The Case for Abolishing Patents (Yes, All of Them)
m.theatlantic.com
m.theatlantic.com
Take the recent Apple/Samsung fiasco, for instance. That's a net cash transfer of over $1B from the South Korean economy to the American economy. Maybe $2B to $3B total when accounting for all the factors.
Is that good? No, it's disgraceful, actually. But good luck convincing American legislators of some abstract far-future benefits to a less regulated world when the short-term result would be a worsening of the trade-deficit, a lowering of American exports, and a lowering of American income and tax yields.
It's a huge factor that's usually overlooked in these discussions -- the United States isn't a closed system.
I'm not sure any of those is actually true. Maybe the trade deficit, but only on paper. In fact the money just goes into Apple's coffers instead of Samsung's, and in turn to Apple's shareholders instead of Samsung's. But they're mostly the same people. Large publicly traded companies are owned predominantly by highly diversified institutional investors. The fact that one company is nominally American and one is nominally South Korean doesn't really have any bearing. Apple manufactures almost everything in China and Samsung does a significant amount of R&D in the United States, and American and Korean investors both invest in both companies.
And the same goes for income tax -- Samsung pays U.S. income tax the same as Apple. (Which is to say not really at all, but that's a different debate.)
Transferring money from one to the other without creating any underlying economic activity has no productive economic consequences. It doesn't create any new non-litigation jobs or produce any new tax revenue, it's just the broken window fallacy as applied to corporate litigation.
I don't think the numbers bear that out. Take employment, for instance.
Samsung employment:
190,464 employees globally; 95,662 working in Korea (50.2% Samsung employees employed in Korea) [1]
Apple employment:
70,000 employees worldwide; 47,000 in the U.S. (67.1% Apple employees employed in U.S.) [2]
> Transferring money from one to the other without creating any underlying economic activity has no productive economic consequences. It doesn't create any new non-litigation jobs or produce any new tax revenue
Right, I don't disagree. From a global standpoint, it results in a wealth transfer from other countries to the United States that's somewhere between mildly negative sum (if you think patents are a net hinderance), mildly positive sum (if you think patents are a net gain), or neutral.
But it's definitely a wealth transfer to the USA. Without digging through all the financials, I'd speculate that in addition to more employees, Samsung also does a greater sum of capital investment into Korea than elsewhere, pays more corporate taxes in Korea than elsewhere, stimulates and patronizes Korean universities more than foreign universities, etc, etc, etc, etc, etc, etc, etc.
I don't even disagree with you philosophically... I'm sort of undecided when looking at policy to work from a starting point of Enlightment values / ethics / humanism, or to start with realpolitik, Schelling points, and incentives. The former is more aesthetic; the latter seems a much better predictor of what will happen in the future.
[1] http://www.samsung.com/us/aboutsamsung/ir/corporategovernanc...
But let's go ahead and assume Apple employs more U.S. workers per device shipped than Samsung. It's still the case that the money gained in litigation doesn't go to the workers. Apple isn't going to hire any researchers or manufacturers with $121B in the bank that they wouldn't have with $120B. The people who get the extra money are the shareholders in the form of either dividends or stock price, and the stockholders are again predominantly large institutional investors for both companies.
Where the economic effect comes in is that those investors will now expect based on past performance for Apple's stock to improve and Samsung's to decline, and so increase their holdings in Apple. If Apple as a rule employes more U.S. workers than Samsung then this is ostensibly a good thing for the U.S. because then Samsung may not have as much available capital to develop new products etc. and Apple will have more, so Apple will be more competitive in the market and need to hire new employees to meet demand etc. There is every possibility that this doesn't actually happen because Samsung can afford to take the hit and keep doing what they were going to do anyway and Apple doesn't have any productive internal use for the extra money, but if it does happen, that would be the national economic good that Congress would be interested in preserving.
But that's where we get back to the premise -- does the patent system help or hurt? Apple's U.S. employees are the researchers, not the manufacturers. Having more sales because the competition has been damaged by litigation and can no longer compete effectively will cause Apple to need more factory workers to sell the extra devices, but those workers are in China. Conversely, by harming the competition's ability to compete, Apple is less in need of the R&D jobs that employ U.S. workers, because the bar has been lowered as to how good of a device Apple needs to produce to make the sale, so why spend more on R&D? Why even spend as much as they might have against a more competitive Samsung?
The point is, funneling money into U.S. companies doesn't inherently produce U.S. economic growth or provide any benefits to U.S. citizens. And if it simultaneously causes economic inefficiency, it can in fact do the opposite.
But what is the cost to the US economy of the fact that we now have only ONE* company left who can design and market handheld portable electronics?
* One might argue that Motorola isn't fully dead yet.
I don't think anyone is serious about suggesting we get rid of intellectual property; if you're create something, there should be protections to stop people ripping off your stuff and selling it without paying you for it.
It's patents that are the problem.
Patents let you capture an idea and prevent people from creating new things.
That's not protecting something you've created; it's stifling the creative will of others, because you don't want anyone to compete with you. It's the legislative antithesis of the open market.
Notch wrote about this before too, thoughtfully: http://notch.tumblr.com/post/27751395263/on-patents
The US could happily continue to have an major IP 'exports' (however that is appropriately referred to) without patents.
But that won't affect, for example, authors, musicians or marketers. It won't allow anyone to start screening movies without paying royalties, or a new social network called "Facefolio" or proprietary products based on GPL'd code.
I'm serious about getting rid of all patents and all copyrights.
Say I pay a Valve employee a million dollars for the current working source-code of Half-Life 3. I then compile it and release the first couple working levels for $10 a pop... I should easily be able to make 50 million out of that exercise.
What protections would Valve have in your no-copyright, no-ip scenario?
Without copyright there was nothing that was removed from Valve. It is just a copy.
In a no-copyright world, Valve's business model would certainly have to change, but your particular example would work mostly the same as it does now. The major difference is that you wouldn't be able to make 50 million dollars. Once those levels were released, people would be able to share them freely among themselves. Only the first person has to pay the $10, which means if you're willing to pay a million dollars for illegal access to secret source code, you should probably have a better plan for what to do with it. =P
> In a no-copyright world, Valve's business model would certainly have to change
Yes it would have to change. Honestly I don't think you've thought this all the way through.
You need to show how companies like Apple, Microsoft, Valve and the thousands of smaller software makers (Adobe, Autodesk, Bethesda, Roxio, Zynga, IBM, Oracle, Blizzard, Symantec, Norton, SalesForce.com, Konami, Blackboard...) can still make as much money as they do today and have the same protections they have today.
If you can't well, then we may as well sit around discussing what the world would be like if there was no war, or what kind of tidal waves two moons would generate.
The notion of intellectual property is now widespread because is the source of profit for companies, but it's not "natural" as the property of material stuff.
Apart from that, if you think that the current laws protect the creators from third parties profiting with their ideas, how do you think Microsoft got big?
I have a strong self-interest in making sure effective R&D happens: computers, biomedical, etc. I don't care where that investment happens for the most part. In terms of maximizing R&D output for the currency invested, US has been the clear leaders for a long time. I am less concerned with why the US is producing so much high-value R&D than with why so few other countries are producing anything comparable. A few European countries do produce similar results on a per capita basis but the tend to be outliers with tiny populations that don't add up to much in absolute terms.
Secondly, there's no evidence to demonstrate that the amount of R&D that happens with patents is more than there would be without patents. I think you're focussed on the upside - companies that do some more work because of protection. But that needs to be balanced against the amount of research and development that isn't done because of the increased barriers to entry.
> Abolitionist lobby faded away mid-1870s, as most European countries retreated to tariff protection (prompted by influx of cheap N. American grain and severe economic downturn). https://docs.google.com/viewer?url=http://www.usc.es/epip/do...
This strikes me as a really fantastic idea. Actually, I wonder if insurance companies shouldn't offer these prizes regardless of the patent situation. They know intimately well which disorders cost them the most money. They could form a consortium and offer a prize for x amount of money for reducing the cost of treating some disorder by y dollars per patient, where x is guaranteed to be less than the amount of money they will save.
In the US, insurance companies compete with eachother to provide coverage for employers. Many (not all) companies want insurance that is beneficial for their employers. If you drop coverage for something an employer wants, you may lose a major customer.
Who makes the call as to how much to award? Who decides who the award goes to (very few drugs are develop by one group alone)? Who decides when a drug is actually better than existing treatments?
Insurance companies already reward innovation. When a new drug hits the market, insurance companies collect and review all the data available and decide on how much access they'll provide their customers with. This analysis includes looking at a drug's impact on total cost of care.
How do you let drug companies recoup costs quicker without reducing the oversight that goes into drug approval? I am also a little curious about the free market implications. Instead of the invisible hand guiding drug development we will be relying on government autocrats? It seems that the incentives for governments to lengthen patent protection would just shift their nefarious attention to the prize system and drug approval process.
An oversimplified summary is that the majority of the pipeline for new drugs is in small companies. When one of these small companies develops a new compound that has an enormous potential market, it is purchased by one of the large companies that has better expertise in distribution and marketing, and can scale up production much more efficiently.
A tremendous amount of funding is put into the development of new drugs, yet it should be no surprise that much of this research produces nothing useful. Innovation anywhere results in hits and misses, yet investors are willing to assume the risk when they believe a certain percentage of success will sufficiently balance out the failures.
In effect, strong property rights allows a modularization of the different roles of drug development.
If people truly believe that there is a problem with the pharmaceutical industry, they should identify what the problem is first, and then unemotionally analyze how they could address those problems.
I tend to believe that there is a general consensus that the growing portion of GDP being devoted to pharmaceuticals is not sustainable, and quite likely already more than it would be in a better optimized economy.
What constrains the demand for pharmaceuticals? If something will save save your life, you may be willing to spend a million dollars on it. However, if you only have a 1/1000 chance of needing something, you may not be willing to spend $1000 on it when you're not under the gun. In order to balance all the many eventualities for potentially needed medical treatment either your government or insurance provider collects and organizes resources for people who need treatment today with the promise that all of the contributors will also receive treatment when needed. How much treatment?
How much treatment is generally determined by whatever is medically necessary. There may be some wiggle room on the definition of medically necessary, but it doesn't matter because this isn't what determines how much medical treatment you receive or might receive. What really determines how much medical treatment you can receive is how much medical treatment is available.
It probably sounds extremely cynical, but the idea of destroying pharmaceutical patents would likely accomplish what it sets out to do. It would dramatically lower expenditures on medicine. However, it wouldn't be because pharmaceutical companies would lose their profits,\1 it is because it would break the advance and development of new compounds that is probably occurring at too fast a rate.
Fueling the excessive rate of development, if it is excessive, is the knowledge of investors that the healthcare market is in a perpetual failure state. There is no constraint on demand. Unlike just about any other product, as long as you make a better product there will always be demand. Imagine doubling the price of a house in order to make it invulnerable to tornadoes. Maybe some people would do it, but they don't get the chance to purchase the modification while a tornado is bearing down on them, and they can't purchase different tiers of tornado insurance then be understandably furious when they find out it doesn't cover emergency home modifications. With other products, even potentially life-saving home improvements, people don't buy them just because they are better, they buy them if they are better and the improvement outweighs the additional cost.
If I were to rationally rank my preferences, I would rank an education that affects the quality of my adult life higher than I would rank a life-saving procedure that extended my life ten years. Some people would be able to choose both, etc, but no one is making those kinds of decisions about how much coverage they get, they simply choose 'whatever is medically necessary', by which they really mean, 'every sort of treatment that has completed development by the time I can use it'.
\1 One can invest in pharmaceutical companies if they think they have magical returns on investment, because little of the revenue is ultimately directed toward expensive research or acquisitions justifying investments in research done elsewhere. Judging by the quality of comments in the thread about efficient markets this morning, they may very well happen!
Most drug discovery and development is done in the private sector. Think 60%+.
Of the stuff that is gov't funded, it's basic research, not the development that actually gets a drug to market and that's what costs so much money.
EDIT: Wanted to provide some numbers.
252 drug were approved by the FDA from 1998 to 2007[1]. Where did they come from?
58% from pharmaceutical companies 18% from biotech companies.. 16% from universities, transferred to biotech. 8% from universities, transferred to pharma.
During this same period, 118 drugs were considered to have scientific novelty. Where did those come from?
44% were from pharmaceutical companies. 25% were from biotech companies, and 31% were from universities (transferred to either biotech or pharma).
[1]http://pipeline.corante.com/archives/2010/11/04/where_drugs_...
Of the 252 drugs that were approved, 118 were regarded as "scientifically novel" (not me-too drugs or minor modifications of existing drugs). They also did another cut where they looked at FDA "priority approvals", which basically means the FDA was willing to fast track the approval because the disease the drug was treating had no effective treatment.
As to your second question, over 60% of the scientifically novel therapies were discovered by pharma/biotech. They would have received no government funding for their research. The remaining 40% or so were discovered in university labs, of which a certain percentage were discovered via gov't funding (don't forget that industry-academic partnerships also make up a certain percentage of university funding).
At one point I worked with a group that raised money to finance medical research for patients with lupus. These were folks who were seen as too few, and suffering from something too complex, to be profitable. For the most part they were relying on some pretty toxic treatments that hadn't progressed since the 1950's - the pharmaceutical equivalent of pre-anastasia surgery.
Believe me, the people suffering from this were HIGHLY motivated to find a cure, and given an organization capable of focusing that interest, they've raised millions upon millions of dollars* to do exactly that. This was an early form of crowd-funding and it just obliterates the argument that "without patents, there's no motivation to cure stuff."
I'm sorry, but that is absolutely, categorically, and demonstrably false. If people are sick and dying, they have bottomless motivation. Indeed, the extraordinarily high prices people people put on their own lives ("my kingdom for a horse!") represents a profound reservoir of motivation.
The patent and approval system diffuses this deep and natural drive, replacing it with the more limited motivation offered by monopolistic rent-seeking (which aims not to cure disease, but to make it 'manageable').
The thing about an awful disease is that it develops a sense of community. I cannot imagine, for instance, someone who has raised a lot of money to find a cure saying, "yeah, but fuck the next generation that comes along and gets hit with the same affliction - those guys are on their own. WE paid for this, and the cure is OURS. They can reinvent their own damn wheel if they want to live."
Just...no, that's not how people think. What they really think is that in devoting themselves to finding a cure, they are finding a valuable role for themselves in a society that tends to see them as victims. It's how they recover a sense of self-worth and dignity. They are PROUD to pay it forward. Indeed, one of the top sentiments I heard from people I interviewed was "I want to find a cure so that no one else anywhere in the world ever has to suffer what I've gone through because NOBODY deserves this."
THAT's what real decency sounds like. And it's what our patent system frustrates in a very profound way. I know the pharmaceutical industry is always brought up as the tough case against patent reform - the exception that "must" be made in any discussions tending towards to liberalization. I'd argue the opposite. I'd say that this is one of the easiest cases to make. Maybe not a decade ago, but as the organizing power of the internet comes into focus, I can see a world where direct and massively distributed research finance is the norm, with the results made openly available to the entire world.
People who are sick used to feel terribly isolated. Thanks to the internet, that's changing. They're finding they discover others going through the same thing, and that they can use the same channels to pool their resources. Were they given tax credits, their resources would increase substantially. And they don't want to "manage" their diseases. They want to cure them. Researchers working on behalf of people trying to solve their own problem pursue tacks different from those who are working from companies looking to exploit that problem most profitably. And when people finding their own cures succede, their natural impulse is to share their triumph with all mankind, the world over, not start trade wars over IP that use the pain and death of millions already in - or facing - poverty as leverage.
*People who say research costs billions, not millions have been suckered by the most pernicious line of bullshit imaginable. The "billions" figure does not represent actual R&D costs, which, in a shocking number of cases, represent single-digit percentages of pharmaceutical company budgets. Instead, they represent the fully loaded costs of maintain legal departments to protect patents and marketing departments to push drugs in cases where they have marginal or negative value. Inflating the reported development costs into the billions is simply propaganda designed to make any system that doesn't involve patents seem like a financial impossibility.
So how do you incentive private organizations to fork over the $100 million(1) or so it takes to get a drug to market? You provide a mechanism to regain your capital plus something more. It's a system that works pretty well.
(1) That's if everything works the first time. Since only 1 out of 10 drugs that are tested on humans get to market, it's closer to $1 billion on average.
A commercial restriction on the sale of a drug would be far less onerous and legally problematic than the current patent system.
Eh, isn't that the textbook definition of a patent?
A patent is granted for the invention of a drug, not the testing. If the monopoly were tied to the approval process, it would be limited to the country where the approval was granted. So shepherding a drug through the FDA approval process would get you a monopoly in the US, but not other countries.
Also, you can patent drugs that haven't been approved, which makes it basically impossible for anyone else to do the clinical trials. Breaking the link between the research and the approval process would make it easier for effective drugs to get tested and approved.
Finally, sure, that scheme would be a lot like patents. But at the very least it would be specific to the drug industry, where they are (maybe) useful, and wouldn't distort other industries where patents are actively harmful.
If you get your drug approved by the FDA, you get 5 years of market exclusivity (12 years of it's a biologic). However, it has to be determined by the FDA to be a NCE (new chemical entity). Right now, a company called Amarin is trying to get a drug approved that has no patent and they are hope to get the FDA to recognize their drug as an NCE.
If it for a very rare disease (orphan drug), you get 7 years of exclusivity (still 12 if it's a biologic).
During that time, no other application for the same NCE and indication will be approved by the FDA, giving the first applicant de facto market exclusivity in lieu of a actual patent.
As mentioned, that's a hugely suspicious "fact". As noted by the National Center for Biotechnology Information.
"In the March 2003 edition of the Journal of Health Economics, a trio of economists from the United States wrote about a number. Soon after, that number began popping up all over the place — in newspapers and political speeches, on television and the Internet. But the figure, despite reaching near-canonical status, drew criticism. Some said it was inflated. Less diplomatic detractors said it was a 9-digit fairy tale.
That number was 802,000,000. It was, according to the 2003 study, the number of US dollars that pharmaceutical companies spent, on average, to bring a new drug to market (J Health Econ 2003;22[2]:151-85). Now there are new numbers. Some health economists peg the current cost of drug development at US$1.3 billion, others at US$1.7 billion."
Full article here.
http://www.ncbi.nlm.nih.gov/pmc/articles/PMC2630351/
Key point: the data used to come up with the original number came from an industry financed source and was not made public. And here's a bit more coverage that throws additional cold water on 10 figure costs.
http://www.theglobeandmail.com/life/health-and-fitness/drug-...
While the actual costs remain unknown, it's a safe bet that they're nothing like the inflated figures being circulated by the industry.
1. Check out the Tufts Center for the Study of Drug Development. They calculate the cost to create a new drug and their methodology is very transparent.
http://csdd.tufts.edu/research/research_milestones
2. You can do a simple sniff test on these numbers. Simply call up a CRO that runs clinical trials and ask "What will it cost me to run a Phase III clinical trial?" I did this recently for a project I was working on. They will freely give the numbers about since they are all in competition with each other.
This is what a recent survey of CROs found[1]: "As for the average per-patient trial costs across all therapeutic areas, in Phase I, costs rose from $15,023 in 2008 to $21,883 in 2011. In Phase II, the cost rose from $21,009 to $36,070. In Phase IIIa, the cost increased from $25,280 to $47,523 and in Phase IIIb, cost jumped from $25,707 to $47,095. Finally, Phase IV expenses rose from $13,011 to $17.042."
Let's do some simple calculations. 1000 patients, 1 year trial. You need to complete two Phase III trials to keep the FDA happy.
1000 patients * $47,000 * 2 = $94M
And that's only for phase III trials. Add in the cost of discovery, pre-clinical work, formulation, Phase I, Phase II, all the paperwork with the FDA.
OK, great, now you're approved, you still need to actually make the drug which includes scale-up, testing, FDA certification of the manufacturing process, packing and distribution.
When I was working at a big pharma company, I heard about a new manufacturing site they had built in anticipation of a really big drug being approved. The cost? Several hundred million dollars. What happen when the drug got rejected by the FDA? The manufacturing site was written off (couldn't really be used to make anything else).
That's why your drugs cost so much.
[1]http://www.pharmalot.com/2011/07/clinical-trial-costs-for-ea...
Doesn't that mean pharma is the one industry where patents could be abolished with literally no consequence?
1) How do they keep them high? They are buying these services from a third-party.
2) These cost of clinical trials is increasing because FDA evidence requirements are getting stricter and stricter. Back in the 1950s, you could get a drug approved in under 2 years. Now? It's more like 5-8 years. Of course, you end up with much safer drugs this way.
Where the regulated industry ends up in some kind of symbiosis with its regulator, encouraging it to both grow and to keep competition at bay.
The conflict between the regulators and the regulated industry is largely a farce as they know they need each other.
Not only does this provide a dangerously (murderously?) distorted view of the compound in question, it means patients (read: victims) will be paying exponentially more for their "treatments".
It's an increasingly sordid business, and not one that can be defended in good conscience. As the Economist notes in its current review of "Bad Pharma" "This is a book that deserves to be widely read, because anyone who does read it cannot help feeling both uncomfortable and angry."
Yes, but they don't have bottomless wallets. I'm sure a great deal of research would still happen in the absence of large potential profits. The problem is very little of it would lead to drugs your doctor could prescribe. The drug targets are the easy part - the hard part is getting a compound through clinical trials, and ones you get approved has to pay for the other 90% that didn't make it because they were too toxic or didn't work as well as existing treatments.
As a real-world case consider antibiotics. There's a huge need for new antibiotics - if you get the right strain of MRSA your doctor is going to be about as useful as the local faith healer. Same goes for a nasty strain of the clap that's making the rounds in Japan. Totally resistant to existing antibiotics - once you get it, it's not going away.
But for various reasons there's no money in antibiotics (or vaccines, either, but let's just stick with antibiotics). You don't get repeat customers, and the bugs will start to develop resistance in a few years. With no profit motive drug companies aren't doing what they need to do to bring new antibiotics to market. So there's nothing in the pipeline.
The concern, of course, is that if you did away with patents entirely every type of drug would be like antibiotics. Drug companies wouldn't exist at all, or they'd exist as contractors to governments (oh, and wouldn't that be efficient).
Yes, but they don't have bottomless wallets.
Also, demand for drugs is often inelastic, so people are more likely to make sacrifices here to pay for drugs. Which is fine in itself, but not when the high costs are the product of a cartel arrangement between government and industry.
But governments and insurers don't save money by saving your life. They save money by letting you die before you get old. That was the ironic thing about the tobacco settlements in the US - the states sued the federal government claiming damages for the extra care they had to provide to people who smoked, when those people would have cost the state more money if they'd lived a normal lifespan.
In some cases a new drug will save money by keeping some damaging disease from becoming a problem and pushing expensive treatments far into the future. That's not the normal case, though. I'm all for helping people live out their threescore and ten in good health, but on average it doesn't save anybody money.
>Also, demand for drugs is often inelastic, so people are more likely to make sacrifices here to pay for drugs. Which is fine in itself, but not when the high costs are the product of a cartel arrangement between government and industry.
Here again there has to be some way for the people doing development to recover their costs. The patent system allows the drug company to charge more to every patient who takes a drug for twenty years. Without it that would all have to be covered by tax money. I like the patent system better, since it's biased toward charging people with lifestyle-related problems more money than people who take care of themselves.
Also, with the patent system companies will spend money on development for treatments that are within the realm of scientific possibility and not because advocates for that particular disease have more political clout. How many billions were wasted in the "war on cancer"? Government just doesn't do this sort of thing very well.
Still, abolishing patents would go a long way to allowing real competition and progress in healthcare.
As long as they still cranked out out new, popular
products, companies like Apple would continue to profit by
being the first to market, which often confers a long-term
advantage.
Let's say this is true; how is this different from any government action in the marketplace? From education to finance to healthcare, we're confronted with problems that have may have good theoretical solutions by government, but the reality is that our solutions will eventually devolve to rent-seeking and regulatory capture by powerful entrenched interests. I have yet to hear a good solution to this problem other than severely limiting the ability of the government to interfere with markets in the first place.
That's whats so bad about patent trolling. Its just so uncivilized.
Most HN-ers work on web startups where $100k is a lot of capital and time to market is everything. I don't think they have a good grasp on the mechanics of industries where you can burn through $100k in a few weeks and where a usable product might take 3-5 years or more to make it to market.
2. It is difficult for examiners to find prior art because there is no "official" channel for "publishing" software research that they recognise. There is much know-how that is common knowledge among developers but is never published in any paper, textbook, standard, RFC, etc. The "database" for searching all these sources may end being a web search engine. That is not ideal.
1. Drugs are very expensive to produce. Not only the research, the equipment, the staff, but compliance with the regulatory regime. There are no protections against bad software to protect users (developers operate in a wild west type atmosphere), but we have many rules about medicines. These are designed to protect patients. Can you imagine an unregulated pharma industry? Profits take precedence over safety. It would be very dangerous for patients.
2. There is a littany of journals that public chemical, biological and medical research and they can all be searched easily in combined databases, to which most all pharmaceutical patent owners subscribe. It is not too difficult for examiners to find prior art and establish publication dates.
These are my thoughts.
I'd argue software is extremelty expensive to produce, on the basis that distributing software is so insignificantly expensive that it could be called free. Relative to the costs of distribution, paying developers to write an application is extraordinarily expensive. So is maintaining that code, providing support, and advertising the product. I'd "guess" startups are so abundant in the software sector because distribution is so cheap, not because development is. Entering any other market's distribution channels on an international scale is prohibitively expensive for almost anyone but an already successful mid-sized company.
> 2. It is difficult for examiners to find prior art because there is no "official" channel for "publishing" software research that they recognise. There is much know-how that is common knowledge among developers but is never published in any paper, textbook, standard, RFC, etc. The "database" for searching all these sources may end being a web search engine. That is not ideal.
Even more fundamentally, it is hard to find prior art because software is information / knowledge and traditionally (in the context of math at least) we never had patents on it. If you consider the physical properties of software, it is just the presence of absence of charge over billions of indicants. Does the interface that exactly duplicates the ios home screen but has a binary representation that is nothing like the disassembly of it represent infringement, or the instant messenger whose disassembly looks 95% like the ios home screen? What happens when a music track and an android map are 90% binary identical?
> 1. Drugs are very expensive to produce. Not only the research, the equipment, the staff, but compliance with the regulatory regime. There are no protections against bad software to protect users (developers operate in a wild west type atmosphere), but we have many rules about medicines. These are designed to protect patients. Can you imagine an unregulated pharma industry? Profits take precedence over safety. It would be very dangerous for patients.
Absolutely you need to regulate the pharma industry somewhat, but I would also argue it is a consumers responsibility to know what they are putting in their bodies. We expect people to be able to judge their own alcohol consumption, how are prescriptions any different? If you make knowledge easily and readily available on what drugs do and their effects, consumers could make informed decisions. A lot of the fears in the phara industry is in how close-boxed knowledge is - you assume your doctor knows best, and don't investigate the effects of drugs you consume. I'd call it foolish to not understand the risks of what you are consuming.
> 2. There is a littany of journals that public chemical, biological and medical research and they can all be searched easily in combined databases, to which most all pharmaceutical patent owners subscribe. It is not too difficult for examiners to find prior art and establish publication dates.
That doesn't mean that a government granted monopoly on drugs is a good thing. When the expenses of drug research (which end up significantly being the rigorous 3 phase testing drugs need to pass to be allowed to be sold to end users) are so high, and profit motive is involved, drug costs spiral out of control. For Americans like myself without health insurance, we just can't afford to buy any of these drugs even with a prescription because they can cost upwards of $200 or more a bottle. The fact the actual drugs only cost at most a few dollars to produce per bottle, so the rest is profit to recoup research costs, doesn't help the fact that the good is cheap to make and is artificially expensive to recoup tremendous research costs. One (not me, but it is a theoretical) might argue that the R&D of a to-market drug could be just paid in full to whoever developed it, and that the formula itself could be released public domain. Taxes go up, drugs are cheap.
The actual marginal cost of each unit of software sold is pretty close to zero. This is what makes it so fantastically profitable compared to almost anything else.
In neither case do you necessarily have fantastic profits although if you can sell at scale at a good price it becomes very likely but if you have a drug for a niche market or software in a crowded market it is quite possible to make a loss.
This is neither an argument for or against the patent abolition proposition which I am torn on. I can definitely imagine with alternative arrangements for Pharma we could be better off than currently but I believe that there must be something possible that is better than both what we have now and better than nothing.
Protecting inventors is one path toward innovation, but it should be a byproduct of maximizing innovation and not the end state.
If the objective of the patent system is to foster innovation, then it should grant patents only if they are necessary for innovation, i.e., innovation wouldn't reasonably occur otherwise.
Amazon's one-click patent versus drug patents are two good cases. If the patent system didn't exist, is it reasonable to think someone else would come up with a one-click method of shopping? Yes. Drugs, however, often require hundreds of millions of dollars in upfront investment. It is reasonable to think that pharma companies couldn't raise the necessary capital, and therefore invent these drugs, without some protection.
As an example, in the recent Apple v/s Samsung, if it weren't for Apple, we would still be dealing with shitty Nokia, Samsung and Sony Ericsson phones with crap OSes, no decent applications, and the phones would be anything but smart - because there was no need to improve. Once Apple made everyone lift their game, their strategy has been to sue all large players aggressively to ensure they can't implement the things that Apple used, no matter how trivial (eg. the green telephone icon). On one hand you can argue that a "slide to unlock" was not done before on a smart-phone and deserves protection. On the other hand, you can argue that it's a very obvious solution for touch screens and someone else would have easily come up with it. You could also argue there's prior art (but that's another story). So ... In this instance, did Apple drive innovation? Yes. Was it necessary for Innovation? Maybe. Would the innovation have happened if Apple hadn't driven it? Not any time soon.
In my view, your definition needs to be tighter to cover scenarios such as these.
In case the Apple fans get their knickers in a knot, Apple aren't the only ones suing others over trivialities. The industry has been locked in a stale-mate for a long time.
I am fascinated by this statement. What evidence do you have to support it?
This is and endless argument, you either acknowledge that they pushed it forward or you don't but there wasn't a significant application platform, touch was nearly nonexistent and even dismissed by RIM, and while many of these things might be dismissed as obvious, Apple made it stick and they beat the entire current crop of competitors to the market.
Everything is easy once you've seen it done...
Take the typical Nokia and Motorola device from 1997 and the typical one from the iPhone launch, biggest improvements? More SMS and the phones got a little bit smaller
The question is, if they knew no patents would get awarded for software features like slide-to-lock or gesture control, would they still have introduced the iPhone?
I believe they would have, but it would be great to hear your thoughts if you disagree.
http://mobile.engadget.com/2006/02/21/review-cingular-8125/ This was released over a year before the first iphone.
I think that apple's contribution was not so much innovation as it was popularisation.
Maemo, Openmoko, and Android all serve as counterexamples to your claim that Apple was the sole driver of recent smartphone innovation. Our smartphones might look a bit different now had Apple not released the iPhone, but they would still exist. Industry consortia were developing higher-bandwidth data standards (a Danish friend told me in 200[012] that 256kbit/s access on cell phones was already widespread), companies were experimenting with different form factors, operating systems were being developed, etc.
In my view, your definition needs to be tighter to cover scenarios such as these.
Perceived scenarios such as these are often a product of missing information.
There is no magical solution, but the contours of the ideal system will account for the capital requirements of an invention. Areas with low capital requirements, such as "slide to unlock" and "one-click buying," should not warrant patent protection.
Not because they require less ingenuity, but because even absent patent protection, companies would still continue to differentiate through new features and ideas.
It's very similar to music and movies. Artists continue to introduce new sounds and new films even though success spawns a host of copycats.
Would Apple cease innovation on software features -- like "slide to unlock" -- if they weren't granted patent protection? I think it's reasonable to assume not because of the relatively small capital requirements and because of their passion to advance technology.
Knowledge Ecology International: http://diyhpl.us/wiki/transcripts/open-science-summit-2010/j... .. where he talks about an "open source dividend".
Health Impact Fund: http://diyhpl.us/wiki/transcripts/open-science-summit-2010/a...
So if it takes 10 years to develop a new drug and have it approved, give them 10 years of patent protection. If it takes a year to invent and perfect some user interface idea, give them a year's worth of patent protection.
Don't set the time limit on a case by case basis or everybody would claim to have thought about it for 30 years before it came to fruition.
And innovations that thrive without IP: http://www.stephankinsella.com/2010/08/innovations-that-thri...
Also: http://mises.org/media/categories/226/Against-Intellectual-P...
and
It's absurd to think that the same age-of-steam monopoly grant system that currently sorta benefits the pharmaceutical industry should also apply to software, websites, business methods, and exercising one's cat.
It's completely retarded. In the literal sense, i.e., holding progress back. End the retardedness now!
Not to mention that as many have pointed out over and over again, the main expenses of drug companies are not research, but drug approval bureaucracy and marketing.
The work of the patent office then would be to validate the patents when there is a conflict, as a pre-requisite for a lawsuit. The office would have less work to do relatively I would think and hopefully would have more time to review the patents when they come to their desks that way.
Now, acknowledging that is far from being enough to abolish them. The world revolves around companies making profit, it's naive to think that the government will agree to rule against the huge companies that currently benefit from those restrictions.
Is there another way to encourage innovation?
Which movie is that, exactly?
a) They improve productivity (I'm assuming this is somehow an Economic encapsulation of the benefit of technological progress, although AFAIK technological progress is essentially a Big Problem for economic analysis, and one of those things that Economists wave off as a pathological one-off event that ruins their assumptions, so I'm guessing it's A-OK for Economists to approximate technological progress -- something they can't really cope with -- as simply output / production cost).
b) They are an alternative to trade secrets, which is dismissed in a single paragraph with the argument that you'll only patent something you can't protect for longer with trade secrets (because, as a typical economic actor you are omniscient and can perfectly predict how long you'll be able to protect something with a patent vs. secrecy).
The follow-up paragraph says this (emphasis mine):
> A more subtle point is that secrecy may bias the type of inventive activity away from innovations that are not easily kept secret to those that can be, viceversa for patents. There is historical evidence from Moser [2004, 2005] in this direction. In 19th Century expositions of inventions, while countries without patent systems had overall rates of innovation similar to those with a patent system, they did specialize in innovations which were more easily kept secret. How strong this bias would be if no countries had patent systems – that is, whether it is true that patents encourage innovations that would not otherwise be made, or if they just shift the location of innovation from country to country – is not known.
Oops. So this argument appears to be well-founded, and we don't know how big the effect is. Never mind, moving right along...
> A good case in point is that of the Wright brothers, who made a modest improvement in existing flight technology which they kept secret until they could lock it down on patents, then used their patents both to monopolize the U.S. market and to prevent innovation for nearly 20 years.
Yes, there was no innovation in flight technology between 1903 and 1923.
> The modern and highly successful open source software movement is a more contemporary example of how collaboration and exchange of ideas thrives absent intellectual property.
This is where they lose me. OK they lost me a while back. Where is the great open source project which is so awesome everyone is imitating it? Open Source is great at commodifying innovations produced by others. We've got imitation Windows UI, imitation Mac UI, imitation iOS, imitation UNIX, imitation Microsoft Office, imitation Photoshop...
> On the other side of the coin, the rationale for patent systems is weak. In most industries the first mover advantage and the competitive rents it induces are substantial without patents. Again: the smart- phone industry – laden as it is with patent litigation – is a case in point.
So, do they think Apple's first mover advantage would have been worth much if competitors had simply cloned everything it did? It was the delicate dance of ripping off Apple's ideas without crossing the line that created at least of the first mover advantage in this case.
I could go on and on -- the authors certainly do.
> In the case of patents, and particularly pharmaceutical patents, the situation is even more severe. We have made mention of the loss of human life due to the pricing of AIDS drugs.
Right, so kudos to the patent system for giving investors a reason to invest money and attention span to creating AIDS drugs, but once they're created they should sell them at break-even? Oh wait, no. No kudos to the patent system for the former -- they were inevitable. People like spending their money making stuff. It happens.
> A simple model helps to focus these thoughts. We suppose that there are two firms i = 1,2 who must choose between innovating (I) and not innovating (N). We have in mind here the creation of a new product, so that the choice to innovate is paramount to entering the market – a firm that does not innovate is assumed to have no product to sell.
Maybe if we do some pretend math it will make our thinking seem more rigorous. As something of a failed mathematician I like counter-examples. In this universe these guys are basing their entire theory on, the entire market for laundry soap does not exist.
It's just magical thinking.