Intellectual Property Profits

Suppose I discovered oil in my backyard. I would have a right to profit from my oil, right? (I'll ignore the little problem of mineral rights.) Now, suppose my neighbor discovered oil in his backyard a day later, and started competing with me, thus driving down the price. Which is mine: the oil in my backyard, or the profits from the oil? Would I have a natural (basic, inalienable, human) right to prevent my neighbor from selling his oil, in order to maximize my profits? Would the economy work better if I had that right? Would it be right for me (in any sense of "right") to buy legislation that prevented my neighbor from selling his oil? Can it possibly be right for me to preserve "my" hypothetical profits at the expense of his ability to use his oil?

A true story in the history of invention is that Alexander Graham Bell arrived at the patent office mere hours before Elisha Gray, both having worked long and hard to invent the telephone.

In a Communist society, Bell's patent would be taken away by the government, which would employ him on the assembly line in a state-run telephone factory, which would make five poor-quality telephones per week for the use of party officials.

In Western society, only Elisha Gray was forbidden from using the fruit of his labor and skill. Gray was forbidden by law from making devices that conflicted with Bell's patent. It took many decades before Bell's monopoly was broken by the government and long distance rates fell to reasonable levels.

Inventors should certainly be able to profit from the fruits of their inventions. This belief is said to be the reason for patents. But patents are not the only way to protect intellectual property, and they often prevent inventors from profiting. Patent industry insiders say that unless you can make a million dollars on your invention, it's not worth patenting -- because that's how much it takes to sort out a patent challenge.

Copyright and trade secret operate on different principles. Both of them protect inventors against direct copying, while preserving the rights of independent inventors of similar products. As we will see, copyright was used successfully for decades as the main protection for an entire industry of products, and this example may be relevant to molecular manufacturing.

If someone has put enough work into an invention to be deserving of profit, they have probably researched enough hard-to-steal details to maintain their business in the face of cheap knock-offs that are not grounded in a similar quantity of intellectual labor. If I invent the next telephone and dream of making a billion dollars, and my neighbor steals my trade secrets, I have legal protection with or without a patent. But if my neighbor develops and sells a similar product with her own independent labor and skill, has my neighbor stolen my work, or only reduced "my" imaginary profits?

The computer software industry flourished for quite a few decades without patent protection. There was no such thing as a software patent; programs were protected by copyright. Occasionally, with a lot of work, one company could duplicate the function of another company's program without actually copying their software (which would have been illegal). More often, people built on each other's basic ideas to produce entirely new products. The Internet, the personal computer, the spreadsheet, the word processor, and the graphical user interface were all developed in this period. From the early 80s to the mid-90s, software patents were phased in. I have not seen as much innovation since that time -- mainly just the web browser -- and I do not think this is a coincidence.

The software industry could never have created as much as it did without a broad pool of shared, unpatentable inventions to build on. Perhaps in a strong patent regime the first few inventors might have made more money -- but the many inventors, equally skilled and dedicated, who expanded on their discoveries would have been out of luck. Again, I am not advocating theft of inventions; the original inventors were free to keep details secret and to protect their programs by copyright. But the basic, elegant, mathematical ideas were free for anyone to discover and use.

In theory patents can be licensed, but in practice, licensing would have strangled the industry in red tape. Even today, most software patents are ignored -- often with the knowledge of their holders, including IBM, which is not known for being self-sacrificing. Everyone except a few jackals knows that software patents are a lose-lose proposition.

Products manufactured by general-purpose manufacturing systems will be designed more like software than like hardware. Is it possible that patent protection will not be the best type of intellectual property protection? Not only society, but inventors, would be impoverished by implementing overly broad patent protection. And it may even be that no patents at all is the best way to go, as it was for the software industry. Of course this has almost no chance of being implemented, at least in today's U.S. But Europe is still resisting software patents, so there may be hope for sensible policy there -- either no patents or at least fewer "category killer" patents.

NOTE: Between writing the above entry and posting it, I found time to track down a link that Nato Welch had posted to our blog in the discussion that inspired this one. He says his position is leftist. I don't see that: it doesn't sound political, just common-sensical. Anyway, I recommend his article as a very similar take on the issues.

Chris Phoenix

Tags: nanotechnology nanotech nano science technology ethics weblog blog

Comments

[Nato Welch]

Thanks for the link!

I suppose I've bowed to the rhetoric that copyfighters and "commonistas" are pinko commies or anarchists for so long that I hadn't considered the libertarian perspective on relaxing patents (IP is a state-granted monopoly).

As a policy, I much preferred curtailing IP rights to a guaranteed income; that preference alone might be considered less left.

Also related to IP policy in an accelerating future:
Why IP retards Innovation.

I may have to revise the title, because it applies mainly to patents, which is just a subset of IP.

I think the main criteria for whether a ptent policy should be implemented is the costs of innovation. Higher barriers to entry (traditional aircraft) = fewer innovators, and fewer patents obstructing technical progress. Lower barriers to entry (software, nanofactory products) = a glut of innovators, more patents clogging technical progress.

[Chris Phoenix, CRN]

Nato: "I think the main criteria for whether a ptent policy should be implemented is the costs of innovation. Higher barriers to entry (traditional aircraft) = fewer innovators, and fewer patents obstructing technical progress."

Heh. I haven't verified this story, but I have been told (in an airplane museum) that in the early days of aviation, patent fights between the Wright brothers and some other inventors delayed the whole field by many years. Finally, when WWI created a national security need for airplanes, the government stepped in and settled the problem--I don't know how.

Here's a question I've been wondering about for a while. If patents are property, then can the government buy key patents at a government-set price under eminent domain laws?

The government can, and does, make the occasional patent secret for national security reasons, but that's a different question. The point of eminent domain purchase would be to make a useful invention available.

I am not recommending this as policy; it seems like a bad "fix" for a bad system. But I'm still curious about it.

Chris

[Mova]

I think there has to be a new patent-evaluation mechanism that would involve the aspects of both (1) the degree of findings and (2) its impact to the society. This way we can weigh how important an invention is and determine the steps on whether it should be denied patentability, subjected to eminent domain or referred to public domain. The latest posts in my blog discussed the theory called TRIZ "Teoriya Resheniya Izobretatelskikh Zadatch" or “Theory of Inventive Problem Solving (TIPS.)” The interesting part of this theory is that it can explain the degree of importance from innovations. I argued that all nanotech design innovations which reaches level 5 of TRIZ should be freed from patent (certainly, with govt giving moneys to the inventors). If psychologist, inventors and lawyers can work together, I am sure there should be a way in reforming the current patent mechanism.

[Brian Wang]

The open invention network is helping create an open database of prior art. Others are working to help the patent office to have better information so that they do not grant bad patents.

http://www.openinventionnetwork.com/press.html

[Brian Wang]

correction: Open innovation network: holds patents for open use

Article on the effort to improve the operations of the US patent office.
http://arstechnica.com/news.ars/post/20060110-5942.html

Prior art databases
http://www.ip.com/pad/home.jsp
http://www.freepatentsonline.com/

Article about cooperation with patent office and the launch of open innovation
http://www.businessweek.com/technology/content/feb2006/tc20060206_139604.htm

[Brian Wang]

Some other patent improvement projects

http://dotank.nyls.edu/communitypatent/
http://www.patentcommons.org/
http://www.law.upenn.edu/blogs/polk/pqi/

[Mova]

Hi Brian
I'll check that ASAP.

[Mova]

almost forgot. this is the draft access to knowledge treaty, forwarded by brazil to the WIPO under development agenda. This will limit IP protection and ensure knowledge utilization for humanitarian purposes.

http://www.theceli.com/modules.php?name=Downloads&d_op=getit&lid=17

Mova

[Tuur Demeester]

excellent article that very thoroughly refutes all arguments pro intellectual property can be found here:

http://www.mises.org/journals/jls/15_2/15_2_1.pdf

kind regards, and thank you for the months of nano-news I've been able to enjoy through your blog. Keep up the good work!