Patents Vs Innovation - the Tabarrok Curve 210
New submitter Optimal Cynic writes "Slashdot likes to argue about intellectual property and patents, and it's clear that both extremes are undesirable. Dr Alex Tabarrok has tackled the question — what is the right level of patent protection? His answer is the Tabarrok Curve, which applies the Laffer Curve methodology to innovation."
Some fundamental, unchecked assumption here ? (Score:5, Informative)
Re:Some fundamental, unchecked assumption here ? (Score:5, Informative)
Where in the world do you get that idea from?
He just says that too much patent protection has a cost that, at some point, must outweigh any benefits, so the optimal level of patent protection is not the maximum one. What the optimum level is, he doesn't know
If you're of the school that believes that patent protection is always bad, then his argument isn't meant for you. He isn't arguing for more patent protection with people like you, he is arguing against more patent protection with people who say "since some patent protection is good, more must be better".
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Where in the world do you get that idea from?
From TFA, as in these lines:
So, we’ve constructed the patent system: people have a 17 year exclusive right to such public goods. That is, we’ve made them excludable by law
I am not necessarily of the "school that believes that patent protection is always bad". I am of the school that believes that patent protection is, sometimes, a necessary evil, and bad at all other times.
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And how does that translate into "regulation of innovation"???
Re:Some fundamental, unchecked assumption here ? (Score:4)
To be clear, he said "Tabarrok seems to tacitly assume that innovation can be regulated via legislation". Which, to answer your question, he supported by quoting the article: "So, we’ve constructed the patent system: people have a 17 year exclusive right to such public goods. That is, we’ve made them excludable by law".
I honestly don't see how you could possibly still be confused, having read both the article and the parent's posts.
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And how does that translate into "regulation of innovation"???
How is this not fairly obvious? Innovation is the process of turning ideas into viable economic products. Patents provide monopoly access to certain ideas for a period of time. Hence, they are regulation on access to ideas (a key issue in the innovation process) and thus, regulation of innovation.
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It is not obvious because turning ideas into viable economic products is an aspect of the totality of innovation, not the entirety of it. So stenvar's question was completely correct, because while it is true that patents affect some types of innovation, they do not affect all of them, so they are not a regulation of innovation.
Re:Some fundamental, unchecked assumption here ? (Score:5, Informative)
Tabarrok seems to tacitly assume that innovation can be regulated via legislation. It seems to me that this non-proven, basic assumption has been proven wrong more than once, e.g. during the few years preceding the internet bubble of the '90s. The tip of the curve, then and there, lay completely to the left. ( Where IMHO it should be, but I am trying to separate facts from discussion from personal opinion here. )
Where in the world do you get that idea from?
From TFA, as in these lines:
So, we’ve constructed the patent system: people have a 17 year exclusive right to such public goods. That is, we’ve made them excludable by law
I am not necessarily of the "school that believes that patent protection is always bad". I am of the school that believes that patent protection is, sometimes, a necessary evil, and bad at all other times.
For the benefit of those who did not read TFA: What he is saying is that patent protection can boost innovation but if that protection is too great the patents get used as a weapon to bash competitors with the result that there is a net drop in innovation. Furthermore he is arguing that we have passed well beyond the point where patent protection is a demotivating influence on innovation so in that sense you actually agree with him. One only has to look at his curve to see this:
http://b-i.forbesimg.com/timworstall/files/2013/06/tabarrokcurve.png [forbesimg.com]
In that graph, if you move too far to the left and you have no patent protection at all which stifles innovation, move too far to the right and have excessive patent protection also stifles innovation, stay somewhere in the middle and patent protection will actually boost innovation above the two extremes. You seem to be mostly arguing for the greatest innovation being achieved at a point that is very close to the left hand extreme. I'm not saying he is right in every detail but the basic idea of applying the Laffer tax revenue curve [wikipedia.org] to innovation seems sound. Too much red tape around patents is just as detrimental to innovation as overtaxation is to state revenue. Likewise too little patent protection is just as likely to stifle innovation as excessive tax cuts are likely to screw up state finances.
As regards the legal system he eventually suggests that it may not be the patent system that is at fault so much as the legal system it self:
Knowledge is a public good and thus in a pure free market we think that too little of it will be produced. Too strong a protection and again too little will be produced.
These are the sorts of thorny questions that we instituted government to deal with for us. Hands up everyone who thinks that our current politicians are going to get this necessary balance right? Quite: it might be that it’s not so much the patent system which is not fit for purpose as the legislative.
Basically he is hypothesising here that we can move ourselves further to the left on his Tabarrok curve mostly (though presumably not exclusively) by legal reform rather than patent reform. I am no lawyer but it seems pretty obvious to me that fixing the legal system such that patent trolling by two bit law firms in East Texas and general patent warfare by major corporations were made significantly harder than it currently is, might be a good idea. In fact the whole issue of anti-competitive and SLAPP lawsuits and the power they give people with lots of money to spend to extort less wealthy people/organisations/companies is something that needs urgent fixing.
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His hypothesis makes sense but it only looks at the time constraints. I assume he did this because it is the easiest thing to legislate and not have to deal with constitutional matters in the US, since the constitution directs the government "To promote the Progress of Science and useful Arts, by securing for limited Times to Authors and Inventors the exclusive Right to their respective Writings and Discoveries;"
It would be nice if we could shorten the patent life to 15 years, limit the exclusive use of a
Re:Some fundamental, unchecked assumption here ? (Score:5, Informative)
His hypothesis makes sense but it only looks at the time constraints. I assume he did this because it is the easiest thing to legislate and not have to deal with constitutional matters in the US, since the constitution directs the government "To promote the Progress of Science and useful Arts, by securing for limited Times to Authors and Inventors the exclusive Right to their respective Writings and Discoveries;"
No, the Constitution only empowers the federal government to grant patents and copyrights. Article I, section 8 does not direct it to do so, however, any more than it directs the government to grant letters of marque and reprisal to privateers, which is another power it holds. Making the US a patent free zone mitt be a bad idea, but it would be perfectly constitutional.
Re:Some fundamental, unchecked assumption here ? (Score:5, Interesting)
It's just his opinion. And his curve is a straw man that he puts out of his ass.
Where is the evidence that some patent protection is good? Ah right there is none. Everybody just assumes that some patent protection is good for innovation. That is just like creationism or like any other theology.
There is evidence that more patent protection is bad. See software patents. But where is the evidence for the other side, i.e. no patent protection as bad?
Don't come to me with some mind experiments like "But without patent protection where is the incentive to innovate". People have innovate for freaking 50,000 years. Our patent system, or our capitalist system is just about 250 years old.
I repeat. There is no evidence that any patent protection increases innovation.
There is plenty of evidence that too strong patent protection hampers innovation. See software patents, patents on DNA, business patents, and so on.
There is also evidence that no patent protection actually increases innovation (I posted already here but I post again)
The only real empirical study that I know of is The patent game [slashdot.org].
See http://www.youtube.com/watch?v=q1Pi4w8ddA8 [youtube.com]
And they come with quite surprising conclusions.
"pure common system" means no patent protection.
1. patents increase innovations?
Average unique innovations is lower in the "pure patent system", and is higher in the "pure common system"
Productivity, aka economic activity, the "pure common system" is almost double the "pure patent system"
Per capita wealth, the total amount of dollars generated in the system: "pure common system" is almost 4 times that of the "pure patent system".
Conclusion: "Despite received wisdom, commons spur innovation better then do patents"
Re:Some fundamental, unchecked assumption here ? (Score:4, Insightful)
You can apply history to it - patents have been around only a few hundred years - dating back to just before America.
You could also try to frame it in context of say IP protection. Is copyright good? Bad? Too much? Too little?
Will open-source succeed without copyright? Would you write a program to scratch your itch if it wasn't under copyright protection? Realize that the latter means it's effectively modified-BSD licensed.
Software is a tricky thing because until its invention, patents were used for "things" and copyright was used for "creative works" and neither the twain shall meet. After all, writing a book doesn't get patent protection (other than design patents, if the book has certain ornamental features). The work itself doesn't have utility other than being entertaining (hopefully), but that's it. Likewise, the printing press used to make the book isn't copyrightable - there's no "expression" going on other than maybe a few decorative items to give it better form.
Software though, is both. It can be a creative work meant to be enjoyed, or a part of a machine. In effect, it's forcefully combining two areas of IP protection that were never intended to be combined in the first place. And both are being twisted to accommodate this ill-fitting piece.
Perhaps what needs to happen is sitting down and realizing this - that software should not be patented nor copyrighted, but covered under its own IP protection category because of its unique nature. After all, if you get rid of software patents, you're saying if I build a machine out of electromechanical parts, I can patent that, but if I replace some of those electromechanical parts with software to make it more flexible, simpler and more reliable, it's suddenly unpatentable? (And software can be hardware, too, thanks to modern VLSI RTL).
It's probably time to stop forcing software into copyright and patents and realize it's got its own attributes from both, and crafting IP protection appropriate for this reality than bending existing protections about.
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Yes, let's take something like cancer research... Who on earth would fund cancer research if they couldn't make billions from marketing expensive drugs to people who would have to sell all their worldly goods to buy them? People with cancer (and their families) perhaps?
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Where in the world do you get that idea from?
From TFA, as in these lines:
So, we’ve constructed the patent system: people have a 17 year exclusive right to such public goods. That is, we’ve made them excludable by law
That doesn't tell us anything about what he thinks though. That is merely a comment by him about what we, as a society, have put in place.
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If you're of the school that believes that patent protection is always bad, then his argument isn't meant for you.
Him having a different audience in mind does not exclude "us" from using his ill thought out arguments against him. Using the curve he presents, we could easily argue that zero strength patents yield the same amount of innovation as we see today (draw a horizontal line from the "we are here" point to the Y axis), but with the added benefit of having no patent trolls and litigation that produce nothing of value to society. If we factor in the side industry of patent litigation (and assume that patent litigat
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Using the curve he presents, we could easily argue that zero strength patents yield the same amount of innovation as we see today (draw a horizontal line from the "we are here" point to the Y axis),
ooh, yeah... no. A drawing like that means he thinks the curve is concave with a local maximum above zero. And 'we are here' means he thinks we're to the right of the maximum. Talking about actual levels of innovation is way beyond his argument.
If we factor in the side industry of patent litigation...
This is precisely what he argues is the cost of patent law. It's already taken into account.
It also assumes that there is only one point on the curve with a global maximum value for innovation, yet is see no argument from him as to why that would be the case.
It is in fact there. Note a couple of things, both said in the article:
Re:Some fundamental, unchecked assumption here ? (Score:4, Interesting)
Woohoo, there may be a curve
As long as you have two parameters, can vary one parameter with respect to the second, and the second parameter varies continuously with respect to small changes in the first parameter (all else being equal), you have a curve.
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There's plenty of historical data. The problem is that it's too hard to interpret. Once something is invented, it can't be invented for the first time again, thus making comparisons of different systems difficult.
I've read that innovation in the telephone field fell when Bell got his patent and increased when the patents expired.
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That's not necessarily a problem. If innovation was boosted because of the potential rewards for being the first to invent a telephone, then the patent system did its job.
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Woohoo, there may be a curve, which we cannot measure and for which we have no data, may exist. And the guy who made it up and named it after himself knows nothing about it. This is going to be so useful.
Sounds good enough for economists.
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I think P.J. O'Rourke saw this coming: http://historyofeconomics.files.wordpress.com/2009/05/pj-orourke-1-1.jpg?w=700 [wordpress.com]
Even more fundamental assumption (Score:5, Insightful)
An even more fundamental assumption he makes is that intellectual property legislation is desirable because it encourages innovation. Why should that be a given?
Take for example, the very same example cited in TFA, Sir Issac Newton and his mathematical principles. Isaac Newton composed Principia Mathematica during 1685 and 1686, and it was published in a first edition on July 5, 1687 [wikipedia.org]. Copyright did not exist at that time; the very first copyright law, the Statute of Anne was enacted only 23 years later in 1710 [wikipedia.org].
The point I am trying to make is that people will innovate and create, even without the protection of intellectual property laws.
On a separate point, if the whole rationale for intellectual property legislation is to promote innovation, shouldn't the focus be on protecting the rights of the actual person doing the creating, as opposed to whichever faceless entity who may own the contractual right to make use of the invention? Start by making intellectual property rights vest only in the creator, and make it non transferrable. This will force commercial entities to grant a fair share of the profits to the real innovators instead of the giving an unearned bonus to the patent troll who own a large number of the patents today. The way it is structured today, it is very clear that intellectual property legislation only benefits those with the capital to buy over the rights and not the creators themselves.
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The point I am trying to make is that people will innovate and create, even without the protection of intellectual property laws.
Which is why has graph, on the left edge where no intellectual property laws exists, still has a level of innovation.
The graph only states some amount of legislation facilitates the financial incentives and the assumption that financial incentives encourage innovation in general.
It also states that too much legislation actually has a negative net effect on innovation.
His graph seems to make no attempt at actually pinpointing any problems, it merely tries to explain that there is some undefined amount of leg
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Except that "protection", while it rewards the person in question, greatly harms dissemination of the idea. Thus, the first question to answer is whether that curve isn't strictly monotonic, which I think it is.
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So some way to encourage disclosure could be beneficial. That way does NOT have to be exclusivity, monopoly. Certainly, no one should have the "right" to tell others that they can't use some idea at all. But not only do we hand out monopolies, we let monopoly holders refuse to deal, denying everyone else. They don't have to license at any price at all. One thing this does is allow obsolete and inefficient industries to continue. They acquire the patents to better methods and bury them, so that everyon
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It doesn't. Protection encourages dissemination. With no intellectual property protection, many innovations and creations are kept as trade secrets. For every Newton you can cite, there were thousands of minstrels who didn't share their songs and blacksmiths, bakers, cobblers, stone masons, swordsmiths, etc. who didn't share their secrets. You used to have to be initiated into a guild to learn any of those things. Some of those guilds became extremely powerful because of it.
Overbearing protection disco
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His graph he gets out of his ass. There is no evidence that backs up the graph. I can draw a nice graph and then conclude anything.
Even the Laffer Curve is a non-model.
From Wikipedia:
"[...] the curve need not be single peaked nor symmetrical at 50%". And in fact the peak range from 32% to 70%.
So first, it can have multiple maxima, and second, studies shows that the peak range from 32% to 70%.
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On a separate point, if the whole rationale for intellectual property legislation is to promote innovation, shouldn't the focus be on protecting the rights of the actual person doing the creating, as opposed to whichever faceless entity who may own the contractual right to make use of the invention?
No. because by contract the faceless entity is the one actually doing the creating. All this talk of "real innovators" ignores that they need various things such as support staff, infrastructure, and capital which are provided by the "faceless entity" in exchange for that contractual right. Without such a transferable right, then one also ends up with unresolvable issues of ownership in cases where there is no one person who is responsible for all of the creating.
Second, it should be painfully obvious to
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Start by making intellectual property rights vest only in the creator, and make it non transferrable. This will force commercial entities to grant a fair share of the profits to the real innovators instead of the giving an unearned bonus to the patent troll who own a large number of the patents today.
Dream on. What would actually happen is a combination of two things. One, employees doing research for large companies will get paid less, on the theory that now they get directly rewarded for the things they invent. It will work just like tipping does for food service people: their base income will drop because this expected (but not guaranteed) revenue would get lumped in as part of their compensation. Of course researchers will actually make nothing that way in the average case, due to the large cos
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Using Newton in this day and age is a bit disingenuous. His output was merely some well-thought out thoughts. Try coming up with the next drug to cure some current disease this way. You won't get past, gee, wouldn't it be neat if the disease worked like this, then I'd have a cure. It takes 100s of millions of dollars to come up with a single drug that hits the market. What's never shown are all the false starts and compounds that failed. And even then the FDA can send you back to the drawing board. And if y
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Using Newton in this day and age is a bit disingenuous. His output was merely some well-thought out thoughts.
Yeah, I don't know what the big deal was about Sir Isaac. All that fame over a few intelligent musings. Big deal, we probably get 100 of those per day on Slashdot.
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An even more fundamental assumption he makes is that intellectual property legislation is desirable because it encourages innovation. Why should that be a given?
There's a book about it [amazon.com]. If you're going to be contrarian, you should at least familiarize yourself with the standard ideas, and the evidence that supports them. The evidence that copyright encourages writers is so huge that if you don't think so, you probably haven't looked. Patents encourage inventors as well; the only question is whether they deter other inventors more (which is the topic of this story).
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No via legislation, but via money. That goes for the innovation that is a result from a controlled R&D process.
It does NOT effect the innovation that comes from pure serendipity, and that's why that curve neither starts nor ends at zero. But note that the right minimum is lower than the left one. Both ends describe a point where no money is invested anymnore, either because there is no money to make with inventions or inventing is to expensive because an invention would contain and base on an existing,
Re:Some fundamental, unchecked assumption here ? (Score:4, Interesting)
> Let's say patents were strong and eternal. This could easily lead to land grabs - there's a rush to discover new areas
> that people aren't even thinking about right now and bring them to market so that they can be patented. The value of a
> patent portfolio is high, and so companies may innovate to create such portfolios. Cross-licensing would be the order
> of the day in that environment, but it would hardly mean innovation would be dead.
No, it means we'd be in eternal stagnant IP feudalism, where only companies the size of Sony, Samsung, Apple, and Microsoft were allowed to innovate anything meaningful commercially. Everyone else would be -- at best -- IP sharecroppers forced to kneel before them and grant their patents for a pittance in return for the right to make commercial use of them at all, because just about any conceivable implementation would otherwise infringe upon two dozen other patents.
Think about it. When's the last time a huge corporation held by risk-averse institutional shareholders concerned with maximizing the next quarter's profits truly innovated *anything* that could be described as "disruptive"? The infant Microsoft would have been thrown into the well and drowned by IBM, DEC, Burroughs, Wang, and all the other companies that used to dominate the American computer industry back in the 1970s/80s. Woz would have gotten served a C&D 3 days after showing off his new prototype to the computer club. Commodore would have never existed, because its whole economic foundation was a semiconductor firm who built what was practically a 6800 clone. Fairchild *and* Shockley would have been eternal vassals of Bell Labs.
Big companies owned by institutional investors are almost genetically incapable of disruptive innovation, because it involves risk, and risk means the next quarter's profits might be disrupted. When alliances of similarly risk-averse companies have de-facto veto power over everyone else by virtue of strong patent protection, disruptive innovation stagnates.
In a way, the former Soviet Union is a perfect indirect example. In the Soviet Union, risk-averse bureaucrats had de-facto (if not de-jure) veto power over everything. The same way a company like Sony can unleash its lawyers to stop disruptive media technologies in their tracks in the holy name of IP law, the Soviet government could unleash its army of law enforcement officers and bureaucrats to prevent a Soviet citizen with a disruptive invention from ever doing anything with it. There was actually quite a bit of underground innovation in the Soviet Union... it's just that it was all basically masturbation, because their efforts were stymied at every level (by buraucratic indifference if they were lucky, by aggressive political backlash if they were perceived as presenting a risk to someone in a position of power, no matter how petty or meaningless).
Going back further to the dark ages, how much real innovation occurred when everyone was forced (by law, if not practical necessity) into being vassals under feudalism that subordinated everyone and everything to landed nobility and the Church? Yes, we had people like Kepler, Newton, and Galileo... and their contemporary influence was almost nonexistent. Their discoveries were talked about privately, behind closed doors, and most of their effort was spent trying to avoid getting crushed by those who cared mainly about preserving the status quo. They're revered today, centuries after their deaths, but in their day, they were basically viewed as godless heretics who deserved to burn for their sins, or at least spend a few decades repenting them in a dark prison cell somewhere.
People forget that the US itself was founded as a reaction to the old world order. Pre-Berne, American IP law was almost at a 90-degree angle to European IP law. European IP law viewed IP as a moral right, like being granted land by a sovereign king acting through the grace of God. American IP law, in stark contrast, was scandalously utilitarian. Up until t
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Going back further to the dark ages, how much real innovation occurred when everyone was forced (by law, if not practical necessity) into being vassals under feudalism that subordinated everyone and everything to landed nobility and the Church? Yes, we had people like Kepler, Newton, and Galileo... and their contemporary influence was almost nonexistent. Their discoveries were talked about privately, behind closed doors, and most of their effort was spent trying to avoid getting crushed by those who cared mainly about preserving the status quo.
The dark ages was a time of significant innovation, e.g. the wheeled, adjustable pough; water mills; the horse collar; draw plates for making wire; the blast furnace; pointed and ribbed arches; the flying buttress; etc., etc., etc.
Kepler, Newton and Galileo did not live during the dark ages. All were well known during their lives, but only Galileo got into trouble over his publications, and it was the way his book was written rather than its scientific content that got him imprisoned (it featured a dialogue
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When Kennedy said he wanted a man on the moon, were there not laws passed to facilitate the budget required?
That single goal inspired a generation of scientists and the most innovative period in the history of the world.
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Indeed, I'd be surprised if there were much validity to this. Especially seeing as the Laffer Curve is a complete joke. It's never been particularly well supported by evidence, and runs completely counter to actual historical data. At least in the US the times when the economy was doing best, were times when the Laffer curve would predict that the economy would be in the tank due to excessive taxation on the rich.
curves (Score:3)
Assurance contracts (Score:5, Informative)
Tabarrok is also known for his work on how to fund public goods via non-patent means, in particular his dominant assurance contract [wikipedia.org] form which is a variant of what Kickstarter does.
don't help and there's more than innovation (Score:5, Interesting)
For software, they don't help innovation, and promoting innovation can't be the only goal. Lots of non-innovative software development is really useful.
* http://en.swpat.org/wiki/Studies_on_economics_and_innovation [swpat.org]
* http://en.swpat.org/wiki/More_than_innovation [swpat.org]
And it's really crucial that patents be analysed per-domain. The don't affect pharma and the auto industry the same, and they don't affect software the same either. The distribution models are different, as is the profile of who mass produces each thing, as is the complexity (number of ideas) that get added to a product within one lifecycle, and the length of product lifecycles...
* http://en.swpat.org/wiki/Why_software_is_different [swpat.org]
Re:don't help and there's more than innovation (Score:5, Interesting)
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So if I invent a new type of car engine I have to set up my own factory to make it, even though I know nothing about running a factory, don't have an established network of suppliers[1], don't have the finances to build one, and don't have anywhere to put it?
Wouldn't it just be better all round if I sell or license the design to Ford or Mercedes? That way they can build it their existing plants with their existing expertise, and I can go back to my shed and invent a wi-fi sewing machine[2] or something.
[1]
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Another nice feature would be protecting only patents actually used in products made by the inventor or its partners
How about going back to only allowing patents on manufacturing processes, rather than fucking products?
This is real simple folks. The government providers the service of patent protection in exchange for the publication of knowledge. The extremely simple idea being that trade secrets are bad for innovation, that the public benefits when there are fewer trade secrets.
Products are not and can not be trade secrets so there is, in fact, absolutely zero benefit to the public for patents on products. Why sho
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The reason their analysis excludes pharma is purely political: the big pharma lobby has such an immense power that anything they perceive as risk will be torpedoed. Having powerful enemies doesn't stop you from being right, though, merely might make holding your cards prudent.
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The reason their analysis excludes pharma is purely political: the big pharma lobby has such an immense power that anything they perceive as risk will be torpedoed.
Probably true.
The silly thing is, Pharma is the easiest one to fix. If a country doesn't require new drugs to be licensed/approved based on (expensively gathered) evidence of their efficacy and safety then, well, they should. A fixed term exclusive right to manufacture could easily be built into the licensing process.
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I disagree. It's crucial that patents NOT be analysed per domain. It's crucial that that basic requirements for a patent be applied consistently and as objectively as possible.
The problem in the software domain is that most "innovation" is trivially easy and stupid things get patented. If you applied the non-obvious requirement consistently you'd find that only a few software patents, the ones that are actually deserving, would be allowed. You don't have an idea for a new drug in the shower and run out
seriously? (Score:2)
Since when an arbitrary curve with extremum gets a name each time it applies to a phenomenon.
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There's prior art concerning porridge temperature and sizes of beds.
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Beware things that people name after themselves.
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FTFY.
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Kicking in an open door (Score:2)
What's lacking unfortunately is the hard work of quantifying the societal benefits as a function on e.g. patent duration. Which incidentally is the 99% perspiration to accompany the 1% inspiration (which all of us probably has anyway).
So Tabarrok's curve is a typical no-brainer (in both senses) as f
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people that argue that patents don't contribute at all to spurring innovation (something that anyone who has ever pitched his idea to a VC with the objective of funding a startup will reject out of hand)
I think that's exactly the point those people miss. Sure, you can come up with as much innovation as you want without any patent protections. But, if you ever want anybody to pay for your innovation to become more than just figments of your imagination, they need to know that they will be getting their money back.
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So how did computing get as big as it did prior to the 1998 State Street Bank decision?
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WWII.
Not that the success of early computing has much to do with the patentability of business ideas. Computers consist of nice, concrete, physical components, which were patented up the ying yang.
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What about getting your potential customers to pay for the innovation itself, rather than some third-party VC group that generally only wants to pay for the right to earn profits off the innovation?
I think Kickstarter and the publicly-commissioned model could make the old funding models of VCs and banks and the like obsolete (for a large swath of products, at least). This reduces the middle-man effect, and ensures that the primary beneficiaries of innovation are the innovators and the consumers of the inno
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Absolutely, this is an option that the Internet (and high-speed communication in general) has given us which wasn't available before. But even still, these kickstarted companies will have to charge much more to their initial customers if another company can swoop in and steal all their R&D the moment they have a successful product. The moment that happens the competitor will only have to pay incremental manufacturing costs, not the R&D which accumulated during the design process, and to be competiti
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There is nothing to stop a private non-disclosure agreement between you and the VC's before you pitch your idea.
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That's not the issue. The VCs don't want to put money into something that isn't patentable, because they're not as likely to get their money back out again. If you don't have a patent and can't get one, that's bad. If you don't have a patent and might not be able to get one, that's almost as bad. If you've got a patent, clearly it's patentable, and that's good.
Haven't you ever watched Dragon's Den / Shark Tank / Soul Sucking VC Rage II?
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And that would stop a third party coming along, making a knock-off of your invention, and pinching your customers (which are also the VCs') how, exactly?
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I think he was poking fun at innovation through naming the curve after himself even though it's just an application of the Laffer curve. See the parallels?
No answer (Score:3)
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Worse than that: we're talking about things that can't be boiled down to two variables. At least the Laffer curve dealt with things that could easily be measured.
This Tabarrok guy is a puffed-up idiot who likes making charts, because he thinks that's what smart people do. He has a long and prosperous career ahead of him.
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And, where's the data? At least with laffer, there are some dots that you can kind of see could justify a curve if you close one eye and tilt your head. With this, it's just an arbitrary line and a cross. It is pure prejudice in the original definition of the term. I wish it were true, though, I really do, because it makes sense and would probably lead to better laws. But until I see some data, this is pure nonsense. And even with data, working out the direction of causality isn't easy.
Natural monopolies for innovations (Score:2)
There are natural patent monopolies that are rewarded to innovators in the market. If you are the first on the scene with a desirable product or service the consumers may reward you with monopoly prices. But as time goes on and other producers notice those outrageous profits it will lead others to enter that market and competition will reduce those profits to around the natural interest rate of the economy.
The nice part about natural monopolies is that they adjust well to how great an innovation is. The mor
Missing the point (Score:3)
Well, patents might behave like that. Or they might not. Because there is actually NO data on why patents should foster innovation. People (and even scientists) just think they do, but any investigations so far turned up no positive correlation. So the verdict from 1851 still stands:
Besides the caveats,
by which one man attempts wrongly to appropriate to himself the bounty
which the State gives for invention and which properly belongs to another,
the granting patents “inflames cupidity,” excites fraud, stimulates men
to run after schemes that may enable them to levy a tax on the public,
begets disputes and quarrels betwixt inventors, provokes endless lawsuits,
bestows rewards on the wrong persons, makes men ruin themselves for the
sake of getting the privileges of a patent. Patents are like lotteries,
in which there are a few prizes and a great many blanks. Comprehensive
patents are taken out by some parties, for the purpose of stopping
inventions, or appropriating the fruits of the inventions of others,
&c. Such Consequences, more resembling the smuggling and fraud caused
by an ill-advised tax than anything else, cause a strong suspicion. that
the principle of the law from which such consequences flow cannot be just.
(The Economist, 1851)
Re: (Score:2)
Because there is actually NO data on why patents should foster innovation.
Well, actually there is. There's even a whole book on it. [amazon.com] There is absolutely no doubt that patents encourage inventors. The only question is whether they deter other inventors enough to reduce the overall level of invention.
Economics is not a physical science (Score:2)
Please stop assuming that economics is a physical science like physics. About the Laffer curve from Wikipedia:
This is the curve as drawn by Arthur Laffer,[3] however, the curve need not be single peaked nor symmetrical at 50%.
and further:
The New Palgrave Dictionary of Economics reports that a comparison of academic studies yields a range of revenue maximizing rates that centers around 70%.[2] Economist Paul Pecorino presented a model in 1995 that predicted the peak of the Laffer curve occurred at tax rates around 65%.[12] A 1996 study by Y. Hsing of the United States economy between 1959 and 1991 placed the revenue-maximizing average federal tax rate between 32.67% and 35.21%.[13] A 1981 paper published in the Journal of Political Economy presented a model integrating empirical data that indicated that the point of maximum tax revenue in Sweden in the 1970s would have been 70%.[14] A recent paper by Trabandt and Uhlig of the NBER presented a model that predicted that the US and most European economies are on the left of the Laffer curve (in other words, that raising taxes would raise further revenue).[11]
So what curve is the Laffer curve? It can have multiple maxima, it can be asymmetric, the peak can range between 32% and 70%. If physical science were based on such curves the Moon landing would miss the Moon and fly to the Sun, and probably miss the Sun and fly to Jupiter.
Economics is a social science with a lot of psychology mixed in. The assumption that every individual in the economy
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Economics should be classified similar to Logic and Math. They are constructs of the human mind that are great tools to model the way the world works. But like any model you have to know the limitations.
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Economics should be classified similar to Logic and Math. They are constructs of the human mind that are great tools to model the way the world works. But like any model you have to know the limitations.
Not really, because the knowledge of the 'rules' of economics changes their effect ('beating the system'). It should be more akin to quantum mechanics, with wavefunctions observing other wavefunctions.
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Economics should be classified similar to Logic and Math.
No. Economics is supposed to be a science, and hence valid only to the extent that it jibes w/ empirical data. Math is a whole different animal, since everything flows from pure reason applied to a set of self-consistent axioms (logic is a branch of math, the watered down rhetorical version of logic notwithstanding). There are no axioms in science. What are called first principles are basic and well demonstrated theories, but always subject to empirical invalidation.
One of the biggest criticisms aimed at ma
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> So what curve is the Laffer curve? It can have multiple maxima, it can be asymmetric, the peak can range between 32% and 70%
Just recognition there there is a curve is a good starting point. The shape depends on a lot of factors in yet unknown ways which makes policy debates interesting.
However the endpoints are known. One point is at zero taxes, which of course means no revenues. The other point is 100% taxes, which is what Genghis Khan experimented with when he razed conquered cities and exterminated
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Most people who look at the Laffer curve don't think about it very deeply.
For instance, it relates tax rate to government income, but many people act as if it relates tax rate to societal benefit.
For another thing, it's clear that the curve will be different for different time spans and for how long in advance the rate is known. Consider Clinton's unconstitutional ex post facto income tax rate increase: by increasing taxes on money already earned, there was negligible possibility for people for people to ch
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For instance, it relates tax rate to government income, but many people act as if it relates tax rate to societal benefit.
Don't forget the moral dilemma inherent in it.
Now to start off with, I believe that the Laffer curve does apply in the best way that it can within the noisy system we call the economy.
But suppose they could in fact figure out the Laffer curve to a great deal of confidence. Now then, is it moral for the government to use this knowledge to maximizing its revenue? Remember that the government does it via its monopoly on prison cells and men with guns.
I believe that the only moral choice within tax polic
Simple fixes that would go a long way: (Score:3)
1. Eliminate the Doctrine of Equivalents
2. Especially with regards to "after-invented technology"
What 1 means is that if you come up with a way to do the same thing, even if you do it a completely different way, they can still sue you in court and you get to spend a million dollars proving that not only did you not infringe on their patent, you came nowhere near infringing on their patent.
What 2 means is that if someone invents something, and later someone else comes along and invents a better way to do something in the patent, it's still infringement because of fucked up court rulings that basically amount to "boo hoo the poor widdle inventors couldn't foresee this invention and shouldn't be penalized because they didn't think of it." Fuck that, if they wanted patent protection for it, they should have invented it themselves.
Oh, erm, groundbreaking? (Score:3)
No patent protection: Everyone tries to keep their innovations secret. Innovations get lost because they're kept secret and are forgotten at some point. Inventors are kept from inventing things because it's hard to profit from their inventions, either because they're immediately copied or because of all the effort to keep them secret.
Tons of patent protection: Great, invent something once and you and your descendants are set for life (just like copyright works today). Invention is stifled because inventors have no motivation to keep inventing after their first breakthrough - they're too busy throwing money out the window.
So the sensible level of patent protection needs to be between those two extremes. Allow inventors to profit from the publication of their inventions, but keep the protection short enough to motivate an ongoing process of new inventions.
what about an public defender system for patents t (Score:4, Insightful)
what about an public defender system for patents that can be used by innovations and company's who can't pay the costs of attorneys. that can help from people being bulled by BIG company's who can / have staff attorneys that can use the court system to shut people down.
Both Extremes Are Undesirable? (Score:2)
It is? I'm pretty sure the world would be a better place if people were not allowed to own ideas or expressions of ideas.
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If you have spent time working in industrial research and development you would realize that the lack of patent protection for real innovations would be detrimental to investment in technology.
Companies don't like investing large sums of money in anything and getting nothing out of it.
Laffer curve is fiction (Score:2)
How about this? (Score:2)
I have a problem with companies that create no concrete products and exist solely as patent trolls. So why not ban that practice? Why can't you make a patent contingent upon the applicant actually producing a product that uses that IP?
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To be fair, this does completely eliminate the concept of "inventor".
Researchers, for example, may have some important invention, but who don't have the capital or experience to build a complex system that uses this feature they invented.
Is it wrong for them to try to license their invention?
While i agree with you about trolls, I just thought I would bring up a counter to your question.
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I don't think I want to have the Laffer Curve as an ally here.
Oh, that's where your wrong; for a powerful ally it is. Just think for a moment: Do you have a problem that you can pretend to boil down to two variables that are inversely proportional in their hypothetical extreme cases? If so, just draw a curve of pretty much any shape between those points on the graph and *boom* Instant policy justification!
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This!
Spot on. And why is the Tabarrok curve not curving downwards? No justification for the shape in the article, other than "of course that is how it looks, d'uh".
Re:The Laffer Curve? (Score:5, Interesting)
Oh, come on! These two curves are perfectly related: They're both attempting to vaguely connect 2 variables that intuitively seem like they ought to have something to do with each other without actually being a remotely accurate description of reality.
For reference, Arthur Laffer said the theoretical relationship between tax rates and government revenue per capita looks like this:
Laffer Curve [cynicalnation.com]
A suspicious Martin Gardner then plotted the actual relationship between tax rates and government revenue per capita, and got something that looks like this:
Neo-Laffer Curve [gapersblock.com]
My basic view on the subject:
1. There's absolutely no way to measure real innovation. Some of the problems:
- Discoveries that seem unimportant can turn out to be incredibly important 15 years later, and vice versa.
- Organizations sometimes protect their discoveries by keeping them secret.
- Academics often give away the knowledge they have without patenting it to build their career. However, they can also build their career by giving away nonsense and getting away with it.
- A lot of "innovations" are just tiny variations on things that we already have and don't make much real difference (e.g. the rounded rectangle).
2. There are lots of motivations for innovation, some of which can't be bottled, organized, or turned into policies. For example, the more idealistic scientists are motivated more by the joy of discovery than by the cash they'll get.
3. That means that trying to take a theoretical approach to creating more innovation is just plain unworkable. The one thing that seems to have worked, historically speaking, is (1) put really smart people in contact with each other, (2) make sure they have plenty of cash and whatever they need to do their work, and (3) tell them they can focus on pretty much whatever they feel like working on, just make something awesome happen. That worked in Alexandria 2300 years ago, it worked in Baghdad around 1000 years ago, it worked in London around 200 years ago, it worked in Bell Labs in the last century.
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- Organizations sometimes protect their discoveries by keeping them secret.
Yes, this is the issue that patent protection was supposed to solve, and it's a reason why SOME legislation is beneficial.
That worked in Alexandria 2300 years ago, it worked in Baghdad around 1000 years ago, it worked in London around 200 years ago, it worked in Bell Labs in the last century.
Except that's really not how it went in any of those cases. In each case the thinkers were directed by patrons.
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In each case the thinkers were directed by patrons.
Who told Erastothenes to measure the size of the earth? Who told Jabir ibn Hayyan to perform a ridiculous number of chemistry experiments? Who told Isaac Newton to write about physics and mathematics? Who told Charles Darwin to come up with evolution? Who told Ken Thompson to write an operating system?
I'm not saying you can't give smart people some kind of direction, like they did in the Manhatten Project, but you certainly get a lot when you do what something along the lines of "Welcome! Here's your lab an
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You're talking about scientists or their pre-science equivalent - crazy people driven by the joy of discovery who can't wait to tell everyone when they figure something out. I'm one of those. Patents are essentially irrelevant to those people anyway.
Patents work when there are people who are driven by commercial motivations. Blacksmiths, iron mongers, stone masons, Microsoft.
Of course, most of the people you mention did have patrons anyway. You don't think Darwin sailed around the world looking at prett
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His grandfather was Josiah Wedgwood[1], so I doubt he was short of a bob.
[1} A fact I only recently learned, along with there being only one "e" in the name.
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Oh, come on! These two curves are perfectly related: They're both attempting to vaguely connect 2 variables that intuitively seem like they ought to have something to do with each other without actually being a remotely accurate description of reality.
So you think there's a "vague connection" between tax rate and tax revenue? Or between innovation and regulation of that innovation? Do tell.
There's absolutely no way to measure real innovation.
You have a reason for this statement? Your supporting statements just mean that such measurement is a bit harder and less accurate than it could be. Not that innovation is somehow impossible to measure.
There are lots of motivations for innovation, some of which can't be bottled, organized, or turned into policies.
Irrelevant especially since there are substantial motivations (such as the profit motive) which can be so "bottled".
That means that trying to take a theoretical approach to creating more innovation is just plain unworkable.
Non sequitur. Nothing of your post aside from the unf
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What do you measure it with? A ruler? Scales? Some mysterious doohicky with flashing lights and dials?
What's the unit called?
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Yes Virginia, the Laffer curve (as well as our gianormous deficit) both indicate that taxes in America are too low at least as far as Mr. Laffer and his curve are concerned.
Only if you think the purpose of government is to take as much real money as possible from its citizens.
I, for one, don't agree with that basis of reasoning.
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The Laffer curve is on record as having been dreamed up on the back of a napkin by Donald Rumsfeld during lunch hour. I am not making this up.
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No, it was dreamed up on the back of a napkin by Arthur Laffer during lunch hour, which is why it's called the "Laffer Curve".
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Nope. Rumsfeld finished his dessert and decided nobody would possibly fall for it. "You want it, you can have it!" he said.
And left Laffer with the check to boot. Known known bastard.