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Comment by lionhearted | Hacker News Reader

Frequently overlooked -- American companies are huge net-exporters of IP, IP licenses, and IP-protected stuff.

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.

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>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.

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'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. ... The fact that one company is nominally American and one is nominally South Korean doesn't really have any bearing.

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...

[2] http://www.apple.com/about/job-creation/

I'm not sure how comparable the employment numbers are given that Samsung does more of their own manufacturing whereas Apple outsources to Foxconn (or Samsung) et al. It makes Apple look like they have a much larger percentage of U.S. workers when you discount the six digit number of factory workers making iPhones in China.

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.

Remember theres a difference between getting rid of patents and getting rid of intellectual property.

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.

It's merely conventional that humans can claim the property of ideas. Nobody can "steal" an idea, so there's no way of ripping off the creator.

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 disagree that there should be protections to stop people from "ripping off your stuff" and selling it without paying you for it. Instead, there should be protections to stop people from copying your idea without you getting credit for it. But there don't need to be legal protections. All you need to do is make your idea public to prevent anyone else from claiming they were first.

I'm serious about getting rid of all patents and all copyrights.

I don't understand.

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?

I'm not anti-trade secrets. In your scenario, the source code to Half-Life 3 is a trade secret that the Valve employee is obligated to keep. However, if the code is ever made publicly available to read, it's no longer a secret and no money should be made from selling or licensing it. And even if the source is never public, once binaries are made public, it should be perfectly legal to reverse engineer those binaries.

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

> Once those levels were released, people would be able to share them freely among themselves

> 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.

Criminal law, it wasn't his to sell, you both broke the law.

Nothing was "stolen".

Without copyright there was nothing that was removed from Valve. It is just a copy.

False, a trade secret was stolen, and said employee did not have the right to copy it or disclose it.

Wait a sec... so get rid of patents, copyrights but leave the concept of trade secrets? How does that make sense?

You can't outlaw companies keeping confidential information. And you certainly can't legalize its theft and maintain a functioning market.

How do you get rid of patents without getting rid of intellectual property? Do you mean setting up better infrastructure for licensing?

According to http://en.wikipedia.org/wiki/Intellectual_property, types of intellectual property other than patents include copyright, trademarks, industrial design rights, and trade secrets. You could get rid of patents while keeping those other types of intellectual property.

And what's the efficacy of copyright, trademark, design rights, and trade secrets in protecting a new process, machine, manufacture, or composition of matter? The first three are not applicable, and the fourth may protect innovation but comes at the expense of no public disclosure.

None. And that's the point. The idea here is to stop granting monopoly on on these areas.

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.

Look at ARM. They license design rights and they're pretty successful.

I agree. I don't know how you could have IP without patents.

The 1850-1880 campaign to abolish patents:

> 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...

There is definitely an element of US self-interest. The US invests a disproportionate amount of capital into R&D relative to its GDP compared to other countries and also reaps a disproportionate result from that R&D investment (i.e. US R&D investments tend to have a higher return per dollar invested compared to most countries).

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.

Two things. R&D is not a generic, fungible thing. R&D that occurs in a patent environment will have a different focus than R&D that occurs without. I'd expect funding spent on lawyers writing defencive patent proposals would be figured on the balance sheet as R&D, even though it isn't. Or R&D spent finding new ways to extend existing patent rights of a drug. Or finding ways to innovate without breaching competitors' patents.

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.

OK, so $1B goes from Samsung to Apple.

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.

What about Amazon?

OK, Amazon counts. Perhaps RIM isn't dead quite yet either. But the point remains.

RIM isn't a US company.

Well, there you go. Guess I'd assumed it was US-based since they'd had such a problem with patent trolls in the US.

Microsoft reveals the shroud of x.

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