Patents, innovation, and progress

[punk]

Yup.

You wouldn't have patented the "idea of a wheel". You would have patented a wheel "reduced to practice." Probably something made out of solid wood, with a wooden axle that you had to slop grease on to keep lubricated.

I don't see to many of those around any more. Do you?

You don't patent ideas. You patent inventions. You cannot patent any possible permutation of your idea until you reduce those permuations to practice.

Someone else will come along and improve your invention, or invent a substitute, which he will patent. You may own the underlying invention. He will own the improvement. He cannot practice his without yours. Your is already made obsolete by his. If you are stuborn and wont give him a license, he will try to sell the substitute instead. Your best bet is to give him a license to your underlying technology before the substitute kills you both.

Okay, let's say I own the patent to the wheel (my great great...great grandfather Og made it and it stayed in the family). I decide I don't like cars because they cause global warming so I stop licensing out the wheel thus making all the improvements useless.

What substitute do you forsee for all those wheels we have on cars and trucks and wheelbarrows and things?

[DavidOdden]

Not all ideas should be allowed to be patented. Only ideas that are very unique.

Which pretty much corresponds to the requirements on patentability laid out in 35 USC 103.

If someone claims that they had thought of your dog hair converter by themselves, and they show your exact sketches for the machine, with the same exact mechanism (only sketched in their hand writing), would you agree that it is practically impossible that they reached the exact same idea independently?

In fact, if you want to apply for a patent, you must submit your sketches and they are easily accessible public records -- that's the whold point of patenting and documenting the patented object. That means that you can patent a particular method of converting dog hair into petroleum, but not the generic ideal "converting dog hair into petroleum". Thus if your evil genius neighbor Lex Luthor thinks of a different way to do the conversion, that can become his patented property.

Some years ago, somebody invented a mildly flexible foam-like rubberoid substance that you can put on handles, to get a better grip. This was a significant invention which has made my life easier; but this patent will expire. I also like square-slot screws, an invention that was no doubt patented (and the patent will expire soon). These are good uses of patents. What I think would be an abuse of the patent concept, and hopefully not allowed under US law (though I think maybe the US Patent Office just cannot handle it any more) is patenting the combination "square-slot screwdriver with sure-grip handle". That's a trivial 1+1=2 application, not a significant innovation as required under patent law.

Unique ideas are like land: two people cannot own it at once: I'm not talking legally, but metaphysically. This is the idea that stands at the basis of patents (I think).

Oh! I didn't see that. That's absolutely right. Goodonya, as the strines say.

[mrocktor]

Okay, let's say I own the patent to the wheel (my great great...great grandfather Og made it and it stayed in the family).

Og patented a round stone with a hole in it. Then came the wooden wheel made out of boards. Then the spoked wooden wheel. Then the spoked wheel made of metal. The tire. The list goes on an on. Og's patent has been worthless for 10 thousand years.

[KendallJ]

Okay, let's say I own the patent to the wheel (my great great...great grandfather Og made it and it stayed in the family). I decide I don't like cars because they cause global warming so I stop licensing out the wheel thus making all the improvements useless.

What substitute do you forsee for all those wheels we have on cars and trucks and wheelbarrows and things?

Here we go into hypothetical land and further from reality.

1. You didn't patent "the wheel", you patented a type of wheel.

2. The fact that you have to state your claims and reduce to practice has the effect that you cannot patent and highly abstract idea, and all of the future incarnations of it. This has the practical effect of making your claims very specific and very contextual. At some point in the future, someone patented something that was unique, enough that it either will not fall under your claims or that is such a leap ahead that their improvement holds more value than your original patent. That means that in a license "stack", their slice of the available royalty will grow bigger than yours, or that you will be pushed out of the stack altogether. This is how it happens and long before patents expire.

3. The fact is that patents for only one aspect of competitive advantage. The fact that you have leverage over everyone else, means that they sure as hell aren't going to let you keep that leverage without building some of their own against you. The smart guys would have bought out Og's patent estate long ago, thereby not having to pay royalties, and giving some greedy ancestor his lump sum payment.

You really think that someone who innovates once, so far in the past, has some sort of magic leverage, such that his inventions need to be taken away from him so that he can't hurt society's steady advance? This is ridiculous. It is not how it works. Patents don't work like that. They wouldn't work like that even if they were permanent, because the patent expiry is not what forces the issue today.

[KendallJ]

A rational system could not accept a patent for "a semiconductor device used to control a large electrical current with a small one", and there is no way the permanent patent to "a gallium arsenide device of BJT construction and NPN polarity used to control a large electrical current with a small one" would stonewall human development forever. There are other ways to switch electric current, there are integrated circuits (which use the same transistor principle but are clearly a different application), electronics itself is bound to become obsolete at some point.

Exactly! because you patent ideas reduced to practice and because you have to substantiate your very specific claims with data that show you have reduced it to practice, what you can claim, inherently can be worked around, obsolteted and improved upon in ways that are more valuable than the original work. Patent value has a natural life.

[DavidOdden]

Yes IP is effortlessly eternal, so what? Is it less mine because I don't have to act to keep it? I did act to create it in the first place, its mine. The only actual argument in favor of time limited IP I have ever heard is "in time someone else would have thought of that". Well, in time someone else would have found that oil field, plowed that field, built that car - accept that argument and you invalidate all property and not only the intellectual sort.

No, I don't think you're getting the basic difference. A physical object can be destroyed, and some kinds of objects get destroyed very quickly, so you have to act to keep that property. If you, or your progeny, do not act to preserve that land, the Mississippi will eat it and there will be nothing to own. But with a patent, in principle the object being protected can never be destroyed, and thus a perpetual patent becomes a hereditary entitlement, akin to the nobility.

Now I agree that eternal IP would have negative effects. Since the moral is the practical, I think that these negative effects we can imagine are a clear indication that there is some reason why IP should be time limited. I just don't think the agrument above is it. Understanding the true reason IP should be limited would most likely lead to an answer to the nagging question "how long should IP be protected?".

I was only giving half of the argument; the other half of the argument is the "stiffling of science" argument that Rand also gives. Taken together, they lead to the conclusion that an inventor should be be well-compensated for his invention, in proportion to its objective value. Taking into consideration practical issues regarding royalties, manufacturing and market costs, the risk of doing business, and so on, that comes down to something in the 15-25 year range.

[y_feldblum]

I'm no philosopher, and this may sound rationalistic. I would say that the purpose of production is the ultimate consumption of what one produces. The purpose of property right is the protection of what one produces so that one may consume it. IP is essentially the same as all other forms of property: it is either to be consumed, or it isn't property.

[mweiss]

One of the problems inherent in the patent system is that the burden of protecting one's intellectual property is costly when another party violates it.

A major semiconductor manufacturer built its business in the 1960s on a stolen patent. Since the inventor of the techology was an individual without the huge resources of a major industrial corporation, the suit against the manufacturer took 7 years to prosecute. He eventually won a judgement, but the company that commited the theft of his idea was so profitable as a result of that technology, that the award to the plaintiff was simply 'the cost of doing business'--it was a token amount and did no harm to the company's financial outlook.

Today, it can cost $1.5M on average, to litigate a patent infringement. Many unscrupulous companies actually search patents for ideas that they can use. With minor modifications, they often can skirt the law. As a result, a number of inventors I spoke with have decided that patents were a liability, at least until they got their product into a manufacturing level of development.

It really is a mixed bag, whether a patent is beneficial or a hinderance to technological development. As with many things, the originator has to exert huge energy to maintain and protect his rights.

[KendallJ]

No, I don't think you're getting the basic difference. A physical object can be destroyed, and some kinds of objects get destroyed very quickly, so you have to act to keep that property. If you, or your progeny, do not act to preserve that land, the Mississippi will eat it and there will be nothing to own. But with a patent, in principle the object being protected can never be destroyed, and thus a perpetual patent becomes a hereditary entitlement, akin to the nobility.

I was only giving half of the argument; the other half of the argument is the "stiffling of science" argument that Rand also gives. Taken together, they lead to the conclusion that an inventor should be be well-compensated for his invention, in proportion to its objective value. Taking into consideration practical issues regarding royalties, manufacturing and market costs, the risk of doing business, and so on, that comes down to something in the 15-25 year range.

I read through the CUI chapter. I'm not necessarily convinced of hte principled need for patent limits. Not that I have anything against the particular limits currently under law, as a de facto representation of the diminishing value of IP. Rand contrasts material property to intellectual property,

The inheritance of material property represents a dynamic claim on a static amount of wealth. The inheritance of intellectual property represents a static claim on a dynamic process of production. - Capitalism The Unknown ideal.

I'm unconvinced of either claim. The value of each of these things changes depending on context, as does the value of a particular royalty one can negotiate (i.e. that you can claim), specifically it always goes down over the long run. Both require that you "work them" in order to preserve the value.

I did not find the "stifling of science" argument. Could you refer me to it. This strikes me as coming from the same socialistic bent the punk is trying to pull off.

[KendallJ]

One of the problems inherent in the patent system is that the burden of protecting one's intellectual property is costly when another party violates it.

A major semiconductor manufacturer built its business in the 1960s on a stolen patent. Since the inventor of the techology was an individual without the huge resources of a major industrial corporation, the suit against the manufacturer took 7 years to prosecute. He eventually won a judgement, but the company that commited the theft of his idea was so profitable as a result of that technology, that the award to the plaintiff was simply 'the cost of doing business'--it was a token amount and did no harm to the company's financial outlook.

Today, it can cost $1.5M on average, to litigate a patent infringement. Many unscrupulous companies actually search patents for ideas that they can use. With minor modifications, they often can skirt the law. As a result, a number of inventors I spoke with have decided that patents were a liability, at least until they got their product into a manufacturing level of development.

It really is a mixed bag, whether a patent is beneficial or a hinderance to technological development. As with many things, the originator has to exert huge energy to maintain and protect his rights.

Patents are a liability, especially if you are a small inventor, however, I don't think this at all makes a case for hinderance of technological development. An idea is just one of the things you need to build a successful commercialized product, and that is all a solo inventor has, just an idea (or a prototype or a patent or whatever).

A lone inventor goes to the market to get the other things he needs: capital, a management team, resources. When he does that he also buys the ability to protect his invention through the use of those resources. The cost of this: he must sell away part of his invention to his investors. This is not an easy task, but it is not easy because many ideas are junk and only a few are really investible ideas, and therefore you need to work hard to sell your ideas amid a din of competing ideas.

Many people think that an inventor with a good idea deserves to have his product succeed, just by virtue of the fact that his idea is a good one. That is simply not true.

A minor modification to a poorly written patent, is not "skirting" anything. To have the government step up to protect one's property, one must be able to claim it. To be able to claim it you must know what you have, and articulate it properly in a patent. One does not just get a pass if one has the idea in your head, but don't know what it's worth or how to properly claim it. If one cannot do that, or hire someone to do that, one runs a grave risk filing for a patent. It is not the company's fault that one did not do that and they do not skirt the law by correcly claiming what one put into public reach.

Edited to replace the general "you" with "one" to avoid belief that I was directing these comments at you.

Edited December 20, 2006 by KendallJ

[Ifat Glassman]

Some years ago, somebody invented a mildly flexible foam-like rubberoid substance that you can put on handles, to get a better grip. This was a significant invention which has made my life easier; but this patent will expire. I also like square-slot screws, an invention that was no doubt patented (and the patent will expire soon). These are good uses of patents. What I think would be an abuse of the patent concept, and hopefully not allowed under US law (though I think maybe the US Patent Office just cannot handle it any more) is patenting the combination "square-slot screwdriver with sure-grip handle". That's a trivial 1+1=2 application, not a significant innovation as required under patent law.

Yes, but what about a green square-slot screwdriver with sure-grip handle? Ah? now that is something unique!

So, what is the reason why patents should be expired after a while? I don't get this one. Do we assume that a unique idea (which is not just abstract, like Kendall said) can actually be thought of independently by two (or more) people if enough time passes from the time the idea was first thought of?

Also, judging if something is unique or not is very difficult. For example: the wheel. I'm sure when the wheel was first invented (to be used to move stuff around) it seemed like the most unique idea ever. But now it seems very trivial to us, and we are certain that thinking of a wheel is trivial.

There is an idea here that some people think "ahead of their time" and if enough time passes then somehow more people will think of those "difficult ideas". But in fact the only thing that advances with time is our knowledge: the mere fact that time goes by does not make "humanity" somehow smarter. Perhaps the logic behind patents expiring is that during more time more people live, and so the chance of an idea being rediscovered is greater.

[DavidOdden]

I'm unconvinced of either claim. The value of each of these things changes depending on context, as does the value of a particular royalty one can negotiate (i.e. that you can claim), specifically it always goes down over the long run. Both require that you "work them" in order to preserve the value.

I did not find the "stifling of science" argument. Could you refer me to it. This strikes me as coming from the same socialistic bent the punk is trying to pull off.

I forgot to mention the debt argument:

"The right to intellectual property cannot be exercised in perpetuity. Intellectual property represents a claim, not on material objects, but on the idea they embody, which means: not merely on existing wealth, but on wealth yet to be produced—a claim to payment for the inventor's or author's work. No debt can be extended into infinity." [p. 131]

The "stifling" argument (not put in those terms, of course) is:

"It would become a cumulative lien on the production of unborn generations, which would ultimately paralyze them."[p. 131]

"A patented invention often tends to hamper or restrict further research and development in a given area of science. Many patents cover overlapping areas. The difficulty lies in defining the inventor's specific rights without including more than he can properly claim; in the form of indirect consequences or yet-undiscovered implications. A lifetime patent could become an unjustifiable barrier to the development of knowledge beyond the inventor's potential power or actual achievement." [p. 133]

Now about that value thing. Because IP cannot be consumed, it is not a thing which you work to gain or keep, so it is not a value (it would be a hereditary entitlement granted to parasites). I would agree that royalties are a value and that you would have to constantly act to keep the flow of revenue coming. I don't see how an immutable entitlement can constitute a value.

I want to understand what you're not convinced of. I used to hold the contractarian view of IP until the Jersey lawyer on HPO pointed me at the rag-picker problem, and then the "but it's arbitrary" view of IP duration, until I shifted my perspective from "primacy of rights" to "conditions necessary for survival qua man". I admit that the argument depends heavily on the practicality issue, but you know what they say about the relationship between the practical and the moral.

[DavidOdden]

So you think if I held a patent on the wheel it would have declined in value by now?

FYI, it is John Keogh who has the wheel patent, in Australia.

[mrocktor]

No, I don't think you're getting the basic difference. A physical object can be destroyed, and some kinds of objects get destroyed very quickly, so you have to act to keep that property. If you, or your progeny, do not act to preserve that land, the Mississippi will eat it and there will be nothing to own. But with a patent, in principle the object being protected can never be destroyed, and thus a perpetual patent becomes a hereditary entitlement, akin to the nobility.

Yes, I got the difference the first time I read Ayn Rand's essay. The fact that an idea cannot be destroyed does not change its status as property. It was created, it belongs to the creator, period. This first argument is a non-sequitur.

I was only giving half of the argument; the other half of the argument is the "stiffling of science" argument that Rand also gives. Taken together, they lead to the conclusion that an inventor should be be well-compensated for his invention, in proportion to its objective value. Taking into consideration practical issues regarding royalties, manufacturing and market costs, the risk of doing business, and so on, that comes down to something in the 15-25 year range.

This argument is false as well. KendallJ's identification of the fact that aplications become obsolete has removed my doubts with regard to perpetual IP.

"It would become a cumulative lien on the production of unborn generations, which would ultimately paralyze them."[p. 131]

This can only happen if you patent concepts or principles, which is patenting reality itself. Proper standards of what can be patented eliminate the problem.

Because IP cannot be consumed, it is not a thing which you work to gain or keep, so it is not a value (it would be a hereditary entitlement granted to parasites).

This is the crucial error. IP most definitely is something you work to gain. It is, therefore, a value. The definition is not "something you work to gain and keep", and for good reason. There is absolutely no difference in inheriting a patent or inheriting a large sum of money - the inheritance is a willing transfer of rightfully aquired property.

[KendallJ]

Now about that value thing. Because IP cannot be consumed, it is not a thing which you work to gain or keep, so it is not a value (it would be a hereditary entitlement granted to parasites). I would agree that royalties are a value and that you would have to constantly act to keep the flow of revenue coming. I don't see how an immutable entitlement can constitute a value.

I want to understand what you're not convinced of. I used to hold the contractarian view of IP until the Jersey lawyer on HPO pointed me at the rag-picker problem, and then the "but it's arbitrary" view of IP duration, until I shifted my perspective from "primacy of rights" to "conditions necessary for survival qua man". I admit that the argument depends heavily on the practicality issue, but you know what they say about the relationship between the practical and the moral.

This is my issue.

1. Values can only consist of those things which can be consumed? I don't follow this logic at all.

2. Somehow describing IP as a "static claim" as Rand does, or an "immutable entitlement" does not make sense to me.

What am I immutably entitled to? The fact that someone has to come to me to negotiate terms to use my IP is certainly a claim or entitlement, but I'm unconvinced that it is immutable, because the terms can and do change objectively with time. Specifically, they decrease in value over time as others add innovation either by patenting around or on top of my innovation.

The fact that I am entitled of personal property such as land does not in any way determine what it is worth, only my right to sell it.

The ineheritance view is a problematic way to think about it. I prefer to think of the fact that this property acan be bought and sold and held by a corporate entity, which can exists for longer than any generation.

[Seeker]

I have some difficulty grasping this issue, but I hope that someone will help me understand a particular aspect of it, as illustrated by the following questions: How can a less-than-lifetime patent be appropriate when man's conceptual faculty theoretically embraces planning the whole of his lifespan? Who is someone else to say at what point his lack of productive potential terminates his claim? If the idea is rightly his own property, who is anyone else to judge the manner or duration of his use of his idea? If a man's needs include the need to benefit from his own ideas (through such license fees as he can negotiate, for instance), then how can a termination of that right by law be anything other than a denial of his right to life?

Thanks in advance for your answers.

[KendallJ]

I have some difficulty grasping this issue, but I hope that someone will help me understand a particular aspect of it, as illustrated by the following questions: How can a less-than-lifetime patent be appropriate when man's conceptual faculty theoretically embraces planning the whole of his lifespan? Who is someone else to say at what point his lack of productive potential terminates his claim? If the idea is rightly his own property, who is anyone else to judge the manner or duration of his use of his idea? If a man's needs include the need to benefit from his own ideas (through such license fees as he can negotiate, for instance), then how can a termination of that right by law be anything other than a denial of his right to life?

Thanks in advance for your answers.

Seeker, Great question!

Better yet, when corporations extend man's capability to plan and take on projects with lifespans even beyond a single working lifetime, doesn't a limited life patent stifle the ability for a corporation to own IP for and invest in really long return projects for which property rights are needed beyond the current limitation.

Aren't pharmaceuticals getting to this point now, with some drugs taking over a decade to develop before they even begin sales, and another 5 years to grow before you even see a maturing of their market, much less a decline?

Your question lets you argue for lifetime patent rights, but beyond that I have, I think, a principled response to the issue of perpetual patent rights, and I think it will hold water; however, I can't post it until I get some time, and I have a full day of work ahead of me so stay tuned.

[Marc K.]

My $.02.

First we must acknowledge that intellectual property is property and treat it as such. And we must acknowledge that all property is intellectual property, in that, there is some intellectual component to every piece of property that you own. The intellectual part is the action that was taken to create the property. The property part is that physical implementation of the idea and all intellectual property must exist in physical form in order to be patented or copyrighted. This is important: ideas are not patentable only their physical implementation is patentable.

Now, what is a patent. It is a promise from the government to protect the uniqueness of your invention for a period of time in exchange for you publishing your unique knowledge; allowing for the free exchange of ideas and their proliferation. Please also note the differences between copyrights and patents here as far as uniqueness is concerned.

You need not patent your invention. Keep it secret. Build your invention and sell it ... or not.

The time limit is the acknowledgment by the government that someone else eventually would have thought of the wheel.

[punk]

Here we go into hypothetical land and further from reality.

1. You didn't patent "the wheel", you patented a type of wheel.

2. The fact that you have to state your claims and reduce to practice has the effect that you cannot patent and highly abstract idea, and all of the future incarnations of it. This has the practical effect of making your claims very specific and very contextual. At some point in the future, someone patented something that was unique, enough that it either will not fall under your claims or that is such a leap ahead that their improvement holds more value than your original patent. That means that in a license "stack", their slice of the available royalty will grow bigger than yours, or that you will be pushed out of the stack altogether. This is how it happens and long before patents expire.

3. The fact is that patents for only one aspect of competitive advantage. The fact that you have leverage over everyone else, means that they sure as hell aren't going to let you keep that leverage without building some of their own against you. The smart guys would have bought out Og's patent estate long ago, thereby not having to pay royalties, and giving some greedy ancestor his lump sum payment.

You really think that someone who innovates once, so far in the past, has some sort of magic leverage, such that his inventions need to be taken away from him so that he can't hurt society's steady advance? This is ridiculous. It is not how it works. Patents don't work like that. They wouldn't work like that even if they were permanent, because the patent expiry is not what forces the issue today.

No, in my hypothetical, no ancestor sold out the patent for a lump sum. You are changing the problem and being intellectually dishonest.

In the hypothetical Og invented the wheel, acquired a non-terminating patent, the family never sold out, I hold the original patent today without dilution. Any licensing agreements we made were for finite terms, and I hate global warming so I am not renewing any of those licensing agreements. All the improvements still require a license from the original patent to be of use, and I don't care about money so I don't care what they offer me.

The only way out is that someone invented something entirely unrelated to the wheel that does the same thing. Except no one has invented something like that that you have been able to point to. At this point in time there is no replacement for the wheel, and it looks a way off.

You can't argue by pulling some nebulous "someone will have invented something to compete with the wheel" out of your hat. If there is a competitor, then point to it. If you can't point to it, then it may be entirely possible that there is *no* competitor at our current level of technology.

The problem with these arguments is that they assume anything anyone can think of can be invented. Or that just because one wants a device which does such and such it must be possible to build such a thing. Personally I want a car that goes 10000 miles on a tank of gas, does 0 to 60 in 1 second has all of the interior of a high-end luxury car, and costs $10 to make, but nature being what it is and being defined by laws, I don't expect to get it.

This all comes out of looking at intellectual property as some kind of footrace. The person that gets there first gets the prize and devil take the rest. This is kind of like saying that if Thomas Edison had died age 5 we'd still be using candles.

The fact that someone invented something doesn't mean that other people never would have invented it had that person not lived to do it. This view of intellectual property belonging to one person in perpetuity really only makes sense if we assume no one else could have invented it.

Progress in science and engineering would seem to require that ideas become public domain over time.

Which goes back to the original post: If X holds a patent but is making no effort to exploit it, should the patent still hold, or should it become public domain so that someone else interested in exploiting it can make use of the technology? Should patents become a means of *inhibiting* progress and innovation. Again, that this might be a "necessary evil" may well be a reasonable response.

Unless there is an argument that actions which inhibit scientific and technological progress aren't necessarily evil? (setting aside some sort of lifeboat argument that inhibiting nuclear weapons in Iran isn't evil. Indeed it isn't, but I want to keep to more benign technologies here).

Patents would seem to simultaneously inhibit and promote progress. They inhibit by providing a short-term "monopoly" of sorts on a particular technology and preventing others from perhaps using it better. They promote by providing a window within which the inventor can recoup his investment and make profits without fearing someone taking it from him. The student of mathematical optimization in me wants to think that perhaps the timeframe is chosen to balance these two competing factors.

Edited December 22, 2006 by punk

[KendallJ]

No, in my hypothetical, no ancestor sold out the patent for a lump sum. You are changing the problem and being intellectually dishonest.

I think if you look at my post again, you'll see that I made points 1,2, and 3 before I ever brought this up, and then only as an aside in point 3. The points stand without it, and were meant to. As stated, it can't be a "bait and switch" and so I'm not sure where your evidence of intellectual dishonesty is exactly.

In the hypothetical Og invented the wheel, acquired a non-terminating patent, the family never sold out, I hold the original patent today without dilution. Any licensing agreements we made were for finite terms, and I hate global warming so I am not renewing any of those licensing agreements. All the improvements still require a license from the original patent to be of use, and I don't care about money so I don't care what they offer me.

The only way out is that someone invented something entirely unrelated to the wheel that does the same thing. Except no one has invented something like that that you have been able to point to. At this point in time there is no replacement for the wheel, and it looks a way off.

You can't argue by pulling some nebulous "someone will have invented something to compete with the wheel" out of your hat. If there is a competitor, then point to it. If you can't point to it, then it may be entirely possible that there is *no* competitor at our current level of technology.

I'll be happy to state one as soon as you deal with my very first point, and show me the patent claims you made. One cannot patent a concept like "the wheel" and so until you clear that, I'm not playing along with your hypothetical.

Barring that fact, your hypothetical begs the question (i.e. it assumes the very claim you attempt to make) and you have magically appeared in the present day rich beyond your wildest dreams because of all of these things your family was able to do, which in fact you couldn't have done by simply holding a patent in perpetuity.

The problem with these arguments is that they assume anything anyone can think of can be invented. Or that just because one wants a device which does such and such it must be possible to build such a thing. Personally I want a car that goes 10000 miles on a tank of gas, does 0 to 60 in 1 second has all of the interior of a high-end luxury car, and costs $10 to make, but nature being what it is and being defined by laws, I don't expect to get it.

And you may want to expropriate my property instead because you need it to make an affordable alternative, but wishing for that doesn't make it so, or moral.

This all comes out of looking at intellectual property as some kind of footrace. The person that gets there first gets the prize and devil take the rest. This is kind of like saying that if Thomas Edison had died age 5 we'd still be using candles.

Huh? you mind running that by me again? How does looking at IP as a footrace mean the candle thing?

I think what I said is that the specific (i.e. it's specificity requirements) nature of the invention patent opens up the ability to innovate around any particular invention. So that any particular patent is not a barrier, nor will it be long term. One need simply look at the power of man's innovation chain to see that this happens all the time.

Progress in science and engineering would seem to require that ideas become public domain over time.

Which goes back to the original post: If X holds a patent but is making no effort to exploit it, should the patent still hold, or should it become public domain so that someone else interested in exploiting it can make use of the technology? Should patents become a means of *inhibiting* progress and innovation. Again, that this might be a "necessary evil" may well be a reasonable response.

Unless there is an argument that actions which inhibit scientific and technological progress aren't necessarily evil? (setting aside some sort of lifeboat argument that inhibiting nuclear weapons in Iran isn't evil. Indeed it isn't, but I want to keep to more benign technologies here).

Should an heir who owns a vacant lot in the middle of midtown Manhatten passed down through his family for generations, unimproved for this whole time, and who stubbornly refuses to do anything with it be forced off of his land so that others can exploit it and make progress?

What is "progress in science in engineering?" and for whom is this a value and why do these people get to decide what is better for my property than I do?

Patents would seem to simultaneously inhibit and promote progress. They inhibit by providing a short-term "monopoly" of sorts on a particular technology and preventing others from perhaps using it better. They promote by providing a window within which the inventor can recoup his investment and make profits without fearing someone taking it from him. The student of mathematical optimization in me wants to think that perhaps the timeframe is chosen to balance these two competing factors.

There may be competing mechanisms, but they can only have one net effect. Which is it exactly? My bet is that the profit motive is the driving engine for innovation, and that science is not at all inhibited by the existence of patent rights. Meaning the net is far and away that property rights foster innovation.

People make the same sorts of arguments about anti-trust legislation, that it serves to balance out "cruel" monopoly power and keep greed from stifling commercial progress. Those people wouldn't be Objectivists though...

[KendallJ]

The discussion on patents and intellectual property [i’ll use IP from now on to denote this term] has piqued my interest! I couldn’t sleep last night mulling over these ideas in my head and I think I have some insights I’d like to throw up against the wall for your criticism.

Some began the conversation claiming that patents serve to stifle innovation, and so shouldn’t they be limited. Others have entered the discussion claiming that there are fundamental principles why intellectual property is different from material property and that the limitation of patents is a specific rational outcome of this fact. In other words, the nature of IP requires its legal limitation. Most notably the advocates of this position have been David Odden, and Rand herself (living vicariously through David). Rand calls it a “static claim”; Odden, an “immutable entitlement”. Because I like to look at these things in the context of a commercial transaction or trade, I’ll refer to it as “magical leverage”.

From my experience with intellectual property in my work, I started with the counter that IP was not to be feared thusly, and in fact the law only served to reflect what already happened naturally. That is, that the leverage that can be exerted by the claim on IP naturally decreases with time. When I started, this was purely a gut feel. I think, however, I’ve got some basis for it now.

I think the basic concern either for stifling creativity, or the “static claim” both boil down to essentials in the example of The Fundamental Patent in Perpetuity, or as I’ll refer to it, Punk’s “Wheel Patent”. Now I think the idea that such a fundamental patent can be written is false (and I’ve explained this to Punk previously), and as a practical matter, I’d end the argument there. But, I also think that even if such a thing could exist, that it is not to be feared, because it will become self-limiting over time. I think this is a metaphysical property, and also derives from man’s epistemology.

What I’d like to do is accept the notion of a Wheel Patent, and then show that one cannot hold “magical leverage” in perpetuity over every new invention that arises, without “working” your property. Punk assumes his “magical leverage” and then asks us to show why he’s not stifling innovation now that he is in his catbird seat (essentially begging the question, and asking us to first accept his premise and then prove a negative). I prefer to start at the beginning and show how his magical leverage never could have arisen in the first place. I think this follows from metaphysical and epistemological fundamentals, that it is necessarily so, and hope to prove it. Also, as a corollary of this, I think it will follow that such a patent does not in any way stifle innovation, in fact it sparks it.

I’ll start with Punk’s ancestor Og, who has the dreaded Wheel Patent, and has formed a company Og Enterprises to exploit it. My assumptions are the following:

a. The patent is fundamental. I’ll suspend my disbelief here to allow Og to have written one of the most masterful patents, and thus be as close as one could come to actually patenting the idea of a wheel as one could come.

b. Patents can be held in perpetuity.

c. There is free association and a system of legal contract. i.e. we have laissez faire capitalism.

d. Og Enterprises acts as a rational free rider. That means that the company acts rationally, but it is not in the business of further innovation (i.e. of “working” it’s property). It exists merely to negotiate licenses and collect royalties. The irrational free rider is not of concern as none of the methods of treating property deal with this type of person, and frankly they are of little relevance.

My fitful sleep last night was because I was formulating 4 metaphysical or epistemological facts which I think make this case. Let’s start at the beginning.

First, whatever claim Og Enterprises has, it is still bound under the concept of voluntary trade as fundamental nature of the transaction. This has several implications. Og Enterprises cannot force a would-be licensee to accept its terms, and neither can the applicant force Og to accept his. Everyone always has the fundamental choice of “deal or no deal.”

This is always where I see the “stifling innovation” argument creep in. Isn’t it true that if Og dictates terms that there are possible innovations which cannot afford the terms he wishes to set. Yes, this is true. However, it is not true that there are NO projects that can afford the terms. If Og sets his terms too high, he still has a claim, but as a free rider, it is a claim to nothing. His first fundamental choice is sit and twiddle his thumbs, or agree to the best terms he can get. Given the choice of no value and some value, a rational free rider strikes his first deal.

So we have at least one, and maybe more would-be applicants that can afford Og’s initial terms (let’s call these the “24 karat” opportunities) and such applicants strike deals and set off to commercialize their ideas. It is still true however, that there are probably some other people with ideas which are “14 karat” opportunities, who cannot afford Og’s terms. Are they stifled? In fact no, because reality shelves opportunities in much the same way, yet we don’t begrudge it for stifling innovation. The profit motive is the mechanism by which the market directs the application of resources, and this is no different. Everyday in life there are great ideas that cannot be commercialized profitably because some aspect of the plan costs too much. Resources get directed to those that can make a profit. The licensing mechanism is much the same as any another cost. It does not stifle innovation. It focuses it on the most important opportunities.

I’ve already demonstrated that “24 karat” opportunities are not stifled by Og; however, if I have a “14 karat” opportunity, I still have options. I still can innovate and am still motivated to do so. I can innovate on one of the other aspects of my cost structure thereby transforming my “14 carat” opportunity into a “24 karat” opportunity that can afford Og. Or I can try to innovate around Og’s patents, and thereby not have to pay him his royalties at all (but this depends on the fundamentality of his patents, which I’ve already ceded). And as I’ll show later, I can also innovate on top of Og’s patents, thereby creating leverage of my own.

So we’ve established that Og will deal at some level, and that licences can function like any other cost element of a commercial opportunity and thus are congruent with the profit motive. The level of royalty does not stifle innovation, it focuses it. What comes next? Specifically, what causes the degradation of future license value over time? The answer is epistemology, specifically two aspects of epistemology.

For the first, I’m going to move into the future. Og Enterprises has profited handsomely from its licenses from “24 carat” opportunities and most of these have been developed and new applicants are slowing down, and Og himself (or his descendants if you like) are quite wealthy. Now a young inventor by the name of Henry Ford comes to Og with a new invention he’s developed, the automobile. He needs a license to Og’s wheel. The problem here is there there is no automobile industry. Few people have ever seen one, and the few that exist are sold to wealthy businessmen as toys.

This is the basis of Og Enterprises first dilemma. Human beings have ignorance of the future. What is Og’s license worth? Well in the long term this would be determined by what the auto is worth, but who knows what that is? The industry is not developed. Applications for the automobile have not been tested and commercialized. Again, Og’s choice is deal or no deal, but he lacks knowledge about what the future will look like. Ford may lack the knowledge as well. He may be just as ignorant. It matters not. Ford wants the license, and is willing to pay for it, but he doesn’t know any better what the future holds. His speculative calculations based on his best estimate of the future would indicate that he can afford say 14% royalties, but not much more. Og Enterprises has been getting 24% up until now. Again here we are back to the fundamental trading choice. My choice is keep what I am making now or give Ford a lower royalty and add to my wealth. Assuming he acts rationally, and he believes that all of the 24 carat opportunities have been developed, he will make the deal. This is the fundamental situation that all businessmen face if they want to expand their businesses. “Do I accept less profit on my marginal unit (or deal) with the intent that I can add volume?” Og Enterprises inks the deal, but without knowledge of the future. It doesn’t know if it has asked a fair value; just that it expects to get some return, albeit less than in the past.

There is a second epistemological form of ignorance that is just as important. That is that Og and Ford’s ignorance can also be asymmetrical. That is, Ford knows more about his future business than Og does. In fact, information asymmetry is common and more pronounced the more that the field of the new innovation deviates from the field of the original innovation. Og know stone wheels. Ford knows automobiles. The further that innovation departs from the stone wheel, the less that Og knows about it, and the less he will be able to assess his asking price as fair. Ford in fact, could know that his opportunity is really a “50 carat” opportunity; however, Og does not. To learn about Ford’s business is not a costless activity, and so if Og is a free rider his ignorance will grow over time. Remember we’re not dealing with the case of Og “working” his property. If he has to work it, one would presume he would continue to earn his royalty.

Note also that, given the asymmetry, it is in Ford’s interest to actively seek out Og, and get his license early. This effectively locks in his terms before the value of his invention is known to all. This is a key point, and it also attacks another one of Punk’s point. Ford would NEVER negotiate a limited-life license. In fact licenses most times match the base patent’s duration for this very reason. No one will allow terms to be renegotiated or the license withdrawn after the true value of the invention is known. Ford will have invested too much and established a going concern, to then hand complete control back to his original licensor. No investor would invest in a project when his return would be put at risk of total loss by such a contractual arrangement. Ford would never get off the ground. It simply doesn’t work that way in reality. Note also that the contractual terms of the license are included here, not just the monetary value. Ford may know it is important for him to have exclusive control of the technology, for example. Let’s say in this case, he gets non-exclusive, perpetual license to the wheel for all automotive applications.

So, since Og is not omniscient and obtaining knowledge is not costless, he will make mistakes of ignorance, whether that is plain ignorance of the future or ignorance asymmetry, it doesn’t matter. Now you may think that Og still has hope of getting his “fair” royalty back, but that brings us to the final aspect which is metaphysical.

Here is the development of the idea. IP is not the only resource that is necessary to build a viable commercial enterprise. It takes capital, talent, know-how (as distinct from IP), market access. These other resources do not march in lock step with innovation. They each have different dynamics, and one cannot corner the market for capital by doing the same activities it takes to corner the necessary IP. Each of these resources can be used as bargaining leverage against the holder of the IP. The rational free riding patent holder does not have the market in these other resources cornered, and if he tried to do such a thing, he would be “working” his property. Essentially this is the “I have lemons, you have sugar. Let’s make lemonade.” scenario, and it is this idea, articulated, for which John Nash won his Nobel Prize in Economics. This is in fact why even innovation that is derivative of the original patent is not stymied, because once this innovation is developed it is a resource to be used as leverage.

What is interesting and what I think cinches the deal for my argument is that in making a mistake of ignorance, the rational free rider brings into existence the wealth and resources that will ultimately curtail the “magical leverage” you have as a rational free rider. Thereby, the process of value degradation is not reversible. This is a common maxim that I know from my work around IP. Once you set the royalty you will accept for a particular context, it is almost impossible to get more for that application after the fact, even from other licensees. And you will create the enemy that will keep you from it.

Let’s go back to the Ford/Og example. A new applicant approaches Og Enterprises, Harvey Firestone. He has a new type of tire, a steel belted tubeless tire, which he wishes to sell to automobile manufacturers. He needs a license from Og. Og Enterprises, seeing how big a business autos have become by watching Ford rake in millions and rueing their original 14% royalty deal with Ford refuses to license Firestone the technology for anything less than the 50% he should have charged in the first place. Firestone has independent investors who don’t like the idea but since it is still a profitable venture they would be willing to invest.

But wait!!! Ford approaches Firestone, and offers to buy his patent, and/or license his technology as well. He has the capital. He has the dominant access to the market. And he has the factories and labor know how to produce the tire. And lastly, he has a motivation to acquire the technology because it will be an competitive advantage for his cars to have these tires. BUT MOST IMPORTANTLY, he already has the wheel license he needs and it is already at a 14% rate. Now, even though Firestone is still an independent inventor he now has leverage against Og. He can go to Og and say “Look, I can sell to Ford, and the best you’ll do is 14% off of my business. But I’d prefer to stay on my own. I’ll offer to take a license at 14% from you.” Og will never get the 50% rate he should have asked for originally. Ford (using Firestone as a proxy) now holds leverage over Og, given the resources he’s been able to amass with his knowledge of the potential for the automobile.

This process will continue. Every time Og makes a mistake of ignorance, he will create the resources that corral him. His royalties will continue to diminish and will do so because of metaphysical and epistemological factors that are in reality.

Now, Og doesn’t have to be a free rider and watch his value cut shrink. He can invest time and resources to learn the application of his technology and to learn the technology of his would-be applicants. He can make wise choices about what rates to charge and what terms to set. But at his most successful he would not be a rational free rider. He would be a Midas Mulligan, parlaying his wealth, and knowledge into the right opportunities (and in fact he’d probably forego licenses and take equity stakes in the most promising ventures). But this would mean he’d earned his wealth, and he should deserving of our praise and admiration.

Four key metaphysical and epistemological factors:

· The dynamics of the voluntary trade

· Ignorance of the future

· Ignorance asymmetries

· IP as a necessary but insufficient resource, leading to the self-limitation of value.

will limit the future value of IP, even in the case of the fundamental patent, and the rational free rider. That "static claim" to the future does not exist. Patents in perpetuity should not be feared. IP should be treated as any other property.

I think we can back this up with plenty of real world examples, and I know several of these dynamics, specifically, the lack of limited life licenses, and the “precedent” effect on royalty rates, to be the way it works in the world.

I’d like to have your comments.

[DavidOdden]

I need to address this in parts: there are some basic matters that I have to understand before moving more than about 1 inch forward.

Patents in perpetuity should not be feared. IP should be treated as any other property.

My main question is, what legal assumptions are you making? Specifically:

1. Are you claiming that IP can be completely subsumed under the general concept "property" with no need to include special legal rules for IP?

2. If not, how is a person's IP identified: how can a man know "This is my property, that is his."? This covers two broad issues, namely registration of IP and identification, especially in the "further development" stage of a work.

3. Related to identification is the problem of division. Property with a definite physical extent can be divided (within metaphysical limits), so that a man can divide his land among his sons 50-50, or 30-70, or whatever he wants. Property with no definite physical extent cannot be so divided. Abstractly, you might think of owning 20% of the rights to the wheel, but does this concretely mean that you are entitled to 20% of all wheel royalties? As the owner of property, you have the right to dispose of your property as you wish -- sell it outright, rent it (get royalties) or even dispose of it (throw it away, make it be no longer property). With land, this means that I can sell my 50% of the plot and my brother can keep his 50%, because the division of property can be concretized to particular sub-plots. Now, as a wheel-maker, if Thog (one of Og's great-grandchildren children and, we conjecture one of Punk's ancestors), who inherited a 1% share of ownership of the wheel, disposes of his share of the wheel and makes it be non-property, then can't I make free use of this un-owned property, namely Thog's 1% of the ownership of the wheel idea? Or, suppose that Thog is a Luddite and on principle refuses to grant

anybody

the right to make a wheel. If 100% agreement is required by the various owners (as would be the ordinary case), Thog the irrational free non-rider can effectively bring civilization to a halt (depending in part on the answer to the broader "identification" question).

4. How do you define "theft" of IP (and is there such a thing as "vandalism" of IP)? For example, in order to steal a person's car, I must actually take their car from them so that for some period of time they do not have the car.

You say that the irrational free rider is not of concern. Nevertheless, under a system of objective law, the irrational free rider can exist and the law must say what happens to him as well. Bear in mind that the existence of government in the first place is based on the possibility of irrational people, ones who will violate rights. If all people magically respected all rights, there would be no purpose for government. We can't make utopic assumptions, so somewhere, we have to have an account of irrational people, either Luddites or GNU-heads.

[KendallJ]

Well, I hope that fact that you are not going one step further means I've raised some good point and made you think. Else you see a glaring error and are setting me up for a fall.

My main question is, what legal assumptions are you making?

And my main answer to you is that a: for purposes of the illustration I didn't change any of the legal issues other than length of term, and b: My case was not to say that material property and intellectual property are absolutely identical, but that the key difference between the two which Rand highlights is not as large as she would make it out to be. It is that difference which seemingly requires that IP be limited. I did not intend to lump all other differences together. This would mean that there probably ought to be some differing legal treatment, but not at the level Rand advocated.

Specifically:

1. Are you claiming that IP can be completely subsumed under the general concept "property" with no need to include special legal rules for IP?

I hope that my previous answer would indicate to you that the answer to this is no.

2. If not, how is a person's IP identified: how can a man know "This is my property, that is his."? This covers two broad issues, namely registration of IP and identification, especially in the "further development" stage of a work.

I'm not sure I see this happening any different that it does now. Your link to the Australian "internet patent" application I think highlighted a key issue with registration and identification. The applicant is reponsible to describe an invention and to identify, i.e. to claim his invention. To the extent to which he is able to skillfully articulate his claims, his patent holds more valueable. The claims must then be checked and tested against "prior art". This is what the new "quick" Australian system seems to dispense with. I.e. someone must

judge

if the claims are novel. It is the specificity of claims in the current system which make this much more difficult than it seems. The claims are objective, and reality based and deal with the invention which has been reduced to practice. Current patents today have a description section, a claims section, a prior art section, and a demonstration of practice section. It is the claims section that is the key to articulating the invention. Each claim is an epistemologically independant unit, but the claim cannot be separated from the other claims as it regards the invention.

So for instance, Og claims that his invention is:

1. A disc of stone with a wooden axle.

2. Whereby the disc rotates around the axle

3. Whereby the disk/axle interface is lubricated by "mud".

4. Whereby two such discs can be attached to each end of the axle.

5. Whereby the whole invention can bear weight up to X lb

etc. etc...

OR maybe instead,

1. A disc of various materials such as X, Y, Z, etc... with an axle...

2. Whereby the disc rotates aroudn the axle

3. Whereby the interface is lubricated by such liquids as as X, Y, Z....

4. Of the disc can be lubricated by solids such as A, B, C ....

etc. etc...

These are different claims, with different implications. Note that the claim cannot be arbitrary, i.e. in the reduction to practice he must show that he build such devices of the classes of materials listed. So he cannot claim all possible future configurations of the wheel.

I'm not sure if I answered your question, but the short answer is the current US system of registration strikes me as adequate. Such a system needs to test the claims based upon some of the criteria above. I'm not a patent lawyer so I'm sure I may have missed a detail or have made an error, but I think the majors are correct.

3. Related to identification is the problem of division. Property with a definite physical extent can be divided (within metaphysical limits), so that a man can divide his land among his sons 50-50, or 30-70, or whatever he wants. Property with no definite physical extent cannot be so divided. Abstractly, you might think of owning 20% of the rights to the wheel, but does this concretely mean that you are entitled to 20% of all wheel royalties? As the owner of property, you have the right to dispose of your property as you wish -- sell it outright, rent it (get royalties) or even dispose of it (throw it away, make it be no longer property). With land, this means that I can sell my 50% of the plot and my brother can keep his 50%, because the division of property can be concretized to particular sub-plots. Now, as a wheel-maker, if Thog (one of Og's great-grandchildren children and, we conjecture one of Punk's ancestors), who inherited a 1% share of ownership of the wheel, disposes of his share of the wheel and makes it be non-property, then can't I make free use of this un-owned property, namely Thog's 1% of the ownership of the wheel idea? Or, suppose that Thog is a Luddite and on principle refuses to grant

anybody

the right to make a wheel. If 100% agreement is required by the various owners (as would be the ordinary case), Thog the irrational free non-rider can effectively bring civilization to a halt (depending in part on the answer to the broader "identification" question).

This is a very good question, integrating the division of IP as compared with the division of material wealth. The answer is they are divisible, but not in the manner that you claim. This is what confused me the most about your line of thinking earlier and your need to separate value from the IP itself.

One can't divide the patent. One can share ownership of a patent, meaning that the shared owners have to both agree to the resulting contracts they will enter into. However considering the patent, out of context, this is the most that can be done with the patent, so Og, cannot own 1% of the wheel. He may own 1% of a company, which owns the full patent, or he may own a company that owns the rights to use the patent in a specific application, resulting in 1% of the value of the patent.

This is the key. A patent claim is not a Platonic "form" out there in space. It can only be considered, when considered in the context of the resulting license agreements. That is why one can't divorce my earlier topic of value from the patent itself. Without a resulting agreement, or without resultant work to commercialize IP, it is a claim on nothing.

In fact, you see very readily in reality the division of patent rights. But these manifest themselves

only as regards the applications for which they are licensed

. One can allow someone the right to the patent, for a particular application, or a prarticular geography, in the form of a license agreement. The license does not mean that I own 1% of the patent, but that I own 100% of the patent, but restricted by other factors. These license agreements are then themselve intellectual property. They are bought, sold, have value attached to them, and can even be further subdivided, through sublicense agreements. This is common in commerce today. So the mechanism of division is different, but it is not that the property can't be subdivided. Patent law woudl deal with the mechanisms and rights that can be assigned and what they mean. Instead of surveying the land and drawing up parcels, I have to think in terms of

exclusivity

, or

geography

,

sublicensing rights

or

defining application

.

4. How do you define "theft" of IP (and is there such a thing as "vandalism" of IP)? For example, in order to steal a person's car, I must actually take their car from them so that for some period of time they do not have the car.

Theft is the taking of the

value of the resultant applications

, by practicing them without license. Again, no Platonic forms here. The

value in use is the manifestation of the IP

. It may not be all of the value of a particular product, but certainly the incremental value that would not have been possible without practising the claims of the patent. This includes future value, but this value decays over time as I've demosntrated.

By the way. Thanks for taking the time to read the whole thing!

Edited to add: by the way. I specifically tried in my hypothetical not to get into the legal details because I think the principled case shoudl be made on metaphysical issues, and do not need the legal specifics to stand on their own. My form of integrating back to reality, if you will.

Edited December 23, 2006 by KendallJ

[DavidOdden]

Well, I hope that fact that you are not going one step further means I've raised some good point and made you think. Else you see a glaring error and are setting me up for a fall.

Both, of course! Since you stepped out of the way of the on-rushing tiger and didn't fall into the punji-stick filled pit in the process, we'll have to peruse this a bit more to see what's next. But just to try to reduce this to the bare essentials, is your proposal that everything can be pretty much as is, philosophically and legally, except in the matter of duration, and you're arguing that statutory limits on duration are not required (for the reasons that you've given)?

I'm not a patent lawyer so I'm sure I may have missed a detail or have made an error, but I think the majors are correct.

Okay; I'm pretty much fine with the US system save for the dubiousness of the judgment of novelty aspect, and the single-sentence rule (somewhere, I found one of those 6-page sentence claims which is an absolute masterpiece of impenetrability).

[KendallJ]

Both, of course! Since you stepped out of the way of the on-rushing tiger and didn't fall into the punji-stick filled pit in the process, we'll have to peruse this a bit more to see what's next. But just to try to reduce this to the bare essentials, is your proposal that everything can be pretty much as is, philosophically and legally, except in the matter of duration, and you're arguing that statutory limits on duration are not required (for the reasons that you've given)?

I'd say that's a fair characterization, yes.