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< | Improving Quality-of-Life through...Patents? |
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Update (5/23) - I'm currently working on revising this paper. |
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> | Relevant Version History: |
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< | I. Improving Quality-of-Life through Technical Innovation |
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> | Version 11 - My first paper |
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< | Government should implement policies that maximize the aggregate quality-of-life of its citizenry subject to its available resources. Among the possibilities for doing so, policies that encourage technical innovation are particularly attractive. A technical innovation, once brought to fruition, has a low recurring cost (compared to alternatives such as, say, welfare programs, which need to be continually funded) and may further enable additional technical innovations in the future (for example, each epoch in computer microprocessor evolution has arrived more quickly than the last, in part because of the knowledge gained in building the previous generation of microprocessors). Therefore, as one part of an overall strategy to maximize aggregate quality-of-life, government should implement policies that disseminate as much technical innovation to as many people as possible, while minimizing the related societal cost of doing so. |
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> | Version 12 - My first paper with Eben's comments |
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< | Technical innovation comes in many forms, including industrial methods and processes, mechanical devices, and increasingly, software. Societal cost includes: (a) the “excess” time for an innovation to emerge relative to some inherent "earliest-possible time," as well as (b) the “excess” cost of the innovation relative to its natural market price during the time period in which access to the invention is artificially restricted (for example, through competition-limiting intellectual property (IP) rights). |
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> | Version 13 - My revised first paper (**currently in progress**) |
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< | Also the innovation lost
as a result of the exclusionary mode of production and distribution,
including anti-commons failures, inhibition of sharing and
collaboration, and parasitic rent-seeking. Also the misallocation of
resources towards less important or socially valuable activities that
are patentable than other activities that cannot generate monopoly
rents. |
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> | Finding a Sweet Spot in Private IP Rights |
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< | II. The Constitution's Approach: Patents |
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< | Interestingly, the Constitution appears to have a vision of how the otherwise broad and aesthetic goal described above (i.e., implementing policy to disseminate as much technical innovation to as many people as possible, while minimizing the related societal cost) should be achieved. Article 1, Section 8, Clause 8 of the Constitution grants Congress the power to: |
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> | Summary of Thesis: |
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> | (1) - The current patent system fails to strike the right balance between private and public intellectual rights, and therefore fails to properly disseminate technical innovation so as to increase social welfare |
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< | "promote the progress of science. . . by securing for limited times to. . .
inventors the exclusive right to their respective. . . discoveries." |
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> | (2) - A better balance could be reached if the patent system distinguished between "platform" technology, which should be patentable (and subject to mandatory "takings" with just compensation by the gov't) and "incremental" innovation, which should not be patentable |
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> | (3) - The current patent system can implement the proposed policy change through the Section 103 "non-obviousness" requirement for patentability (while a ground-up solution would obviously be more desirable, it is less realistic) |
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< | First, this clause suggests that the above-described goal should be achieved through private IP-rights, i.e., patents, as is evident from the words "securing," "exclusive," and "their." Second, the phrase "securing for limited [time]" suggests that the above-described goal is solved simply by turning a “knob” that controls patent-term (i.e., the duration of time during which a patent owner enjoys private and exclusive rights to her innovation) to the point where an inventor receives just enough incentive to invest her resources into creating new innovations. Turning the knob any further than necessary would, of course, award too much patent-term and therefore unduly increase the societal cost associated with the patent. |
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> | I. Technical Innovation Improves Social Welfare |
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< | No, this is
retrospective ahistorical analysis. As I have previously pointed out
in numerous places, in its late eighteenth-century context, this
provision allows Congress to permit otherwise noxious social conduct
for the purpose of encouraging immigration. |
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- Insert an edited version of the first paragraph from my first draft of this essay here
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< | Even accepting this Constitutionally-endorsed formulation as a sensible one, it seems difficult or impossible to determine how far to turn the knob in practice. The amount of patent-term awarded should seemingly depend on a large number of factors, including: the likelihood of commercialization, the time needed to recoup investment costs, and the expected time until a substantially similar innovation would have been developed by another inventor. The intended use of the patent also matters (does the inventor actually seek to bring the patented innovation to bear, or is she simply going to add it to her "stockpile" to scare potential competitors from entering her market?). Further, patent-term should be adjusted downward in a scenario where the grant of a patent eliminates an inventor's incentive to develop still-better innovations, especially when she is in the best position to do so. (Consider a hypothetical corporation that corners the market by patenting a drug that can keep a patient alive, albeit with constant physical pain - what is this corporation's financial incentive to develop a better drug that can keep the same patient alive with no pain?) |
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< | Which should be a clue
that this isn't the policy of the legislation in the first
place. |
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> | II. The Trade-Off Between Private and Public IP Rights |
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< | III. The Patent Office - Poorly Implementing Misguided Policy?
Admittedly, it would be difficult or impossible to perfectly adjust the knob based on even a small number of the (mere sampling of) relevant factors identified above. Still, it is surprising that the United States Patent and Trademark Office (USPTO) makes no effort to do so. Instead, the USPTO awards a patent-term of 20 years to every issued patent. |
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- In encouraging technical innovation, there is a trade-off between private and public IP rights
- Create an inventive incentive, but don't unduly rob the citizenry of quick and cheap access (and don't distort the way in which technical innovation is done!)
- One extreme - such rights should be temporary and highly-limited. For example, private IP rights would last for short period of time, or would be in the form of a large payout from the government to work on a project (i.e., "pseudo rights")
- The other extreme - rights should be all but absolute. Long or infinite rights, little government intervention, etc.
- Virtually everyone agrees that maximizing technical innovation requires some degree of private ownership rights (or incentives that are equivalent to private rights - "pseudo rights" and profitability), but the appropriate degree of rights is highly contentious (for example, Eben believes that such rights should be a very small fraction of what they are today)
- The patent system is an attempt to strike the right balance between private rights and public rights
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< | You seem to be
suggesting that the PTO has some discretion in this matter, which it
does not. The term is statutory. |
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< | The choice of 20 years seems arbitrary. Under this rule, 20 years would be awarded to a small-time inventor, who slaves away at great personal sacrifice to create a new product, and who then “loses” many of these precious years attempting to secure production and marketing for his invention. It seems unsound policy to award the same 20 years of patent-term to a mega-corporation, for a product created using the minimal efforts of a corporate assembly-line “invention” process, for a patent that will predictably and immediately generate millions of dollars in daily profits. |
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> | III. The Patent Office |
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< | Under this system, some patent owners gain, at the eventual expense of the public, billions of dollars over what would have been necessary to create an "inventive incentive" ([1]). On the other hand, truly inventive but resource-strapped individuals and small organizations have little incentive to create, given the potentially inadequate patent-term that awaits them (and their incentive is further reduced by other artifacts of the patent system, including the expense of dealing with the USPTO and the threat facing a strategically-filed patent-infringement lawsuit if their invention threatens one of the mega-corporations ([2])). |
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- The patent system fails to find the sweet spot in private IP rights
- 20 years - no matter what. Highly suboptimal
- The patent system distorts the process innovation
- resources that could go to R&D are diverted to patent litigation and prosecution
- resources that could go to long-term and fundamental innovation (which is often unpatentable) are diverted instead to short-term ideas that are patentable
- Leads to stockpiling without intention to use
- Inhibits sharing and collaboration
- While the above issues are certainly sub-optimalities, many current proposals (e.g., adjusting "patent-term") amount to small-scale solutions for a large-scale problem
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< | This argument bears no
relationship to the realities of the two industries (pharmaceuticals
and digital information technology) that actually make significant
use of the patent system, which has become vestigial over trade
secrecy for almost all other lines of
commerce. |
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> | IV. The Sweet Spot - Platform-Based Innovation |
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< | IV. Towards a Solution |
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- A more appropriate way to slice private and public IP rights would be to distinguish between "platform" technology, which should be patentable (though subject to mandatory "takings" by the gov't) and "incremental" innovation, which should not be patentable.
- in technical areas where the platforms are widely available (e.g., computer software), the "incremental" innovation happens automatically through natural human curiosity and experimentation - there is little or no need to provide private IP rights
- but building platforms are typically resource intensive and require the profit-motive (e.g., the cellular network, etc.)
- therefore, the gov't should grant private IP rights so as to create platforms, but then buy out these platforms and make them available to the public
- there is no need to grant private IP rights to encourage "incremental" innovation
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< | Predictably, I do not have a solution to the question posed (i.e., what policy maximally encourages technical innovation so as to improve the aggregate quality-of-life?), but the approach endorsed by the Constitution (and therefore, the patent system) seems misguided. One alternative proposal calls for creating an “efficient market” for buying and selling patent rights ([3] and [4]). Another approach, of my own thinking but certainly not original, would allow the government to force the sale of certain high-value patents from private hands to the public at prices substantially lower than their “fair market value.” However, these approaches are unimpressive. In addition to being susceptible to corruptive influences and findings of unconstitutionality, they are merely
"patchwork" solutions based on the existing patent system. The best solution, whatever it may be, is probably more elegant than that. |
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< | You don't consider the
actual, elegant and optimal solution: the abolition of patent law
altogether. |
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> | V. A Proposed Implementation
- This is a fairly drastic call for change, and will not be adopted overnight (see Section VI for sources of resistance)
- The practical way to bring about change - implement change through the Section 103 non-obviousness requirement of the current patent system to better capture the trade-off between private and public IP rights
- i.e., by reinterpreting Section 103, "platform"-based innovation can be deemed non-obvious (and therefore patentable), while "incremental" innovation can be deemed obvious (and therefore unpatentable)
- Although a ground up approach would be better - not as realistic at the current time
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< | -- By SaswatMisra - 6 March 2010
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> | VI. Anticipated Consequences and Sources of Resistance |
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< | I am skeptical of your
skepticism. It isn't based on the strongest available arguments. It
doesn't reflect realities of the industries actually using the patent
system. It doesn't treat the economics accurately (even right-wing
economists would have observed that patents are equivalent from an
"incentives" point of view to a direct reward system for inventions,
which is actually the system we employ in the fully-socialized
biomedical research sector where we are outstandingly innovative).
It gets the history fundamentally wrong. It fails to distinguish the
roles of the Congress and the PTO, thus missing the primary sources
of corruption in both institutions. It makes no analysis of the
actual costs of the system, which it inaccurately summarizes at the
beginning and never discusses again. In short, it seems to me, this
is propaganda for the system dressed up as skepticism: it creates a
straw man for the forces of ownership gleefully to knock over. |
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- Many, many, fewer patents would issue - less revenue for the USPTO
- Where does the money collected by the PTO currently go? is it funneled to the general US treasury?
- if so, there is likely to be much resistance...
- Who decides what is a "technical platform" for the purposes of granting a patent?
- Source of corruption - who decides what platforms the government is willing to buy out? How do we determine just compensation? (not as clear as with real-property based takings)
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< | You need to decide whether the essay is shilling for the owners or
not. If it is, it should eat the same dogfood the owners offer in
all the other venues. If it isn't, you need to deal with the real
issues instead of phony ones. |
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VII. Conclusion
-- By SaswatMisra - 23 May 2010 |