Are patents/IP good for innovation?

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Cradarc
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Are patents/IP good for innovation?

Postby Cradarc » Wed Feb 14, 2018 8:21 pm UTC

I'm curious about your opinions regarding patents and intellectual property.

Clearly, they are intended to encourage innovation by allowing people/companies to disclose their ideas without (or with limited) fear of being scooped by some some competing party. However, I get the feeling that people nowadays are too eager to file patents, even when they have little intent of using it themselves. In other words, they are using patents as a way to make money/prestige rather than to protect their future work on the concept. An extreme example of this is a patent troll, but I think many others, even in academia, share the same type of mentality.

In the context of today's society, are patents (or intellectual property, in general) beneficial or detrimental to technological progress?
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Re: Are patents/IP good for innovation?

Postby cphite » Wed Feb 14, 2018 10:11 pm UTC

Cradarc wrote:I'm curious about your opinions regarding patents and intellectual property.

Clearly, they are intended to encourage innovation by allowing people/companies to disclose their ideas without (or with limited) fear of being scooped by some some competing party.


Correct. But they also benefit society because they allow other people so see the idea and what it involves, and therefore (in theory) make more informed decisions about whether or not the idea is worth buying, should be legal, etc. The general idea being that you can be open about your ideas without having to worry about them being stolen out from under you.

However, I get the feeling that people nowadays are too eager to file patents, even when they have little intent of using it themselves. In other words, they are using patents as a way to make money/prestige rather than to protect their future work on the concept. An extreme example of this is a patent troll, but I think many others, even in academia, share the same type of mentality.


Patent trolls are a problem, and should be dealt with just like normal trolls - with fire. Kidding. Sort of.

If you have an idea for a new Widget and you haven't quite decided how you're going to make it, or market it, or for whatever other reason aren't quite ready to make use of it yet; you ought to be able to protect that idea for some reasonable amount of time. Other people don't have an automatic right to your Widget, no matter how cool or even useful it might be. There are certainly examples of cases where people take this a little too far, but all in all it tends to work itself out. People don't generally just sit on ideas that are worth acting upon.

That being said, while I don't know exactly how the details would work, I wouldn't be opposed to some kind of appeal process for patents where it can be shown conclusively they are not being utilized.

In the context of today's society, are patents (or intellectual property, in general) beneficial or detrimental to technological progress?


Overall I would say they're a good thing. There are abuses, yes, but the general idea is that people who put the time and resources into innovating ought to have protection against someone taking what they've come up with for free. Innovation is a form of investment; and investment is driven by the expectation of a return.

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Re: Are patents/IP good for innovation?

Postby Leovan » Thu Feb 15, 2018 6:13 am UTC

What used to happen is one craftsman would have an innovation but have to protect it by obfuscation etc. They would be so efficient at that nobody ever knew how it was done and when they died, their innovation died with them. Patents share the idea with the world and attempt to preserve knowledge as much as protect it.

Patents also speed up innovation because you can use them to get ideas for your next project. Patents often contain good ideas that you can use without violating the patent, or the patent is expired by the time your own product hits the market.
Companies have a time limit by which time they have to have a new product out if they want to keep their market position. Otherwise the market will be flooded by copycats. Instead of resting on their laurels, the investments in R&D have to keep on coming. Especially in the pharmaceutical market, this is useful.

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Re: Are patents/IP good for innovation?

Postby LaserGuy » Thu Feb 15, 2018 7:52 am UTC

Generally, yes, they're necessary to some degree or other, most commonly for the reason that it is much cheaper and easier to copy an existing idea rather than the doing the R&D necessary to come up with something new. The most extreme example is in pharmaceuticals, where developing, testing, and bringing a new drug to market, could run in the billions of dollars, but the final formulation, the active ingredient that actually makes the thing work, might cost a penny per dose. So somebody has to pay a billion dollars in development costs, only to have a competitor recreate and market the generic for negligible cost. And because we're talking about chemistry rather than a widget, the copy can be perfect... there is no difference in terms of effectiveness between Tylenol and generic acetaminophen. So in this particular case, you basically only have two options: You can have the public cover essentially 100% of R&D costs and allow companies to profit off of that for nothing, or you allow them to cover their own R&D, but give them a patent.

There's a related scenario where an innovator develops some novel product, but if they don't have the infrastructure in place to scale it, it's trivial for somebody established in the market to simply copy it and use their existing advantage to get all the credit. If you design a unique improvement on, I don't know, a hammer, then there's a good chance that a company that already makes hammers could, moments after seeing your design, have their own teams recreate it and mass market it before you had the chance to do anything with it.

Patents also, unlike copyright, have a fairly limited term where they can be exploited (typically something like 10-14 years), so even though it gives the original inventor a head start, it doesn't prevent it from becoming more universally adopted in the long term if it really is a good idea. You can certainly argue about how much time is appropriate, but having a patent with a duration of fifty years is probably in the "likely harmful" stage, whereas having it with a duration of one year is in the "likely useless" stage.

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Re: Are patents/IP good for innovation?

Postby slinches » Thu Feb 15, 2018 5:21 pm UTC

My opinion is that with the laws as they currently stand, patents and trademarks are a net positive and copyright is a net negative. And copyright could be a good thing as well, if the term wasn't so long. With today's laws, anyone who would care about saving a work would be dead long before copyright expired. So tons of creative works are rotting away on dead media formats in some basement rather than being shared, archived and preserved to feed the creativity of the next generation. I think the ideal range is likely 15-30 years (similar to patents). Long enough to span the bulk of the economic life of the work, but not so long that it's completely forgotten about and lost before it becomes public domain.

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Re: Are patents/IP good for innovation?

Postby jewish_scientist » Thu Feb 15, 2018 6:32 pm UTC

I think that the core of most problems in the current patent system is how long patents last. If the length of a patent was shortened enough, patent trolls would not exist. Also, the fanfiction is a perfectly valid form of literature that is outlawed under the current system. This video traces the development of the King Arther canon and makes a joke every now and then about how later writers were just writing fanfiction, but I think that they are actually onto something.

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Re: Are patents/IP good for innovation?

Postby slinches » Thu Feb 15, 2018 7:15 pm UTC

Patents can't really be shortened without losing their usefulness, though. At least for mechanical devices, the time from patent application to market can be measured in decades in some industries. Unless you want all large industrial companies to stop disclosing any inventions, I wouldn't shorten the terms.

However, the problem with trolls would be more directly addressed by limiting transfer rights of IP. Just require that the original author/assignee cannot sell their ownership and any license sold is transparent and non-exclusive (anyone can purchase for the same price), then acting as a middle-man would no longer be profitable.

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Re: Are patents/IP good for innovation?

Postby elasto » Thu Feb 15, 2018 8:43 pm UTC

slinches wrote:However, the problem with trolls would be more directly addressed by limiting transfer rights of IP. Just require that the original author/assignee cannot sell their ownership and any license sold is transparent and non-exclusive (anyone can purchase for the same price), then acting as a middle-man would no longer be profitable.

Seems like it'd be tricky to lock that down.

If IP's are not transferable you simply have a company register the IP (by 'employing' the creator if necessary) then simply sell the company rather than selling the IP.

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Re: Are patents/IP good for innovation?

Postby Sizik » Thu Feb 15, 2018 9:37 pm UTC

slinches wrote:Patents can't really be shortened without losing their usefulness, though. At least for mechanical devices, the time from patent application to market can be measured in decades in some industries. Unless you want all large industrial companies to stop disclosing any inventions, I wouldn't shorten the terms.


20 years is waaaaay too long for software patents though. 5 years or less would be much more reasonable.
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Re: Are patents/IP good for innovation?

Postby slinches » Thu Feb 15, 2018 10:58 pm UTC

elasto wrote:Seems like it'd be tricky to lock that down.

If IP's are not transferable you simply have a company register the IP (by 'employing' the creator if necessary) then simply sell the company rather than selling the IP.

If they register that IP with a separate company, they'd need to buy a license to use the IP. Then there's a price set for it that any competitor can pay and selling the company really doesn't do any good.


Sizik wrote:20 years is waaaaay too long for software patents though. 5 years or less would be much more reasonable.

True, the ideal term for different forms of IP is likely not the same. Not sure how to resolve that without it getting really complicated, though.

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Re: Are patents/IP good for innovation?

Postby jewish_scientist » Fri Feb 16, 2018 7:51 pm UTC

slinches wrote:Patents can't really be shortened without losing their usefulness, though.

Think about this. If patents were arbitrarily short, it would not be profitable for someone to become an inventor and start a business based on their inventions. If patents were arbitrarily long, an inventor would only need to make one invention in their whole lives, assuming the total income from that invention equals or exceeds what they believe is an acceptable level of income. At both extremes, inventors will be making practically no inventions. That means that if there is a point in between these two where inventors must make 2 inventions, then there must be a point in between these extremes where the amount of inventions / inventor is at a maximum. THAT point, that is how long we should make patents last.

P.S. Patents in different industries have different lengths.

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Re: Are patents/IP good for innovation?

Postby elasto » Fri Feb 16, 2018 9:19 pm UTC

slinches wrote:If they register that IP with a separate company, they'd need to buy a license to use the IP. Then there's a price set for it that any competitor can pay


Why does selling a licence to one company mean other companies can buy the same licence? Why couldn't they sell an exclusive licence? Why couldn't they add conditions that the preferred company meets but others wouldn't, just like not just anyone can open a McDonalds franchise?

If none of that works, why couldn't company A set up company B, pay a billion dollars for the licence, which company B pays straight back to company A as share dividends (or some tax-efficient equivalent)? Then, in your terms, there is a price set for the IP but it's not anything any competitor would pay.

(Finally, if that doesn't work, they could just set up company B overseas. As with most rules of this kind, unless they are enforced globally there are always loopholes.)

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Re: Are patents/IP good for innovation?

Postby slinches » Fri Feb 16, 2018 10:51 pm UTC

elasto wrote:Why does selling a licence to one company mean other companies can buy the same licence? Why couldn't they sell an exclusive licence? Why couldn't they add conditions that the preferred company meets but others wouldn't, just like not just anyone can open a McDonalds franchise?

Because that post was in the context of this:
slinches wrote:However, the problem with trolls would be more directly addressed by limiting transfer rights of IP. Just require that the original author/assignee cannot sell their ownership and any license sold is transparent and non-exclusive (anyone can purchase for the same price), then acting as a middle-man would no longer be profitable.


elasto wrote:If none of that works, why couldn't company A set up company B, pay a billion dollars for the licence, which company B pays straight back to company A as share dividends (or some tax-efficient equivalent)? Then, in your terms, there is a price set for the IP but it's not anything any competitor would pay.

They could, but who would buy that company if it doesn't produce anything on its own and the price to license its IP is so high that no one else would pay for it?

elasto wrote:(Finally, if that doesn't work, they could just set up company B overseas. As with most rules of this kind, unless they are enforced globally there are always loopholes.)

That problem exists no matter what we do with IP laws.

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Re: Are patents/IP good for innovation?

Postby SuicideJunkie » Tue Feb 20, 2018 2:09 pm UTC

slinches wrote:If they register that IP with a separate company, they'd need to buy a license to use the IP. Then there's a price set for it that any competitor can pay and selling the company really doesn't do any good.
One... hundred... beelion dollars! </pinky>
If they have purchased the company that owns the IP, then the money just goes around in a small circle.

If you manage to wrangle a tax that works on internal budgets or otherwise counts for this, they could also just use the IP without paying. The owner certainly isn't going to sue them over it.

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Re: Are patents/IP good for innovation?

Postby elasto » Tue Feb 20, 2018 6:58 pm UTC

slinches wrote:They could, but who would buy that company if it doesn't produce anything on its own and the price to license its IP is so high that no one else would pay for it?

If they come to sell it why can't they reduce the price to licence the IP? Even easier, why can't the new owners licence the IP at whatever price point they like?

Are you seriously suggesting that once companies sell a product for $x they can't ever sell it for anything other than $x? That'd screw up the economy way more than our current crappy IP laws do.

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Re: Are patents/IP good for innovation?

Postby slinches » Tue Feb 20, 2018 7:49 pm UTC

SuicideJunkie wrote:One... hundred... beelion dollars! </pinky>
If they have purchased the company that owns the IP, then the money just goes around in a small circle.

If you manage to wrangle a tax that works on internal budgets or otherwise counts for this, they could also just use the IP without paying. The owner certainly isn't going to sue them over it.

Your point? They would then own a company with IP too expensive to sell if they wanted to later on. They would have been better off keeping the IP to themselves and not selling any licenses. Oh, and if some companies try to get tricky and not purchase a license once they've assigned the IP to a separate company on the basis that the "separate" company won't sue. Knowingly failing to defend IP rights is already grounds to have the rights invalidated.

elasto wrote:If they come to sell it why can't they reduce the price to licence the IP? Even easier, why can't the new owners licence the IP at whatever price point they like?.

Price changes can easily be abused for anti-competitive practices. Although, I'd be open to allowing that if someone who has already bought the rights to use it and paid more is entitled to a refund of the difference if the price is lowered later. However, there could be a pro-rating clause to account for the reduced value of a license as it nears the end of the term.

And there is no "new owner". Ownership of IP would be non-transferable after the initial assignment, so if the company is bought, it's still the owner. It's just part of a bigger company.

elasto wrote:Are you seriously suggesting that once companies sell a product for $x they can't ever sell it for anything other than $x? That'd screw up the economy way more than our current crappy IP laws do.

I am seriously suggesting that once an IP owner sells a license, that same offer (or equivalent in terms of dollars) must be made available to anyone who wishes to purchase it. IP is not a product. It's a grant of monopoly power to inventors/content creators over what they create for a limited term to incentivize more invention/creative works. The market has no power to set prices in this scenario, so I think it's reasonable to at least require that licensing be non-discriminatory.

To be clear, these regulations would only apply to IP, not end products. So I don't see how that would "screw up" the economy in general.

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Re: Are patents/IP good for innovation?

Postby elasto » Tue Feb 20, 2018 8:24 pm UTC

slinches wrote:And there is no "new owner". Ownership of IP would be non-transferable after the initial assignment, so if the company is bought, it's still the owner. It's just part of a bigger company.

In all cases, the owner is the company that owns the company that owns the IP. My point is that making IP non-transferrable is meaningless unless you are going to say that companies that own IP cannot themselves be sold.

I am seriously suggesting that once an IP owner sells a license, that same offer (or equivalent in terms of dollars) must be made available to anyone who wishes to purchase it.

What you're missing is that the payments are circular so your limitation is meaningless.

- Company A owns Company B which owns IP X
- A pays $1Bn licence fee to B
- B returns $1Bn to A through some tax-efficient loophole

Company A sells company B to company C for a thousand dollars (or whatever the true worth of X is)

- Company C now owns Company B which owns IP X
- C pays $1Bn licence fee to B
- B returns $1Bn to C through some tax-efficient loophole

To be clear, these regulations would only apply to IP, not end products. So I don't see how that would "screw up" the economy in general.

The point is that there is a grey area between 'IP' and 'end product'. Any regulation that didn't screw up the economy would likely be easily exploitable simply by selling the 'end-product' at a variable price to 'preferred customers'.

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Re: Are patents/IP good for innovation?

Postby slinches » Tue Feb 20, 2018 8:55 pm UTC

elasto wrote:What you're missing is that the payments are circular so your limitation is meaningless.

- Company A owns Company B which owns IP X
- A pays $1Bn licence fee to B
- B returns $1Bn to A through some tax-efficient loophole

Company A sells company B to company C for a thousand dollars (or whatever the true worth of X is)

- Company C now owns Company B which owns IP X
- C pays $1Bn licence fee to B
- B returns $1Bn to C through some tax-efficient loophole

What's the problem there? Company A has given up all its rights (including usage rights) to company C. That's essentially the same thing as "assigning" a patent. I don't want to eliminate works for hire, just make sure that either one company/person holds the IP or it's available for anyone to license on equal terms.

elasto wrote:The point is that there is a grey area between 'IP' and 'end product'. Any regulation that didn't screw up the economy would likely be easily exploitable simply by selling the 'end-product' at a variable price to a single customer.

A copy of a creative work is an end product, the right to make that copy is IP. A device that uses patented technology is a product, the right to make a device that uses patented technology is IP. Where's the gray area?

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Re: Are patents/IP good for innovation?

Postby elasto » Tue Feb 20, 2018 9:10 pm UTC

slinches wrote:What's the problem there? Company A has given up all its rights (including usage rights) to company C. That's essentially the same thing as "assigning" a patent. I don't want to eliminate works for hire, just make sure that either one company/person holds the IP or it's available for anyone to license on equal terms.

But it's not available for anyone to licence. Only A can use it, then only C can use it - because it's only worth $1k but B licences it for $1Bn to anyone (but the real owner (A or C) can use it for free through clever accounting).

The problem is that whatever you were seeking to achieve by making IP non-transferrable remains since IP is still transferrable.
A copy of a creative work is an end product, the right to make that copy is IP. A device that uses patented technology is a product, the right to make a device that uses patented technology is IP. Where's the gray area?

We seem to be talking past each other.

Please give a specific example of how you think your solution solves a specific problem, and I'll try to demonstrate how companies could fit their product into a grey area such that either your solution either doesn't work or your cure is worse than the disease...

(In particular, I've looked back and you seem to think this is a solution to patent trolling - which is where a company buys a load of patents and sues companies who it claims infringed on the IP - relying on the fact that it's usually more expensive to try to defend the lawsuit than to simply settle, even when IP hasn't actually been infringed at all.

Because IP can be transferred simply by selling the shell-company your solution definitely doesn't fix that issue.)

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Re: Are patents/IP good for innovation?

Postby slinches » Tue Feb 20, 2018 9:51 pm UTC

elasto wrote:
slinches wrote:What's the problem there? Company A has given up all its rights (including usage rights) to company C. That's essentially the same thing as "assigning" a patent. I don't want to eliminate works for hire, just make sure that either one company/person holds the IP or it's available for anyone to license on equal terms.

But it's not available for anyone to licence. Only A can use it, then only C can use it - because it's only worth $1k but B licences it for $1Bn to anyone (but the real owner (A or C) can use it for free through clever accounting).

The problem is that whatever you were seeking to achieve by making IP non-transferrable remains since IP is still transferrable.

My intent is to stop the practice of exclusive licensing, not necessarily stop works for hire from being sold. It also ensures that the creator of a work will keep control of his work unless he intentionally jumps through the hoops required to incorporate the ownership so that it can be sold.

elasto wrote:We seem to be talking past each other.

Please give a specific example of how you think your solution solves a specific problem, and I'll try to demonstrate how companies could fit their product into a grey area such that either your solution either doesn't work or your cure is worse than the disease...

It solves the problem of content creators segmenting the market through exclusive contracts. Hulu and Amazon should be able to license streaming rights to everything on Netflix other than their "originals" for the same terms. It also solves the problem of sports team coverage on TV. If there's enough interest in the market, a second channel could step in and broadcast the game in an area that wouldn't be served otherwise.

It would also solve the problem of strategic patent licensing. You couldn't license a patent to one company who would undermine a competitor without giving your competitor equal access to the patented technology or giving it up yourself.


As for trolling, what I have proposed so far wouldn't necessarily eliminate it, but it would be a significant impediment. Trolls would only be able to profit on IP that hasn't been licensed yet but has been set up to be transferred, which would limit the occurrence. If they are still an issue after that, adding the requirement that IP rights are either actively licensed or exercised by the IP owner themselves would solve it.

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Re: Are patents/IP good for innovation?

Postby elasto » Tue Feb 20, 2018 10:19 pm UTC

slinches wrote:It solves the problem of content creators segmenting the market through exclusive contracts. Hulu and Amazon should be able to license streaming rights to everything on Netflix other than their "originals". It also solves the problem of sports team coverage on TV. If there's enough interest in the market, a second channel could step in and broadcast the game in an area that wouldn't be served otherwise.

Ok, so you're talking copyright specifically rather than IP in general - say, patents?

Well, forgive me, but that's a self-correcting problem. It's so trivial to torrent shows and find re-broadcasts of live-streams that companies can't price-gouge too much without killing the goose laying the golden egg. My kids are almost teenagers now and haven't watched network tv in their lives.

But, can I summarise your argument as this?

Netflix buys some material from company A who produced it. You would like Hulu (say) to be able to buy that material too, paying the same price.

Well, as I say, that's trivial for A to bypass. When they produce the material, they produce it via shell-company A1. Instead of licencing the material to Netflix, they sell company A1 to Netflix instead, whereby A1 licences it to Netflix at an exorbitant (but meaningless) fee.

What if A wants to licence the show to Netflix and Hulu but not Amazon? They can't sell A1 to both, right? Sure, but it's still trivial to bypass.

They create shell-companies A1 and A2 which have the same show but with trivial differences to the editing, say. They sell A1 to Netflix and A2 to Hulu. Amazon remains locked out.

It would also solve the problem of strategic patent licensing. You couldn't license a patent to one company who would undermine a competitor without giving your competitor equal access to the patented technology or giving it up yourself.


Also not true. You simply sell 50% of the shell-company to the preferred partner, meaning you and they can both get back your own ongoing licence fees, whereas the competitor can't. (The 50% you sell the shell-company for is actually the true licence fee you are charging.)

As for trolling, what I have proposed so far wouldn't necessarily eliminate it, but it would be a significant impediment. Trolls would only be able to profit on IP that hasn't been licensed yet but has been set up to be transferred, which would limit the occurrence. If they are still an issue after that, adding the requirement that IP rights are either actively licensed or exercised by the IP owner themselves would solve it.

I think you're completely missing the problem with patent trolling. It's when companies claim breaches of IP when breaches have (probably) not in fact taken place. Usually when the defendant goes to court the troll doesn't turn up. The troll makes money because most people don't fight a claim for $1k when it would cost $10k to do so.

The fix lies in reforming the court system not the patent system.

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Re: Are patents/IP good for innovation?

Postby slinches » Tue Feb 20, 2018 11:08 pm UTC

elasto wrote:
slinches wrote:It solves the problem of content creators segmenting the market through exclusive contracts. Hulu and Amazon should be able to license streaming rights to everything on Netflix other than their "originals". It also solves the problem of sports team coverage on TV. If there's enough interest in the market, a second channel could step in and broadcast the game in an area that wouldn't be served otherwise.

Ok, so you're talking copyright specifically rather than IP in general - say, patents?

I am talking about both, but I just thought of copyright examples first.

elasto wrote:Well, forgive me, but that's a self-correcting problem. It's so trivial to torrent shows and find re-broadcasts of live-streams that companies can't price-gouge too much without killing the goose laying the golden egg. My kids are almost teenagers now and haven't watched network tv in their lives.

Relying on illegal activity to balance the market is not a sound strategy. That is what's driving the push for more "enforcement" by ISPs shutting off people's internet and the attacks on fair use.

elasto wrote:But, can I summarise your argument as this?

Netflix buys some material from company A who produced it. You would like Hulu (say) to be able to buy that material too, paying the same price.

Well, as I say, that's trivial for A to bypass. When they produce the material, they produce it via shell-company A1. Instead of licencing the material to Netflix, they sell company A1 to Netflix instead, whereby A1 licences it to Netflix at an exorbitant (but meaningless) fee.

This is just a work for hire. That's already a way that Amazon or Netflix "originals" get made now.

elasto wrote:What if A wants to licence the show to Netflix and Hulu but not Amazon? They can't sell A1 to both, right? Sure, but it's still trivial to bypass.

They create shell-companies A1 and A2 which have the same show but with trivial differences to the editing, say. They sell A1 to Netflix and A2 to Hulu. Amazon remains locked out.

This trick wouldn't work because the work A2 owned would be infringing on the work owned by A1. So A1 could sue A2 and maybe A as well. Besides, if more than one company is interested, why would A do that when they can retain the ownership of the copyright and sell licenses to both A1 and A2.

elasto wrote:
It would also solve the problem of strategic patent licensing. You couldn't license a patent to one company who would undermine a competitor without giving your competitor equal access to the patented technology or giving it up yourself.


Also not true. You simply sell 50% of the shell-company to the preferred partner, meaning you and they can both get back your own ongoing licence fees, whereas the competitor can't. (The 50% you sell the shell-company for is actually the true licence fee you are charging.)

Only one company can hold the IP, so that doesn't work either.

elasto wrote:The fix [for patent trolls] lies in reforming the court system not the patent system.

I agree that we need to reform the court system, but changing IP laws to make them less easy to abuse would help too. There are trolls who do what they do legally (e.g. "on the internet" and submarine patents), so the problem won't be entirely solved by working on just one or the other.

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Re: Are patents/IP good for innovation?

Postby SuicideJunkie » Wed Feb 21, 2018 4:12 pm UTC

Shell companies aren't going to sue their true master because that's the point of the scheme.

The shell company is the only one that owns the IP, licenses it for one beeelion dollars, and only the two companies that are each holding 50% stock ownership get their money back. Limited only by taxes and accountant fees to bury the profits in matching expenses.

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Re: Are patents/IP good for innovation?

Postby slinches » Wed Feb 21, 2018 5:54 pm UTC

SuicideJunkie wrote:Shell companies aren't going to sue their true master because that's the point of the scheme.

The shell company is the only one that owns the IP, licenses it for one beeelion dollars, and only the two companies that are each holding 50% stock ownership get their money back. Limited only by taxes and accountant fees to bury the profits in matching expenses.

What does that accomplish? The original company could just hold onto the IP and not license it without creating the shell company and it would do the same thing.

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Re: Are patents/IP good for innovation?

Postby Jorpho » Wed Feb 21, 2018 6:31 pm UTC

cphite wrote:That being said, while I don't know exactly how the details would work, I wouldn't be opposed to some kind of appeal process for patents where it can be shown conclusively they are not being utilized.
I'm pretty sure compelling a company to license a patent when they would otherwise refuse to do so is a thing.
Last edited by Jorpho on Fri Feb 23, 2018 3:20 am UTC, edited 1 time in total.

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Re: Are patents/IP good for innovation?

Postby SuicideJunkie » Thu Feb 22, 2018 3:35 pm UTC

slinches wrote:
SuicideJunkie wrote:Shell companies aren't going to sue their true master because that's the point of the scheme.

The shell company is the only one that owns the IP, licenses it for one beeelion dollars, and only the two companies that are each holding 50% stock ownership get their money back. Limited only by taxes and accountant fees to bury the profits in matching expenses.

What does that accomplish? The original company could just hold onto the IP and not license it without creating the shell company and it would do the same thing.
It accomplishes the workaround that the thread has been on about for the last while.
Allowing company A to effectively license or sell stuff to company B while shutting out company C, despite the suggested solutions.

I'm just trying to expand the explanation since it wasn't clear enough before.
The license is simply set at a silly high price for everybody. Everyone is free to buy it, but the select few you've given shares to are the only ones who get their money back after paying the ludicrous fee. The chosen ones thus get it for the price they would have before, and everyone else is still locked out. (if they buy it anyways, well, you're up a billion dollars so you can't complain)

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Re: Are patents/IP good for innovation?

Postby slinches » Thu Feb 22, 2018 5:35 pm UTC

SuicideJunkie wrote:
slinches wrote:
SuicideJunkie wrote:Shell companies aren't going to sue their true master because that's the point of the scheme.

The shell company is the only one that owns the IP, licenses it for one beeelion dollars, and only the two companies that are each holding 50% stock ownership get their money back. Limited only by taxes and accountant fees to bury the profits in matching expenses.

What does that accomplish? The original company could just hold onto the IP and not license it without creating the shell company and it would do the same thing.
It accomplishes the workaround that the thread has been on about for the last while.
Allowing company A to effectively license or sell stuff to company B while shutting out company C, despite the suggested solutions.

I'm just trying to expand the explanation since it wasn't clear enough before.
The license is simply set at a silly high price for everybody. Everyone is free to buy it, but the select few you've given shares to are the only ones who get their money back after paying the ludicrous fee. The chosen ones thus get it for the price they would have before, and everyone else is still locked out. (if they buy it anyways, well, you're up a billion dollars so you can't complain)

And what I've been trying to say is that it's not a very effective workaround. If it's one company that creates a shell and "buys" its own license, then there's no difference to just keeping it. And if N companies share ownership of a shell that then licenses out the IP, then unless they're committing accounting fraud, only the company that originates the IP would get back their full fee. Other companies who buy in would only get back 1/N of their license cost. So the highest barrier that they could create is 2x of the IP's true market value.

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Re: Are patents/IP good for innovation?

Postby SuicideJunkie » Thu Feb 22, 2018 9:18 pm UTC

slinches wrote:And what I've been trying to say is that it's not a very effective workaround. If it's one company that creates a shell and "buys" its own license, then there's no difference to just keeping it.
The difference from keeping it, is that there is now a 'market price' for the license according to the new rules, and as I understand the proposal, anybody should then be able to buy at that price.
And if N companies share ownership of a shell that then licenses out the IP, then unless they're committing accounting fraud, only the company that originates the IP would get back their full fee. Other companies who buy in would only get back 1/N of their license cost. So the highest barrier that they could create is 2x of the IP's true market value.
Each of the N companies buys a license, and each gets 1/N of the license costs back for each purchase because they own 1/N of the company. N/N = 1 for a full refund when the dust settles.
The only net payment is buying shares of the spinoff/shell company before the licenses go up for sale.

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Re: Are patents/IP good for innovation?

Postby slinches » Thu Feb 22, 2018 9:33 pm UTC

SuicideJunkie wrote:Each of the N companies buys a license, and each gets 1/N of the license costs back for each purchase because they own 1/N of the company. N/N = 1 for a full refund when the dust settles.
The only net payment is buying shares of the spinoff/shell company before the licenses go up for sale.

Except that would be clear grounds for a collusion suit by anyone not part of the original deal. The only way that could work is if they collaboratively funded the IP creation in the first place. Then collectively setting a price would be justifiable.

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Re: Are patents/IP good for innovation?

Postby qetzal » Fri Feb 23, 2018 5:09 pm UTC

Are you suggesting this scheme specifically as a way to deal with patent trolls? If so, I don't understand why this is a good solution. Patent trolling i about trying to force people to license patents that don't really need, or that should never have even been granted. The better solution to that, IMO, is to (a) tighten the patenting process so that fewer "bad" patents are granted, and the ones that slip through are easier to invalidate; and (b) make it harder for companies to assert infringement under unreasonable circumstances. Obviously, the details of how to do that could be hugely challenging, and at some point you have to balance the benefit of reduced patent trolling with the negative of potential harms to "legitimate" patent-holders.

Or do you think more generally that exclusive licensing of patents is bad policy? If so, can you explain why you think that?

Suppose I'm an academic researcher and I invent and patent a potential drug molecule. There's no way I (the inventor) or my university (the assignee) can actually get that molecule approved as a drug so that it can be sold in the US, EU, etc. The only way to benefit from that patent is to license it to someone who has the ability to commercialize it. E.g. a pharma company, a biotech, or the like. But none of them will want to license my patent unless they can have an exclusive license. Under your proposal, if one of them did license and develop it, their competitors could just wait to see if it's successful. If so, then they could get the same license terms and sell the drug as well, without having to pay most of the enormous costs associated with actually getting the drug to the market.

So, if I understand your proposal correctly, my invention becomes worthless to me and my university. I'm using drug patents as an example, because it's probably the most extreme situation, but I think there are plenty of other situations where my ability to benefit from my invention would be significantly reduced under your proposal.

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Re: Are patents/IP good for innovation?

Postby slinches » Fri Feb 23, 2018 7:50 pm UTC

No, I'm not trying to solve the troll problem with patents. I think the non-exclusivity requirement will help with that some, but not solve it entirely.

I think a big problem with exclusive licensing is that it can be too easily used for anti-competitive practices. I'd prefer it be an all or nothing thing. Either the company thinks the IP is important enough to them that they hold onto it themselves or they license it to whoever is willing to pay them for it. Since IP is essentially a grant of monopoly, I think some of the basic FRAND (fair, reasonable and non-descriminatory) principles that are enforced on essential patents for certain sectors of the technology market should be applicable to all IP. The idea is to keep a lot of the utility, but eliminate as much of the "strategic" use as possible.

As for your drug example, that's why I proposed leaving in the ability to assign patents and works for hire. In your case, you would have to begin negotiations prior to the patent being granted so that you can assign it to the drug company who plans to test and develop it commercially. Then they would own the IP and could choose to license it or not on their terms.

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Re: Are patents/IP good for innovation?

Postby CorruptUser » Sat Feb 24, 2018 12:12 am UTC

To deal with patent trolls, just have a rule where if you neither created the patent nor meaningfully used it in a reasonable timeframe, you can NOT claim damages in court.

For drugs, I just want one very simple rule change. No exclusivity for drugs, not directly, but if you sell a drug for $50 a pill in Spain, EVERYONE can sell the drug anywhere so long as they pay you $50 a pill. So you still get to undercut everyone since they have to manufacture and market and still pay you $50, but you can't sell for $50 in Spain and $3500 in the US.
Last edited by CorruptUser on Sat Feb 24, 2018 12:15 am UTC, edited 1 time in total.

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Re: Are patents/IP good for innovation?

Postby reval » Sat Feb 24, 2018 12:13 am UTC

This discussion is so far missing the "information is free" position, according to which Intellectual Property claims are always wrong, and are harmful to innovation and to humanity.

The US Constitution eliminated the other monopolies that enriched European monarchs, but perpetuated patents and copyrights, with which it did great harm to the "progress of the arts and sciences". In the long view back, this may have been a greater crime even than slavery.

Information is free because making the energy cost of making a copy is negligible. Making another sandwich costs energy, but making another copy of an idea does not.

Yes, this means zero "incentive" to creators. A new idea may be a contribution to humanity, but it is never a living or a business. If your idea is worthwhile to another human, then that's your incentive.

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Re: Are patents/IP good for innovation?

Postby ucim » Sat Feb 24, 2018 2:17 am UTC

CorruptUser wrote:For drugs, I just want one very simple rule change. No exclusivity for drugs, not directly, but if you sell a drug for $50 a pill in Spain, EVERYONE can sell the drug anywhere so long as they pay you $50 a pill.
How would you deal with places that simply cannot afford the pill? Especially for contagious diseases. Ch*rp 'em, let 'em die? (...and spread the contagion?) This is just the nation-state version of "The rich get richer, and the poor get the shaft."

reval wrote:This discussion is so far missing the "information is free" position, according to which Intellectual Property claims are always wrong...
...perhaps because that POV is totally wrong.

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Re: Are patents/IP good for innovation?

Postby Pfhorrest » Sat Feb 24, 2018 2:21 am UTC

reval wrote:This discussion is so far missing the "information is free" position, according to which Intellectual Property claims are always wrong, and are harmful to innovation and to humanity.

The US Constitution eliminated the other monopolies that enriched European monarchs, but perpetuated patents and copyrights, with which it did great harm to the "progress of the arts and sciences". In the long view back, this may have been a greater crime even than slavery.

Information is free because making the energy cost of making a copy is negligible. Making another sandwich costs energy, but making another copy of an idea does not.

Yes, this means zero "incentive" to creators. A new idea may be a contribution to humanity, but it is never a living or a business. If your idea is worthwhile to another human, then that's your incentive.

I for one am glad someone is finally talking sense in this thread. Thank you.
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Re: Are patents/IP good for innovation?

Postby CorruptUser » Sat Feb 24, 2018 2:21 am UTC

ucim wrote:
CorruptUser wrote:For drugs, I just want one very simple rule change. No exclusivity for drugs, not directly, but if you sell a drug for $50 a pill in Spain, EVERYONE can sell the drug anywhere so long as they pay you $50 a pill.
How would you deal with places that simply cannot afford the pill? Especially for contagious diseases. Ch*rp 'em, let 'em die? (...and spread the contagion?) This is just the nation-state version of "The rich get richer, and the poor get the shaft."


I think you are splitting hairs here. I'm not suggesting that the pills available at cost in the Congo should be the basis, just the pills in developed countries.

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Re: Are patents/IP good for innovation?

Postby ucim » Sat Feb 24, 2018 3:24 am UTC

CorruptUser wrote:I think you are splitting hairs here. I'm not suggesting that the pills available at cost in the Congo should be the basis, just the pills in developed countries.
Yes, that was what you were suggesting. You did not restrict it to developed countries - but even so, who shall keep the list of "developed" vs "developing" countries, and how do you want to manage the binary assignment of what is a vast grey area?

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Re: Are patents/IP good for innovation?

Postby qetzal » Sat Feb 24, 2018 3:37 am UTC

Inventions are free could work fine in some fields. Especially where the inventor can commercialize the invention rapidly and benefit for a period of time just based on his head start over orhers.

But what do you think it would do in fields where there’s a huge lag between invention and commercialization? Do you think drug companies will spend hundreds of millions to prove a drug works, if the moment they do so some competitor can make the same drug and take away the market?

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Re: Are patents/IP good for innovation?

Postby Pfhorrest » Sat Feb 24, 2018 3:42 am UTC

Maybe medical research should be done in a publicly funded academic setting for the betterment of mankind and not be beholden to the whims of the market?
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Re: Are patents/IP good for innovation?

Postby qetzal » Sat Feb 24, 2018 3:54 am UTC

Yeah, that’s a possible option I suppose. Of course, that could happen right now, without changing the patent system at all. But in fact, academics virtually never take new drug discoveries through to approval and commercialization. I suspect there are lessons to be learned from that observation, but under the right circumstances, maybe that would work just fine.


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