Re: Alternative to Invention Patents

royls_at_telus.net
Date: 06/25/04 

Date: Fri, 25 Jun 2004 20:27:28 GMT

On Wed, 16 Jun 2004 08:47:15 -0400, "Mark Monson" <m_monson@ztech.com>
wrote:

>The downsides of the patent system are that the patent process takes about two years
>and a good bit of money for the patent preparation. The public pays high prices for
>the patent protected product in the market. The huge fortunes that are collected
>due to patent protection are a lure that prevents research into "unpatentable"
>ideas.

Perhaps even more importantly, the economics of monopoly rent seeking
(of which the the US Founders were of course completely unaware when
they made granting IP monopolies a function of the federal government)
mean that IP rents are maximized at the expense of total production
and consumer surplus.

>The public ultimately pays for patent fortunes, yet the supposed reason for patents
>is to benefit the public. Accepting for the moment the argument that some type of
>compensation should be offered to inventors beyond that of the free market in order
>for the public at large to benefit, and remembering that this compensation must be
>paid by the public, we should ask what is the most cost-beneficial way for the
>public to support inventions.

See below.

>During the first world war, governments awarded inventors cash prizes for weapon
>ideas. The same system could compete with the patent process today. An inventor
>would agree to forego patent protection and submit his idea to the office of
>invention awards. An examiner would check to see if the idea was new and useful
>and the government would award a cash prize to the inventor if his invention is
>found to be novel and useful. The invention would then pass immediately to the
>public domain where anybody could use it.

Who would determine the amount of the prize, and on what basis?

>The downside to inventors is less chance for huge fortunes but the upside is less
>upfront costs, less risk, less of the business side so inventors can concentrate on
>inventing. The public ultimately pays less for the invention and it gets to market
>sooner.

OK. I promised Albert months ago that I would present a proposal to
replace IP monopolies with something fairer and more efficient. Looks
like Mark is shaming me into following through.

The basic problem with current IP systems is monopoly. We _know_ that
granting monopoly privileges is very unlikely to be the most
economically efficient way to achieve any policy goal, because
monopolists reduce total production in order to increase monopoly rent
capture. However, proposals like Mark's suffer from a lack of market
feedback to ensure that benefits received are commensurate with
benefits contributed.

As there is no natural right to property in any information that has
been disclosed to the public, the purpose of IP monopoly privileges is
to encourage creation, disclosure, and thus the availability of more
intellectual products in society -- _not_ to secure a non-existent
property right. It is thought that IP monopolies achieve this goal
indirectly; but in fact, if they do so at all, they only do it after
an initial period of _reduced_ availability while the rent is
captured. With the recent trend to extending copyright privileges to
virtual perpetuity, that "initial" period of restriction is becoming
_so_ long that total availability of products may well be less than if
there was never any copyright at all: the product may become obsolete
before total production can make up for the reduced availability
during the copyright period. Surely we can do better than this
one-step-forward, two-steps-back approach.

I would propose a system of open licensing for intellectual products
that does away with monopoly privileges altogether, and replaces the
current clumsy combination of civil and criminal law with,
effectively, a tax on economic rent, half of which would be remitted
to the creators of intellectual products according to their market
value, the other half used to defray administration costs and
contribute to maintenance of the government and community that make
creative endeavors profitable.

Under this system, a creator who wanted to be paid for his work would
register any new intellectual product with a government office similar
to the Patent Office by paying the office a user fee of his own
choosing. On payment of this fee, the office would investigate the
product to verify its originality, utility, non-obviousness,
eligibility, etc. If the product passed these tests, the creator
would be paid back half his fee, and be registered as the originator
of the product, the office keeping the other half of the fee as a
service charge. Anyone else who wanted to reproduce the product would
then have to pay the office the same fee as the creator, to be able to
produce the product for one year. Again, the registered creator would
be paid half of all such user fees, and the office would keep half
(any surplus would be remitted to the government, like tax revenue).

Any demonstration of prior art, independent creation or predictable
development by skilled practitioners would automatically void the
registration and place the product in the public domain. Standards,
formats, protocols, interfaces, etc. would not be eligible for
registration.

Any prospective user would also have the option of paying _more_ than
the original user fee, thus increasing the fee to that new level for
all subsequent users for a period of one year. The originator would
be paid half of all such increased fees, as before, and would also
have the option of increasing the user fee in the same way after his
own one-year registration period had elapsed. If a period of one year
elapsed with no user fees being paid, the originator would be able to
reset the user fee at whatever level he chose, by payment of that
amount.

The user fee requirement for users of a registered product would be in
effect for a period of 10 years, or until total user fee payments
reached 1000 times the initial fee paid, whichever came first.

This system would encourage creation and disclosure of intellectual
products just as the IP system does (perhaps even more), but without
the deadening economic effect of monopoly privileges. Because the
user fee is a fixed cost once paid, each paid-up user would have an
incentive to produce more of the product, not less, giving consumers
the benefit of increased supply and more competition. By contrast,
current IP licensing almost always eliminates competition, and
per-piece or percentage royalties are a variable cost that reduce
total production.

The expiry of the registration after payments totaling 1000 times the
initial payment would allow the creator to set the level of ultimate
total payment he considered sufficient reward for creating the
product. Any payment more than what he requires would clearly be
economic rent anyway, so as the product is not scarce, there is no
point in requiring such payments in return for allowing use.

Until systems like the proposed one have been tried and found wanting,
any claim that the current system of IP monopolies is necessary (or
even the best or most efficient way) to stimulate creation and
publication of intellectual products is flat false.

-- Roy L

Relevant Pages

  • Re: One for the Legal Beagles
    ... "Originally the King granted monopolies pretty lavishly, ... In this particular case the invention would have been called ... "Improvements in the manufacture of boots," and the grant of the Patent ... publication would be. ...
    (uk.local.southwest)
  • Re: One for the Legal Beagles
    ... > "Originally the King granted monopolies pretty lavishly, ... In this particular case the invention would have been called ... > "Improvements in the manufacture of boots," and the grant of the Patent ... > publication would be. ...
    (uk.local.southwest)
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