Intellectual property, legal inefficiency and micro-economic reform

This story on slashdot is an excellent example of how debauched intellectual property is as a means of stimulating research, development and innovation:

As we discussed on Tuesday, Andre Geim won this year’s Nobel prize in physics for graphene, but he never patented it. In an interview with Nature News, he explains why: ‘We considered patenting; we prepared a patent and it was nearly filed. Then I had an interaction with a big, multinational electronics company. I approached a guy at a conference and said, “We’ve got this patent coming up, would you be interested in sponsoring it over the years?” It’s quite expensive to keep a patent alive for 20 years. The guy told me, “We are looking at graphene, and it might have a future in the long term. If after ten years we find it’s really as good as it promises, we will put a hundred patent lawyers on it to write a hundred patents a day, and you will spend the rest of your life, and the gross domestic product of your little island, suing us.” That’s a direct quote.

Of course this doesn’t just point to the inadequacies of the intellectual property system. It points to the extraordinary inefficiencies of our legal system. You’d think it might have been targeted for micro-economic reform by now, but because micro-economic reform became a deregulatory formula long ago the best that economists can manage is to argue for deregulation of advocacy, which may or may not be a good idea. But there are much bigger problems than that.

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10 Responses to Intellectual property, legal inefficiency and micro-economic reform

  1. Tel says:

    They tried that one on with the CSIRO and their wireless LAN patent, but gradually the big electronics companies are giving up and just paying CSIRO royalties instead. The business of “you will spend the rest of your life, and the gross domestic product of your little island, suing us” is easily defeated by just selling the rights over to some institutional investor who happens to take on IP cases — they get on with the job of litigation, you get on with the job on invention. That’s the magic of trade!

    Since Graphene is naturally occurring in flakes of graphite anyhow, it would be difficult to patent the material itself (although anything goes in today’s world of legal fiction). However, I’d guess that a patent for particular industrial applications of graphene (stuff that you can’t do with plain graphite like rolling up a nanotube, or building electrical components) would be solid. Such patents can be written anyhow, regardless of whether Andre Geim gets a prize for published work, because there’s no way Andre could possibly publish all the possible industrial applications, so you should expect to see hundreds of lawyers drafting hundreds of patents regardless of what else happens.

    From doing a bit of reading I note that the Nobel prize was awarded not for “discovering” graphene but for being able to take measurements of some of it’s more unique properties. Although you could patent the methodology used to make those measurements, I suspect it would be very difficult to patent the results of the measurements themselves (which are just properties of the physical universe after all).

  2. conrad says:

    “Since Graphene is naturally occurring in flakes of graphite anyhow, it would be difficult to patent the material itself (although anything goes in today’s world of legal fiction)”

    Not that I know anything about patents, but simply finding something that simply exists is what occurs when people try to patent bits of DNA, and I can’t really see how finding some novel aspect of some material is much different. So perhaps the legal fiction aspect could have been used!

  3. Glen says:

    One of the first patents granted in England for an invention occurred in 1559, to an Italian, Giacopo Acontio, who prefaced his application by writing that, “nothing is more honest than that those who by searching have found out things useful to the public should have some fruit of their rights and labours, as meanwhile they abandon all other modes of gain, are at much expense in experiments, and often sustain much loss.” He went on to say that he had invented certain furnaces and wheel-machines which others would copy without remunerating him unless he were protected. The patent was subsequently granted to him in September 1565.

    This is the basic problem with changing the patent system. Unless you want to encourage rent-seeking, where Australians (or whoever abolishes their patent system), ride on the coat-tails of others who have patent systems.

    Actually, none of the complaints about the patent system are new – they have been made throughout the last couple of centuries, all the time while the patent system has endured. See if you can come up with a better system.

    Or else review the experience of countries that have abolished or restricted their patent system. Some countries would not allow patents for pharmaceuticals or medicine in the past – for example, Italy until the 1980’s or more recently India and Thailand, until they joined the WTO. These countries now all have modern patent systems; the rest of the world tolerated their rent-seeking for only so long; though they did manage to create some generic pharmaceutical industries, now mostly owned by the pharmaceutical multinationals, ironically.

    As for Andre Geim, this just goes to show that you can be foolish (and gullible), and still win a Nobel Prize. You have to wonder why did he believe what he was told by some guy who would have had a vested interest, and so gave up on getting a patent without checking this out. Over a hundred thousand patent applications are filed each year, many by small entities, so the system does work. You can only feel sorry for his employer, who would have benefited hugely from any patent.

    But quite possibly this story is now entirely accurate – I suspect that he may not have gotten a patent anyway, or one that would have been commercial; usually the real world situation is more complex than people say. The patent system has many checks and balances to minimize its abuse; all developed over the last couple of centuries, during which time it has functioned effectively.

  4. Tom N. says:

    Hi Nick,

    This is a bit off-topic and somewhat unusual, but I don’t have your phone number and … I am doing some work right now (at 6pm on a Sunday – with an urgent deadline) on Australia’s IP laws and would appreciate if you could chat through a few issues with you. In particular, I want to pick your brains on a few points from you 1996 IC paper (jointly authored with Bruce and Prior). Can you send me an email with your number and I’ll give you a call.

    Thanks, Tom

  5. Tel says:

    Actually, none of the complaints about the patent system are new – they have been made throughout the last couple of centuries, all the time while the patent system has endured. See if you can come up with a better system.

    Complaints about bullying are nothing new either, and still the practice endures. See if you could design a better bully.

    Over a hundred thousand patent applications are filed each year, many by small entities, so the system does work.

    Most filings are defensive, people file not to protect their work from copying but to protect themselves from the patent system. Also, you forgot to mention that the number of applications is accelerating every year, and the volume of litigation is also accelerating. This is a genuinely new complaint about the patent system — how is it sustainable for our society to shift an ever increasing proportion of our productive capacity into the business of arguing over where our productive capacity comes from? Another new complaint is the stagnation imposed by the large number of possible infringements triggered by even a relatively minor technological effort. We have reached the stage where it is basically impossible to build anything without at least risk of patent infringement.

    The patent system has many checks and balances to minimize its abuse; all developed over the last couple of centuries, during which time it has functioned effectively.

    James Gosling had some interesting remarks about “checks and balances”, with their competition at Sun: “see who could get the goofiest patent through the system”. Those same goofy patents are now going to cost some hundred million in legal fees between Oracle and Google long after Sun released the entire Java system under General Public License. Personally I expect that Oracle will lose, but only after vast amount of pointless waste of resources. In the meantime, people who invested their time and effort learning Java are now in the difficult position of uncertainty.

  6. Mango says:

    This is also a little off-topic – but this was the closest (recent) relevant blog post I could find.
    I heard you this morning (Tuesday 12th) on 666 ABC radio Canberra, and your thoughts were music to my ears (no pun intended).
    A number of times I have been introduced to a particular musical artist by a friend giving me a ‘mix tape’ – and I have gone on to purchase albums and concert tickets when I otherwise would have not. Similarly, I have shared music with friends who have done the same thing.
    Record companies have not thought and planned ahead. I grow frustrated with them trotting out the ‘poor artist’ line when they invest so heavily into marketing only a handful of acts who they consider ‘commercially viable’. It is the record companies who are losing in the digital age, due to their own lack of planning. Now they are scrambling and taking the most defensive course of action. If they thought it through, I believe they would take a different direction, similar to the one you espouse. They could still turn a profit directing people to their musical tastes.
    On a side note – do you think you could link to a copy of the paper you presented last night? I only caught the last six minutes of your radio interview.
    Regards and thanks in advance.

  7. Glen says:

    @Tel – A couple of comments. I doubt that it is common to file patent applications to “protect themselves from the patent system”. It is expensive to file patent applications, and there is also the requirement to invent something first to base the patent application upon. A patent is only granted on new inventions; to protect yourself from a patent, all that is needed is to publish the subject matter, because once that becomes known, a patent for the same material would not be valid. Publish a description, and you are safe from patents – no need to spend lots of money on preparing patent applications!

    You still haven’t dealt with the core issue of rent-seeking. For example, a pharmaceutical company develops a new drug, at a cost of a $100 million, say, and goes thru the huge effort of getting regulatory approval for it, and sets up a large data collection system to watch for unwanted or dangerous side effects. Without the patent system, a generic drug company can copy the drug, at a cost of, say, $10 million, and ride on the original company’s coattails for regulatory approval and ongoing data collection. The original company has to recover its developments costs of $100 million, by including that in the sale price of its products, whereas the generic company only has to recover its much lesser costs. The generic company will prosper much better than the original company. Development of new drugs will decline, as a consequence. How can you prevent this happening without a patent system?

    Part of the problem with software patents, is that they are only a recent innovation. Only a decade or two ago it was believed that patents could not be obtained for software, and in some countries, that it is still difficult to obtain them. The checks and balances for software patents are deficient as a result, since there is not an appreciation, nor a sufficient set of data in place, to now test for the inventiveness and newness for these patents, and a lot of poor patents squeezed thru, as a consequence.

    Most patent disputes do not end up in courts; not are they numerically very large in number. Most disputes result in licensing and negotiation. In fact, one of the subsidiary benefits of the modern patent system is to encourage cross-licensing, and interaction among all the developers of new technology.

    The countries with the strongest patent systems are also those with the strongest technology development. Europe has a patent system which puts road blocks in front of software and biotechnology industries, and it punches below its weight in these industries – there is a connection. You are right that the use of the patent system is increasing – led by China, and South Korea, who are becoming strong in technology and innovation. The system works – so if you want to replace it with something else, or abolish it, please explain how that can benefit us all?

  8. Nicholas Gruen says:

    Thanks Mango. If you’re talking about my speech to the Music Council, it’s here.

  9. conrad says:

    “You still haven’t dealt with the core issue of rent-seeking. ”

    I don’t think rent seeking goes entirely one way, as you seem to suggest. For example, if I patent a bit of DNA in some plant that has taken perhaps thousands of years to develop, which is most crops we plant today, it seems to me the rent-seeking is in reverse, since I’m asking you to believe that this is a new and unique find when it is not new nor unique at all — all I’ve done is sequenced work done by thousands of others and localized some bit of DNA. That may well include a bit of DNA that does something that causes some expression that people already measure in less sophisticated ways (e.g., growth).

  10. Glen says:

    @conrad

    You misunderstand the patent system. A patent basically stops you from making money from the strand of DNA unless you are the first one to invent a way of making money from it. Patents apply to technology not science. If you find a microorganism that produces petrol from sugarcane, you have invented something, essentially by isolating and purifying that particular microorganism. With a patent, you can stop others from producing petrol from that same microorganism, but you cannot stop anyone investigating that microorganism, (or breeding an improved higher performance strain – tho that gets a bit more complicated legally). Look up the Budapest Treaty – inventors in this situation have to deposit a sample of the microorganism if they want to patent it, and ensure it remains available during the life of the patent, and to allow others to experiment on it, if that experimentation is not commercial. Remember that patents only have a life of 20 years or so – then the invention becomes public property, and they all get published, so the public gets access to the information about the invention.

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