The insanities of imaginary property - patents

Even "traditional" patents (as opposed to new ones like those on algorithms) are, I just accidentally found out, being used insanely by the industry:

Jan. 16 (Bloomberg) -- A U.S. Supreme court case pitting Quanta Computer Inc. against LG Electronics Inc. will shape the power of patent holders to extract royalties from companies at each stage when a product is being made.

At issue is whether LG can enforce its memory-technology patents against both Intel Corp. and the computer makers that install Intel's chips in their machines. Quanta, the world's largest maker of notebook computers, says it can't be forced to pay royalties on three LG patents because Intel already has paid.

[...]The lower court ruling ``allows each patent owner to work its way through every manufacturing chain that in any way implicates its patents, extracting a separate royalty for the same invention at each stage of the process,'' Dell, Hewlett- Packard, Cisco and EBay Inc. said in a filing with the court.

LG's allies at the court include Yahoo! Inc. and a trade group that represents Monsanto Co. and other seed growers. [...]Of LG's supporters, Qualcomm may be the one with the most at stake. The San Diego-based company collects royalties from both chipmakers and the phone-handset makers that use the chips.

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and another take on the issue by the EFF.

Patents are being used in an economically destructive way: lawyers make money while the industry is prevented, for the duration of these stupid legal fights, from using technology that is already available.

There was one, and only one, motive to institute a patent system: to encourage individuals and companies to publish at least some (and increasingly fewer, I can tell you that!) technical specifications for their inventions, so that others might copy them easily, after the patent expired. This no longer makes sense in our modern world, for many of the industries (software being the most obvious, but certainly not the only, one): the patents being granted are often obvious, and in most cases cover technologies that would quickly be reverse-engineered once they were released to market.

The patent system has thus become harmful to society at large, instead of beneficial. It stifles competition, it encourages companies to become rent-seekers instead of active producers (which eventually leads to loss of expertise by those companies, and to making those no more that parasite surviving from the proceeds of old patents), it creates unnecessary delays and extra costs in bringing new technology to marked.

All this harm in exchange for what? In many areas the patent system provides nothing back to society. In fact even 20 year patents almost ensures that whatever is patented will be obsolete by the time they expire, in the case of fast-evolving industries such as electronics or computer-science related activities. In the absence of patents companies would still spend in R&D (those that spend the most are big industrial corporations that would have to spend anyway in order to keep creating new products), would still obtain (as they do today) usefully research from universities and publicly-funded laboratories, and would indeed be able to slash costs related to royalty payments and invest that money instead in further R&D in order to maintain a technological lead, even if only a short-term one, because that would remain important. Funds that are now wasted in royalties to rent-seeking companies and patent lawyers. In the worst case the cessation of royalty income would be balanced by the savings on royalty payments, in companies that actually produce things beside holding patents. In the best case the money and slack time saved by abolishing the patent system would boost productivity and competition, to the whole of society's benefit.

Furthermore abolishing patents would put an end to legal monopolies enjoyed by some big corporations in each industrial area. The emergence of a new industry is always a time of rapid technical evolution and fierce competition. Then comes consolidation, and everything slows. I used to believe this was solely a result of increased technical complexity. But I have met quite a few bright people well capable of dealing with complex technical subjects (someone has to work for these companies, after all!) but incapable of setting up their own companies because of the entrance fee imposed by patent licensing - not to mention that some companies will simply not license some patents to groups they may find threatening.

Well, it seems I got carried and this post turned into a sweeping attack against patents. So, can I convince someone that the patent system is at least questionable? Why not put a time-limited moratorium on it and see what really happens? Even in only on contain types of industries. A few years during which the whole of patent law would be suspended, a practical test to check who is right on this by now old discussion?

Without intellectual property protection, the incentive to innovate is diminished. The Supreme Court has been softening the power of patents and I expect this case to continue that trend. With patents becoming obsolete before they expire, it is obviously possible to carve out a place in the marketplace by innovating beyond the patents. Maybe you can point to a slowdown in innovation lately. I just do not see it.

JollyRoger said:

Maybe you can point to a slowdown in innovation lately. I just do not see it.

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The obvious problem with evaluating options, and the reason to call for a moratorium, is that the current system is so pervasive that we can't compare it with any alternative. The effect of patents is too complex to evaluate without disagreements, and too intertwined with other effects. I gave my view, but I’m well aware it’s one among many and impossible to prove.

Without patents, and with, as you say, the ability to reverse engineer pretty much anything, there is no incentive to create something new, because there is no way to profit from the time invested in it; people will simply copy it immediately.
There doesn't need to be a practical test: there's no reason for a ban on patents to work.

Brighteye said:

Without patents, and with, as you say, the ability to reverse engineer pretty much anything, there is no incentive to create something new, because there is no way to profit from the time invested in it; people will simply copy it immediately.
There doesn't need to be a practical test: there's no reason for a ban on patents to work.

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Software patents were allowed in the US but not (through companies are trying to work around it) in the EU. Yet the EU software companies did not cease working and inventing. In fact everybody created new methods and used and published them, before software patents were allowed in the US.

I do not accept the argument that "without patents no one would invent anything" as proved. It's the only practical argument invoked to continue supporting patents, and indeed all imaginary property, yet not only has no one ever proved it, it has been disproved in several industries, software being just a recent one.
The way I saw it in the case of software patents, they were demanded by the larger corporation so they could protect their dominant positions and create monopolies. Ironically some of these corporation were founded on the use of other people's code, the best case being Microsoft's founder starting by digging and studying code from the trash. Had software patents existed back then...

Take any industry where the creation of a new production (R & D, testing, etc) is extremely expensive, but the manufacturing is fairly cheap.

What incentive would companies have to continue to develop new products when competitors simply copy the product and sell it cheaper than the original company?

-- Ravensfire

Brighteye said:

Without patents, and with, as you say, the ability to reverse engineer pretty much anything, there is no incentive to create something new, because [snip]

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You are wrong.
You are factually incorrect.
You are mistaken.

I don't know whether you're being deliberately stubborn, playing devil's advocate, plain ignorant, or something else, but YOU ARE CONTRADICTED BY REALITY.
...

innonimatu seems to be quite right when he uses the word "insanity". I've been in this argument for years and years, and I have seen OVER and OVER again that people are innovating without patents, innovating because of idealism, innovating for the sake of prestige and making a "clever hack", innovating with the explicit goal of avoiding/voiding/obsoleting patents, innovating because they're paid to innovate, innovating for various other reasons,

and yet I hear:
"without patents there is no incentive to innovate".

This. Is. False.

To paraphrase Richard Dawkins, It is absolutely safe to say that if you meet somebody who claims that innovation depends on patents, that person is ignorant, stupid or insane (or wicked, but I'd rather not consider that).

I am not denying that patents can be an incentive to innovate, so put your strawman away. I am stating: There are other incentives to innovate than patents.
Furthermore, patents can dampen innovation, because e.g. independent invention violates a patent. If Joe the Patent Troll thinks of something, patents it, and then goes to hide, and Bob the Engineer thinks of the same idea later, all by himself, and tries to profit off it, Joe can sue Bob into oblivion - literally, as Joe can refuse to license the patent and therefore has veto rights over Bob's use of an idea that Bob came up with by himself. The sheer volume, obfuscatedness, filing time, and various other attributes of patents are therefore a reason for Bob to not attempt to innovate and profit from it as he may be sued.

Erik, that is the most ridiculous post I have seen in a long time. <snip>

The kid who hacked the iPhone, while an innovator, didn't do anything to 1.)create more technologu 2.) produce wealth for anyone. The creators of the iPhone on the other hand 1.) improved technology and 2.) generated wealth for millions and because of those two things Apple will continue to do both.

You fail.

Moderator Action: Warned for flaming, and flame removed.
Please read the forum rules: http://forums.civfanatics.com/showthread.php?t=422889

Patroklos said:

Erik, that is the most ridiculous post I have seen in a long time. You are a moron.

The kid who hacked the iPhone, while an innovator, didn't do anything to 1.)create more technologu 2.) produce wealth for anyone. The creators of the iPhone on the other hand 1.) improved technology and 2.) generated wealth for millions and because of those two things Apple will continue to do both.

You fail.

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You don't deserve a response, but in the interest of discussion I'll respond.

Has it even occurred to you that what Erik mentioned happens daily in the corporate world, as companies are forced to circumvent patents? In the academic world, as researchers are forced to work around payments of royalties they cannot afford?

We were not discussing merely what some kid does with a gimmick. Through some big corporations started that way also. Ask Steve Jobs and Steve Wozniak how the first Mac came about, and specifically who Wozniak, the engineer, started working with electronics and computers.

Erik, I'm sure there are people who innovate and invent without protection via patens. But there are far fewer of those, than people who seek to profit from their hard work.

I asked this before but no-one bothered answering:

Do you think that there would be a rise or fall in the number of new innovations and inventions if patents were to be scrapped?

innonimatu said:

Ask Steve Jobs and Steve Wozniak how the first Mac came about

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The Mac is patented, right?

But don't worry, we'll all be using Linux in 5 years from now anyway. irrespective of when "now" is

Has it even occurred to you that what Erik mentioned happens daily in the corporate world, as companies are forced to circumvent patents? In the academic world, as researchers are forced to work around payments of royalties they cannot afford?

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1.) Being forced to work around patents gernerates innovation.

2.) And what do they do once they circumvent a patent? Patent it. And why are all of them furiously trying to find new ways of doing things to circumvent patents? To make money, through their own patents.

We were not discussing merely what some kid does with a gimmick. Through some big corporations started that way also. Ask Steve Jobs and Steve Wozniak how the first Mac came about, and specifically who Wozniak, the engineer, started working with electronics and computers.

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And what did those two do as soon as they innovated? Patented it. Oh, you're under the impression money and success wasn't on either of their minds at the time. How sad

Patents, properly implemented, are an incentive to innovation and development. They're not necessary to produce innovation, but neither do they have only detrimental effects. The problem is that our patent system isn't working as well as it could (and should). Sometimes patents (like copyright) are abused to stifle innovation in the interests of short-term economic gain.

What it'll take is a Congress less dominated by money, and more knowledgeable of intellectual property issues.

Cleo

I think its obvious that there are other reasons for innovation besides profit from patents. The question is, outside of a few intellectual property scenarios, like software...does it help the consumer? Consider the following scenario.

A fellow named Max develops a new kind of shovel, one that digs a little better than any of the other current shovels on the market. Seeing that his product digs better than the other shovels on the market, Max decides to create a shovel-producing firm, called SuperShovel.

The Shovel market, in our little model, is dominated by one firm, called US Shovel. US Shovel has significant market power, and had millions of dollars in assets.

US Shovel purchases one of Max's shovels, and seeing as there is no patent system to protect his invention, mass produces them, and sells them at a loss, preventing Max's firm from entering the Shovel market. Max is unable to compete via price, and his competitive advantage (his superior product) is removed since US Shovel can duplicate it. If he's lucky, US Shovel will hire him to innovate more Shovels. If not, he's kicked to the curb.

If Max was able to patent his innovation, he could have sold the idea to US Shovel, started his own firm, or gone to work for another firm.

People will continue to innovate shovels in this model (for the same motivations that Erik mentioned), but will not have the motivation to put their product on the open market

Patroklos said:

The kid who hacked the iPhone, while an innovator, didn't do anything to 1.)create more technologu 2.) produce wealth for anyone.

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So? What exactly are you trying to prove here?

Patroklos said:

The creators of the iPhone on the other hand 1.) improved technology and 2.) generated wealth for millions and because of those two things Apple will continue to do both.

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SO?

I'm arguing that there are other incentives than patents to innovate and that it is false to say that without patents there is no incentive to innovate. What are you arguing?

Mise said:

Erik, I'm sure there are people who innovate and invent without protection via patens. But there are far fewer of those, than people who seek to profit from their hard work.

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Do you have a source? I would think it was the other way around; that the patent-using innovators are fewer but richer and more influential.

Mise said:

Do you think that there would be a rise or fall in the number of new innovations and inventions if patents were to be scrapped?

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In the short term, I think there would be a fall as many groups would be adjusting their business model. In the medium term, I think it would still be somewhat lower, but we'd see lots of side benefits from engineers/programmers/whatever being able to incorporate previously patented algorithms,combinations of features, etc. In the long term, I think that the number of new innovations and inventions would be somewhat higher.

Example of a patented thingy, which, if de-patented, could lead to side benefits: USPTO link, Canadian link, to "SYSTEM FOR TRANSFORMING AND EXCHANGING DATA BETWEEN DISTRIBUTED HETEROGENEOUS COMPUTER SYSTEMS". Yeah, someone has a patent on that. Ten quatloos says at least one other group has a patent on it too. If I had come up with such a system, I could have been sued. If anyone in this thread comes up with such a system now that they've seen the patent, they can be sued for three times as much.

Patroklos said:

1.) Being forced to work around patents gernerates innovation.

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Not necessarily. Being forced to work around patents may lead to reinventing the wheel. Sometimes a patent may be impossible to work around.

Patroklos said:

2.) And what do they do once they circumvent a patent? Patent it. And why are all of them furiously trying to find new ways of doing things to circumvent patents? To make money, through their own patents.

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Again, not necessarily the case. Some are forced to do this defensively, in a form of patent MAD or Prisoner's Dilemma, where it's given that a hostile group has patents they can sue you with, and your choice is having patents to sue them back with or not having patents. Some publish the workaround into the public domain, thus constituting prior art against anyone who might want to patent it later.

I'm Cleo! said:

Patents, properly implemented

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"I think that would be a very good idea." (Gandhi.)

Patroklos said:

And what did those two do as soon as they innovated? Patented it. Oh, you're under the impression money and success wasn't on either of their minds at the time. How sad

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Sad that you're wrong? No, that makes me happy.

The Apple I wasn't patented at the time, they couldn't afford it even if they wished to patent it. Yet they made enough from it to continue developing new machines. Then, over one year later, came patents and all the rest of the usual corporate trappings. It's how the world works and companies are forced to play by those rules... even then the patents, two of them were notably vague, one covering a floppy drive and another a generic computer with a video display, which could probably be struck down due to the existence of prior art.

And the computer architecture that eventually became dominant and brought cheap computers to nearly everyone, now simply known as "PC", succeeded precisely because it wasn't patented. Oh, components like the processor are. But IBM attempted to keep the whole architecture proprietary and failed. That ushered in the era of the PC compatible, which being cheap and ubiquitous became the standard.

What was it you were arguing about the necessity of patents, again?

Erik or innonimatu - care to address my question?

Take any industry where the creation of a new production (R & D, testing, etc) is extremely expensive, but the manufacturing is fairly cheap.

What incentive would companies have to continue to develop new products when competitors simply copy the product and sell it cheaper than the original company?

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Thanks,
-- Ravensfire

@ranvesfire: I'll try to get to it, sorry! For the moment, consider what incentive professors of mathematics have to develop and publish new theorems when all other professors can use them. (R&D is time-consuming if not necessarily monetarily expensive; manufacture and reproduction is cheap.)

Ron P. Reagan said:

I think its obvious that there are other reasons for innovation besides profit from patents. The question is, outside of a few intellectual property scenarios, like software...does it help the consumer? Consider the following scenario.

A fellow named Max develops a new kind of shovel, one that digs a little better than any of the other current shovels on the market. Seeing that his product digs better than the other shovels on the market, Max decides to create a shovel-producing firm, called SuperShovel.
The Shovel market, in our little model, is dominated by one firm, called US Shovel. US Shovel has significant market power, and had millions of dollars in assets.

US Shovel purchases one of Max's shovels, and seeing as there is no patent system to protect his invention, mass produces them, and sells them at a loss, preventing Max's firm from entering the Shovel market. Max is unable to compete via price, and his competitive advantage (his superior product) is removed since US Shovel can duplicate it. If he's lucky, US Shovel will hire him to innovate more Shovels. If not, he's kicked to the curb.

If Max was able to patent his innovation, he could have sold the idea to US Shovel, started his own firm, or gone to work for another firm.

People will continue to innovate shovels in this model (for the same motivations that Erik mentioned), but will not have the motivation to put their product on the open market

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This is an excellent example of how patents should work.
Do you mind if I copy it down for future use? (And will you be wanting royalties? )

Now, let me give an example of one way patents do currently work, but shouldn't.
As before: "A fellow named Max develops a new kind of shovel, one that digs a little better than any of the other current shovels on the market. Seeing that his product digs better than the other shovels on the market, Max decides to create a shovel-producing firm, called SuperShovel.
The Shovel market, in our little model, is dominated by one firm, called US Shovel. US Shovel has significant market power, and had millions of dollars in assets." (And a team of professional lawyers.)
Now, in this hypothetical scenario with patents, US Shovel has a patent on OBJECT OF CYLINDRICAL SHAPE WITH AFFIXED WIDE BLADE FOR IMPROVED TRANSPORT OF GROSS PHYSICAL SUBSTANCE.

One SuperShovel gets started, US Shovel sues SuperShovel for patent infringement. Max has just sunk most of his money into founding SuperShovel, but his specialty is in inventing shovels, not patent law, so he has to hire a lawyer, which leaves him in poor financial straits.

Once the lawsuit gets under way, US Shovel's first request is that SuperShovel be forced to pay damages equal to the entire value of US Shovel, as that is the amount that could be lost if SuperShovel is allowed to continue violating US Shovel's patent, eventually driving them out of business. US Shovel also gets a temporary injunction against SuperShovel to prevent more violations while the lawsuit proceeds.

Max thinks this is ridiculous, but leaves the arguing to his lawyer. Max's lawyer is getting paid to argue the case, not to file a separate brief with the US Patent Office and ask to have the patent overturned, so he has to ask the judge to strike the patent down instead.

Since Max only hired his lawyer recently, while US Shovel's team has had years of both preparation and practice, they convince the judge to uphold the patent, which is the normal procedure, as patents should be overturned by the USPTO, not courts. SuperShovel is now in rather dire straits, so US Shovel offers to settle out of court for an undisclosed sum of money and a promise that Max will never attempt to act in the shovel market again. Max is likely to lose the lawsuit, so he accepts, selling what's left of SuperShovel to pay his costs, and comes out a poorer man.

US Shovel has now sent a chilling effect message to everyone else who might be infringing on their patents, and so can increase the price of their shovels as the possibility of an innovative shovel design appearing and threatening their market has just been reduced. US Shovel has now profited at the expense of the consumer, who will see less innovation and higher prices.

---

Both scenarios happen. Max can be prevented from entering the shovel market with or without patents. I don't pretend to have perfect knowledge and I don't pretend to have the correct solution, but I am convinced that 1) the patent system is rife with abuse, such as patents on algorithms, and 2) patents are not the only incentive to innovate.

ravensfire said:

Erik or innonimatu - care to address my question?

Take any industry where the creation of a new production (R & D, testing, etc) is extremely expensive, but the manufacturing is fairly cheap.

What incentive would companies have to continue to develop new products when competitors simply copy the product and sell it cheaper than the original company?

Thanks,
-- Ravensfire

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That's already happening today: despite patents Apple rushed its iPhone to market because Korean and Chinese companies were already copying the "look and feel" it it to some of their products.
These technology companies still invest in new products because they always get a limited time window to market new products without competition. Without patents they would have to rely more on brand, but they're doing it already.
Even hardware components such as processors have successfully been produced without patent protection. All RISC processors share some design characteristics not covered by patents. Some of the most successful of these processors had a purposefully open specification, allowing interested companies to manufacture them (sparc is a notable example). Others, technically superior to x86 designs (themselves now no more than instruction sets running on RISC cores), died out (among other reasons) because they were patented and could never gain enough market share (good old alpha). Intel, despite having them, doesn't need patents on their pentium processors - would be imitators simply can't keep up with it anyway.

More traditional industries would face greater change, but could survive without patents. The first great users of patents were chemical companies in the late 19th and early 20th century. After WW1 and especially after WW2 german companies were stripped of their patents. Still, despite that and the devastation of the war, they survived and went on to prosper again. They held more than the patents: they had the experienced personnel and the know-how (and I can tell you that patents on chemical processes tend to omit some very important details on process optimization!). These companies would keep investing even if they couldn't hold patents because they would still make money from selling the products. R&D costs are not that high compared with sales volumes.

Pharmaceuticals are a more interesting case, the industry most usually considered dependent on patents. But the common idea about this industry hides one interesting fact: most of the industrial capacity is now controlled by companies that produce generic drugs, no longer covered by patents. They can survive without patents. The issue is then just: would companies invest in researching new drugs without patent protection?
Time to look at how many new drugs the majors of the pharmaceutical business released in recent years. I won't look for the numbers now but can tell you that they were few - they've been busy making small changes to their patented drugs just to extend the slife-span of their cash-cows.
Start-ups are expected to become (if they are not already) the major introducers of new drugs. Much of their support comes from venture capital interested in reaping the enormous profits to be made from a successful drug. But much also comes from publicly-funded research that is now increasingly being used to create new companies (researchers are encouraged to take patents and start companies). This is raising alarms in the academic world, by the way, as access to colleague's research is now harder, with researchers jealously guarding their data.
The bottom line on the pharmaceutical industry: its the one that does depend on patents, currently, to introduce new drugs. But that's not an inevitable arrangement, and probably not the best possible one, too.

Erik Mesoy said:

Do you have a source?

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No, just a guess. I probably shouldn't have said number though. Number of patents * "influence" or "value" would be a better measure. I doubt there's an adequate source.

I would think it was the other way around; that the patent-using innovators are fewer but richer and more influential.

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Funny how all the people who use patents are richer and more influential...

In the short term, I think there would be a fall as many groups would be adjusting their business model. In the medium term, I think it would still be somewhat lower, but we'd see lots of side benefits from engineers/programmers/whatever being able to incorporate previously patented algorithms,combinations of features, etc. In the long term, I think that the number of new innovations and inventions would be somewhat higher.

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I agree with the short-term, but I'd switch mid- and long- term around. I think that as people are allowed to incorporate existing patented work into their own work, they'll get a great productivity boost than at present (being encumbered with patent law 'n' all). But after that initial boost, it'll start to slow down again.

I think you see "inventors" and "innovators" as individuals working on their own little pet projects, and developing novel devices or procedures for a specific task. It's true that that's the sort of thing that doesn't get patented, and that people develop without the incentive provided by patents. But a hell of a lot more money gets poured in to R&D specifically aimed at "giant leaps". For every 100 or so pissy little patent like the one you linked, there's one gem of a patent that would never have been invented if it couldn't be protected.

At the company I work for, we develop industry-leading technology that helps us stay ahead of the game. If our competitors were allowed to see the designs for the equipment we were using, our company would lose millions. And our R&D department would be the first to go. What's the point in spending millions of pounds on R&D if we don't see a return?

I think you underestimate just how important businesses are to innovation.