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Why Patents Matter for Job Creation and Economic Growth


Written by Gene Quinn
President & Founder of IPWatchdog, Inc.
Patent Attorney, Reg. No. 44,294
Zies, Widerman & Malek
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Posted: January 2, 2011 @ 9:01 pm
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We have all made the arguments — the issuing of patents leads to job growth. The nay-sayers would have people believe, however, that the issuing of patents is a drag on the economy. The factual realities are stark and tell a clear and unmistakable tale: patents are good for the economy and promote job growth.

Those who are not fond of the patent system like to pretend that innovation is free and will happen despite funding. Purveyors of extremist anti-patent rhetoric even go to the extreme of saying that we can expect the same level of innovation as we enjoy now absent a patent system. There is always one who is a software programmer who says that he or she could just work non-stop for six months, suffer many sleepless nights and wind up with a killer application, program or service, all at no cost and despite any patent protection. Of course, this proves the point for those who believe in a patent system, which is clear to all rational thinkers. Nothing in life is free. Opportunity costs are costs, and exactly how do you plan on taking your application, software or service to market? At some point every business will need funding to grow, it is just that simple. Patents and the rights they provide are extremely attractive to investors, so attempting to grow a business without a strategic patent portfolio means you are building obstacles and hurdles to success rather than removing them.

Mario W. Cardullo is a distinguished engineer and someone who knows a thing or two about innovation, inventing and entrepreneurship.  Cardullo has been a founder or principal various technology companies and is the inventor of one of the basic patents for the RFID-TAG devices (i.e., E-Zpass), for which he was nominated for the Lemelson-MIT Prize (2003) and the Presidential National Medal of Technology (2004). He was served as the counselor on technology and entrepreneurship to the Under Secretary of Commerce for the International Trade Administration, and has consulted as a technology advisor for the governments of China, Japan and Italy. In an essay titled Intellectual Property – The Basis for Venture Capital Investments he wrote:

One of the major problems faced by new technology seed and start-up enterprises is access to the first round of funding, either through debt or venture capital investment.

Venture capitalists want to know where an invention or innovation fits in the marketplace with reference to existing and potential competitors. The potential investors also want to know if the invention or innovation offers a dramatic and sustained advantage, and whether there is compelling evidence to warrant building a business based on the invention or innovation. They seek to evaluate both the strength of an innovation and the ability of the entrepreneur to motivate commercialization…

One of the most important issues evaluated by venture capitalists is the security of intellectual property. Normally, a strong patent position is desired and the issues of ownership of intellectual property need to be well understood…

But what difference does it make whether businesses get funded from venture capitalists? Roughly 600,000 new businesses launch in the United States each year, with about 1,000 new businesses receiving their first venture capital funding each year. See Connecting the Dots. What that means is that .167% of new business receive venture funding. So the deck is enormously stacked against you if you are planning on starting a business and raising venture capital. That being the case, you certainly don’t want to make it more difficult to acquire VC funding.

According to a Patent Survey conducted by the University of California Berkeley Law School, many investors place a premium on patents when making investment decisions. In fact, 67% of firms surveyed indicated that the existence of patents were an important factor in their investment decisions. And for those software folks who always want to incorrectly believe they don’t need funding, the figure was 60% for software companies. Higher were biotech companies (73%) and medical device companies (85%), proving that it doesn’t matter what industry you are in, significant percentages of VCs place a premium on patents when making funding decisions.

The fact that VCs place a premium on the existence of patents makes all the sense in the world. The patent grant provides to the owner of the grant the right to exclude others from making, using, selling, offering for sale or importing in the United States anything that would infringe one or more of the claims contained in the patent. The patent provides absolutely no affirmative right to do anything; that is save exclude others. So you cannot get a patent on a pharmaceutical and start selling it without FDA approval, but you can prevent others from making, using, selling or importing. The patent right is an exclusionary right, which by its very nature means the owner of the patent has a competitive advantage. Now all the owner of the patent needs is for there to be consumer demand for that which they have claims on, making them the sole supplier.

According to Pascal Levensohn, Managing Partner of Levensohn Venture Partners, the problem with the US economy is the lack of Initial Public Offerings. He opines that without an increase in IPOs in the United States it will be difficult, if not impossible, to see the economic growth that we want. Without economic growth there will be no job creation, and the sluggish US economy will continue on its anemic path. He suggests that the best way to increase IPOs is to increase venture capital and make it more attractive. He writes that is our leaders really wanted to fix the job problem in America “there would be no higher legislative priority than promoting regulatory and tax reform to stimulate new capital formation and venture capital in the U.S.” See Connecting the Dots.

The importance of increasing venture capital is clear when you understand that since 1999 some 60% of IPOs have been from venture capital funded companies and, according to Levensohn, “92% of the job growth in venture-backed companies occurs AFTER their IPO.” See See Connecting the Dots.

Let’s assume that Congress will not do much, if anything, useful to attempt to create a more friendly VC climate.  While not a sure bet, Congress has been incredibly ineffective at doing the business of the people and has shown an amazing ability to get bogged down in small issues — small at least compared with the laser focus they should have had on the economy and jobs.  What can be done to help the venture climate with minimal assistance from Congress?  How about issuing more patents!  Since VCs overwhelmingly place a premium on patents when making funding decisions the enormous backlog of unexamined patent applications presents a tremendous burden on the formation of funded businesses.

Looking at data since 1989 shows the problem.

The number of patents issued has not grown appreciably over this time, but the number of patent applications has grown appreciably, as have the number of applications awaiting first action and the number of patent applications pending.  Between the above chart and the chart below it becomes clear that in about 1998 things started to get out of hand, with demand for patents growing and the Patent Office unable to keep up with the pace.

The United States Patent and Trademark Office is at the root of our economic problems and our leaders in Washington, DC don’t even get it.  How sad.

Presently the leadership at the Patent Office is making headway, but like start-up businesses they cannot do as much as they could or should without funding, and the battle for an adequately funded Patent Office is constant.  During fiscal year 2010 Congress siphoned of some $70 million from the Patent Office, and this year the Patent Office is collecting more than $1 million a day it cannot use.  You see, the Patent and Trademark Office of the United States government is a revenue generating entity.  User fees are supposed to go to the administration of the Office, but amounts over and above what Congress appropriates does not go back into the Office to invest in people, systems and infrastructure, but rather it goes to things that have nothing to do with innovation and the patenting thereof.

Congress is derelict in its duties to the American people, which is hardly a surprise I know.  What is disgusting, however, is that one agency — namely a division of the Department of Commerce called the United States Patent and Trademark Office — has the ability to create wealth out of whole cloth by recognizing that an innovation worthy of protection has been disclosed to the public.  Because of the incompetence of Congress when it comes to innovation policy that mission is being thwarted, assets are not being created, VCs are not backing start-up companies because they don’t have any competitive advantage without issued patents and the cycle that could and should lead to growing companies that employ hundreds, thousands, tens of thousands of people is stopped because it is more important for Congress to siphon user fees away from the Patent Office.  There is only one word to describe this — PATHETIC!

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Posted in: Anti-patent Nonsense, Gene Quinn, IP News, IPWatchdog.com Articles, Patents, US Economy, USPTO

About the Author

is a Patent Attorney and the founder of the popular blog IPWatchdog.com, which has for three of the last four years (i.e., 2010, 2012 and 2103) been recognized as the top intellectual property blog by the American Bar Association. He is also a principal lecturer in the PLI Patent Bar Review Course. As an electrical engineer with a computer engineering focus his specialty is electronic and computer devices, Internet applications, software and business methods.

 

64 comments
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  1. This is a simple-minded analysis by an industry-insider. Patents are unnecessary barriers to competition and potent destroyers of wealth. The allegation that the patent system is needed to maintain investment in the pharmaceutical industry is ludicrous. Patents are hindrances to product innovation. When it comes to “recouping investment for the expense of development and regulatory approval,” that is easily addressed:

    * R&D expenses are recouped through sales. This is the nature of any business.
    * Regulatory costs are recouped by way of FDA marketing exclusivity provisions. If not for FDA regulatory requirements, these exclusivity agreements would be uncalled for, but due to the onerous burdens placed on pharmaceutical firms by the FDA, they are afforded generous marketing exclusivity, as is fair. Patents in fact dont have much practical application today in the pharmaceutical industry, since the major products marketed have FDA exclusivity expiration dates later than patent expiration dates.

    In other words, let the underlying technology be open to the market for innovation. Put the USPTO bureacrats, patent attorneys, and the rest of the patent industry out of work and save consumers and businesses billions of dollars every year in more efficiency and stronger innovation.

  2. George-

    Answer me this, how is a small start-up tech company supposed to recoup R&D through sales after a big company copies what they have done and puts the small start-up out of business? I can’t wait for your insightful answer.

    I would also love for you to expand upon your truly insightful observation that patents don’t have much practical application for pharma because they have more exclusivity through the FDA process. I can’t wait to hear you dig the hole deeper. You are, of course, absolutely wrong. In fact, pharmaceuticals are given an extra 5 years of patent protection to compensate for FDA delay.

    While you are setting out to enlighten us, please also respond to the fact that 67% of VCs require patents and why any company in their right mind would make it more difficult to obtain venture capital funding.

    Simply stated, George, you obviously don’t know much about patents or business. You claim I am one who has an agenda, but why don’t you let us know what YOUR agenda is? The only logical position to have is that the patent system is objectively good, has lead to the creation of many life altering innovations that otherwise would never have occurred and is a force for advancement of science and technology. So why the desire to pretend George? Why do you want to act like there is no incentive necessary?

    -Gene

  3. Gene,
    What you’ve provided evidence of is that when you have patents, being a firm that has patents is preferable to being a firm that doesn’t have patents. Nobody is denying that, although there is some debate on how much an advantage it actually gives in various industries, and it does vary greatly from industry to industry. That doesn’t mean it’s good for the industry as a whole.

    As an example of something similar, I’ve heard that in the tobacco industry, the number of smokers remained roughly the same regardless of the amount of advertising. However, firms that advertised more could take customers away from firms that advertised less, so it was a disadvantage to not advertise as much as your competitors, even though advertising was a drag on the profitability of the industry. The tobacco companies actually benefited from legislation stopping tobacco advertisement.

  4. Bobby-

    I actually don’t try and prove and re-prove every single possible assertion in every article.

    I am still anxious to hear you explain why countries that don’t have a patent system see dramatic economic growth and development after they adopt a patent system. You only ever say that “correlation is not causation”, but when the correlation is 100% of the time that is, of course, dramatic evidence of causation.

    I am still also waiting to hear you explain who would spend the hundreds of millions of dollars, or billions of dollars, necessary to bring drugs, biotechnology innovations and medical devices to market if there are no patents. I’d also like to understand how it benefits society if companies with revolutionary innovations cannot get funding to continue on as a going concern unless they have patents.

    You never want to answer these questions, which clearly prove that I am correct. You want to point to a benevolent professor or scientist working for a check from a university or on a grant and then pretend that the basic research would make it to market without any commercial forces. You also want to pretend that governments can fund innovation to the level we have today, never noticing that government funds basic research and there is a great amount of translational research necessary to transition into something commercial relevant.

    -Gene

  5. Bobby,

    Your grasp on business and economics is as bad as your grasp on farm policy or patent law.

    You are much too glib with your comments and your poor handle on logic belies on overreach in trying to support your dogma. You make an overarching statement (which coincides with your agenda) that “advertising was a drag on the profitability of the industry” and “companies actually benefited from legislation stopping tobacco advertisement” while neither is technically entirely true in any particular application.

    First, you must understand that generally speaking, “patenting” is not an industry by industry law. As a baseline, there is no such bias present. Now extra perks are awarded certain industries at the President’s urging (and Congress compliance). Such do not support your position. The basic rules apply to (any) and all industry or fields of art (and as Bilski reminds us all, that includes no categorical exemption of business methods).

    Second, you seek to discount the value of advertising in its entirety, yet, cannot avoid the truth of “firms that advertised more could take customers away from firms that advertised less“. You seek to only paint this as a negative (much like you wish to paint patents in certain arenas only as a negative).

    The actual point is that advertising worked. Plain and simple – you must accept that truth.

    The only tobacco companies that “actually benefitted” were the ones losing market share to those with better advertising. You cannot have the losers benefit AND the winners benefit, as the winners, no longer take from the losers with its advertising. In some business arenas, market share is the battle.

    Your premise is once again faulty and your logic suspect at best. You “see” , or in this case “you’ve heard” something that you think supports your position and you gleefully and ignorantly assume it must be so.

    You really should try critical thinking some time.

    So are you now going to back-peddle on yet another of your examples (like you had to with your farm policy example)? When will you actually learn about what you want to talk about instead of relying on your naked agenda? Your “I’ve heard” anecdotal premises are not cutting it as support for your positions.

  6. “I actually don’t try and prove and re-prove every single possible assertion in every article.”
    The article is about job creation, generally seen as an issue for society and the economy, while your evidence is that an individual firm is better of within the patent system when they have patents.

    “I am still anxious to hear you explain why countries that don’t have a patent system see dramatic economic growth and development after they adopt a patent system. ”
    In modern times, adopting a patent system means the country gets more favorable trade relations with western nations. For example, the Special 301 report influences US trade policy and is based on how well they respect our IP, and I believe in order to be part of the WTO, you have to have at least 20 year patents. Powerful nations trading with you can do wonders for a developing nation.

    In less modern Europe, there wasn’t really a clear cut advantage to those with patents (as evidenced by Switzerland’s strong position in 19th century world fairs I cited), and in many cases patents replaced policies that were clearly worse. England’s statute of monopolies is generally pointed to as the first modern patent law, but it was replacing a policy of the king granting monopolies at his discretion. Sometimes they were used to attract talented artisans, and sometimes they were just a roundabout way of collecting taxes, but they are regarded today as a harmful system. Relative to this policy, even harsh critics of the patent system see this as an improvement, just as you would see taking less money being taken from the USPTO as an improvement.

    “You want to point to a benevolent professor or scientist working for a check from a university or on a grant and then pretend that the basic research would make it to market without any commercial forces.”
    No, I’m not saying we should depend upon benevolence. I see competition as the primary driving force of progress. Leaving things up to market forces is not socialism, it’s not belief that people are ultimately good, it’s laissez faire capitalism.

    “I am still also waiting to hear you explain who would spend the hundreds of millions of dollars, or billions of dollars, necessary to bring drugs, biotechnology innovations and medical devices to market if there are no patents”
    As I’ve said before, a large share of the dollars that bring these things to market come from federal funds already. Now, one thing that could improve the situation regardless of patent policy would be streamlining FDA approval. If we can get comparable assurance of safety and efficacy at a significantly lower cost, then we can get more lifesaving devices for less investment, regardless of the source. This lower barrier to entry is especially advantageous to small firms.

    “I’d also like to understand how it benefits society if companies with revolutionary innovations cannot get funding to continue on as a going concern unless they have patents.”
    This is a very simple math problem. If the value of the things we can get without patents is greater than the things we can get with patents, then we are better off without patents.

    “You also want to pretend that governments can fund innovation to the level we have today, never noticing that government funds basic research and there is a great amount of translational research necessary to transition into something commercial relevant.”
    The closest I’ve said to that effect was that the government provides a large share of the funding in pharmaceuticals, and that a large share of resources are wasted because of perverse incentives caused by the patent system. If more half the R&D funding comes from the government, and more than half the funding is wasted because of patents, then it’s reasonable to suggest that we could get about the same, possibly more of the important drugs if we didn’t have pharmaceutical patents, let the NIH and other government sources fund drugs from start to finish, and this made Big Pharma stop all R&D investment. I don’t think the government is the ideal force for marketing drugs or producing drugs, but that’s something that even me-too generic companies can do.

  7. @BD
    You’re missing the forest for the trees. Yes, an individual firm gains a relative competitive advantage from increased advertising, but the industry as a whole gets no significant gains from the advertising. The amount of revenue the industry gets is going to be the same regardless of advertising expenditure in this situation, so the industry is more profitable without advertisements.

    With this article, Gene has given evidence that having a patent is a competitive advantage to the party that has a patent. However, providing a competitive advantage does not mean that it results in greater efficiency for the system as a whole.

  8. And you Bobby are running into the trees thinking the forest is still far away. “Business” is not about everyone doing better in some pollyanna idyllic world. Wake up to the errors of your logic!

    Your treatment of industry (or groups of industry) “as a whole” does not have a basis in patent law. just like you don’t “get” that the greater “efficiency” of the system is not the aim. This goes back to your mistaken foundation that “promote” must mean that something is broken. Do you remember when I posted that your statement of the problem is the problem? You stumble blindly on.

    My advice is to stay away from downhill skiing until you can understand the basics (and from the looks of it, you simply are not trying to understand the basics).

  9. Gene, if you are arguing only against people who think we would be better off without all patents, you obviously have a point. But you seem to be going further than that. This post completely ignores the other side of the coin. While I would disagree with George that, in general, “patents are unnecessary barriers to competition and potent destroyers of wealth,” I think it is certainly true that certain patents (and many patents in certain areas) do potentially fit that description.

    For example, you discuss how patents lead to greater initial funding, and how therefore they are a good thing in general. But that doesn’t mean they are a good thing in all cases. If a patent is issued that does not actually represent true innovation, and simply is used as a stick to milk actual innovators, then the issuance of that patent is indeed a tax on innovation. The benefit the patent owner got in greater funding in that case is actually not a good thing (let alone a counterargument for why the patent should have been issued).

    Of course, I would imagine the big disagreement is the difference between a patent that represents true innovation (and therefore needed to prevent this innovation from being copied), and a patent that does not represent innovation and simply prevents other companies from innovating. Or rather, whether the issuance of too few good patents is a bigger problem or smaller problem than the issuance of too many bad patents.

  10. Bobby-

    What I have demonstrated is that businesses are better off having patents and that having patents more likely leads to investment, which leads to job creation.

    In other articles I have demonstrated the benefit to society for a patent system. You continue to ignore the questions I ask you because if you would answer them honestly you would be forced to concede that a patent system is a benefit to society.

    You ignore the fact that patents can and do block competitors, which does result in competitors engineering around those patents, thus the march of innovation. You ignore this because you choose to focus on those companies that see patents as an impediment and throw up their hands and bitch and moan after reading only the title to the patent. Those lazy individuals and terribly run businesses are not innovators, they simply want to copy. Why should any regime benefit those who add nothing and only want to take?

    -Gene

  11. Jon-

    You say: “the issuance of that patent is indeed a tax on innovation…”

    That is only the case if the person being held up by the invalid patent claims chooses to pay extortion rather than fight. There are all kinds of ways to fight, some expensive, some less expensive, but being in business companies need to plan for the reality that they will be sued. So, yes, bad patents present a tax on innovation when the party chooses to pay the tax because it is perceived as cheaper than fighting. What this does, however, is paint a bulls-eye on the payor company, which is not a good thing to do.

    Having said that, there are things that the Federal Circuit could and should do to make such extortion ploys less profitable and come with a great deal of risk. Similarly, Congress could do that if they like. That is exactly what should happen.

    -Gene

  12. @BD
    ““Business” is not about everyone doing better in some pollyanna idyllic world. Wake up to the errors of your logic!”
    No, but businesses may work together for something that is mutually beneficial. If RJ Reynolds and Phillip Morris are both spending $100 million on advertising, resulting in no net change, and they would be better off if neither one spends that money. However, they can’t convince the other not to spend that money because spending money provides a relative advantage. If they can ban tobacco ads, then they both end up saving $100 million each, which is preferable.

    Now, Gene is making the claim here that society as a whole benefits from the patent system. This is an economic claim, not a legal one. However, what he has shown is only that when we have a patent system, those that get patents have a competitive advantage over those that don’t. I’m not denying that. However, this is not evidence of the patent system being economically preferable for society for no patent system.

  13. @Gene
    “You continue to ignore the questions I ask you because if you would answer them honestly you would be forced to concede that a patent system is a benefit to society. ”
    I’ve replied to every point in your last reply.

    “You ignore the fact that patents can and do block competitors, which does result in competitors engineering around those patents, thus the march of innovation. ”
    I’m not saying that doesn’t happen, but I’m also not agreeing that it’s an efficient use of resources either. Just as redundant drugs have little to no social value, redundant inventions often have limited social value as well. Sometimes having to work around a patent may result in a better product. However, sometimes we may get stuck with an inferior workaround. In the cases where the workaround is better, there would be some incentives to invest in that technology anyway, at least unless it was only marginally better, in which case it may be a poor use of resources.

    “Why should any regime benefit those who add nothing and only want to take?”
    If we were paying people to copy innovators, then your response would be an apt question, but we aren’t doing that as far as I know, and if we are, you haven’t brought it up here. The active step here is in protecting those that innovate via the patent system. In that case, we must determine what levels of protection, if any, are most appropriate, and even if the lawful monopolies given by patents are the best way to do so.

  14. I think that everyone, Gene included, is looking at this from the wrong vantage. I don’t think that there’s any doubt that holding a patent can be a competitive advantage for a company. Preventing your competitors from competing is advantageous.

    And I don’t think that there’s any doubt that venture capitalists will fund a company that holds patents, over a company that doesn’t.

    So forget those two arguments. Instead, let’s look at some patents. Specifically the patents that Gene included in his article ‘Merry Christmas: Christmas Tree Patents’ (no link – you can find it from the top menu). First we have:

    Corner/wall situated Christmas tree stand – US Patent No. 6,818,264
    In effect the invention claimed is using a corner book shelf to hold a Christmas Tree.

    Collapsible artificial Christmas tree – US Patent No. 5,906,869
    This is an adaption of an Chinese lantern.

    Christmas tree ornament – US Patent No. 4,939,004
    Lighted ornaments have been around since I was a child, this is just a minor variation.

    Fire safety Christmas ornament – US Patent No. 4,113,020
    An adaption of an old passive firefighting system.

    Now each of these devices was issued a patent. Obviously the U.S.P.T.O. decided that they were patentable devices. However none of them show any display of originality in my opinion. They are all minor modifications of existing devices.

    Now consider the costs involved. Each of these patents would have certain fixed costs for filing the applications, hiring a lawyer to ensure the forms are properly filled out, etc.

    The first question is, do these patents deliver any value to the patent holders?

    My personal guess is that they don’t. None of these patents is of any real value to the patent holder.

    The second question is, do these patents deliver any value to society?

    My personal guess is that they don’t. None of these patents is of any real value to society.

    So if they have no value to the patent holder, and no value to society, why were patents issued?

    And that I think is the real question. I’ve read hell of a lot of patents. In my last job, one of my responsibilities was evaluating the technologies that people were attempting to sell us, to see if it really worked. Almost all of the patents I’ve read have been either:

    1) Obvious
    2) Of No Value
    3) For a device already in existence before the patent was filed
    4) Technologically impossible (see the Dean Drive)
    5) Impossible to build from the disclosure
    6) All of the above

    Now you may or may not agree with me, however consider the implications if I am right. This would mean that the U.S.P.T.O. is totally incapable of enforcing it’s own rules. If the U.S.P.T.O. is incapable of enforcing it’s own rules, why does it exist?

  15. Or Bobby, Maybe I tell you that I am not going to adverytise, go ahead and advertise and take your lunch – then I don’t care that I spent $100 million and I am way better off.

    Wake up! The real world is calling and your pipe dreams are nothing but a fool’s paradise. Real world needs real discussions about real law. Your positions smack of ivory tower idealism that lack any sense of real world pragmatism, and thus any shot at real world success.

  16. @BD
    “Maybe I tell you that I am not going to adverytise, go ahead and advertise and take your lunch – then I don’t care that I spent $100 million and I am way better off.”
    That’s what I meant by ‘they can’t convince the other not to spend that money.’ They’ll both promise not to spend the money and they’ll both spend the money because betrayal of that promise is beneficial at an individual level. Short of banning the behavior (or perhaps a contract with punishment greater than the rewards, but this provides an advantage to any firms not part of the contract), there’s no reliable way to get either firm to not spend the money.

    Things do change a bit on the individual level if one firm is already large enough to expend enough on advertising to crush the other firms, but apparently in this scenario the difference present was not to an extent large enough to make the law passing not advantageous. And even if it were, it’s still optimal for industry as a whole for advertising to not exist.

  17. And guess what pops up – just what I needed, and example of a patent that was issued for an existing device. These are copies of the judges ruling in the Honeywell Inc. v. Sperry Rand case.

    Wayne

  18. I used to represent investors a lot — I’ve done over $10 billion in patent-backed investment deals. before I went in house, me one little associate, in many years moved more patent-based money through the investment pipeline than the entire federal judiciary moved in damages.

    Here’s the tradeoff in the patent system.

    Investors have lots of choices — an investor has over 10,000 possible investments on any given day. Companies compete fiercely for capital. If you change the economics of a deal even a little bit, the company moves a little above or a little below the average, and either has good access to capital or none. Patents are that “little bit above.” If we weaken the patent system a little bit, there will be a large change in investor behavior.

    Nat’l Venture Capital Ass’n estimates that over 20% of GDP now arises from firms that benefited from venture capital. Not a perfect overlap with patent based investment, but close — and it gives you an idea of the big numbers we’re talking about.

    On the other hand, patents do raise costs for competitors. That’s exactly what they’re supposed to do, create economic rents for the first innovator. The innovator has to be able to charge above-free-competition prices to recoup the investment it takes to get a product to market. Raising rivals’ costs, to prevent free-riding on the initial R&D and productization costs, is exactly how things have to work.

    So the question is, which effect is larger — the added costs, or the added economic activity from patents? Well, let’s look at the numbers.

    The total investment flow in the U.S. is well upwards of $200 billion per year, when you add federal R&D funding, state economic development funding, private equity funding, venture capital, internal R&D funding, etc.

    The costs for patent litigation, design-around, etc. are around $20 billion (again plus or minus a factor of two, hard to run down exact statistics – I’ve tried). At least a factor of 5 less, probably a factor of 10 less.

    The upshot is, that if you tamper with the patent system a little bit, you’re going to get a very large change in a very large piece of the economy.

    Patents are net wealth creators — the leverage is very high in favor of the wealth-creating effect.

  19. David,

    One major error that kills your argument. You said:

    The total investment flow in the U.S. is well upwards of $200 billion per year, when you add federal R&D funding, state economic development funding, private equity funding, venture capital, internal R&D funding, etc.

    You are assuming that every penny of investment money is moving because of patents, and it isn’t. Software wasn’t patentable when Microsoft was first getting started, the same with Adobe, Corel, Apple (Apple does a lot of software), Electronic Arts, and so one. Out of fields where patents are used, I’m pretty sure that most investors who bought shares in the GM IPO would have done so without patents, in fact a lot of the smaller investors may not know what patents are.

    Facebook is another example, they only started accumulating patents after their initial funding.

    Exactly how much investment money is placed because of patents is probably impossible to determine, however I would expect no more than 5-10% of the figure that you quoted, as investment money also has to take into account manufacturing equipment, physical plant, employees, business plans, existing products, the channel, suppliers, current sales, engineering facilities and equipment, and other factors.

    But is investment money the correct measure? I think that the correct measure should be profits made from patented inventions. Again, those numbers are probably impossible to determine, even if you do read SEC filings like I do. There’s nothing in the SEC filings which ties specific patents to specific products. There’s nothing in company press releases either. And if you call and ask, no one knows (I’ve done it).

    If you have another metric, that you think might work better, I’d like to see it.

    Wayne

  20. Wayne –

    I should have been clearer. I meant about $200 billion/yr in technology R&D investment, not broad business investment. You’re right, total business investment is several times that $200 billion figure.

    But your analysis doesn’t fully reflect business reality either. A business doesn’t get off the ground until the management and investors see an end-to-end business flow from conception to complete product design to manfacturing to distribution to final sale. If you pull out one link, the entire chain of investment in “manufacturing equipment, physical plant, employees, business plans, existing products, the channel, suppliers, current sales, engineering facilities and equipment, and other factors” collapses as well, That’s my point, is that very very small changes in the patent system and the investment grade of patented businesses will have very large effects.

    Profits from patented inventions is not the right measure, because lots of externalities escape. The full social benefit of the patent system is profits to the company, lives and health saved by medical technologies and the social benefits that those people create, the efficiencies created for users of patented inventions — the full set of feedback loops. All of this is reduced if investors back away.

    The amount of social welfare generated by the patent system is immense. For the new businesses that create most new jobs in the U.S., and that create the biggest breakthroughs, usually the hardest step in getting going is finding investors. If we noodge the patent system even a little bit, the effect on investment, and on social welfare 10 years down the line, will be immense.

  21. David,

    Let’s not forget the other benefits – those that accrue to others – the impetus to design around and create different ways because a patent may block a path is one such benefit that is often overlooked.

    So even aside from the investment angle, the traditional Quid Pro Quo does more to promote then what first meets the eye.

  22. Patent systems are important. Unfortunately, most patents probably are not. Patents just sitting there, as most of them do, generally do not exclude anybody from doing anything, until one tries to enforce them in the legal system–at great cost, and with highly uncertain outcome. A nine-year compilation of data collected by the University of Houston Law Center on patent judgments shows that validity issues resolved in favor of the accused infringer 44.5% of the time, while infringement issues resolved in favor of the accused infringer 72.5% of the time. Not great odds for a piece of paper that costs a lot of time, effort, and money to procure. Patent practitioners need to focus first and foremost on commercially meaningful and truly novel and non-obviousness in constructing claims, rather than simply touting, “patents are good.” Here’s a different point of view on that Berkeley study.

  23. Oops, left out the article…

    http://radar.oreilly.com/print/40278.html

  24. infringement issues resolved in favor of the accused infringer 72.5% of the time.

    That could be viewed as more of a plaintiff problem than a patent problem. Whether that statistic is a product of overly-litigious patentees or applicants who fail to claim broadly enough, it’s not a case of “not great odds for a piece of paper that costs a lot of time, effort and money to procure”, but rather a case of highly-paid players taking too many low-probability shots and then complaining when they don’t go in.

    It’s especially disappointing to see such a high percentage of non-infringement when the infringement analysis occurs after the claim construction. If you already know the scope of your claim, and you have 300% false positives in your pre-litigation infringement analysis, you probably need better legal advice.

    Unless of course people are pursuing dubious infringement claims because they’re chasing a ridiculously large payoff, in which case I’d put those numbers down to selection bias. Of course, if that’s what’s happening, the only way out of that predicament would be to make (losing) infringement cases more expensive.

    Anyway, it will always be the case that most patents are worthless, and that’s not necessarily a patent problem either. Most of the time, the reason a patent is worthless is because the underlying product never makes it to market, which is hardly the patent’s fault. A patent that covers a product being sold by the patentee is much more likely to have value.

  25. the reasoning is solid and logical. Overall, a good article!

  26. @BD….
    Very good point that I can attest to personally. I had to dodge possible prior art claim challenges several times during the conceptual phase of the process, as I found prior art during a personally done patent and published application search. The resulting invention that I came up with was in fact Much better than what I had been contemplating before, and incidentally Much more economical to manufacture. If I had never had to dodge prior art, I might have never found a much better way to do things, and my application and possibly resulting patent would have been much weaker. There is probably a very good way to explain why American inventors have tended to out-invent the rest of the world per capita by about 6 to 1 in the past , which I would suggest is the very strong patent rights the USPTO has conferred to inventors if it can be reasonably determined that the inventions are truly new and novel.

    I tend to agree with David very avidly that even small increments of the devaluation of US patent rights will have Huge consequences on the future of the US economy, which will of course not even be discernable for perhaps 5 years or more, as David suggests. Meanwhile the Bobbys of the world will probably be extinct, their only claim to fame being to have helped to destroy much of the value of US patents, and by way of extrapolation, much of the rest of the world. Contrary to what others have said, Bill Gates started MickySoft with a few patents that his prominent attorney father managed to get allowed for him. If he had not had the possiblity of getting a US patent granted, his literally garage developed *inventions* would have probably never seen the light of day. In fact I heard of a story where Bill was literally dumpster diving in the IBM trash bins to *borrow^ source code back in the 70’s, but that is just hearsay, of course.

    Congrats on being the top dog blog Gene!
    Stan~

  27. “There is probably a very good way to explain why American inventors have tended to out-invent the rest of the world per capita by about 6 to 1 in the past”
    I’m rather curious as to the source of this claim. I hope by ‘the rest of the world’ you mean ‘any other nation’ and not the rest of the world collectively. Bringing the massive populations of unindustrialized nations wrecks the averages of otherwise comparable nations, since the former has less resources, less infrastructure, and less education in for comparison is cheating, you know.

    “Contrary to what others have said, Bill Gates started MickySoft with a few patents that his prominent attorney father managed to get allowed for him.”
    Best I can tell according to the freepatentsonline utility Gene previously linked, Microsoft didn’t apply for any patents prior to 1985, and their total applications by the end of 1990 were a mere 32, and some of those weren’t even for hardware (for comparison, it seems IBM has just shy of 4000 patents applied for between 1985 and 1990). Perhaps they did have some patents before that where MS is not listed as the assignee name, but it seems unlikely that MS would have any significant valid patents on their then core product of MS-DOS, seeing as it was something they had purchased, (also Seattle Computer Products isn’t getting any results. I’ve got one for Tim Patterson where the assignee is Motorola, though)

  28. Bobby,

    Per capita just means the percentage of any population that successfully invents. I have heard it was more like 8 to 1 in say the early part of the 1900’s but I have no proof to offer for that belief.

    Stan~

  29. The assignee would have most likely have been William Gates SENIOR, or who knows who else. I was there at the time, and it became clear that IBM was trying to roll over Bill juniors rights, but Bill senior managed to win the case, hence the fact that about 90% of us use *Personal Computers* (PC’s) Interestingly enough, Bill jr and Steve Jobs were near neighbors on Mercer Island, and collaborated for a few years in Bill Seniors garage to write software, and then later split to become MickeySoft and Apple. I happen to know that Bill offered to license his new operating system to IBM, but it seems as if they weren’t buying the prospect that they might be able to sell more than about 5,000 computers per year. How dumb was that?

    Stan~

  30. If you’re going to make such a claim, I’m going to have to ask for some evidence. My understanding was that other complete and by at least some standards more advanced operating systems were available for the IBM PC, but it cost more to run them due to differences in licensing agreements. MS-DOS would have been protected by copyright, so IBM wouldn’t have been a threat against them unless IBM had another OS that infringed on the patents, but IBM had other operating systems available to them already, as far as I know MS did nothing to stop the sale of these OSs.

    Also, the usage of the term ‘PC’ to refer to Wintel based machines came from the IBM PC. The market became dominated by IBM PC compatibles or ‘clones’ (which emerged due to reverse engineering. Had IBM patented their BIOS, the personal computing revolution could have been greatly delayed), which over time were often abbreviated to just ‘PC.’

  31. David,

    Ah, but would it improve the economy, or not? The problem is that there aren’t any solid peer reviewed studies that we can refer too. There are studies, but the studies available tend to be written by people or firms with a stake in the issue, and therefore not necessarily reliable.

    To give an example of why I’m critical of the patent system, let’s take Uniloc v. Microsoft, which Gene wrote about today (you can see my response at the top of the comments). As I posted there, I once wrote a program which did the same things, back in the late 1980s. The main difference between my program, and Uniloc’s patent, is that my program used email, because the internet wasn’t generally available when I wrote it. It worked with one specific type of email system, and what it did was send an inquiry via email to the ‘authentication server’, and the authentication server emailed a response back. This allowed pirated keys to be inactivated.

    So how did this patent get issued? Easily. Admittedly my program was an extremely specialized bit of software. I made less than a 100 sales total over three years, out of about 500 possible sites that could have used it. The authentication routines were a damned stupid idea, they costs me about two months of evenings and weekends to get working, and I didn’t get value from them, something simpler would have done. But the main point, is that I borrowed the idea from someone else, who’d done it previously… And if the software (which was written for an electronic bulletin board system using a modem over a telephone line) had have been useful on the internet, I might have modified it to work on the net, but who was using BBS systems anymore, they were all using websites.

    So Microsoft got taken to the cleaners on this one (while my own code is long since gone, it’s possible the example code I used still exists, but that was over 20 years ago, and I don’t remember the name of it, or the name of the author).

    Mind you Uniloc benefited, but legally it shouldn’t have been able to.

    And if MikeP’s numbers are correct, when you consider my story, KSR V. Teleflex, and I.P. Innovation v. Redhat and Novell, you can understand why.

    Because basically it comes down to the U.S.P.T.O. not doing the job it is supposed to.

    Wayne

  32. If you’re going to make such a claim, I’m going to have to ask for some evidence.

    Bobby, perhaps he “heard” of such a situation… or farmed one out…

    Really, the last person I would expect to be calling for evidence is you. Perhaps you should treat all us readers to the evidence that backs up your positions. Oh wait, there is none, because you make things up as you go, which is clear because you speak from a purely cerebral wishful thinking dogmatic position, ungrounded in the actualities of law.

  33. Give it a rest, BD. I’ve given evidence of the levels of NIH funding for at least 2006, I’ve given evidence of 19th century countries without patents being competitive against similar countries with patents in the World’s Fair. The 301 Special report exists and influences US trade policy. I even did some basic research on identifying the patents applied for and assigned to Microsoft during an early period to counter Stan’s claim as best as I could.

    You, on the other hand, still haven’t answered my question of why inventors, which have nothing taken away from them involuntarily, should be given direct consideration in the way we make our patent laws, instead just throwing around ‘blind’ ‘dogma’ and ‘kool-aid’ like the villain of a Saturday morning superhero cartoon.

  34. You, on the other hand, still haven’t answered

    I have done even better, Bobby. I have explained what it is that you are missing, and shown you how the learning of that material is undertaken. Those exercises (Socratic method) strengthen the critical thinking skills that you would find useful, rather than the repeated “I had heard” types of arguments from you that I typically deconstruct.

    Once you understand what Quid Pro Quo really means, you will not have to have me answer why inventors should be given direct consideration. in fact, you would recognize that the mere asking of that question is asinine.

    Do you realize that you prove my point with every one of your posts?

    Have another drink while you watch your cartoons.

  35. Under the incorrect assumption that inventors have exclusionary rights other than the statutory ones given by patent law, it would be an asinine question. However, under the correct assumption that the only rights they have are those given by statute, it’s a perfectly valid question, because it doesn’t make sense to ‘balance’ the rights of those that have rights and those that don’t (this is assuming that you don’t take current statute as the justification for future statute). However, the public waiving some of their rights to inventors may be a worthwhile tradeoff for the additional inventions it might bring.

    Also, I have to ask, if the current levels of patents are appropriate for a tradeoff, than why is the idea of a tradeoff so offensive to you?

  36. Once again, you stumble onward in your ignorance Bobby. You assume that your view of “tradeoff” is correct and that that view is what I find offensive – all the while I keep informing you that it is your disregard for the basics of patent law that I find offensive.

    Your point of “incorrect assumption that inventors have exclusionary rights other than the statutory ones ” has absolutely nothing to do with your desire to not include inventor’s in the balance. We do not even have to go to the point of debating your view onthe Consitutional Mandate, because the mandate itself does not support the view that you think it does (even if viewed in your utiliarian dogma). Stop trying to avoid the concept of Quid Pro Quo. Stop trying to force your dogma by blindly ignoring one side of the deal. You close your eyes and proclaim “I don’t see the sense”. Here’s a clue – OPEN YOUR EYES. The reason you cannot see sense, is because you insist on seeing through your blind dogma. The fact that the question is indeed asinine is not up for debate. Why you insist on your purposeful ignorance of the law – now that may be up for debate.

    Further, your comment of “current level of patents” has absolutely nothing to do with the balance – you (once again) slink back to some group-think business-as-a-whole kumbayaa ivory tower mentality. Your ability to track with the legal issues and with reality is painfully deficient. Your relentlessness in posting merely evidences your willful blindness and thirst for Kool Aid that I long ago cut you off from.

    Lastly, I notice that the Patent Prospector has found a quote that I think is on point for my dealing with you:

    Reason owes him incalculable obligations; the ridicule and sarcasms which he plentifully poured out upon fanatics and hypocrites of all sects, have prepared men’s minds for the light of truth, to the search for which every intelligent mind ought to aspire.

    – Adam Smith on Voltaire –

    Bobby, aspire to remove the wanton ignorance of the basics of patent law; aspire to understand what Quid Pro Quo means; aspire to set aside your dogma and actually think.

  37. “Your point of “incorrect assumption that inventors have exclusionary rights other than the statutory ones ” has absolutely nothing to do with your desire to not include inventor’s in the balance. ”
    If the balance is the conflict between the rights of the inventor and the rights of the public, then yes it is, because you can only balance rights of two conflicting parties if the rights of those two parties are in conflict, and if the inventor has no rights, there is nothing to balance. If the balance is something different, you’ve not gotten that across clearly. to me, and I would ask you please clearly explain what balance you are speaking of.

  38. Hi Bobby,

    The inventor if any should probably understand very clearly what they might be getting into before they decide to try to pusue an *invention* If they can’t understand that, then they are most likely doomed to failure anyways, such that they become a bit irrelevant. What really matters most is informed inventing, and trying to prevent the patent vandals from stealing the handle off of the pump.

    “The pump don’t work because the vandals took the handle” Bob Dylan circa 1967 or so. SD~

    Do you happen to have a friend named Mike Masnik or Malcolm Mooney? (MM) Just curious as always.

    Stan~

  39. If the balance is the conflict

    It is not.

    and if the inventor has no rights,

    Only in your dreams.

    Once again, I remind you that your problem is how you frame the problem.

    you’ve not gotten that across clearly. to me,

    I refer you back to our discussions on the Socratic Method. I will not spoon feed you (in part because you have shown that you will bat the spoon away, and in part because you need to learn how to think critically for yourself). The learning is something you need to do (not I). That learning will be easier if you release your dogma.

  40. @BD
    What precisely do you think is being balanced?

  41. Quid Pro Quo

  42. @BD
    Okay, please be a little more specific. What quid is balanced for what quo and by whom?

  43. please be a little more specific

    No.

    See comments regarding the Socratic Method. Come on now Bobby, you need to learn to think critically on your own.

  44. I’m just trying to establish your position. I’m guessing the quid pro quo is that the public’s right to copy for 20 years is traded for the public disclosure of an invention by the inventor. Is this correct? If not, please specify. I am asking what your personal position is, so using a source other than you might mislead me.

  45. And I am asking you to learn what the legal meanings are. My “giving them to you” defeats the Socratic Method that I want you to engage in. Bobby – you need to learn to think critically – that way you will avoid including in your arguments farm policies and things you have heard that just do not support your position.

    We’ve been on this Merry-go-Round before Bobby. If you pay attention (and get busy learning), we can avoid this dance. I could repeat comment 39 here as well, but I suspect that I will (once again) get the same response from you.

  46. @BD
    You need to quit assuming a superior position and answer my question. Is the quid pro quo you are speaking of the public’s right to copy for 20 years is traded for the public disclosure of an invention by the inventor?

    If your next reply does not include a yes or no, than you are afraid of answering the question because I have already cornered you. You are then trying to say that I am ignorant and don’t understand to cover your flawed position. Please don’t be a coward and actually answer my question so the conversation can proceed.

  47. Bobby,

    No, I most emphatically do not need to stop “assuming’ a superior position, because I own the superior position.

    Until you show that you actually understand what you are talking about, I owe you no concessions. Least of which would be an answer to your “ultimatum” with a result of my being a coward. I quite literally laughed at your comment.

    Go now and learn. When you have learned and realize how asinine your premise actually is, then we will discuss on equal ground. Until then, I own the high ground and do not relinquish it, not even to your name-calling.

  48. “No, I most emphatically do not need to stop “assuming’ a superior position, because I own the superior position”
    I had a laugh at that myself. You, in your ‘superior position’ can’t even humor me with the answer to a simple question, although you are probably going to say it’s the answer is too deep for me (a rather poor cop-out, if it is try me, and leave me dumbfounded).

  49. Bobby,

    Go back and read the comments posted on earlier threads about why the Socratic Method is used.

    We are on the same Merry-go-Round ride.

    You continue to ignore what I say. Yet you want me to say more. Where is the sense in that? Until you can think critically, think for yourself, and escape your dogma, your tainted view will prevent yourself from understanding the basics you need to understand in order to have an intelligent conversation.

    And yes, I am in a superior position – or are you now questioning that knowledge of law somehow does not create a superior position? You have never questioned my statements that you are ignorant in law – how does that place you even close to an even position? You do realize that this is a legal topic we have before us, right? The rationale supporting the thought that I am not in a superior position will be priceless, no doubt. So let’s hear it.

    I am not here to “humor you”, as it is quite clear that such “humoring” will do you no good because you have not shown the ability to understand the basics. As I have said – when you show that you understand the basics, then we can have an intelligent discussion. If you refuse to learn the basics, then we will keep on having this dance of you posting wishful thinking and me posting counter-points that destroy you and you then posting things like, well, “I didn’t know” and “that was just an example” and never getting around to you actually acknowledging anything that gets in the way of your dogma, no matter how obviously true or fundamental the point is.

    In the meantime, these exchanges only further evidence your purposeful ignorance. I do wonder if you have a masochistic bent for repeatedly relishing your posting in ignorance. I do not think that you realize how these exchanges damage your agenda though. Either that, or you really don’t care as much about the agenda as you care about wanting to hear yourself. Here’s a hint for you – sometimes being heard is not a good thing.

  50. Blind Dogma-

    I tend to think that you might be wasting your time and knowledge a bit here. It sounds like an MM approach to try discredit you or anyone else that happens to stand in their way, and to be able to be very public about it. It generally comes from the IT fanatics that have decided that they don’t need no steenking patents, hence my earlier reference to the two MM’s. Nary a word from Mike yet though, as I am about 95% sure that he reads every word of this.

    BTW, The first batch of my *NEW* Lime Kool-aid with the Hemlock and Juniper berry infusion is nearly done!

    Cheers,
    Stan~

  51. “You do realize that this is a legal topic we have before us, right? ”
    More specifically, this is about the responsible way of making patent law, and that is going to be rooted in the Constitution. I am capable of reading it correctly, while you don’t seem to be able to, perhaps because of a dogmatic view of your own that inventors have a natural and constitutional right. As I’ve said before, it’s quite possible that someone could take this position and not even have any opposition to the laws your are familiar with. Inventors only get exclusive rights by the statutes granting them rights under certain conditions, and statutory rights are not a good justification for statutory rights.

  52. I think this is perhaps the strangest double-speak I have heard in a very long time. This is a bit like saying that Americans shouldn’t be allowed to be free, because the King of England had decided that North Americans should remain English subjects. Well guess what? The American Revolution. Please pardon the reference numbers, which I was unable to remove for some reason.
    Stan~

    ” Inventors only get exclusive rights by the statutes granting them rights under certain conditions, and statutory rights are not a good justification for statutory rights.”

  53. U.S. statutes cannot override the U.S. Constitution. The Constitution leaves patents and copyright optional. Politicians thus have no direct obligation to inventors, so a responsible patent policy would be one that is an ideal tradeoff of the public’s two conflicting interests: the right to enjoy ideas and having ideas to enjoy. If inventors end up getting a benefit out of this tradeoff, that’s wonderful for them, but our patent policies ideally should be based around the public benefiting from the system.

  54. Blind Dogma-

    Please let me handle this one. You need a break anyways methinks.

    Ciao bella,
    Stan~

  55. Hi Bobby,

    I am afraid that you make Blind Dogma’s case very admirably with this jewel;

    (Bobby writes in small part) U.S. statutes cannot override the U.S. Constitution. The Constitution leaves patents and copyright optional. Politicians thus have no direct obligation to inventors, so a responsible patent policy would be one that is an ideal tradeoff of the public’s two conflicting interests: the right to enjoy ideas and having ideas to enjoy. If inventors end up getting a benefit out of this tradeoff, that’s wonderful for them, but our patent policies ideally should be based around the public benefiting from the system.

    In point of fact the Constitution of the United States of America was written such that the individual states have the ultimate responsibility for the governance of their citizens. If you can’t understand that very basic fact, all of the rest of this discussion will probably not matter at all.

    Hasta la vista,
    Stan~

  56. Individual states have the powers not reserved or prohibited by Congress, but states don’t have jurisdiction over patents or laws that play similar roles, such as anti-plug molding laws

  57. Stan,

    Thanks – And you better make sure your license for that Lime Kool-aid with the Hemlock and Juniper berry infusion is up to date. I don’t think you want my goons, er um, agents, harass.., er um, negotiating with you.

    As to Bobby’s penchant to ignore actual law and bank his entire position on his reading of the Constitution, you are correct in that he makes my case for me. His ignorance is pretty astounding, and yet he somehow thinks that I do not hold the superior position.

    The simple point (even simple enough for Bobby to understand) is that you cannot delete the inventor from consideration of the Quid Pro Quo. It simply is impossible to do so in any formulation of an ideal patent system. It is asinine, and no responsible person who understand the basics would advocate such utter nonsense.

    It is his pure dogmatic stance of just what is “ideal” that blinds him to any chance of truly understanding even the basics of patent law. Yet he wants to pontificate without understanding. He wants to pontificate on ideology, even when (repeatedly) his ventures into points can be easily or even summarily dismissed.

    Yes, he does reek of a software anti-patent follower. His reliance on “principle” as he reads the Constitution, yet his ever vigilant reluctance to actually understand law is quite comical and quite reflective of the blind adherence to dogma that some software anti-patentists display.

    However, I do not view this as a waste of time, but rather, since Bobby so zealously insists on making my points, it is merely an opportunity for the rest of Gene’s readership to see what such blind dogma does (drink responsibly people, yes even my Kool Aid must be taken in moderation). I have repeatedly indicated to Bobby that his posts actually hurt his agenda, but obviously, his dogma has completely shut down the critical thinking portions of his brain and he refuses to see the very damage he is rendering to his own views.

    I somewhat suspect that it will take some fellow software anti-patent believers to suggest to Bobby that he disengages from our dialogues for Bobby to stop making my points for me (Friends don’t let friends become Bobbies).

  58. BD…
    Haven’t you ever heard of the Coca Cola approach? They kept the trade secret by splitting the formula into 4 parts, and keeping them in seperate locations. Still happy after about 110 years. You are probably correct in the latter aspect, as cooler heads might suggest that the manga programmers might want o cool their jets just a little bit.

    Stan~

  59. “The simple point (even simple enough for Bobby to understand) is that you cannot delete the inventor from consideration of the Quid Pro Quo. It simply is impossible to do so in any formulation of an ideal patent system. It is asinine, and no responsible person who understand the basics would advocate such utter nonsense.”

    You can easily delete the inventor’s welfare from the formulation of an ideal patent system. The inventor variable is changed from ‘what inventors deserve’ to ‘what is the best value society can get from inventors for their rights.’ If waiving certain freedoms to temporary monopolies under conditions X,Y, and Z is a better value to society than not waiving those freedoms, then the XYZ patent policy is better than no patents.

    That’s not to say that once you’ve determined a set of rules, there isn’t a benefit in sticking by them and maybe even some degree of consistency despite other variables (and thus the ideal) changing. The action of inventors and other market forces will be different depending on the level of strength and dependability of their monopolies, and that itself is a variable worth considering.

    Determining these values and how inventors act under them is not an easy task, and is where the real debate over patent policy lies. Incentives, monopolies, and competition weave a complex web, which can make it more difficult to estimate the social benefit and social cost of patents.

  60. and is where the real debate over patent policy lies.

    Not. Even. Close.

    Playing with your policy castles built on a foundation of sand may bring you academic pleasure, Bobby, but divorced as these fantasies are from the understanding of law, they have zero practical value.

    You can easily delete the inventor’s welfare from the formulation of an ideal patent system

    Utterly asinine. What is the (pedantic) difference between deleting the inventor or “the inventor’s welfare” from the formulation of an ideal patent system? Your ideology borders on marxism in the guise of democracy. You have lost all sense of individualism that is a critical component of “We the people”.

  61. “Your ideology borders on marxism in the guise of democracy. You have lost all sense of individualism that is a critical component of “We the people”.”
    Again, this idea did not originate from me. Thomas Jefferson said “Considering the exclusive right to invention as given not of natural right, but for the benefit of society, I know well the difficulty of drawing a line between the things which are worth to the public the embarrassment of an exclusive patent, and those which are not.”

    In the case that having patents is preferable, we are giving the public a favorable return in value on their investment of rights, sort of running the patent system like a business.
    In the case that not having patents is preferable, we are actually left with a competitive free market, and I don’t think you can really say that free market competition is Marxist at all.

  62. Bobby,

    That the idea did not originate with you is no surprise (see comment 57 above).

    Surely you know that quoting Thomas Jefferson does not equate with understanding the law. See my earlier comments about seeing what you want to see – that which fits your agenda – and being blind to all else.

    Clearly, you hang on the words “embarrassment” a little too lovingly. How do you feel about the words “liberal encouragement”?

    The (mis)application of my comment to market competition misses the point of the comment. Again, you choose to see those portions of law that seem to fit your idiology, yet refuse to see other portions that do not support it. And once again, you make statements full of holes. In the case of not having patents, there is no guarantee that we would be left with a competitive free market. Patents at the very least are but a minor governmental intrusion into the market place and a whole host of various laws govern the market. “Free market” is not synonomous with unregulated market. Chaos and anarchy are synonomous with an unregulated market.

    You still need to unerstand the basics if you want to speak intelligibly. Ardent following of your dogma is no substitute.

  63. Patents work through incentives, so ‘encouragement’ would be an apt description of what patents at least hope to do. Of course, patents are by no means the only way to encourage ingenuity, and we may find many cases where there are better incentives.

    ‘Free Markets’ sometimes do refer to unregulated markets, but are sometimes used to refer to lightly regulated markets as well. If you prefer the term laissez faire capitalism, that’s fine as well.
    However, Marxism is far from an apt description for either lightly regulated or unregulated markets, although it seems that proponents of leaving things more up to market forces instead of government backed monopolies often get labeled communists, socialists, or Marxists.

  64. IT’S A MATTER OF FAIRNESS..
    AND COURAGE
    Honest Americans who believe in
    Justice can only pray that judge
    Rader (and any pals who see
    things in his disconjerkutigulated
    way) are reading these reports.
    And that these judges are learning
    what has helped make America
    great; a protected Patent System.
    One that is free from wanton
    thievery by big companies preying
    on small innovative companies
    like Tivo.
    Sam