Patents vs. Free Market

Yesterday I posted about sharing information -- how it can be a self-interested thing to do, even if the information is valuable, and even if most people don't share theirs back.

Meanwhile, back in patent-land, patent experts are saying that it's not worth getting a patent these days for anything less than a million-dollar idea -- because that's how much it costs to defend one. That's also how much it costs to fight a fraudulent patent -- which are being issued in droves.

When a company gets big enough, it will want to compete by getting special privileges rather than by innovation and quality. This is called "rent seeking" and economists recognize it as a form of inefficiency. Rent seeking is an integral part of capitalism, more so as companies grow in size -- but it damages the free market. (It's interesting that many people use "free market" and "capitalism" as though they are interchangeable -- here is an example that shows they're not.) The modern patent system does not support the free market. Instead, it supports the rent-seeking side of capitalism -- the side that continues to damage the software industry. In at least some industries, reducing the number of patents granted would actually help the free market.

You may say that, for all its faults, the patent system still protects the small inventor. At $8,000 to get a single patent, I have to wonder how "small" an inventor can be and still use the system. But that's only the first problem. An idea that's worth stealing can still be stolen. One tactic (among many) is for a competitor to write additional patents that cover trivial but necessary aspects of its implementation that didn't make it into the first patent. I can get a patent for a great invention, one that I could sell to telecom companies for a million dollars apiece. In response, one of those companies writes a new patent for my idea plus "...using a disk drive." Now I can't sell it to any other companies at all, and the company with the patent can set a much lower price, because my idea is useless without their patent.

There may be industries that benefit from patents. The software industry has not benefited. Companies, individual programmers, and customers have been hurt by software patents. Designs for general-purpose nanofactory products will be similar enough to software that patents will probably be bad in that case as well.

This is an important issue. If it's done wrong, it will delay important innovations by many years and cost the nanofactory-product industry many billions of dollars. Some of those delayed innovations will be lifesaving, so lives as well as money are at stake.

If patents were not granted for (certain classes of) inventions, wouldn't this be a Communist-style theft of the work of the inventors? No, it would not. No one would require inventors to disclose their information. And if they did choose to, there would be other legal protections including copyright, which supported a thriving software industry for decades. Intellectual property is purely a societal construct, an artificial scarcity -- and in the case of both patent and copyright, it was originally justified by the claim that granting limited property rights would encourage invention and benefit society.

Administering and litigating patents requires substantial resources. Complying with patents costs still more -- and the cost is not only resources lost, but opportunities missed for new innovation. If the benefit to society of patents in a certain field is less than the cost, then the original justification for patents falls apart, and we must find a new justification or else refuse patents in that field.

Refusing patents might reduce the hypothetical future government-supported income of a small subset of inventors. This is not the same as stealing existing resources -- a confusion often used to good rhetorical effect by the rent-seekers. A government that steals existing wealth is bad. A government that refuses to create special-interest wealth is probably good. Refusing to create a small amount of special-interest wealth, in favor of creating far broader and larger opportunities, is definitely good: good for inventors, good for society, good for small businesses -- in fact, good for everyone except anti-free-market rent-seekers.

Software takes hard work and creativity to develop, and once developed it can be copied and run at near-zero cost and high value. Product designs for general-purpose manufacturing systems will have the same characteristics. Copyright protection of software was good for almost everyone; software patents were bad for almost everyone. The same will be true of designs for molecular manufacturing products.

This should be an aspect of molecular manufacturing policy that everyone from Socialists to Libertarians can agree on -- everyone, that is, exept the few who profit from rent-seeking. And let me repeat: the stakes are very high. Billions of dollars and thousands (if not millions) of lives are at risk if innovation is crippled by bad patent policy.

Chris Phoenix

Comments

[Nato Welch]

Bravo!

By the way, there's some Patent Reform legislation before the US congress right now.

It has a few good things in it. Not only does it statutorily expand the prior art defense from business methods to any patent (software and, prospective mm designs included), but it would also establish a review board that would allow small players better access for challenging invalid patents without the expense of litigation.

http://yro.slashdot.org/article.pl?sid=06/08/06/0236201

[Brian Wang]

A lengthier discussion of patent filing costs is at this link

If you are a small entity then you get discounted fees from the patent office in the US and Canada. You can reduce costs by doing more admin work yourself. Theoretically it could be possible to keep the cost down to $1000 for a US non-provisional patent. There are a lot of books to guide you through the process. Doing your own patent searches teaches you what is already patented in your area of interest. It helps you to focus on what you are doing that is innovative.

The new legislation will reduce windfalls from patents where you do not also execute a profitable business. It will still be good to protect your rights to the innovation where you also make a lot of money.

[Tom Craver]

I pretty much agree - patents never really were a good idea. In fact, I think civilization may well have been better off if we didn't have copyrights either.

Of course, about now any authors and musicians out there are screaming that I'm a communist/pirate who wants to steal their living...

But I believe alternative mechanisms to let them profit from their work would have evolved, if government hadn't decided to grant monopolies.

Of course, it might also require the government to stay out of private contractual agreements - e.g. allowing publishers to "collude" to set prices and make joint royalty arrangements with authors. But without government enforced monopolies, such collusion becomes harmless.

Don't worry, authors/musicians - there's pretty much zero chance that government will ever believe it isn't necessary to meddle. Goes against the grain of the politicians' egos.
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BTW, Chris - picking a few nits:

"Rent seeking" isn't an integral part of capitalism - it's enabled by government interference with capitalism. Yeah, it happens to be a big part of how our diluted form of capitalism is practiced - but that's more of an unfortunate reality, than an essential part of capitalism.

Free markets are not capitalism - but in "pure" capitalism, markets would be free of government interference. (Whether pure capitalism is an ideal to strive toward, is a separate discussion.)

[mova]

Why not just deny any patent for MM? New molecular structures could be patentable, but if it is done, it will create huge gaps and prevent further development. I think future MM software should be copyrighted, but not patented.

ps: Has anyone ever made possible categorization/classification of MM software?

[KAZ]

You're mistaken about the disparity you seem to identify between capitalism and free markets. What you are actually seeing is the mis-use of the word "capitalism".

The best of both sides, for example Marx and Friedman, all agree that if you don't have a free market, you don't have real capitalism.

The problem is that people call a marketplace distorted by government interference "capitalism". Therefore, for example, collectivists could blame National Socialism in Germany on "capitalism", when it was actually a form of market socialism.

[Nato Welch]

I'd just like to add that the "government interference" is synonymous with "democratic regulation".

Any time a libertarian rails against "government" as unacceptable, it pays to realize that democratic governments are usually the only effective influence that common people people have over the operation of an "otherwise" free market. Opposition to government then implies opposition to democracy.

I should clarify that yes, there are plenty of undemocratic forms of government - and we must all be vigilant to insure that government becomes increasingly democratic. Libertarianism does not, however, characterize itself as opposition to non-democratic "government interference". In so doing, it restricts the exercize of democratic as well as non-democratic government forms.

In the end, Libertarianism ends up opposing a particular //organizational structure// - one that favors one vote per person, rather than one vote per dollar. This strikes me as contrary to the libertarian value of encouraging "free markets". It says that people should be allowed to organize as they wish - unless they plan to organize democratically!

--Nato

[michael vassar]

The claim that "If you don't have a free market you don't have real capitalism" = the claim that capitalism has never existed on a large scale, which conflicts with common usage and seems equivalent too the claims of communist apollogists claiming that Soviet "Communism" wasn't "real communism". In practice, it seems that attempts to organize on a mass scale in the name of "capitalism" inevitably lead to plutocracy and massive "public choice" style regulation while attempts to organize in the name of "communism" inevitably lead to blood-baths.

[michael vassar]

The claim that "If you don't have a free market you don't have real capitalism" = the claim that capitalism has never existed on a large scale, which conflicts with common usage and seems equivalent too the claims of communist apollogists claiming that Soviet "Communism" wasn't "real communism". In practice, it seems that attempts to organize on a mass scale in the name of "capitalism" inevitably lead to plutocracy and massive "public choice" style regulation while attempts to organize in the name of "communism" inevitably lead to blood-baths.

[michael vassar]

The claim that "If you don't have a free market you don't have real capitalism" = the claim that capitalism has never existed on a large scale, which conflicts with common usage and seems equivalent too the claims of communist apollogists claiming that Soviet "Communism" wasn't "real communism". In practice, it seems that attempts to organize on a mass scale in the name of "capitalism" inevitably lead to plutocracy and massive "public choice" style regulation while attempts to organize in the name of "communism" inevitably lead to blood-baths.

[Tom Craver]

Nato:
'"government interference" is synonymous with "democratic regulation"'

Well, no. I think you meant that democratic regulation is one form of government interference?

"people should be allowed to organize as they wish - unless they plan to organize democratically"

No - people should be free to organize as they wish - people certainly have to be free to make mistakes, including turning their lives over to the "will of the majority". But it'd be far better if they didn't make such a mistake in the first place, or at least had some reasonable way to escape such a mistake.

The US system was originally pretty decently organized - democracy to focus the government on doing right by the people, a republic to chain down democracy and avoid mob rule, federalist so a multitude of states offered people some choice in what laws they had to live under, with a few basic universal rights to protect people from the occasional execesses of democractic state or city governments. That has gone downhill ever since the Civil War.

Do I have a better system in mind? Not at the moment - I'd be reasonably happy if we just went back to what we started with, tweaked only to eliminate the fatal compromise (on slavery) that eventually killed it.

[Chris Phoenix, CRN]

Tom: There appears to be some disagreement about what "rent-seeking" means. The Economist says it can include a cartel of companies raising prices.
http://www.economist.com/research/Economics/alphabetic.cfm?LETTER=R#rent-seeking

But then they also say that Tullock invented the term, which he says he didn't. Tullock also seems to treat rent-seeking as government-mediated.
http://www.thelockeinstitute.org/journals/luminary_v1_n2_p2.html

Kaz: Even if I were to grant that a free market is necessary for capitalism, that doesn't mean they are the same. Is it even known whether in a totally free market, capitalism would be the most successful strategy long-term?

Chris

[Kermit Williams]

I have one patent are no good make different forms called agreement plans and they should be cheaper $50 bucks to $100 AND THATS ALL ! and laywers should be cheaper on the agreements forms unless the inventor wins in court its hard to invent new prodocts because its thiefs and bad compaines that lie patents are no good for investors because you can patent that same idea over .

[Kermit williams]

patents are no good and cost too much ! agreement forms called planners should be used and cost cheapers a patent can cost more than buying a house it dont make since.