Finding a Sweet Spot in Private IP Rights

Summary of Thesis:

(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

(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

(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)

I. Technical Innovation Improves Social Welfare

• Insert an edited version of the first paragraph from my first draft of this essay here

II. The Trade-Off Between Private and Public IP Rights

• 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

III. The Patent Office

• 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

IV. The Sweet Spot - Platform-Based Innovation

• 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

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

VI. Anticipated Consequences and Sources of Resistance

• 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)

VII. Conclusion

-- By SaswatMisra - 23 May 2010