Subject: Re: Examples needed against Soft Patents
From: Taran Rampersad <cnd@knowprose.com>
Date: Tue, 25 Jan 2005 13:10:45 -0500

Stephen J. Turnbull wrote:

>>>>>>"Taran" == Taran Rampersad <cnd@knowprose.com> writes:
>>>>>>            
>>>>>>
>
>    Taran> True. But there is increasingly little liberty of choice
>    Taran> between protection of secrecy or protection of law.
>
>You're free to jump off a 1000m cliff, but choose not to do it for
>obvious reasons.  That doesn't make you any less free, nor does it
>prevent you from deciding to do so anyway, perhaps because you've
>acquired a hang-glider.
>  
>
But it certainly does make one choice more forced than others.

>    Taran> But to make financial gain off of a patent which does not
>    Taran> make people think of better ways to do things - I believe
>    Taran> that this stifles innovation.
>
>Why do you think that?  Of course it doesn't make the patent-holder
>think of better ways to do things.  But (1) it prevents _others_ from
>thinking real hard in order to come up with the same way of doing
>things---presumably much of that energy will be redirected to novelty.
>And (2) it gives strong incentives for _other_ people to either come
>up with alternative methods for doing the same thing, or with methods
>to extend the patent so that they can collect some of the profit.
>
>Sure, there are practical problems; the question is whether the
>practical problems of secrecy and duplication of effort with trade
>secrets are outweighed by the practical problems of patents.
>  
>
If you and I add 1+1 and come up with 2, we have the same knowledge. I
may have counted my fingers, you may have automagically determined the
number in your head. I can prove my process, you cannot prove yours. If
I patent my process, you have to pay me every time you add 1+1. Do you
understand me better?

>    Taran> I'm no economist, but that seems like a form of inflation
>    Taran> with no real rewards for consistent innovation.
>
>The reward for consistent innovation is consistently increasing
>wealth.  That's quite real; of course many, perhaps most, people are
>satisfied with a modest amount of wealth.
>  
>
OK, fine - look at Monsanto, when it comes to GM crops - a company
presently suing farmers for piracy because they are saving seeds instead
of purchasing seeds from Monsanto for the next year. Now, all of this
knowledge is in the 'public domain' on *how* Monsanto created new GM
crops, but to use it you have to pay Monsanto. So Monsanto gets larger,
and buys over it's competition - as it is doing - meanwhile the farmers
around the world cannot benefit because of Monsanto's licensing.

Is Monsanto innovating? Yes. But that same patent process keeps the rest
of the world from being able to use the same technology without paying
Monsanto, which of course a lot of money for R&D. An amount which not
anyone - including most developing countries - can afford. So patents in
this case are actually keeping developing countries - developing. Oddly
enough, China is the only country with publicly available information on
GM crops. In the rest of the world, these GM crops - which could help
feed a lot of people - are not feeding these people. Where's the value
there?

>    Taran> Err. You agreed with me. By becoming making trade secrets
>    Taran> more risky, it takes away from the capacity of having trade
>    Taran> secrets.
>
>That's what I said, but it's not what you said.  What you said was
>absolute:
>
>    Taran> it takes away the capacity to have trade secrets,
>
>    Taran> And patenting is the withholding of knowledge on public
>    Taran> display. You can see it, but you can't buy it if you cannot
>    Taran> afford it.
>  
>
I suppose to someone who is on the other end of the stick, it would seem
more absolute.

>What else is new?  That's what the market is all about, keeping people
>who are unwilling to pay the price from acquiring the goods.
>  
>
The 'goods'? In the case of software patents, the 'goods' are things
that a gifted teenager with imagination and a keyboard could develop on
their own. So these 'goods', as you call them - they are actually just
little flags claiming 'who patented it first'.

>This often results in unfair outcomes, but it is much more effective
>to fix the income distribution so people can afford what they need,
>rather than breaking the market, in most cases.  There's no general
>reason why this wouldn't be true for markets in patents, too.
>  
>
I don't think there's a system that has fixed income distribution... is
there a system that has 'fixed' problems created by such issues? I
honestly don't think a system that fixing income distribution systems is
a plausible answer, because the people fixing them tend to be too far
removed from 'what the people need'. Instead, such systems tend to give
'what we think they need based on statistics'.

>    Taran> This is bad news for SMEs.
>
>Not at all.  It turns out that this is pretty much wholly transparent
>to SME vs. large corporation (at least in theory, I'm unaware of
>empirical followups).  It is simply a cost, which is more or less
>offset by R&D that doesn't need to be done, and by implicit costs of
>products that would be impossible if the patented technology had not
>been invented.
>  
>
A farmer is a SME. A farmer may actually come up with a new seed which
is better through natural evolution, but if that farmer has ever bought
seed from Monsanto - or knew someone who had this seed... do you think
Monsanto's lawyers would accept 'natural evolution'? Do you think the
farmer would rush out to patent a naturally evolved seed?

Software is not too different.

>And in fact, there are several antitrust cases where it was argued
>that a group of SMEs received above-normal profit because of the
>barrier to entry created by a patent that they all had to license.
>
>The big advantage that a large corporation has is the use of its own
>patent portfolio in patent pools and other cross-licensing schemes.
>
>    Taran> A 'spite-economy'? And tell me, how is a system which
>    Taran> increases the overhead of a business startup not spiteful?
>    Taran> How is a system that rewards whoever holds the most patents
>    Taran> instead of who creates the most patents not spiteful?
>
>First, whatever definition of "spite" you're using is not in any
>dictionary I have access to.
>  
>
Again, you're not on this side of the stick. Spite is a relative term,
so it probably is in the dictionary. You probably don't understand the
perspective from which I am writing. I'm trying to remedy that.

>Second, the system doesn't reward anybody who merely holds patents.
>They have to put them to productive use.  It's the same as any other
>asset; people with money can buy them, and receive interest although
>they do not work.  Thus, there are rentiers, but that is an
>unavoidable side effect of the creation of transferable productive
>assets.
>  
>
If you can license patents, I suppose that's considered 'productive
use'. It's income for the duration of the patent. If one has a trade
secret, then it has to be in productive use or you won't profit. And if
it's in a competitive market, that trade secret will be circumvented
somehow. It always does.

The present system, and changes in the present system, only profit
people who can afford large sums of money for R&D. For people with
access to those large sums of money, I guess patents are OK - but one
has to realize that the majority of the *world* does not have such
access. And yet the majority of the world has these patent laws being
crammed down their throats. This is bigger than a one country economy.
I'm not an economist, but as an entrepeneur, I can tell you plainly that
trying to get a patent in most of the developing world is a very arduous
and time consuming process which is also very expensive. Prohibitively so.

>A world without capital is not an unethical dream, but it would
>certainly be materially much poorer than the one we live in.  Nor is
>there much evidence that the smaller amount of wealth would be
>sufficiently fairly distributed to make up for the shrinkage of the
>pie, either.
>  
>
No idea where this came from. We're not talking about the removal of
capital. We are talking about a patent/trade secret system which is more
balanced. The capital remains - it always does. If you're referring to
patents as capital, then we haven't been discussing things in the same way.

In my world, a SME startup might have to get a loan to start operation,
and if there's an added cost of patent licensing in it, then it's likely
less SME's will actually start up. And the SME's that do start up will
have a higher cost, and may very well be paying their competition to do
R&D to stay ahead of them. So the cost to the consumer goes up - much
like reselling bandwidth - but does the value go up? No, the value
remains the same more than likely. Because a patent based on another
patent has to pay licensing fees as well.

So this does seem like artificial inflation which already exists which
would be what you perceive as capital. But capital is a relative term as
well, and in this case the capital of the market may very well be a
liability to the future of the market. If we artificially inflate an
industry, such as technology, but all other industries remain the same,
then the buying power of the average person can purchase less technology
with their budget.

There's a lot of food for thought for myself here... maybe others... but
one of the points I am trying to make is that artificially inflating any
industry over another has the capacity to diminish the market size. I
live next door to people without computers, and who don't use technology
already because their income does not permit them to do so - their
priorities are on other things. So by artificially inflating technology,
and the same patent system artificially inflating the cost of food,
guess which one will win? Food. At the end of the day, at the bottom of
the chain, there are people. And I don't see how the patent system being
discussed gives more value to the end-consumers for the additional cost,
and I don't see how this patent system allows for competition outside of
the small portion of the developed world which generates these patents.

To me, it all seems like a rear-guard action to stay at the top of the
hill. And I don't see how that is anything but spiteful.... But again,
our perspectives differ.

-- 
Taran Rampersad

cnd@knowprose.com

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