or patents for which there is ample prior art in the literature or open source code repositories.
Telling the difference requires a great deal of conceptual thinking. Patent examining is "strong AI hard." I think it is possible to expand on these ideas to some useful extent. Obviousness for example could be explained as first-order connectedness is the evolutionary/learning state-space graph. Something is obvious if getting from current art to the new idea requires only one "hop" through state space or traversal of a densely connected region of state space. Non-obvious means some kind of great leap across state space or long journey through many indirections was required. It's basically a measure of creative labor.
The RSA patent is often cited as an example of a decent software patent: original, a specific well-bounded invention for a specific purpose, and non-obvious in the extreme. Another example would be if whomever Satoshi is had patented proof of work block chains since that would also meet those criteria. Of course patents on cryptographic systems tend to result in them not being used, but that's a separate issue.
I do not understand the difference between the two. As a mathematician with an interest in philosophy, I would say that about 50% of mathematicians would agree that algorithms and theorems are discovered, not invented.
Thus, your example of RSA as a "good" patent sounds preposterous to me. The RSA algorithm was discovered, and it is a law of nature as much as the Euclidean algorithm to find the gcd. I find it honestly absurd that it can be patented (not angry, merely surprised).
That said, RSA itself probably would not be patentable today. The Supreme Court's decision in Alice probably precludes pure algorithm patents. You need an algorithm in the context of a specific use case. For example, a cell phone that uses RSA to encrypt keys to protect data in flash memory.
And we'd have even less issues if software patents were only valid for 0 years (i.e. not exist).
I don't know how true it is that a lot of patents come just from employees sitting around navel-gazing in their free time and aggressive management telling them to write down those ideas so they can file more patents, but it seems believable that it would happen at least sometimes.
A company that does not have patents around its core technology or products is worth much less than one that does have patents. If your ideas are not worth patenting (e.g., protecting) why should your investors keeping putting money in?
Look at the garbage patents Dropbox has, and and the fact that they haven't used those patents to sue competitors out of existence or licensing fees. https://patents.justia.com/assignee/dropbox-inc https://patents.justia.com/patent/8855605
including "logging into your account from your phone"
The crazy thing is - the voodoo works: They don't even have to hold up! The threat of litigation itself and/or the patents being a bargaining chip in such litigations are enough.
I mean, look at the 1-click example: It doesn't matter that many of their claims were deemed invalid years later, the damage (direct: expensive lawsuit, preliminary injunction, settlement; indirect: chilling effect) has been done.
[1] https://papers.ssrn.com/sol3/papers.cfm?abstract_id=1354849
[2] https://en.wikipedia.org/wiki/Wright_brothers_patent_war
One can imagine alternative ways to monetize that R&D. Unfortunately, the main alternative historically was proprietary products and vertical integration. But one can imagine there is something better.
People will certainly use patent protection where it is available to them, but that doesn't mean they wouldn't have invested in those technologies solely on the basis of first mover advantage [0], and the lack of any observed effect of strengthening the patent system and increasing the scope of what is patentable on R&D spending tends to back that up.
[0] ARM would need a different business model, but it's unclear to me that other business models (i.e., Intel's) wouldn't have been just as successful, and wouldn't come with the social deadweight loss of patent trolls highlighted in the article.
Why? there's actually legislation specifically tailored to these kinds of problem, and it seems to work well:
https://en.wikipedia.org/wiki/Semiconductor_Chip_Protection_... (And it's equivalents in other parts of the world)
"We show that despite the existence of basic aircraft patents, aircraft manufacturers faced no patent barriers in the market dominated by government demand. We show that the notion of the aircraft patent hold-up is a myth created by government officials and used to persuade the Congress to authorize eminent domain condemnation of basic aircraft patent" https://papers.ssrn.com/sol3/papers.cfm?abstract_id=2355673
Except that if you look at the history of inventions you'll notice that quite frequently several people invented the same thing independently at almost the same time (the phone for example). So the risk of losing a 'trade secrets' isn't that high..
A patent incents me to slave away and then requires me to teach the patent in exchange for a limited monopoly. Trade secret law only punishes me for stealing but incents me to keep secrets.
The trouble with trade secrets is that I have to be able to exploit my invention and still keep it a secret. I probably can't do that with the phone. So I wouldn't slave away working on that problem if the best protection I could get is a trade secret.
Assuming the purpose of patents is 1) to eliminate trade secrets, 2) that patents must be novel, and 3) that patents must be non-obvious to someone skilled in the art, then perhaps a solution would be: take a handful of people skilled in the art, tell half of them to implement the patent and tell the other half only the end goal and see if any of them come up with the same process.
The first group would help to see if the patent is written well enough. If they can't implement it then your patent is automatically rejected.
If anyone from the second group comes up with the same process, then that's an automatic patent rejection. Even if they don't, it's still helpful information for the patent examiner. For example, if they can solve the problem, just not in the same way as the patent application proposes, perhaps the patent examiner will see that the patent isn't necessary. Go ahead and have your trade secret, the public can obviously solve that problem with or without that knowledge.
Patents may stop someone from on purpose or accidentally copying someone else invention, but that isn't stopping discovery.
There's a reason that software and algorithms weren't deemed patentable for a long time (and still aren't in certain jurisdictions - at least on paper).
I generally feel that the cost of patents isn't worth the value they've created. Once one factors in the costs of lawsuits over stupid/obvious patents, patent trolls, the cost of patent attorneys, the increased cost of goods due to patents, etc, etc, the value of patents generally shrinks considerably. Being sure only good patents get through could go some way to increasing the value of patents to society, and thus might be worth the extra cost.
Then again, I'd rather patents just be dumped unceremoniously.
1) Patents enable "benevolent monopolies." Companies that can afford to splurge on fundamental research because they have a revenue source protected by some sort of barrier to entry or network effect. Xerox PARC, for example, created many of the technologies fundamental to modern computing. PARC was bankrolled by Xerox's near-monopoly on copiers, which was enabled by Xerox's patents. PARC's decline closely tracks what happened after the 1975 consent decree in which Xerox was forced to license its patents to Japanese competitors.
2) Patents enable business models that separate design from production. ARM and MIPS, for example, design chips incorporated into designs from myriad manufacturers. How much value has been enabled by proliferation of these IP cores? You may point to things like RISC V, but that only proves the point. RISC V followed 15 years after the first ARM licenses, and has a fraction of the capital backing it. It's a lot harder to raise capital to build designs with the idea that you're going to give away the work product for free.
3) Patents enable technology sharing. Dozens of different companies have technology that is included in DVD, Blu-Ray, 2G/3G/4G, Wi-Fi, etc. Companies contribute the results of very expensive R&D efforts to these openly-published standards because they can ensure they get a cut of the value created by that technology. If they could not, there would be strong incentives to keep that technology secret instead. You might point to the success of web standards in the absence of patent protections. I'd posit that the web is the exception not the rule, and it's an exception that exists because of how easily the web can be monetized with advertising. That monetization strategy is not widely applicable.
Their designs are already protected by copyright, though.
1) "In less than 30 years, the flow of patents more than quadrupled. By contrast, neither innovation nor research and development expenditure nor factor productivity have exhibited any particular upward trend." In other words, more patents does not appear to encourage people to splurge on fundamental research in aggregate.
But it gets worse, "The cost of litigating patents is not insubstantial either. Bessen and Meurer (2008) used stock market event studies to estimate the cost of patent litigation: they estimate that during the 1990s such costs rose substantially until, at the end of the period, they constituted nearly 14 percent of total research and development costs." So at least we've identified where some of the money being brought in from all of these monopolies is going (it isn't to the scientists and engineers).
2) It also enables business models that allow taking money from people without contributing anything at all. "On the other hand if a patentholder does not produce a marketable product and hence cannot be countersued---like Microsoft in the phone market or other patent trolls in other markets---then patents become a mechanism for sharing the profits without doing the work. In this scenario, not only do patents discourage innovation, but they are also a pure waste from a social standpoint."
3) "The downstream blocking effect of existing monopoly grants on incentives for future innovation has greatly increased in recent decades because modern products are made up of so many different components. The recent---and largely successful---efforts of Microsoft to impose a licensing fee on the large and expanding Android phone market is but one case in point. ... Microsoft is attempting to charge a licensing fee solely over a patent involving the scheduling of meetings---a rarely used feature of modern smartphones. ... Hence, the main dynamic general equilibrium effect of a patent system is to subject future inventions to a gigantic hold-up problem: with many licenses to be purchased and uncertainty about the ultimate value of the new innovation, each patent holder, in raising the price of his "component," imposes an externality on other patent holders and so charges a higher than efficient licensing fee." The externality isn't just on patent holders. Later, quoting Bill Gates: "A future start-up with no patents of its own will be forced to pay whatever price the giants choose to impose."
Having participated in these kinds of technology sharing efforts, I can assure you that the value extracted is basically unrelated to the actual value of the innovation, and mostly defined by the (current or expected) network effects of the technology in question and the political clout of its proponents in convincing other people to require its use. I.e., you're not paying for an invention, you're paying for a standard, and making standards is not something that requires external incentives.
As for monetization: "At the opposite extreme we have, again among many, the example of the Cornish steam engine discussed in Nuvolari (2004, 2006). Here engineers exchanged nonpatented ideas for decades in a collaborative effort to improve efficiency." I don't think they monetized it via advertising.
You're not trying to minimize litigation costs, but rather maximize R&D investment net of litigation costs. So the question is, if competitors could quickly copy the results of R&D efforts, would R&D investment be more or less than 14% lower? Also, it's not like litigation costs under those alternative regimes would be zero. At the end of the day, the free-rider problem is a real economic problem and permitting it undermines market efficiency. One can imagine alternative models for addressing it, but those frameworks will have a cost too.
> It also enables business models that allow taking money from people without contributing anything at all.
That incorrectly assumes that the only "contribution" is producing an end-user product. ARM, for example, doesn't produce end-user products. You can't go to ARM and buy Cortex A72 CPUs. When MediaTek produces an SoC integrating an ARM core, is the license fee an example of ARM simply "sharing profits without doing the work?"
> The downstream blocking effect of existing monopoly grants on incentives for future innovation has greatly increased in recent decades because modern products are made up of so many different components.
Hold-up problems are real, and there is a real question of how to properly value all the technologies that go into a modern product.
> I.e., you're not paying for an invention, you're paying for a standard, and making standards is not something that requires external incentives.
If standards don't embody important technical contributions, then why don't implementers rush to create alternative, unpatented standards? 802.11 has been out for more than two decades. Why do implementer companies continue to pay for each new generation of 802.11, instead of developing their own? If the choices truly are arbitrary, it should be trivial to avoid the relevant patents (indeed, everything in 802.11a should be out of patent by now, or close to it).
The idea that alternative monetization strategies are workable in the large scale is almost self-refuting. Patents don't preclude you from developing technology and releasing it into the public domain, so long as you get there first. But it seems like companies motivated by patent protection consistently "get there first." That is itself a validation of the incentive structure created by patents.
I think you missed the part where, "during the 1990s such costs rose substantially." To give further evidence, from 2006 to 2012 the number of patent troll lawsuits increased by a factor of six [3]. But, "the US economy has seen neither a dramatic acceleration in the rate of technological progress nor a major increase in the levels of research and development expenditure." So the answer is no, all of this litigation is not encouraging R&D spending (for some reason).
> That incorrectly assumes that the only "contribution" is producing an end-user product.
Perhaps I wasn't clear. I'm not saying that ARM doesn't contribute value. I'm saying that a system that allows the separation of "design from production" also allows patent trolls, and you have to trade the benefits of one against the costs of the other. For the benefit of your one ARM example we pay the cost of 2,900 lawsuits by trolls in the year 2012 alone [3], making up 61% of all patent cases [4] (I wish I had more recent numbers).
> If standards don't embody important technical contributions, then why don't implementers rush to create alternative, unpatented standards?
You mean like <https://aomedia.org/>? They do, but I think that there are a few reasons that this doesn't happen more often:
(a) Avoiding patent thickets once they have already been created is incredibly hard work. Much harder than just developing the technology, in my opinion.
(b) It is even harder to collaborate without incurring substantial legal liability. But no such collaboration is required to create the thickets.
(c) Standards organizations often have policies which make it difficult or impossible to achieve these results, and many participants have strong incentives to prevent you from achieving them.
(d) Even if you make something "better", it is not "the standard". Displacing entrenched incumbents is incredibly hard (again, because of the network effects).
The places where you will see this happen is where there are business models that cannot support any per-unit royalty (e.g., giving away your software for free on the internet), because that provides strong incentives to make it happen.
Laptops and routers are not such an industry. They can just pass on the cost to consumers, who are not represented when these standards are set. This is the basic public goods problem.
Again quoting the article: "Notice, too, that many patent lawsuits have a public goods aspect. Consider a case in which the plaintiff is asserting that its patent has been infringed. If the plaintiff wins the lawsuit, by confirming its monopoly position it appropriates all the benefits of winning the lawsuit. A victory by the defendant, by contrast, benefits partly itself, but also other firms that might be sued by the plaintiff for patent infringement as well as consumers who would have a more competitive market. Thus, the defendant receives only a slice of the overall benefits from winning the lawsuit, and will be willing to spend less on such lawsuits than it would if it were to receive all the benefits." The parallel with getting your patent-encumbered technology into a standard vs. some other firm trying to keep it out is exactly equivalent. The correct play is for the other firm to just file their own patents, but this tragedy-of-the-commons result isn't exactly ideal.
[3] https://www.wsj.com/articles/SB10001424127887323469804578525...
[4] https://money.cnn.com/2013/07/02/technology/enterprise/paten...
There is a baseline level of research which will be done even without the patent system, e.g. because Verizon would rather spend fifty million dollars improving radio efficiency than an extra billion dollars in a spectrum auction. If you provide a patent system on top of that, they take the patent even if it wasn't necessary for them to do the research. That isn't proof the patent grant was the incentive for that research, only that it was the incentive to apply for the patent on it.
If you want the real numbers you need some way to distinguish those cases from the ones where the invention wouldn't occur without the patent grant.
The by far most important aspect of those standards is not of technical nature. It's the host of agreements between the involved parties to not sue each other into oblivion. The patents involved have long ceased to hold the role of drivers of technical innovation, it's about the sheer amount of legal ammunition they can provide, and they have been created in such an image.
Lots of technical fields (esp. in IT) nowadays are a veritable minefield, scattered with a huge amount of incredibly broad and vaguely written patents, often playing mix-n-match with prior art or other kinds of dubious validity (which nevertheless have been granted - while it has gotten better, the allowance rate of the USPTO was close to 100% around the turn of the millenium...), where the attempt to navigate around any violations is a herculanean effort, and hardly possible without a veritable legal team. (And you should let them do the patent search anyway: If you dare to try it yourself and someone sues anyway - hooray for treble damages!)
The value in "benevolent monopolies" isn't the revenue source. Money is fungible. If there is something worth investing in, it will attract VC money. And if a company has revenue from a monopoly, they could just as easily invest it in real estate or the S&P 500 as their own industry.
The value of a monopoly is that it excludes free riders from improvements. The best example of this was Ma Bell and Bell Labs. If you can improve the phone network, e.g. with lasers (fiber optics), or information theory (data compression), or transistors (microprocessors), then you can invest in those things and capture the benefits directly without incurring a competitive cost disadvantage, because you have no competitors.
But the AT&T monopoly wasn't due to a patent. They never expected their monopoly to expire as patents do. The patent monopoly isn't designed to be long enough to engage in this kind of behavior in general. Which is why we see this much more often in monopolists whose monopolies aren't derived primarily from patents -- AT&T, Microsoft, Google, etc.
And the other side of it is that you're excluding the whole rest of the world from making improvements. You have to buy your phone from AT&T. No modems, no iPhones, no third party ISPs or open internet. Just the original monopoly extended into everything it touches, with all the deficits that make monopolies terrible.
That this is a net-negative is the reason we have antitrust laws.
> 2) Patents enable business models that separate design from production.
The simple version of this where you have a core design but not a fab is solved by having the fab you use sign an NDA, or you can sell the secret to the implementer outright. The version where you design part of the core and someone else improves on it or you have multiple customers is really this:
> 3) Patents enable technology sharing. Dozens of different companies have technology that is included in DVD, Blu-Ray, 2G/3G/4G, Wi-Fi, etc.
The counterargument is that it's difficult to keep a lot of these things secret. And there are reasons to enter into technology sharing agreements independent of patents, like the network effects of interoperability. You want your movies to play on every customer's DVD player and your phone to work on every carrier's network.
The patented technology sharing cartels are also currently used to exclude new entrants to the market, or impose unrelated conditions like requiring all DVD player manufacturers to not let customers skip particular ads as a condition of the patent license.
The best case to be made for patents is that they prevent free riding. But that's maybe the biggest problem with the existing patent system -- independent reinvention is not free riding but is patent infringement. Which is the root of all patent trolling.
So, I doubt that's true. Really the patent office could spend 100 billion per year and still be a net gain for society. The problem seems to be many people have a lot to gain from a broken patent system, and most people don't care.
It's clear they play some very important roles, and the entire industry is structured around them. So, I sympathize with people that think it's too risky to change them. But I can't agree with that certainty on your comment.
It's very clear that patents are required by the drug industry before they will invest in Research or as often happens buy companies that have done research.
Now, if we give up all private R&D we could still manufacture existing drugs at much lower prices. But, turning over all drug research to non for profits and governments is a very steep price to pay.
PS: Ok their are some game theory based approaches where small countries could benefit from abolishing drug patents while benefiting from other countries research. But, that does not scale worldwide.
https://www.forbes.com/sites/quora/2018/01/02/antibiotics-ar...
Also in the case of MPEG?
Now I'm curious if patent officers have ever been fired, sued, or prosecuted for profiting from the information in a rejected or granted patent.
The societal disclosure-value of the patent seems to be dropping off over time, both because reverse engineering has improved and because the body of a typical patent is becoming less informative about how to construct a useful embodiment of the patented invention.
https://www.uspto.gov/web/offices/ac/ido/oeip/taf/us_stat.ht...
In 1963 the USPTO granted patents to 54% of applications. In 2015 the rate was actually slightly lower (52%). But as "The Case Against Patents" notes, the total volume of applications has soared. I kind of expected to see some sort of upward inflection around 1980 (Bayh-Dole Act) but didn't spot one by eye.
The growth rate just in this century is astonishing; there were "only" 288,811 applications in 1999. Total applications per year were below 500,000 as recently as 2009. They're now well over 600,000/year.
Even trade secrets often only buy you a small amount of time these days before a competitor reverse engineers your technology, so increasingly elaborate (and often futile) measures are being taken to extract an advantage from R&D that justifies the investment in the first place before your competitors use it against you.
Especially in computer science, as much as many people complain about algorithm patents, an enormous amount of state-of-the-art research is being solely done as trade secrets now and will never be patented or published. I suspect many people that strongly favor banning computer science patents would not be happy with the reality that this drives advanced computer science research to never be published at all. There is no longer a viable path for recovering investment in computer science research that involves publishing it, which should be cause for concern. (People that want to monitor the advancement of AI tech should find this reality particularly distressing, as it severely hampers their efforts.)
Someone else suggested that you can hide some kinds of algorithms if you only provide software-as-a-service. That way there's never even a binary available for reverse engineering. The same applies for software that is used just internally, like if an aircraft manufacturer has their own geometric modeling kernel that aircraft buyers never get near. But even with NDAs for employees and no external distribution of software, good ideas leak as people change jobs and find inspiration from systems they built/used before. Sometimes the main thing you need to know is that a particular line of research was fruitful; exactly reproducing the original implementation is less important.
I tend to think that it would usually take less than the 20 years of patent exclusivity for a good, intended-to-remain-secret algorithm to diffuse out of a for-profit company, or to be independently invented again by somebody who will publish regardless of patentability. Pondering a world without software patents, is it worth it to learn about a good idea 10 years "late" (assuming secrecy is attempted), in exchange for being able to freely use that idea 10 years "early"? I say with complete confidence: maybe.
I suppose one benefit of patents is to reduce incentives for corporate espianage.
Regarding a patent revealing trade secrets, an applicant really has no incentive to do so. A patent only needs to enable a person of ordinary skill in the art to practice the invention. That has been interpreted to mean without undue experimentation, meaning some experimentation may be necessary. [0]. And there is a requirement that a patent set out the "best mode" contemplated by the inventor, but a failure to do so doesn't result in the invalidation of the patent. [1].
[0] https://www.uspto.gov/web/offices/pac/mpep/s2164.html [1] https://www.uspto.gov/web/offices/pac/mpep/s2165.html
The idea is simple: take the traditional model of a patent troll, but alter the settlement terms to create a cascade that ultimately ends or significantly reduces the exclusive ownership of facts (aka IP).
Patent Trolling for Good acts like a traditional Patent Troll in that it takes any IP it has and aggressively uses it to make claims against other firms/entities.
However, instead of just seeking cash, PTG offers two options:
- Pay us a lot of cash
- Join PTG. By joining: 1) all of your IP can be used by PTG to sue others and 2) everyone in PTG has automatic rights to any IP held by others in PTG
And of course, anyone is welcome to join PTG at any time. You don't have to wait to be sued to join :)
I've brought this idea up with VCs and lawyers a few times across the years but I've never gotten any bites. If anyone was ever seriously and credibly interested in pursuing it, I would give such an entity any and all IP owned/claimable by LBRY (https://lbry.io) and potentially a small amount of initial funding as well.
This is an offensive patent network with the intent of proactively obviating or severely reducing patent enforcement.
To be sustainable it can't be TOO effective.
Problem is, once it begins generating revenue, there is a chance it will want to continue doing so. The lawyers on staff don't want to get fired for lack of work, so there is a possibility it becomes a bad (or at least Chaotic Neutral) patent troll.
This is one of the weirdest definitions of IP I have ever seen.
You think a story is a fact? Stories are usually copyrighted and usually part of what people mean by "IP".
Facts are generally not copyrightable. You want to go and make a phone book or a map, you can. Other existing phone books or maps do not mean you can't make your own.
What about a distinctive trademark? Surely you agree that my company logo is not a fact. You want to use my company logo to sell your stuff? That would be deceiving customers if you started to sell your stuff under my name. Is the logo and distinctive mark a fact?
I do not think it is moral to claim that you own a story or a logo in the same way that one owns a shirt or a cell phone.
(But yes, I think a story or a logo is much more like a fact than property. Though they're certainly less fact-like than other types of facts.)
_Claiming_ to be another company that you are not is something different entirely (fraud) and does not require IP.
The very term "intellectual property" is troublesome because it indicates the very ownership that you're objecting to. There is no ownership. And there is no property.
A patent is about disclosing inventions. Copyright is about giving the author economic and moral rights. A trademark is about making sure consumers are not deceived. It is a separate law than fraud. You can deceive by abusing trademarks without outright lying.
Patents can be infringed accidentally. You can infringe a patent without ever being aware of it. You cannot accidentally infringe copyright. The plaintiff of a copyright infringement complaint has to prove that you deliberately copied. Independent retelling of a story is fine. Independent rediscovery of a patented invention is not.
It is important to understand these laws, their origin, their purpose, and their nuance, whether you agree with them or not, in terms of the rights they grant and what constitutes infringement. Making the analogy to property and ownership is misleading and leads to the wrong conclusions about how these laws work.
Know thy enemy.
Many do not realize that utility patents generally protect how something is done, not what was done. Inventors will often say, we can't patent that because someone else does that thing already. But it is the "how" that matters not the "what."
For example, even though the paper mention Amazon's one-click patent, there are probably 100's of other shopping cart patents that claim different methods of making an ecommerce shopping cart work.
Trademarks are also defend-it-or-lose-it. That is why companies aggressively sue to protect their trademarks. If they do not actively defend their marks from infringement they will lose their rights in the undefended marks.
The article talks about first-mover advantage.. it seems to me that the case for or against patents depends on how you model it.
If you model it as a single-shot prisoner's dilemma, then without patents, there is no incentive to make result of research public. This is a classical argument in favor of patents.
On the other hand, if you model it as a many-rounds prisoner's dilemma, then even without patents, it makes sense for companies to have a strategy which makes some results of research public, then hopefully piggyback on the research that was done by others and also published (that is, mutually cooperate).
It seems to me that the second strategy can only be viable if the results of the research are "infinitely divisible", that is, companies can make arbitrarily small steps in opening up their research.
However, I don't see any evidence that the research is NOT infinitely divisible, thus it seems to me that patents are not really needed for the latter to happen.
In addition, interestingly, economists generally approve patents as needed for someone to make the first move, but they don't feel the same about similar issues that happen in the market. For example, somebody needs to explore new market first or make a capital investment in a new field - economists do not call for government support in that. This convinces me that the rationale for patents is somewhat hypocritical defense of status quo (caused by rather arbitrary choice in the game theoretical model).
We continually make more and more complicated things. The time in which we iterate also decreases. I can see the argument that patents were useful at a time where an iteration could take decades or more. However, I'm sure we're well past the point of usefulness for any patent system.
A lot of decision makers in companies are stuck in the mindset of trade secrets because that made sense at one point. Your company made a widget. Your goal was to make that widget better than the other widget makers. You (at least believed that you) had some breakthrough that made your widgets better and continued to make widgets in that style for years without much change. In that time, you protected how you achieved the breakthrough. Patents helped with this.
Today, a lot of the money is not really in creating widgets. It's in creating digital recreations of widgets (e-widget) that accomplish the same task [0]. You don't pay much overhead per copy of e-widgets, so prototyping and "mass production" is fast and cheap. You can iterate at increasingly faster paces. It is not worth it to you to protect how you differentiate your e-widgets once it comes out [1]. You're already working on the next version. If you spend a lot of resources on protecting how you achieved your previous iteration(s), you are doomed to fall behind [1].
Once a company falls so far behind, it makes more sense (but only in the short term) to double down on your protection efforts. This is how we end up with the cable company ISP situation in the US. It is easier [2] to fight in the legal system than it is to a) spend on the R&D to improve your networks and b) actually roll out those changes.
These are just my observations. I have some ideas on solutions but obviously don't really know what would work. I doubt any one thing would work for every company, but I know (long term) a lot more are either going to need to adapt to a more open mindset or continue to spend more and more to protect their closed mindset. The latter is probably more likely for the foreseeable future.
[0]: Realistically, the real money is in trading investments in potential value of creating digital recreations of widgets, but that's a different conversation. At some point, you usually have to create the widget / digital recreation, so we'll continue to talk about that.
[1]: Unless you're a patent troll.
[2]: Cheaper.
Something is your property if you have exclusive control over it. Since IP is not exclusive (two people can have the same thought), it is not property.
Patents are the worse form of IP, since it is possible to accidentally infringe on them.
Copyright is almost as bad, especially at current timespans, and because it has such a chilling effect on the internet and other media.
Trademarks are essentially just defenses from fraud, so they aren't really IP.
I would say for the larger part, the exclusivity in both is artificial. As gowld points out, for many physical things there exist fair sharing schemes. And historically, when public lands were enclosured to become private property, it was an artificial process which explicitly created the exclusion. This exclusion wasn't needed from economic point of view.
In a way, enforcement of intellectual property rights infringes on physical property rights. If you come up with a process P to assemble certain kinds of physical widgets together, your claim on the patent for P prevents others to use those kinds of widgets in a certain way, even when they own those widgets fully.
[1]: https://mises.org/library/against-intellectual-property-0
The worst cases are the ones that grant monopolies on common or important technologies. They can completely block the progress in certain areas. Even companies with patents stop with innovation until the patent has run dry, if they do any innovation at all.
> ... there is no empirical evidence that [patents] serve to increase innovation and productivity ...
This seems to be a fundamental misunderstanding as to what purpose patents serve. The public benefit of a patent is that the information is public -- inventions which might previously have been kept secret are instead put into the light where others may use them. The cost to the public of patents are that such use must be deferred out of respect for the temporary monopoly granted to the patent holder.
That is, patents don't increase innovation or productivity -- that is by design. They are just a means of harnessing the innovation and productivity of individuals and encouraging them to make their work public instead of keeping it a secret. So it seems to me that the paper is arguing a strawman rather than making a useful point.
Can you come up with siginificant patented innovations that are not easy to reverse-engineer? I have thought that the raison d'etre of patents is to foster innovation.
1. Was kept secret 2. Had not been made in the first place?
(I had the key word "significant" on purpose)
But who does this benefit? The author points out that it benefits big/old ("stagnant") corporations rather than innovators. And that still holds, no?
Here's a thought experiment: if you're a small innovator and you invent something new (let's be evil: a software algorithm), what benefit does disclosure bring you? It's better to keep it secret, because big/old ("stagnant") companies will find legal loopholes in your patent application to work around it. Or, they will run it in the cloud and not tell you at all that they're running your exact algorithm. The innovator would never know.
Big/old ("stagnant") companies, on the other hand, have enough legal manpower to sue you out of existence regardless of whether their patent is valid or not. It's not the patent, it's the legal process that will bankrupt the small innovator.
Can patents be molded to protect the small innovator? Because isn't that the intent? Regardless of whether that protection results in monopoly, disclosure or both.
There's plenty of cases of a small or lone inventor making big companies pay for infringing a patent. I think patents are about the only protection for a small innovator to get enough leverage to enter a market.
As a small innovator myself, at probably every pitch I've ever made to investors, I've been asked immediately if I have patents. When I've looked at Chinese manufacturing for products, the first thing they ask is about patents (un-patented means they can copy and sell in a lot of markets, patented makes it harder for them to sell in markets where I have a patent).
There's also plenty of people that are skilled at invention, that don't work for a big mega-corp, and they make their living by being able to stop big corporations from simply stealing their product ideas and crushing them via bigger and better distribution networks.
Patenting a key aspect of a new item gets small players a seat at the negotiating table where a big player has to buy the product. Without patents this would rarely happen.
They cover that in the paper.
More generally 'productivity' is being used slightly more abstractly here more in terms of general welfare, e.g. do patents serve to increase the productivity of the economy overall.
>That is, patents don't increase innovation or productivity -- that is by design.
Yes one part is to prevent trade secrets, but the idea is that by making trade secrets public, other people will have the ability to improve on the idea and make innovations that wouldn't have otherwise been possible had the knowledge been kept secret--not just that society gets to use that one invention.
The other purpose has nothing to do with trade secrets. There are many inventions that wouldn't be possible to protect with trade secrets. Patents are designed to make this kind of invention profitable to create--encouraging people to invent them.
Btw I'm not arguing that patents necessarily fulfill their purpose.
Sounds rigorous
Also, the US FDA has another restriction called "exclusivity period." An exclusivity period can be anywhere from 6 months to 12 years depending on what kind it is. It runs independent from the patent term (if any)
https://www.fda.gov/drugs/developmentapprovalprocess/ucm0790...
> We are grateful to the editors, the referees, and to Richard Stallman for a careful reading and comments.
A patent can promote innovation in at least two ways: (1) rewarding the inventors for their toil and risk taking; and (2) by forcing competitors to try to solve the same problem with a different solution.
People seem to forget about the second one.
But there is this, countries with the strongest IP protection are the most innovative and successful. So there must be something beneficial going on.
There are multiple of forms of intellectual property beyond patents: copyright, trademarks, etc
This is the way the legal system has always worked, not an invention of a modern corporate interests, the ancient Greeks recognizes some forms of patent, the modern version is based around the implementations of Italy's patent system in the 1400s: https://en.wikipedia.org/wiki/History_of_patent_law
no conspiracy here....but yes corporations do like to see a return on their significant research and development investments
A patent can be accidentally issued, but it can be hell to accidentally UN-issue it. Meanwhile the patent constraints your actions and speech through its power. And we want to treat it like a house? The house limits what you may do upon that land, a patent limits what you may do anywhere any everywhere. And you don't even need to know the patent "property" upon your actions even exists.
IP is as real as any other legal construct, such as, contract rights. The term intellectual property is a term of art that just happens to model some of the analogues that exist between intellectual property, real property, and personal property.