Hacker News Reader

Comment by asmithmd1 | Hacker News Reader

Do you know why musicians are allowed to "cover" any song they like? It is because Congress decided music is so important no one artists should be able to lock it up for themselves so they passed a law for "compulsory licensing" of copyrighted music. We need to do the same for patents. The compulsory license for a recorded song is 9.1 cents per song, Set some fee per patent claim.

View on HN

I didn’t know this was a thing! Fascinating. It doesn’t seem like the economics always work similarly though. It’s fairly easy for millions of dollars of R&D to be put into a single invention, for it to be worth millions/billions on the market, and for someone else to copy it identically.

I.e. presumably Congress wouldn’t protect someone literally stripping the name off someone else’s song and publishing it and earning money from it?

Fee per patent claim is definitely interesting, just pricing it seems harder than in the song case.

No, I can't republish a song and call it mine, and I can't use someone else's recording of a song without their permission. What I can do is record my version of their song and sell it and I can publicly play their song and charge people - but I have to cut them author of the song in for 9.1 cents for each instance.

Yeah, devil is in the details. Currently a patent gives exclusive use for 20 years and music copyright gives control for 100 years, but anyone can license it. The trick is to strike a balance that gets the most economic benefit. Set the claim fee high at first and tinker with it. I would think companies that innovate would be happy to know there is a ceiling to their liabilities instead of being at the mercy of a jury. And do we really want an inventor to be able to lock up any use of a technology for 20 years. Imagine a solo inventor cracks low-temperature fusion and sells their patent to Saudi Arabia for $1B - who sits on it for 20 years and sues anyone who tries to use it. Here is the public framing: "We need to pass the 'Freedom to Innovate' act passed to stop evil foreign companies from locking up American inventions that would benefit all hard-working Americans!"

Music is not as easy as it seems. How much should an artist get for a ring tone? For a stream? How much should artists get paid for longer songs? There is a 3 judge panel that adjudicates all these things: https://www.crb.gov/index.html

Your nightmare scenario actually sounds pretty good to me. Solo inventor is forced to publish the details of how to crack a 50-year-old problem, and even if the guy is a complete dick (refusing to license) and the rest of the world can't figure out a way to engineer around the patent claims, the world gets the technology a measly 20 years later. Many fields don't advance very much in 20 years - computers are the recent exception to this, but as the field matures, innovation will slow down (see what happened with Moore's law).

Said solo inventor gets rich and (in)famous in the process, but this is a person who solved a problem that the world has been working on for the last 50 years with no significant indications of progress, so maybe that inventor deserves to get rich and famous for coming up with the solution.

In contrast, without the $1 billion pot of gold sitting at the end of the rainbow for the solo inventor, there is a very good chance that person would never have tried to innovate on something like low-temperature fusion, and if they did, the details would be kept under lock and key rather than disclosed. The existence of the patent system both provides the incentive for someone who isn't a megacorp to innovate, and forces disclosure.

With my proposal there is still the exact same $1B pot of gold for the inventor, the difference is everyone gets the benefit of their invention now. The trick is to set the claim license fee so that the value of the patent is exactly equal to the value of a current patent.

Great, now figure out how to discern the value of a patent without negotiating it. Also, for many patents (drugs, for example), a lot of the value comes from the exclusivity of it, and losing that also decimates the value of the patent.

This isn't copyright where 100000 plays of someone's cover is worth $1 and doesn't hurt the original artist at all. This is a hundred million dollar asset offering exclusive access to a competitive product. This is fundamentally different.

> a lot of the value comes from the exclusivity of it

I think you are confusing value and price. Auctions precisely determine something's value. Companies sometimes can use scarcity to capture more money in price than they deliver in value - but that is a bug in our economic system, not a desired feature

Implied in your comment is that scarcity does not confer value, which is just not true. Scarcity, particularly when controlled by one entity, creates tremendous value for that entity because it creates a power imbalance with other entities. Otherwise, the secret coca-cola formula would have no reason to stay secret. Patents actually get their entire value from the artificial scarcity they create - you don't need a patent to confer an invention to someone else, only to stop other people from using it. Scarcity also greatly improves your ability to capture value, but it creates value to be in the club.

Another possible misunderstanding you may have about the concept of "value" is that you may be conflating value (in general) with societal value. One is a subset of the other - you can get value, companies can get value, and society can get value. People and companies can get a lot of value out of things that are not directly valuable to society, and society tolerates these things because society, on the whole, gets more value from having those people and companies in it than not. This is why you can drink, and also why most countries have patent systems despite that patent owners may not make optimal societal use of their patents during the term of their limited monopoly.

Also, if you have ever sold a patent before, you will know that it frequently takes the form of an auction process. Even if not explicitly structured as an auction, these negotiations have auction-like qualities with buyers bidding against each other and actually a lot of information-sharing.

So you are saying price==value? That is not true. The price a company extracts from a customer is de-coupled from the value a customer receives.

If I walk into a store to buy a shirt I saw online only to discover it is on sale for 20% off, I am getting the exact same value as buying it online, but the company captured less of the value they delivered.

If there is one shirt left in the store and the store holds an auction for it that I win for a price 20% higher, again I get the exact same value, but the store captured 20% more of the value.

The goal of any sane economy should be to deliver the most value to the people in it - including the people who own companies.

Basic economics can tell you that "price <= value to customer" is a relationship that holds pretty damn strongly. Price isn't decoupled from value, it is derived from value. I am just saying that the actual customer (not some nebulous notion of society) derives value from the scarcity.

Like it or not, people often get value from scarce things, usually in the form of power (or status for other kinds of goods). In a system with compulsory licenses for everyone who wants them, that power is gone, and so is the value related to it.

> The goal of any sane economy should be to deliver the most value to the people in it - including the people who own companies.

Which is why every economy today has a strong patent system with monopolistic rights. It is a very good way to deliver value to inventors and small technology business owners while encouraging disclosure, and a good incentive for them, in turn, to contribute to the wider body of societal knowledge. A system with mandatory non-scarce licenses would not do this - we would end up with more "coke formulas" and fewer papers.

Now I understand what you are saying. The only way I see individuals deriving value from scarcity is with brands - not functional patents. Even with technical luxury goods like watches and cars, which may also include patents, the real customer scarcity value comes from showing others they are rich enough to buy and flaunt those goods. Can you think of an example where something purely functional is only valuable because it is scarce? Maybe private jets? If jets dropped in price 50x, private airports would become crowded and destroy much of their benefit. But then the gating luxury good would switch to being a member of a private airport network or something.

I am talking about a change to patents, not copyright and trademarks which are exclusive essentially forever. You can still strut around with a $20k Birkin bag (If they deem you a worthy buyer of course) that delivers the same functionality as a $100 purse. No one will be allowed to make fake Birkins and destroy their exclusivity. But if Hermes patents some new zipper, you would be able to duplicate their zipper and pay them a license fee. You would NOT be allowed to mention their brand. Patents are about function, not color, size, style or ornamentation.

Individuals don't derive value from scarcity of inventions, which is why individuals don't buy patents.

Companies do derive value from that scarcity. Companies derive value from a lot of things that don't pass along to the customer, which is why companies engage in marketing and buy business insurance, for example. Both of these add $0 of value for the end customer, but they have value to the company. Patents are the same. You can't discount the value to the company in your economic calculation here, because the companies are the ones who are actually buying/licensing the patent!

When you think about patent-based tech transfer, there are two parts of that transfer which you can actually value separately:

1. The invention itself - a new widget or process that does something cool/useful for the customers or makes the company more efficient

2. The patent - a property right that allows the company to exclude other people from using the invention for 20 years

End customers/users only get value from #1. Regardless of whether the patent is for nuclear fusion or changing the volume on a speaker setup, they get $0 of value from #2. The same is true of trademarks and copyrights, by the way, they have $0 of value to the consumer.

Your hypothetical change in patents would work perfectly if you assume that all of the value of the patent is encapsulated in #1, and is a way to price that. It completely discounts #2. #2 is actually where most of the value in high-value patent portfolios comes from.

Your nuclear fusion hypothetical is the same: the energy companies likely get O($100 million) or less of value from the technology itself (thanks to how commodity markets work - efficiencies basically get passed on to the consumers), but tens of billions of dollars of value in terms of their ability to expand market share into markets where it is cost-effective to use and their competitors can't use it. The exclusive right to use the technology is what enables the company to capture value there.

By the way, the main enforcement mechanism today against lookalikes of those Birkin bags is a design patent (US D656,313), not a trademark. In about 3 years, that patent will expire, and you will see trademark-non-infringing similar-looking bags popping up a lot more. Under your hypothetical, someone looking to make a similar bag would just have to pay them a license fee (and of course, don't mention the brand or the word "Birkin" and make sure to change up one of the trademarked features - see trademark no. 76700120), and the lookalikes would be 100% okay.

Thanks for sticking with me and engaging.

I agree that design patents should not have a compulsory license. Interesting that Birkins patent expires in 3 years. I will set a calendar reminder to look into knocking them off in a couple years :)

I appreciate your thoughtful disagreement with my assertion that it is possible to set a compulsory license fee that would be "value neutral" between patents as issued today, and patents with a compulsory license. I think there is something that could be done to reform patents along these lines, but it is a harder argument to make and that argument DOES start going into the "value to society" area and is therefore purely political.

That doesn't really solve the problem of patent trolls taking money from other companies.

A covered song is actually a specific lyric, not "a song about love in which the party of the first part expresses admiration for the part in the second part"

Currently, in trade for publicly disclosing how their invention works, we give patent holders an exclusive right to make, sell, or use their invention for 20 years. A patent holder can say no one other than me can use my invention for 20 years. I think inventions are more important than songs, yet Congress decided there must be some way to force the author of a song to allow anyone to play that song - and we will decide how much you get in compensation. I am saying we do the same thing for inventions. Don't like the deal? You are free to keep your invention secret. The formula for Coke is a classic example of how they chose to protect their invention.

Some types of inventions are easier to keep secret than others. And some, like drugs, probably legally have to disclose ingredient in order to sell them. But, in general, I'm not sure we really want a system where companies are incentivized to either just not pursue certain avenues of research given the results will just be copied or to take steps to make it harder to reverse engineer devices.

I agree patent trolls are a problem. And I agree we want to incentivize people to innovate. I am citing an example with copyright how Congress chose to strike a balance and I think it could be applied to patents.

I have several patents that were issued to both large companies and start-ups. The patent system right now only works for large companies and is actively stopping innovation by small companies. What changes do you think would help?

Breadth of patents is the most obvious issue--though it's somewhat understandable scope creep given that mechanical inventions are probably not as central as they once were. But any system of IP protection is always going to favor the entities who can afford good lawyers and pursue enforcement claims. A system where those same large entities can swoop in and copy anything they want is not obviously better.

Reply on news.ycombinator.com