What A Concept: Sharing New Inventions With The World Is Good For The Inventor

from the but...-but...-where-are-the-patents?!?!? dept

If you read the angry comments we get from self-proclaimed "inventors" whenever we write about patents around here, you might get the impression from them that if you can't protect your ideas, there's simply no reason to be an inventor. It looks like Johnny Chung Lee is proving that's simply not true. Lee has made plenty of cool things, some of which have garnered plenty of attention: from his Poor Man's Steadycam to his Wii-based interactive whiteboard. But none of his inventions have garnered as much attention as his YouTube video of his headtracking virtual reality system for the Wii, which became a YouTube sensation:
The New York Times now has an article noting all of the ways that Lee has benefited from being so public in revealing all of his inventions. Rather than struggling to get known, he's well known all over the place. Plenty of companies came calling trying to hire him, leading to a job he wanted at Microsoft. And, even when he's giving his ideas away for free, he's making some money on the side. The Poor Man's Steadycam, for example, is available to purchase, and Lee has made a quarter of a million dollars from it -- even though he provides full instructions for anyone who wants to build their own. Patent lawyers may cringe, but it would seem that he's doing quite well actively giving away his ideas, rather than trying to lock them up with patent protection.


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    Anonymous Coward, Oct 27th, 2008 @ 4:19pm

    Un-freakin believable

    Kudos to this guy to show other "inventors" that patenting ideas is a double edge sword, and in most cases, will fail you in the end.

    Cant wait to see this idea put into play in the next version of video games (which based on the ease of the concept, could happen sooner rather than later)

     

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    Willton, Oct 27th, 2008 @ 4:49pm

    Make patent lawyers cringe?

    Hardly. Mr. Lee is clearly a inventor-philanthropist. It is clear on the face of the NYT article. These types of inventors have been around for generations. They haven't changed the IP landscape in the past, and there's little reason to think that they'll do so in the future.

     

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      Mike (profile), Oct 27th, 2008 @ 5:33pm

      Re: Make patent lawyers cringe?

      Hardly. Mr. Lee is clearly a inventor-philanthropist.

      I don't think he's a "philanthropist" and I doubt he sees himself as one either. In fact, it's rather condescending to make such a claim.

      Lee finds himself BETTER OFF as a result of these actions, which is different than a philanthropist.

      It's sad that you can't understand the difference.

       

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        Willton, Oct 27th, 2008 @ 6:11pm

        Re: Re: Make patent lawyers cringe?

        Lee finds himself BETTER OFF as a result of these actions, which is different than a philanthropist.

        Perhaps, but it doesn't seem to be directly benefitting monetarily. With the small exception of his Poor Man's Steadycam business (an endeavor he does not appear to be diligently pursuing), the man gives away his inventions, encouraging others to make and use his inventions. He appears to benefit not monetarily, but from making a technological and social impact, or what he calls "wow." I call that a philanthropist: he may be benefitting from a social standpoint, but he does not benefit monetarily.

         

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          Jim, Oct 27th, 2008 @ 7:18pm

          Re: Re: Re: Make patent lawyers cringe?

          Compare his current state with his would-be state (had he tried to patent his ideas).

          Currently he has pursued his hobbies, made money in the short term, become somewhat famous, and landed his desired job.

          Had he "protected himself" he would be in debt from patenting his ideas, he would have to go further in debt to manufacture them (or lose the rights to do so), and he would be at risk of companies "stealing" his ideas.

          Maybe he didn't "directly benefit" from his ideas - but he is clearly benefiting from them. Furthermore, you and I and anyone else technically minded benefit in that he has freely shared his ideas for all to use. The only people who don't win here are the lawyers who have nothing to argue about in court.

          So, are you trying to argue that he would have been better off had he patented and attempted to sell his ideas?

           

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            Willton, Oct 27th, 2008 @ 8:05pm

            Re: Re: Re: Re: Make patent lawyers cringe?

            Compare his current state with his would-be state (had he tried to patent his ideas).

            Currently he has pursued his hobbies, made money in the short term, become somewhat famous, and landed his desired job.

            Had he "protected himself" he would be in debt from patenting his ideas, he would have to go further in debt to manufacture them (or lose the rights to do so), and he would be at risk of companies "stealing" his ideas.


            Yeah, not to mention all those long-term profits from selling products pursuant to his inventions in mass quantities. That really would have sucked. >rolleyesMaybe he didn't "directly benefit" from his ideas - but he is clearly benefiting from them. Furthermore, you and I and anyone else technically minded benefit in that he has freely shared his ideas for all to use. The only people who don't win here are the lawyers who have nothing to argue about in court.

            If Mr. Lee's concern is the interests of "you and I and anyone else technically minded", that would certainly enhance my view that he is a philanthropist.

            So, are you trying to argue that he would have been better off had he patented and attempted to sell his ideas?

            Hardly. Read my post. I am saying that Mr. Lee and people like him have been around for ages, and their choices are not going to have a congizable effect on the IP landscape. I have no idea what is best for Mr. Lee; only Mr. Lee knows that.

             

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              Jim, Oct 27th, 2008 @ 8:39pm

              Re: Re: Re: Re: Re: Make patent lawyers cringe?

              Generally a philanthropist gives in a manner that is good for humanity at a personal cost. Mr. Lee "gave" in a manner that has benefited himself and humanity.

              If he is acting in what he considers to be a truly selfish manner (setting himself up to get free advertisement for sale of his goods and a higher salary), is he still acting philanthropically? It is hard to imagine him being as successful as quickly had he tried to sell his ideas "directly".

              Your point that he will not make a dent in the IP landscape is a bit baffling. This site brings up many examples of the "share the free and charge for the new" business model - this is just one example among many. No one band, business, or person will turn the tide - but it does appear to the casual observer that the internet is allowing free as a business model to become a standard business model.

               

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                Willton, Oct 27th, 2008 @ 9:31pm

                Re: Re: Re: Re: Re: Re: Make patent lawyers cringe?

                Generally a philanthropist gives in a manner that is good for humanity at a personal cost. Mr. Lee "gave" in a manner that has benefited himself and humanity.

                I guess I have a broader definition of philanthropy. I don't see receiving acclaim from the public as a benefit that negates the title of philanthropist. I also do not agree with the idea that receiving a job offer as a result of one's seemingly philanthropic actions negates the philanthropic aspect of such actions.

                If he is acting in what he considers to be a truly selfish manner (setting himself up to get free advertisement for sale of his goods and a higher salary), is he still acting philanthropically?

                I would say no, but since he's not selling any goods (he no longer carries a supply of his Poor Man's Steadycam, and he never sold any of his other inventions), I don't see why you bring this up.

                It is hard to imagine him being as successful as quickly had he tried to sell his ideas "directly".

                Perhaps, but it is, in my mind, very easy to imagine him being more successful selling products pursuant to his inventions over a long period of time. Most business ventures tend to take a long time before they reach a level more profitable than Mr. Lee's salary, but many of them do and reward the entrepreneur accordingly. Again, just ask Mr. Lee's employer.

                Your point that he will not make a dent in the IP landscape is a bit baffling. This site brings up many examples of the "share the free and charge for the new" business model - this is just one example among many. No one band, business, or person will turn the tide - but it does appear to the casual observer that the internet is allowing free as a business model to become a standard business model.

                But this is not an example of "free as a business model"; this is an example of building one's resume. Mr. Lee is not using "free as a business model" because Mr. Le is not running a business - hence, he has no business model.

                 

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                  Mike (profile), Oct 27th, 2008 @ 9:40pm

                  Re: Re: Re: Re: Re: Re: Re: Make patent lawyers cringe?

                  But this is not an example of "free as a business model"; this is an example of building one's resume. Mr. Lee is not using "free as a business model" because Mr. Le is not running a business - hence, he has no business model.

                  Then you clearly do not understand business models.

                  Building one's resume is one of the most important business models out there.

                   

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                    Willton, Oct 27th, 2008 @ 9:54pm

                    Re: Re: Re: Re: Re: Re: Re: Re: Make patent lawyers cringe?

                    Then you clearly do not understand business models.

                    Building one's resume is one of the most important business models out there.


                    So what's Mr. Lee's business, then? Selling himself? If so, that's an astronomically broad definition of "businessman."

                     

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                      Mike (profile), Oct 27th, 2008 @ 10:19pm

                      Re: Re: Re: Re: Re: Re: Re: Re: Re: Make patent lawyers cringe?

                      So what's Mr. Lee's business, then? Selling himself? If so, that's an astronomically broad definition of "businessman."

                      No, it's actually an extremely accurate definition of a businessman these days. That you do not understand this will likely harm you in your own career. Since you are just starting out, I imagine you will quickly learn that this is very much the definition of a business model in the real world. You would do well to learn that lesson sooner, rather than later.

                       

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          Aaron deOliveira (profile), Oct 27th, 2008 @ 7:56pm

          the opportunity

          did no one catch all the offers he got? his sharing of ideas and his participation in the community have rocketed him into the top 1%. before the digital world, what would you have to achieve to have every major company in your field calling you unsolicited to have you come and work with them.

          Lee basically got to write his own ticket. i don't think he's particularly exceptional in talent, charisma, or accomplishment. you could probably easily find hundreds if not thousands of people with his experience and credentials.

          he rose to the top and and money calling him because he shared his idea and took an active role in the community.

          $$$ was calling him. he could have taken it in any form he wanted. he could have been named VP of this or that with huge bonses and pensions.

          he benifited in a huge way monitarily. he just chose a route that seemed more fulfilling to him.

           

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          Mike (profile), Oct 27th, 2008 @ 8:03pm

          Re: Re: Re: Make patent lawyers cringe?

          Perhaps, but it doesn't seem to be directly benefitting monetarily.

          Getting multiple job offers from many huge companies who were fighting over him? And then getting to land his dream job.

          Uh, I'd say he absolutely benefited monetarily quite a bit.

           

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            Willton, Oct 27th, 2008 @ 8:24pm

            Re: Re: Re: Re: Make patent lawyers cringe?

            Getting multiple job offers from many huge companies who were fighting over him? And then getting to land his dream job.

            Uh, I'd say he absolutely benefited monetarily quite a bit.


            Not directly. Getting a job offer by way of giving away his inventions is an indirect way of benefitting monetarily from doing so, as it is the job that pays him, not his inventions. If Mr. Lee wanted to get paid via his inventions directly, I imagine he would have taken a different course of action.

            I'm sure that MS will pay him well, but I find it difficult to believe that he would not necessarily make more by going into business through the sale of his inventions. Just ask Mr. Lee's employer. What is not a question, however, is that MS is not paying Mr. Lee for his past inventions; they are paying him for his future work.

             

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              Aaron deOliveira (profile), Oct 27th, 2008 @ 9:00pm

              the opportunity

              the point of this article is not that Lee has maximized his income earning potential by working for Microsoft.

              the point is that Lee's work brought him a choice of all he could ever want. $$$ came to him, unsolicited. he didn't do anything directly to gather this money. he just disseminated his ideas. by doing so he got to write his own ticket.

              if what he wanted had been cash money, could he not have asked for millions in signing bonuses, equity stakes, etc. he could have easily gone to the highest bidder.

              in this case, Lee had other interests in mind when he made the decision. i imagine he has a great deal of freedom in projects he can pursue. and he said he decided to work for Microsoft because he saw the company as an avenue to help lots of people.

               

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              Mike (profile), Oct 27th, 2008 @ 9:27pm

              Re: Re: Re: Re: Re: Make patent lawyers cringe?

              Not directly. Getting a job offer by way of giving away his inventions is an indirect way of benefitting monetarily from doing so, as it is the job that pays him, not his inventions.

              Willton, I recognize that you are a law student, not an economist, but it might help in these discussion to learn a bit about basic economics. Mr. Lee was able to get the job *because* of those inventions, and the salary and benefits are at the level they are DIRECTLY because of those inventions.

              What is not a question, however, is that MS is not paying Mr. Lee for his past inventions; they are paying him for his future work.

              Again, this shows a rather surprising lack of understanding of basic economics. The competition between various job offers, and the likely salary level provided due to that competition means that it's quite likely that he's starting at a much higher level than someone just out of college.

              In other words, he used the infinite goods -- his ideas -- to increase the value of the scarce goods -- his time and work. So, it's rather disingenuous to claim that MS is not paying for those past inventions.

              But, more importantly, in what sort of world do you think it's less than optimal where a company pays someone for future work, rather than past work. I see that as a much more efficient solution.

              Do you keep getting paid for the work you did last week?

               

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                Willton, Oct 27th, 2008 @ 10:27pm

                Re: Re: Re: Re: Re: Re: Make patent lawyers cringe?

                Willton, I recognize that you are a law student, not an economist, but it might help in these discussion to learn a bit about basic economics. Mr. Lee was able to get the job *because* of those inventions, and the salary and benefits are at the level they are DIRECTLY because of those inventions.

                Which means that he is being paid directly by his employer, not by his inventions or the sale thereof. His salary from MS is an indirect result of the creation of his inventions. I recognize that you are a business consultant, not a logician, but it might help in this discussion to learn a bit about basic logic.

                Again, this shows a rather surprising lack of understanding of basic economics. The competition between various job offers, and the likely salary level provided due to that competition means that it's quite likely that he's starting at a much higher level than someone just out of college.

                In other words, he used the infinite goods -- his ideas -- to increase the value of the scarce goods -- his time and work. So, it's rather disingenuous to claim that MS is not paying for those past inventions.


                Why? It's not like MS is paying Lee so that they may use his inventions. Just like if I were to clerk for a judge and then get a bonus from a law firm as a result of that clerkship, the firm is not paying me for my work as a clerk, but for the work I will do for them in the future. Mr. Lee's inventions are resume builders, not products that he's selling. There is a difference between paying someone for something and paying someone because of something.

                But, more importantly, in what sort of world do you think it's less than optimal where a company pays someone for future work, rather than past work. I see that as a much more efficient solution.

                In a employer-employee relationship, I agree, but that is not necessarily so in a buyer-seller relationship. As a buyer, I typically don't pay someone to build me a television in the future; I prefer to wait for that television to be built before I deliver payment.

                Do you keep getting paid for the work you did last week?

                Only if I continue to sell that work to other people.

                 

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                  Mike (profile), Oct 28th, 2008 @ 12:24am

                  Re: Re: Re: Re: Re: Re: Re: Make patent lawyers cringe?

                  Which means that he is being paid directly by his employer, not by his inventions or the sale thereof. His salary from MS is an indirect result of the creation of his inventions.

                  No, the level of salary and the position he is in is a DIRECT result of his inventions. To deny this is to deny reality. He would not be in those positions without those inventions. It's as simple as that.

                  I recognize that you are a business consultant, not a logician, but it might help in this discussion to learn a bit about basic logic.

                  I taught logic at the college level, and my students did quite well, thank you very much. If you believe I have made a logic error, I would suggest you point it out.

                  However, considering in this discussion you have shown that you do not understand economics, basic business or the definition of rather common words, to have you lecture me on logic is rather amusing.

                  Why? It's not like MS is paying Lee so that they may use his inventions.

                  No one said they were paying him to use the inventions, but they're paying him more BECAUSE of the inventions. It's the promise that if he can do that, he can do a lot more for MS.

                  Just like if I were to clerk for a judge and then get a bonus from a law firm as a result of that clerkship, the firm is not paying me for my work as a clerk, but for the work I will do for them in the future

                  But the reason they believe you are worth more is because of the work you did in the clerkship. In other words, as a DIRECT (yes, DIRECT) result of your work, you are getting paid more.


                  In a employer-employee relationship, I agree, but that is not necessarily so in a buyer-seller relationship. As a buyer, I typically don't pay someone to build me a television in the future; I prefer to wait for that television to be built before I deliver payment.


                  Ah, but that's different. We're talking about the difference between scarce goods and infinite goods. It's quite common to pay for scarce goods -- and that includes a television *or* contracting for services to be done. But paying for infinite goods in the past doesn't make much sense.

                   

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          nasch, Oct 28th, 2008 @ 9:05am

          Re: Re: Re: Make patent lawyers cringe?

          Perhaps, but it doesn't seem to be directly benefitting monetarily. With the small exception of his Poor Man's Steadycam business

          I consider myself to be doing pretty well financially, but in my book you have to be bordering on stinking rich to consider a quarter million dollars a small exception. If my rule was I don't make any money, with the small exception of $250,000 here and there, I would be quite happy with that rule!

           

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            Willton, Oct 28th, 2008 @ 9:39am

            Re: Re: Re: Re: Make patent lawyers cringe?

            I consider myself to be doing pretty well financially, but in my book you have to be bordering on stinking rich to consider a quarter million dollars a small exception. If my rule was I don't make any money, with the small exception of $250,000 here and there, I would be quite happy with that rule!

            Looks like you did not read the article. That $250,000 was generated over a span of 5 years. I don't know about you, but I imagine that a businessman would not consider $50k a year to be hugely successful. Furthermore, that $50k per year is merely revenue, not profit, so it's likely that Mr. Lee was not taking all of that $50k per year home with him.

            And finally, the article indicates that Mr. Lee has stopped manufacturing his Poor Man's Steadycam, as he has been out of supply for over a year. So, it appears that this $250k may be the peak of that revenue source, even though it did not have to be.

             

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              nasch, Oct 29th, 2008 @ 8:36am

              Re: Re: Re: Re: Re: Make patent lawyers cringe?

              And still, you consider $50K a year in revenue to be an insignificant amount of money? We don't know how much he profited, but A) he was bringing money in B) he was doing something he enjoyed and C) it probably wasn't his only source of income anyway. Just the first two are more than many people ever achieve.

               

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                Anonymous Coward, Oct 29th, 2008 @ 9:33am

                Re: Re: Re: Re: Re: Re: Make patent lawyers cringe?

                And still, you consider $50K a year in revenue to be an insignificant amount of money?

                For someone who is getting a PhD in a highly valuable field at one of the best engineering schools in the country, and for someone other than Mr. Lee who would likely profit much more if he diligently pursued the same endeavor, yes, I do. $50k a year for 5 years is nice to have, but it's not the sign of a very successful business man.

                I'm not saying that Mr. Lee is right or wrong for not diligently pursuing this business. I'm saying that his doing so evidences a limited interest in making money. Most inventors do not have such a limited interest when marketing their inventions. Mr. Lee appears to have different (some would say higher) interests regardin his inventions.

                 

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    angry dude, Oct 27th, 2008 @ 6:01pm

    T-shirts, idiots

    Start selling t-shirts, LOOOOOOOOOOOOOOOTTTSS of them

    But seriously, if you think that being hired by MShit is something every inventor wants then you don't know shit about real inventors and entrepreneurs
    Suing Mshit is fine with me, but working for BillyG and that fat asshole Stevie ?
    Thanks, but no thanks

     

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      Jim, Oct 27th, 2008 @ 7:20pm

      Re: T-shirts, idiots

      It may not be the average techy's dream - but it was his goal. He got what he wanted, which is more than a lot of people can say. Being angry seems cool and all, but maybe he prefers a lighter emotion...?

       

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      dorpass, Oct 27th, 2008 @ 7:22pm

      Re: T-shirts, idiots

      Ahh, everyone's favorite mudila is back. Too busy patenting being angry or going to AA meetings?

      He was looking for that type of job and he got it by showing his inventions, get over it. No one gives a damn about your opinion on what is a "good" job for another person.

       

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        angry dude, Oct 27th, 2008 @ 8:20pm

        Re: Re: T-shirts, idiots

        Blya mudak

        Most of the true inventors and entrepreners in this country do not want to become corporate slaves
        American dream is not about getting regular paycheck from the likes of MShit... never was and never will be...
        Got it, nedoumok ?

         

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          Franssu, Oct 27th, 2008 @ 9:20pm

          Re: Re: Re: T-shirts, idiots

          Are you trying to force your views of the "American dream" on everyone ?

          To me, the American dream is about freedom and accomplishment, the way to achieve the latter being by exercising the first. Nobody (except you) said it was mandatory to be an entrepreneur or to insult people who aren't enough entrepreneur for you.

           

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          Mike (profile), Oct 27th, 2008 @ 9:23pm

          Re: Re: Re: T-shirts, idiots

          Most of the true inventors and entrepreners in this country do not want to become corporate slaves
          American dream is not about getting regular paycheck from the likes of MShit... never was and never will be...
          Got it, nedoumok ?


          Let's try this again, since apparently, you're a bit slow to comprehend: I said that he achieved what he wanted. That was specific to Mr. Lee. Your response was to mock me for saying every inventor's dream is to work for Microsoft. I pointed out this wasn't true. And your response? To again falsely suggest I said that inventors want to work for Microsoft?

          Dude, seriously, learn how to read.

           

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          dorpass, Oct 28th, 2008 @ 2:25pm

          Re: Re: Re: T-shirts, idiots

          Most of the true inventors and entrepreners in this country do not want to become corporate slaves
          American dream is not about getting regular paycheck from the likes of MShit... never was and never will be...
          Got it, nedoumok ?


          And who are you to say what each and every one of them wants? You can barely make a sentence without erupting in nonsense and insults. Go back to your binge drinking.

           

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      Mike (profile), Oct 27th, 2008 @ 8:05pm

      Re: T-shirts, idiots

      But seriously, if you think that being hired by MShit is something every inventor wants then you don't know shit about real inventors and entrepreneurs

      Dude, for once, perhaps, you could try reading. No one claimed that being hired by Microsoft was something that every inventor wanted.

      I mean, are you really so hard up for an argument against us that you're reduced to outright making up what you think we said?

      Dude, that's really sad.

       

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    Anonymous Coward, Oct 27th, 2008 @ 6:18pm

    I'm sorry

    But as an electrical engineer I can't honestly side with "all patents are bad m'kay". I'm all for linux, I'm all for the open spread of ideas (and the idea behind patenting is that it's supposed to only apply to execution of an idea, not the idea itself), and the central driving force in my career is to do work for the benefit of humanity; however, why shouldn't I get some money from my inventions to pay off the student loans?

    Patents are necessary for inventors who choose to live off of their work in some way, but the current system needs severe reform; how do we go about it?

     

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      DCX2, Oct 27th, 2008 @ 7:23pm

      Re: I'm sorry

      From one electrical engineer to another, if your invention is that good you would take what you can get in the market. If you're looking for a continuous stream of money, that's what a job is for. Why do you need a patent if your employer is paying you?

      Consider patenting a multi-touch interface. Now one company has a strangehold over the evolution of the market. This is hardly free. Consumers suffer when competition is scarce.

       

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      Anonymous Coward, Oct 27th, 2008 @ 7:33pm

      Re: I'm sorry

      Your time is worth money - but once you have completed a design once you could just give it away. There are some negatives to this approach, but there are many positives too. Sure people will use your work to do some of their own, but if you are good your opinion will eventually mean something. Becoming a repository for the EE community means that you are a go-to in the community for help. Help = $

      Argue against the business model all you want, but you only look silly doing so. No one is forcing you to do it. It is just one good idea among many, but it has been shown to work. That is Mike's point here.

       

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        Aaron deOliveira (profile), Oct 27th, 2008 @ 8:05pm

        Re: Re: I'm sorry

        i like what he said. time is worth money. time is becoming more and more and more valuable in our day and age. as your ideas spread your time becomes demanded by millions.

        think about the people on the top of heap already for other reasons. how much money do you think it would cost to buy unfettered access to Bill Gates and his time. What about Warren Buffett? How much would anyone pay for an hour, a day a week with those who are or were visionaries in our world? How much would you have to pay to convince them that it was worth it to give the time?

        Having your ideas deseminate pushes you up to the top of the heap.

         

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      Anonymous Coward, Oct 27th, 2008 @ 8:01pm

      Re: I'm sorry

      patents are no longer necessary in this brave new world. lee is yet another example of what is happening. his idea spread so far and wide that it got every major company in his field asking for him.

      where his ideas difficult to implement? no. kids were building them in their classrooms? so why were the companies willing to shower $$$ on him unsolicited? because they saw him as the source of the idea. because he actively participated in the community, people came to him as the source.

      any idea that gains that wide of adoption will be valuable to it's creator protected or not.

       

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      Mike (profile), Oct 27th, 2008 @ 8:07pm

      Re: I'm sorry

      Patents are necessary for inventors who choose to live off of their work in some way, but the current system needs severe reform; how do we go about it?

      Why are they necessary? What's wrong with building a product and getting rewarded by the marketplace?

       

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        Willton, Oct 27th, 2008 @ 8:32pm

        Re: Re: I'm sorry

        Why are they necessary? What's wrong with building a product and getting rewarded by the marketplace?

        There's nothing wrong with it; that's why patentees choose this route. What the patent does is allot the patentee security to do so.

         

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          Greevar, Oct 27th, 2008 @ 8:59pm

          Re: Re: Re: I'm sorry

          What about the people who had the same idea completely separate from Mr. Lee? Are they any less entitled to credit for their work? What if the other guy had an even better version of the idea? Under current patent law, the patent goes to the guy who gets the paperwork done first. Just because you have an idea, you own it? Let me answer that question. No, no one does.

          Intellectual property was a sick idea dreamed up by the rich and powerful to turn an infinite resource such as our thoughts into something scarce in order to create artificial value. If I put a fence around every source of fresh water in the world, would I have the right to charge people to drink or bathe? We are all guests in this life. It's poor manners to walk in and start claiming ownership of anything you see.

           

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          Franssu, Oct 27th, 2008 @ 9:27pm

          Re: Re: Re: I'm sorry

          Maybe, but in the current sorry state of affairs it also allows them to do nothing at all except sueing anyone who'd get close to the patent even without trying to license it first...

          If I remember well my microeconomy class, monopolies are never a good thing. I don't see why a monopoly on an idea would be different.

          The guy or the company who invents something has the opportunity to benefit from its advance and understanding on that thing to better compete on the market with what really matters : quality of execution.

          Mr Lee has clearly demonstrated it with his poor man's steadycam. He invented it, he makes it well, and people are ready to pay for all that...

           

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          Mike (profile), Oct 27th, 2008 @ 9:29pm

          Re: Re: Re: I'm sorry

          There's nothing wrong with it; that's why patentees choose this route. What the patent does is allot the patentee security to do so.

          No, what a patent does is give the patentee a gov't backed monopoly, allowing him to block others from innovating. That's a problem.

          In what other business does the gov't set up a monopoly to "protect" someone by giving them a protection scheme around their business?

           

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            Willton, Oct 27th, 2008 @ 9:49pm

            Re: Re: Re: Re: I'm sorry

            No, what a patent does is give the patentee a gov't backed monopoly, allowing him to block others from innovating. That's a problem.

            A patent is not a monopoly; it is a grant of property rights. Other people are free to compete with the patentee's product by offering substitute products that are not covered by the patentee's patent claims. If you want to debate the merits of patent law, fine, but don't use pejorative terms to call a patent what it is not.

            In what other business does the gov't set up a monopoly to "protect" someone by giving them a protection scheme around their business?

            Given your apparent (and incorrect) definition of "monopoly," I'd argue that transportation would fit into this realm.

             

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              Mike (profile), Oct 27th, 2008 @ 10:17pm

              Re: Re: Re: Re: Re: I'm sorry

              A patent is not a monopoly;

              It is, and always has been. From when Jefferson first designed the US patent system, he referred to them as monopolies, and they certainly meet all the criteria of a monopoly.

              We can disagree on other points, but you are simply incorrect if you believe a patent is not a monopoly.

              Other people are free to compete with the patentee's product by offering substitute products that are not covered by the patentee's patent claims.

              Then they are offering a different product.

              If you want to debate the merits of patent law, fine, but don't use pejorative terms to call a patent what it is not.

              It is, in no, way, pejorative.

              "The saying there shall be no monopolies lessens the incitements to ingenuity, which is spurred on by the hope of a monopoly for a limited time, as of fourteen years; but the benefit of even limited monopolies is too doubtful to be opposed to that of their general suppression." --Thomas Jefferson

              "Certainly an inventor ought to be allowed a right to the benefit of his invention for some certain time. It is equally certain it ought not to be perpetual; for to embarrass society with monopolies for every utensil existing, and in all the details of life, would be more injurious to them than had the supposed inventors never existed; because the natural understanding of its members would have suggested the same things or others as good. How long the term should be is the difficult question. Our legislators have copied the English estimate of the term, perhaps without sufficiently considering how much longer, in a country so much more sparsely settled, it takes for an invention to become known and used to an extent profitable to the inventor. Nobody wishes more than I do that ingenuity should receive a liberal encouragement." --Thomas Jefferson (expressing sentiment I believe you might agree with more than I would).

              I had no idea that Thomas Jefferson was so pejorative.

              It's a fact that they are monopolies. It's a technical term, not a pejorative one. I don't understand why you're upset by it.


              Given your apparent (and incorrect) definition of "monopoly,"


              If I have the definition of monopoly incorrect, then so does just about everyone other than yourself.

               

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                Anonymous Coward, Oct 28th, 2008 @ 8:38am

                Re: Re: Re: Re: Re: Re: I'm sorry

                "Then they are offering a different product."

                Would it be fair to say that with two different products having substantially equivalent functionality now before consumers that to some degree competition has been enhanced and additional ideas infused into the relevant technology area?

                 

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                  nasch, Oct 28th, 2008 @ 9:12am

                  Re: Re: Re: Re: Re: Re: Re: I'm sorry

                  Sure, but by competition, not by patents.

                   

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                    Lonnie E. Holder, Oct 28th, 2008 @ 2:10pm

                    Re: Re: Re: Re: Re: Re: Re: Re: I'm sorry

                    On the other hand, if a second product was developed because a first product was patented, and the second product contained improvements to entice customers from the first product, the producers of the second product knowing they had to not only be different, but better, then would it be fair to say that competition has been enhanced by patents and customers have increased product differentiation and expanded choice?

                     

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                      mobiGeek, Oct 29th, 2008 @ 7:39am

                      Re: Re: Re: Re: Re: Re: Re: Re: Re: I'm sorry

                      Two major problems with this scenario:
                      1. patents block people from building on existing inventions, thus patents force everyone into re-inventing (wasting resources to work around a known solution)
                      2. you can be damned sure that even if a complete workaround exists, the patent holder will still attempt to sue over a "look alike" product.
                      In both of the above scenarios, the consumer is hurt by a delay in advancement of the art (oops...isn't that the exact opposite of the purpose of the patent system?) and by a rise in prices (wasted resources in building work arounds and fighting in the legal system).

                       

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                        Lonnie E. Holder, Oct 29th, 2008 @ 8:23am

                        Re: Re: Re: Re: Re: Re: Re: Re: Re: Re: I'm sorry

                        On the other hand:

                        1. A patent may drive an innovator to a new technology outside the bounds of an existing patent. While a patent holder may attempt to sue, if the new invention is completely new technology, the patent holder will lose. Ultimately, the new technology expands competition and available options.

                        2. Re the "force everyone into re-inventing" comment. "Re-inventing," or more appropriately, "inventing," since you cannot "re-invent" something that has already been invented, is one of the goals of the USPTO. The premise is that inventing options expands choices, and the market will decide which of the choices is best. We do not know a priori whether the original invention or the later invention is the best option. If the original invention was the best option, then resources have been wasted. If the later invention is the best option, or an invention after that, then the resources used to develop the later invention were appropriately used.

                        In both scenarios, the consumer's options were improved by the advancement of the art, and it is likely that the later invention will either be so significantly better that it is worth a higher price, or the later inventor will lower price as an added inducement to switch to the later invention, thus lowering prices (competition has improved resource utilization, increasing efficiency of innovation rather than wasting time on an easy, but potentially less optimum, solution). In the event the later product succeeds in the market place, any legal costs incurred become insignificant and are far outweighed by the improvement in choices and potentially by reduction in costs.

                         

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                          nasch, Oct 29th, 2008 @ 8:33am

                          Re: Re: Re: Re: Re: Re: Re: Re: Re: Re: Re: I'm sorry

                          1. A patent may drive an innovator to a new technology outside the bounds of an existing patent.

                          How would that happen? The only way I can think of is if somebody sees a patent that's been filed, but has no successful product. If that is the success story of the patent system, that's pretty sad. If the patented product is out there in the marketplace, other inventors don't need the patent to find out about it.

                          2. ...inventing," ...is one of the goals of the USPTO... We do not know a priori whether the original invention or the later invention is the best option. If the original invention was the best option, then resources have been wasted. If the later invention is the best option, or an invention after that, then the resources used to develop the later invention were appropriately used.

                          So why not just let the market determine this? What value is the patent adding?

                          In both scenarios, the consumer's options were improved by the advancement of the art, and it is likely that the later invention will either be so significantly better that it is worth a higher price, or the later inventor will lower price as an added inducement to switch to the later invention, thus lowering prices (competition has improved resource utilization, increasing efficiency of innovation rather than wasting time on an easy, but potentially less optimum, solution).

                          I'm still not seeing anywhere in this scenario that patents are necessary or beneficial. Everything is taken care of by competition.

                          In the event the later product succeeds in the market place, any legal costs incurred become insignificant and are far outweighed by the improvement in choices and potentially by reduction in costs.

                          But again, why incur the legal costs at all? How are they benefiting society?

                           

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                          mobiGeek, Oct 29th, 2008 @ 9:09am

                          Re: Re: Re: Re: Re: Re: Re: Re: Re: Re: Re: I'm sorry

                          For #1, the issue isn't about winning or losing, but about the fact that the new innovator has to overcome the concern of a legal fight. The threat, in and of itself, interferes with innovation.

                          For #2, the term "re-inventing" was chosen by me directly and purposefully. The phrase exists to highlight the fact that resources are WASTED trying to get to an known, existing point in order to then simply move beyond. It is "re-inventing" because getting to that known point in and of itself is pointless. That re-invented product is simple duplication.

                          But yes, I can see how someone that defends the patent position would say this forces more choice. It is a positive spin on the wasted resources.

                           

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              DanC, Oct 27th, 2008 @ 10:21pm

              Re: Re: Re: Re: Re: I'm sorry

              A patent is not a monopoly; it is a grant of property rights.

              And one of those property rights is an exclusionary right - the ability to stop other people from using your invention. Since the rights granted by a patent don't exist naturally, they are enforced by the legal system for a limited time.

              That's a government-granted temporary monopoly.

              Given your apparent (and incorrect) definition of "monopoly,"

              What would be your preferred definition then?

               

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              Anonymous Coward, Oct 28th, 2008 @ 7:39am

              Re: Re: Re: Re: Re: I'm sorry

              The word "monopoly" is hardly pejorative.

              I find your obvious self-obsession amusing. You're convinced you're absolutely, 100% right about everything, aren't you? By the condescending nature of your responses, I'm guessing you need an extra-large garage just so your head will fit.

              Must be awful being the brightest person on the planet, when no one else recognizes your sheer genius.

              So, explain how "transportation" (an industry) is a monopoly?

               

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      pawn, Oct 28th, 2008 @ 4:12am

      Re: I'm sorry

      Patents are necessary for inventors who choose to live off of their work in some way, but the current system needs severe reform; how do we go about it?

      Patents exist to drive innovation, not to insure profits.

      That's the first thing that needs reform. Patenting may lead to profits, but the basis of it has to be grounded in providing benefit to society.

      Also, if the government has to enforce a monopoly for you to profit, the value you provide to society with your invention is offset by your inability to efficiently market a product.

       

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      nasch, Oct 28th, 2008 @ 9:14am

      Re: I'm sorry

      Patents are necessary for inventors who choose to live off of their work in some way,

      Did you even pay attention to the story you're commenting on at all?

       

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    Greevar, Oct 27th, 2008 @ 8:45pm

    Inventions are the latest incarnation of manifest destiny. These wannabe inventors are looking for their lottery ticket idea that will make them rich for the rest of their lives. I'm proud of Mr. Lee and his accomplishments. He showed everyone that he had something that was worth something. He has a brilliant mind and talent. If you ask me, that is far more valuable. Now people want to pay him to use that talent.

     

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    Anonymous Coward, Oct 27th, 2008 @ 9:23pm

    I never cease to be amazed how relatively minor matters are continually overblown and promoted as proof that a longstanding system of law in now a total and unnecessary anachronism.

    At most Mr. Lee's actions reflect a very effective use of the internet to augment his Curriculum Vitae, not to mention the fact he enjoys sharing some of the stuff he is doing. He does the very same thing with photography, another of his passions.

    To suggest that his videos reflect the effective implementation of a new "business model" is very much an overstatement of what he has done. Perhaps "mischaracterization" is even more accurate.

    Before jumping on the "new age" bandwagon continually lauded and promoted here it is always useful to read one's CV and writings, to wit:

    http://www.cs.cmu.edu/~johnny/academic/johnny_lee_CV.pdf

     

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      Mike (profile), Oct 27th, 2008 @ 9:38pm

      Re:

      I never cease to be amazed how relatively minor matters are continually overblown and promoted as proof that a longstanding system of law in now a total and unnecessary anachronism.

      Then you are reading things incorrectly. I never said that Mr. Lee's experience proved that the patent system was an anachronism. However, Mr. Lee's experiences are useful in proving a point: that giving away your inventions isn't necessarily a bad idea and doesn't necessarily harm you -- as many patent system defenders insist.

      When you combine these stories with all of the research and evidence *then* you begin to get a picture of why the patent system is an anachronism.

      I find it amusing that folks such as yourself whine and complain when we point to studies, saying that an academic study doesn't reflect the real world. So then we give real world examples, and you whine and complain that it's just a single anecdote.

      It's as if you can't keep more than a single concept in your head at once.

      To suggest that his videos reflect the effective implementation of a new "business model" is very much an overstatement of what he has done. Perhaps "mischaracterization" is even more accurate.

      The only mischaracterization would be in your comment here. Can you please point to where I said this was an effective implementation of a new business model? I did not. I merely pointed out that, contrary to what patent system defenders normally say, giving away your ideas isn't necessarily a bad option.

      Before jumping on the "new age" bandwagon continually lauded and promoted here it is always useful to read one's CV and writings, to wit:

      Since you did not come out and state it, my only guess is that you're referring to the fact that Lee does have some patents. However, that reinforces our point, rather than yours. Lee's success did not come from his patents at all, but from when chose to forego patent protection and focus on giving away his ideas.

      In other words, it would appear that the patents were not all that helpful. Giving away his ideas was.

      So what was your point?

      No one said that Lee had taken an ideological stance against patents. For you to suggest we said that is, again, misleading. But it is true that his success came from the projects that he openly shared, rather than patented.

       

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        Anonymous Coward, Oct 27th, 2008 @ 9:51pm

        Re: Re:

        "Patent lawyers may cringe, but it would seem that he's doing quite well actively giving away his ideas, rather than trying to lock them up with patent protection."

        I obviously misunderstood the point you were trying to make with the above portion of your article.

        This may come as a surprise, but more often than not my interactions with inventors led to business decisions that patents and other formal means of protection were suboptimal in view of the inventor's/employer's goals. Yes, there are attorney's who inevitably default to the position "you need a patent". Fortunately, there are many who are motivated to try and help a client move from Point A to Point B without such bias.

         

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      Aaron deOliveira (profile), Oct 27th, 2008 @ 9:47pm

      Re:

      2 quick thoughts:

      1) minor matters are pointed out because the "theory" of economic of infinite goods was so completely railed against. many naysayers said that it could never work in the real world. as one example after another is pointed out the theory gains it's proof.

      2) as far as a "long standing system of law" patents and such are all relatively recent in human history. man has been creating art, literature, etc. since his birth. look at the great poets of yore. Longfellow, for example, was popular because people took his ideas and spread them far and wide. he did not fight to possess them, or if he did, he was not served by it. he became great because the ideas he gave birth to as a poet spread themselves into the hearts and minds of nations.

       

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    mike42 (profile), Oct 27th, 2008 @ 10:35pm

    Business model?

    "The Poor Man's Steadycam, for example, is available to purchase, and Lee has made a quarter of a million dollars from it"

    How's that for a business model? More than I made in the last 4 years, and that's just one of his inventions...Mike, you totally own these guys! I am laughing my ass off! Just like the NIN and RadioHead stuff, protectionists are artificial, unnecessary, and soon to be extinct. They'll probably go with the mainframes. No time soon, but the writing is on the wall...

     

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      Lonnie E. Holder, Oct 28th, 2008 @ 5:39am

      Re: Business model?

      How's that for a business model? More than I made in the last 4 years, and that's just one of his inventions...Mike, you totally own these guys! I am laughing my ass off! Just like the NIN and RadioHead stuff, protectionists are artificial, unnecessary, and soon to be extinct. They'll probably go with the mainframes. No time soon, but the writing is on the wall...

      Continue to laugh, funny boy. I find your glee at this one example humorous. You take a limited case and extrapolate to the universe.

      o Anyone is free to do what Lee did and give their inventions away. There is nothing in our system that prevents someone from adopting his business model.

      o Logically, if a business model incorporating free is better than a business model incorporating pay, then the business model incorporating free will win out over the business model incorporating pay. Maximum options are obtained when both models are available, and may the best model win.

      o "Soon to be extinct," followed by "no time soon"? I suspect that "no time soon" will likely be closer to centuries, if ever, but hey, it could happen. Hillary Clinton could be elected President on write-in votes. It could happen. On the other hand, if the only people against IP are a small group of people writing on obscure blogs, and none of these people are working through the legislative process to eliminate IP, then guess when it will happen?

      o Mainframes still have their uses.

       

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        Aaron deOliveira (profile), Oct 28th, 2008 @ 7:19am

        Re: Re: Business model?

        Continue to laugh, funny boy. I find your glee at this one example humorous. You take a limited case and extrapolate to the universe.
        This is not "a limited case". Rather it's one of now several examples put forward on this site of successful businesses using infinite goods.

        o Anyone is free to do what Lee did and give their inventions away. There is nothing in our system that prevents someone from adopting his business model.
        Exactly. Anyone can use his business model. In fact this site and others are advocating for exactly that. Because of infinite goods, the barriers to entry have changed. One of the properties of infinite goods is that copying is free or of such infinitesimal price that it is effectively free. So trying to erect barriers to stop copying is a largely useless endeavor. The new barriers to entry are things like Attention and Reputation. Look at Red Hat. They offer all their products for free. Anyone can download them and anyone can distribute them. Heck, anyone can do exactly what Red Hat does and charge for services like set up, optimization, enterprise, etc. So why aren't there innumerable competitors in this space? Because Red Hat has their reputation as a barrier to entry. Especially with enterprise customers, they often base their decisions on reputation.

        o Logically, if a business model incorporating free is better than a business model incorporating pay, then the business model incorporating free will win out over the business model incorporating pay. Maximum options are obtained when both models are available, and may the best model win.
        Business models that incorporate infinite goods are winning in the market place. This article about Lee is shown as yet another example. Without infinite goods, what would Lee or anyone else have to do to get every major company in your field to come to you unsolicited and offer you $$$? Lee achieved this result with minimal cost. All he did was share his idea and help push it out to as many people as wanted it.

        o "Soon to be extinct," followed by "no time soon"? I suspect that "no time soon" will likely be closer to centuries, if ever, but hey, it could happen. Hillary Clinton could be elected President on write-in votes. It could happen. On the other hand, if the only people against IP are a small group of people writing on obscure blogs, and none of these people are working through the legislative process to eliminate IP, then guess when it will happen?
        infinite goods is not about eliminating IP. it's rather about pointing out the nature of ideas and infinite goods being in conflict with artificial scarcity. patents and other forms of intellectual property create artificial scarcity in infinite goods.

        o Mainframes still have their uses.
        They do. not the best of examples, but his point was that they once dominated the marketplace and were replaced by more open models. the PC is more open than the mainframe.

         

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          Lonnie E. Holder, Oct 28th, 2008 @ 1:59pm

          Re: Re: Re: Business model?

          Aaron:

          This is not "a limited case". Rather it's one of now several examples put forward on this site of successful businesses using infinite goods.

          You are in error. This is a limited case. Lee has no tooling costs. His R&D costs were negligible. Further, you also confirm that this is one of "several." Well, there have been millions of examples of products that contained patented features, and you compare millions with "several." I consider "several" as compared to "millions" to be limited. Unless you are using "new math."

          Anyone can use his business model.

          I suspect that engine, car, plane and pharmaceutical manufacturers, among others, would beg to differ with you.

          In fact this site and others are advocating for exactly that. Because of infinite goods, the barriers to entry have changed.

          Again you extrapolate from a limited example to the universe. How has the barrier to entry in car design and manufacturing changed? How has the entry to developing new pharmaceuticals changed? In fact, how has any manufacturing industry that relies on research, development, tooling and assembly lines changed?

          Look at Red Hat. They offer all their products for free. Anyone can download them and anyone can distribute them. Heck, anyone can do exactly what Red Hat does and charge for services like set up, optimization, enterprise, etc. So why aren't there innumerable competitors in this space? Because Red Hat has their reputation as a barrier to entry.

          You can choose your explanation as to why others have not done what Red Hat has done, and I will choose mine. My explanation is that Red Hat has chosen a niche that fits well with their business model. I say bully for them. One size does not fit all.

          Business models that incorporate infinite goods are winning in the market place.

          Yes? I own lots of supposedly infinite goods that I purchased. I have music, movies and books, all supposedly "infinite goods." Gee, people tend to buy all these things. Alert the media.

          This article about Lee is shown as yet another example. Without infinite goods, what would Lee or anyone else have to do to get every major company in your field to come to you unsolicited and offer you $$$? Lee achieved this result with minimal cost. All he did was share his idea and help push it out to as many people as wanted it.

          Ron Popeil does the same thing with vegematic. Lee just repackaged the concept. Again, limited example that works in specific circumstances.

          infinite goods is not about eliminating IP.

          You obviously have not spoken to the other people on this web site.

          it's rather about pointing out the nature of ideas and infinite goods being in conflict with artificial scarcity. patents and other forms of intellectual property create artificial scarcity in infinite goods.

          I believe this point has been debated to death. Those who believe as I do disagree, and those who believe as you do agree. Neither of us sees the point of the other. Until you put forward a convincing case (which seems unlikely to occur), our philosophical differences are unsurmountable. Incidentally, both sides believe they are right.

           

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            Aaron deOliveira (profile), Oct 28th, 2008 @ 3:20pm

            Re: Re: Re: Re: Business model?

            working on a response to this. good conversation. i should have something tonight or at the latest tomorrow morning. it's been a busy day.

             

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            Mike (profile), Oct 28th, 2008 @ 6:16pm

            Re: Re: Re: Re: Business model?

            You are in error. This is a limited case.

            Lonnie, I am afraid that you are in error, again, in this case. The point that I believe Aaron was making is that we have shown numerous examples of these "limited cases." On top of that, we've also showed macro economic evidence.

            When we show the macro economic evidence, people complain that there's no evidence it works in real world. So we show examples in the real world, and people, such as yourself, complain that there's no evidence that it works on a macro level.

            We have shown both. This may be an isolated example, but it's one of many that proves the point.

            Lee has no tooling costs. His R&D costs were negligible

            In this case. In other cases, we have shown scenarios where there are high R&D costs.

            ell, there have been millions of examples of products that contained patented features, and you compare millions with "several." I consider "several" as compared to "millions" to be limited. Unless you are using "new math."

            You are, I'm afraid, missing the point. The patent system supporters, such as yourself, insist that the model we discuss cannot work. To disprove a negative, you merely need to show one or, perhaps, a few cases to disprove the negative.

            The fact that there are millions of patents out there does not establish that a patent system is "good." However, the fact that someone can be more successful without patents does, in fact, establish that patents are not necessary for an inventor to succeed.

            I suspect that engine, car, plane and pharmaceutical manufacturers, among others, would beg to differ with you.

            Shocking. You suspect that those who have abused a system to limit competition would want to continue to do so?

            But Aaron is correct. All of the industries you describe above could do quite well to adopt a different model.

            Again you extrapolate from a limited example to the universe.

            No, he is not. He is pointing to the numerous examples, combined with the macro research to suggest that the idea that patents are necessary is clearly incorrect.

            You can choose your explanation as to why others have not done what Red Hat has done, and I will choose mine. My explanation is that Red Hat has chosen a niche that fits well with their business model. I say bully for them. One size does not fit all.

            Once again, you are missing the point (it's becoming rather common). First, to claim that Red Hat is a niche business shows a rather astounding ignorance, but let's leave that aside.

            No one is saying "one business model fits all." In fact, we're saying the opposite. There are many potential business models -- but many of them are PREVENTED by the presence of a patent system, which instead DOES enforce a single business model solution. If you don't play the patent game, you are likely to get sued. The only one enforcing a single model is the USPTO and its supporters.

            Yes? I own lots of supposedly infinite goods that I purchased. I have music, movies and books, all supposedly "infinite goods." Gee, people tend to buy all these things. Alert the media.

            Once again, showing that you miss the point. First of all, books and CDs are scarce goods, not infinite. When you go to the movies, you're buying a seat (a scarce good) not the content (the infinite good). Plus, the fact that some are able to, temporarily, sell infinite goods, does not make it a good business model. Aaron's point is that those who embrace the freeing up of infinite goods are finding widespread success, which will make it more difficult for those who continue to try to sell infinite goods in the future.

            You obviously have not spoken to the other people on this web site.

            It doesn't have to be about eliminating IP, but when IP gets in the way of other business models, then we have a serious problem.

            I believe this point has been debated to death. Those who believe as I do disagree, and those who believe as you do agree. Neither of us sees the point of the other. Until you put forward a convincing case (which seems unlikely to occur), our philosophical differences are unsurmountable. Incidentally, both sides believe they are right.

            Hmm. Odd. Why do you think that is impossible to put forward a convincing case? What would it take to convince you that companies can be better off by not using a protectionist system, but instead expanding their economic opportunities?

             

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              Lonnie E. Holder, Oct 28th, 2008 @ 7:29pm

              Re: Re: Re: Re: Re: Business model?

              You are in error. This is a limited case.

              Lonnie, I am afraid that you are in error, again, in this case. The point that I believe Aaron was making is that we have shown numerous examples of these "limited cases." On top of that, we've also showed macro economic evidence.

              Numerous? How many? 10? 100? 1000? I balance that with millions, and perhaps tens of millions of inventions with patents behind them.

              When we show the macro economic evidence, people complain that there's no evidence it works in real world. So we show examples in the real world, and people, such as yourself, complain that there's no evidence that it works on a macro level.

              Careful what words you put into my mouth. I do not recall ever have said that "there's no evidence" it works in the real world. Examples have been provided. I am a believer. Amen. Hallelujah. I believe that free can be a successful part of a business model. Bully for the people that choose that model and successfully employ it. Just do not limit my choices to that business model.

              Lee has no tooling costs. His R&D costs were negligible.

              In this case. In other cases, we have shown scenarios where there are high R&D costs.

              I think I must have missed those scenarios. Can you point them out to me?

              Well, there have been millions of examples of products that contained patented features, and you compare millions with "several." I consider "several" as compared to "millions" to be limited. Unless you are using "new math."

              You are, I'm afraid, missing the point. The patent system supporters, such as yourself, insist that the model we discuss cannot work. To disprove a negative, you merely need to show one or, perhaps, a few cases to disprove the negative.

              Oh no, I am not saying that the model you discuss cannot work. It would be foolish to say it cannot work. I think it is a business model that appears to work in some situations. If I ever said "it cannot work," which I do not recall having said, then I admit I was in error.

              The fact that there are millions of patents out there does not establish that a patent system is "good." However, the fact that someone can be more successful without patents does, in fact, establish that patents are not necessary for an inventor to succeed.

              The patent system is neither "good" nor "bad." The patent system is without value. I fall back on Rothbard with respect to "successful." Since we do not know what a competitive price is or what a monopoly price is, we cannot know whether someone can be "more successful" without patents. I think the most we can say is that "someone can be successful without patents." However, we do not have any proof that we can extrapolate the models shown thus far to a universal.

              I suspect that engine, car, plane and pharmaceutical manufacturers, among others, would beg to differ with you.

              Shocking. You suspect that those who have abused a system to limit competition would want to continue to do so?

              Actually, I am unable to think of one person driven out of business by an engine company, a car company, or a plane company. Indeed, these companies, to the best of my knowledge, rarely sue each other. In general, manufacturing companies like to manufacture. There is typically little money in suing people. Pharm companies tend to be litigious.

              But Aaron is correct. All of the industries you describe above could do quite well to adopt a different model.

              Since these are all profit-making companies (or at least, they try), and since they all report to stockholders, I would suggest you show them the light. I am sure they will be thrilled with any proposition that clearly increases shareholder value.

              Again you extrapolate from a limited example to the universe.

              No, he is not. He is pointing to the numerous examples, combined with the macro research to suggest that the idea that patents are necessary is clearly incorrect.

              No, you are extrapolating one business model to a universal. We already know there are dozens of business models in existence today. One business model does not work for all industries. Assuming from limited data that "patents are unnecessary" is not a logical conclusion, and given the evidence that an array of successful business models exist, would initially appear incorrect.

              No one is saying "one business model fits all." In fact, we're saying the opposite.

              Outstanding, we agree on something.

              There are many potential business models -- but many of them are PREVENTED by the presence of a patent system, which instead DOES enforce a single business model solution.

              That is incorrect. There are multiple patent-based business models. In fact, many business models are ENABLED by the presence of the patent system, which permits both patent based business models as well as non-patent based business models.

              If you don't play the patent game, you are likely to get sued.

              I am unsure of how many individuals and companies exist in the United States, but in 2002, Samson Vermont wrote that 11,000 suits were filed in the five previous years. That is about an average of 2,200 suits per year. Even if each suit named multiple parties, that still comes to a few thousand entities per year. Hardly seems to warrant "likely to get sued."

              The only one enforcing a single model is the USPTO and its supporters.

              The USPTO enforces nothing. They are essentially a recording and licensing agency.

              Once again, showing that you miss the point. First of all, books and CDs are scarce goods, not infinite. When you go to the movies, you're buying a seat (a scarce good) not the content (the infinite good). Plus, the fact that some are able to, temporarily, sell infinite goods, does not make it a good business model. Aaron's point is that those who embrace the freeing up of infinite goods are finding widespread success, which will make it more difficult for those who continue to try to sell infinite goods in the future.

              As I have stated numerous times, using "freeing up" (whatever that means) of so-called "infinite goods" can be one kind of business model. I applaud those people that are successful at using a model that works for them.

              You obviously have not spoken to the other people on this web site.

              It doesn't have to be about eliminating IP, but when IP gets in the way of other business models, then we have a serious problem.

              On the other hand, when other business models get in the way of my business model, then we have a really serious problem.

              I believe this point has been debated to death. Those who believe as I do disagree, and those who believe as you do agree. Neither of us sees the point of the other. Until you put forward a convincing case (which seems unlikely to occur), our philosophical differences are unsurmountable. Incidentally, both sides believe they are right.

              Hmm. Odd. Why do you think that is impossible to put forward a convincing case? What would it take to convince you that companies can be better off by not using a protectionist system, but instead expanding their economic opportunities?

              I believe I have put forth a convincing case, multiple times. My question to you is: Why do you think it is impossible to put forward a convincing case that patents are never a valid part of a business model? What does it take to prove to you that there are scenarios where a huge investment in a new invention should be protected long enough to at least have a chance to repay the investment?

               

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                Mike (profile), Oct 28th, 2008 @ 9:20pm

                Re: Re: Re: Re: Re: Re: Business model?

                Numerous? How many? 10? 100? 1000? I balance that with millions, and perhaps tens of millions of inventions with patents behind them.

                Lonnie, learn a little bit of basic logic. It would help. If you are making an absolute argument, it only takes one example to disprove.

                The fact that there are millions of patents does not change that one bit.

                I made this point in the previous post. Your decision to ignore it entirely is odd. I can only chalk it up to cognitive dissonance.

                Just do not limit my choices to that business model.


                You are confused. No one is limiting your choice of a business model. What we'd like to limit is the GOVERNMENT choosing what business models are protected. Let's remove that and let the market compete. I don't want the gov't picking winners. Why do you?

                I think I must have missed those scenarios. Can you point them out to me?

                There's a search engine. It might help. But you might want to look at the economic research. There are some good pointers in Boldrin and Levine's book, for example.

                The patent system is neither "good" nor "bad." The patent system is without value.

                How do you figure? I assume that if it is limiting the economic pie, holding back new innovations and decreasing new business, then, I think there's a fair argument that it is bad. The economic research on this is pretty clear. A patent system does not increase innovation, and often holds back innovation. Is slavery neutral?

                Since we do not know what a competitive price is or what a monopoly price is, we cannot know whether someone can be "more successful" without patents.

                Uh, what?!? Learn some economics. Otherwise this conversation is useless. You are flat out wrong if you believe it is not possible to tell whether or not someone can be more or less successful without patetnts.

                I think the most we can say is that "someone can be successful without patents." However, we do not have any proof that we can extrapolate the models shown thus far to a universal.

                There you go again. We've pointed out aggregate studies at the macro level showing *exactly that*. That is IS a universal thing. And the response is always "but that doesn't work at the individual level."

                So now we show you how it works at the individual level, and you're back to insisting it can't work at the universal level?

                *bangs head against the wall*

                You're a piece of work.

                Actually, I am unable to think of one person driven out of business by an engine company, a car company, or a plane company.

                What about those who never started because of the risk of getting sued for patent infringement? What about those who never started, knowing that licesning would be too expensive? What about those who focused on other industries where patents weren't such an issue?

                The biggest problem is the UNKNOWN loss hindered by a monopoly system that you support. It's basic economics that monopolies drive out good business. To say that it hasn't happened is, again, pure ignorance on your part of most basic economics.

                Since these are all profit-making companies (or at least, they try), and since they all report to stockholders, I would suggest you show them the light. I am sure they will be thrilled with any proposition that clearly increases shareholder value.

                WTF do you think I do all day?

                No, you are extrapolating one business model to a universal.

                I have never done so. You are flat out lying at this point. I don't support any single business model. I support understanding the economic realities in order to create a better business model. From there, there are tons of business models, however.

                What I do not support is the gov't picking a business model that wins by setting up protectionist policies that diminish competition and innovation.

                That is incorrect. There are multiple patent-based business models. In fact, many business models are ENABLED by the presence of the patent system, which permits both patent based business models as well as non-patent based business models.

                No, I'm afraid that once again, your lack of economic understanding is showing. Business models create a protectionist barrier. If that "enables" business models, then why don't we enable other protectionist policies?

                Clearly, if only one company could supply salt, just THINK of all the business models that would enable?

                I don't want the gov't favoring ANY player in the space or ANY business model through protectionism. Let the market work out the best, most efficient business models. Why are you so against competition?

                I am unsure of how many individuals and companies exist in the United States, but in 2002, Samson Vermont wrote that 11,000 suits were filed in the five previous years. That is about an average of 2,200 suits per year. Even if each suit named multiple parties, that still comes to a few thousand entities per year. Hardly seems to warrant "likely to get sued."

                Once again ignoring those who were pushed into settling, ignoring those who went a different direction to avoid getting sued. If you don't think that patents destroy economic incentive you don't talk to many entrepreneurs.

                The ones I talk to are scared shitless of doing anything useful. It's a shame.

                The USPTO enforces nothing. They are essentially a recording and licensing agency.

                If only that were true. The head of the Patent Office has been a major factor in setting policy over the years, and a big supporter in increased protectionism.

                As I have stated numerous times, using "freeing up" (whatever that means) of so-called "infinite goods" can be one kind of business model. I applaud those people that are successful at using a model that works for them.

                I like how you ignore the point. You claimed to be buying infinite goods, but you were not. You claimed that selling infinite goods was a good business model, and I explained why they were not.

                And you ignore that?


                On the other hand, when other business models get in the way of my business model, then we have a really serious problem.


                No, Lonnie, that's called COMPETITION, and it's a GOOD THING that increases the economic pie and leads to innovation.

                Why do you hate competition?


                I believe I have put forth a convincing case, multiple times.


                Really?!? So far we have pointed out that your "convincing case" is based on a weird misunderstanding of economics and business, and your response has been to ignore the main points.

                In fact, once again, here, you FAIL to explain what it would take to put together a convincing case that protectionist models are better than the free market.

                Why do you think it is impossible to put forward a convincing case that patents are never a valid part of a business model?

                I don't think it's impossible to put forward such a case. I've been asking people to do so for years. Yet, not a single one has presented economic evidence that makes the case. They post anecdotes only. I've shown both economic evidence. I think I win.

                What does it take to prove to you that there are scenarios where a huge investment in a new invention should be protected long enough to at least have a chance to repay the investment?

                Easy. Show me the economic research.

                 

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                  Willton, Oct 29th, 2008 @ 6:00am

                  Re: Re: Re: Re: Re: Re: Re: Business model?

                  I thought I'd point out something:

                  Mike: It doesn't have to be about eliminating IP, but when IP gets in the way of other business models, then we have a serious problem.

                  Lonnie: On the other hand, when other business models get in the way of my business model, then we have a really serious problem.

                  Mike: No, Lonnie, that's called COMPETITION, and it's a GOOD THING that increases the economic pie and leads to innovation.

                  Okay, so according to Mike, getting in the way of a business model is bad, unless it's another business model doing so? What if that second business model uses IP as a basis? Is it then a problem, even though it's still a business model?

                  By the way, when Lonnie referred to "other business models getting in the way of my business model," I believe was referring to anticompetitive behavior, like tying or predatory pricing, as that interferes with another's ability to do business. Such behavior is NOT competition, and that is a serious problem.

                  As for hating competition, I find it odd that Mike condemns hating competition, yet he seems to hate competition when it's based around IP. So, apparently according to Mike, it's okay to hate some competition.

                   

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                    mobiGeek, Oct 29th, 2008 @ 11:04am

                    Re: Re: Re: Re: Re: Re: Re: Re: Business model?

                    But there is NO COMPETITION when it comes to invoking IP. IP specifically limits, usually granting a MONOPOLY, which by definition means "NO COMPETITION".

                    So Mike is arguing for competition, thus against IP.

                     

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                      Lonnie E. Holder, Oct 29th, 2008 @ 11:12am

                      Re: Re: Re: Re: Re: Re: Re: Re: Re: Business model?

                      And why would there be no competition? I am afraid of the dark, because I do not know what is coming. The boogeyman could be in the closet?

                      One of the key points of the patent system was that it placed solutions in the public eye so that others could seek alternative solutions, thus ENHANCING competition.

                      What reduces competition is having everyone copy the very same design.

                       

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                      Lonnie E. Holderr, Oct 29th, 2008 @ 11:15am

                      Re: Re: Re: Re: Re: Re: Re: Re: Re: Business model?

                      Lack of IP provides incentive to copy, which specifically limits choice, thus reducing competition.

                      So, Mike is arguing against competition. He is arguing FOR uniformity and identical products.

                       

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                        Douglas Gresham, Oct 29th, 2008 @ 12:25pm

                        Re: Re: Re: Re: Re: Re: Re: Re: Re: Re: Business model?

                        Lack of IP provides incentive to copy, which specifically limits choice, thus reducing competition.

                        So, Mike is arguing against competition. He is arguing FOR uniformity and identical products.

                        Sorry, but the market doesn't reward plain old copies. It rewards you when you do something better than your competitor. That's why it's called competition. IP is a limitation on what your competitor can do, so it's a limit on the ways in which they can attempt to do something better than you, so it's a limit on how they can compete, so it's a limit on competition. Maybe there will be duplicate products on the market, but that's an incentive to make yours stand out, right? The fashion industry is a great example of this.

                        You also completely ignore the fact that patents don't just stop you producing an identical copy, they stop you using what is covered by the patent in any context without permission. Say you invented a kitchen fork and got a patent on "a multiple-pronged instrument for manipulating malleable objects by means of skewering or scooping" (yeah crappy description, I'm tired) - you wouldn't be stopping me just from producing an identical kitchen fork, but also garden forks, sporks, various types of skewers, multi-headed screwdrivers, tridents (!) . . .

                        Alternatively, we could say the patent should be limited to something more concrete like "a four-pronged 6-inch metal implement used for the transfer of food from plate to mouth by way of skewering or scooping", which means you only stop me directly copying you - except then I could just make a fork with 3 prongs, or one made of plastic, or one that was 5 inches long, or whatever. In other words, instead of directly copying, people copy making just enough changes not to infringe, which both fails to address the fundamentals of your argument and decreases the value of the patent to the inventor.

                        If you can show me 1) that copying actually decreases innovation, and 2) that there is a wording of patent law that would allow for the prevention of copying without promoting this kind of busywork while maintaining someone else's ability to do something new with your idea, then you might have an argument.

                         

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                      Willton, Oct 29th, 2008 @ 12:31pm

                      Re: Re: Re: Re: Re: Re: Re: Re: Re: Business model?

                      But there is NO COMPETITION when it comes to invoking IP. IP specifically limits, usually granting a MONOPOLY, which by definition means "NO COMPETITION".

                      So Mike is arguing for competition, thus against IP.


                      Then Mike's arguments are misplaced. IP does not guarantee no competition; IP only grants a narrow right to exclude. It does not prevent others from competing with the patentee by marketing and selling products that do not fit within the scope of the patent.

                      The elimination of IP would greatly empower copyists. It's debatable whether that is a good thing.

                       

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                    Mike (profile), Oct 29th, 2008 @ 7:25pm

                    Re: Re: Re: Re: Re: Re: Re: Re: Business model?

                    Okay, so according to Mike, getting in the way of a business model is bad, unless it's another business model doing so? What if that second business model uses IP as a basis? Is it then a problem, even though it's still a business model?

                    Willton I have been rather clear about this, so I'm confused by your confusion:

                    I support competition in the marketplace. I am against anything that involves the gov't TIPPING the scales by favoring one business model over others. The gov't has unfairly hindered any business model that is not based on IP.

                    I'm for real free market competition, rather than the gov't picking winners. That's not free market competition.

                     

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                Aaron deOliveira (profile), Oct 28th, 2008 @ 9:21pm

                more answers

                This time around i'm only going to address certain things so that this conversation doesn't get even more muttled.

                I think I must have missed those scenarios. Can you point them out to me?
                If you use techdirt.com's search and search the term infinite goods, you should find a lot of our previous discussion. Also a really great place to start reading about infinite goods on Techdirt would be here:

                The Grand Unified Theory of the Economics of Free

                http://techdirt.com/articles/20070503/012939.shtml

                read the whole post and then read all the posts it links too. It's a really good primer. As you're reading, realize that what you already know isn't wrong. What you know is just being expanded. Many of the same things you already know still remain true. The ones that change should be obvious and logical.


                A great deal has been said about patents. One thing that I want to state in this conversation is that patents work in the sense that they make money for the stake holders. Yes, millions of patents and millions of dollars. There are 2 problems with patents. They are inherently limiting. By allowing one person to control the destiny of an idea or any infinite good so much is missed. Their one take on the idea is successful if they are thriving in the marketplace. But what about all the value that the rest of the world could build on top of it and the creator could capture. Those that accept infinite goods would probably accept the premise of that patents are like owning 100% of $1. it's all yours. You built it alone. You own it alone. A world without patents could be compared to having 1% of a $google. 1,000,000,000,000,000,000,000....... you don't control it all. You dont' capture it all. Conversly, you don't make it all, you don't pay for it all. The 1% that you've captured is hugely more profitable than 100% of anything that you could build of only your own efforts.

                 

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                  Aaron deOliveira (profile), Oct 28th, 2008 @ 9:30pm

                  2nd problem

                  just realized that i didn't mention the 2nd problem. Chilling effects. one a few peoples heads get cut off, no one wants to be the next in line.

                  this is a problem because all these people who are threatened with having their heads figuratively cut off want to build on top of the current IP that's out there. they want to add value.

                  all of this can make the market bigger for everyone.

                   

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            Aaron deOliveira (profile), Oct 28th, 2008 @ 9:01pm

            some answers

            Sorry it took so long to get back. Work and then dinner with extended family.

            I'll address some of them here and then some of them in your next response since you added some good points there.

            Anyone can use his business model.

            I suspect that...

            most of the things you listed are scarce goods, however most of them are also a bundle of scare and infinite goods. Increasing either the value or the amount of the infinite goods in these bundles could certainly add value for these products.

            Engine – one of the infinite goods I can identify in an engine is the design. Engine designs have been changing and improving over time. I imagine there is quite a bit of development cost in developing proprietary engines. There's the initial development costs, the costs to protect them with patents, the costs to maintain all the secret information, the cost to bring new people up to speed on your proprietary information and the risk that all of these costs ultimately could fail in the market place. What would happen if engine makers open sourced the design side, ie. the infinite goods side, of their business and focused on the manufacturing side. The chip maker AMD is doing something similar to this. What would happen is the cost of developing the infinite good would drop to near zero. Tens of thousands would join the current hundreds in working on every facet of modern engines. This lowers the initial development cost as well as decreases the cost of replacement for employees. Now you have a large pool of experienced developers to choose from if you want one in house. His learning curve would be no where near as steep as with proprietary information. So there would be 2 huge savings in this model. The engine manufacturer could focus on manufacturing techniques, efficiencies, etc. Could anyone copy their business model? Yes, but like in baseball or any other sport, everyone is doing the same thing. There are those that do it exceptionally well and get paid millions and those that are only average and get paid pennies comparatively.

            Car – this is a really fascinating place to watch the implementation of infinite goods. Look at recent offerings like Sync to play your music in your car. Car companies are recognizing that people are consuming more and more infinite goods and are adding value to their scare good, the car, by incorporating ways to consume infinite goods. See all the stuff about design of engines above. It could also apply to cars. Another place that infinite goods are going to get really interesting with cars is all of the computer hardware and software that is going into them. From guidance to maintenance systems. More and more what we call a car is becoming a computer with wheels. As cars and computers continue to intersect infinite goods such as software, music, movies, art, etc. drive the value of the of the car much like they do computer hardware.

            Plane – engines, cars & planes are all similar enough mechanically that I don't think I need to address it again here. There is one place that infinite goods are aiding airlines and by extension planes. In the manipulation of their data such as schedules, ticket sales, etc. look at all of the intellectual property, other wise known as infinite goods, that has been built up around the airplane. Hotwire, Priceline, Orbitz, Expedia. Also on the construction end. Since planes cost so much to build, their manufactures would and do benefit from software that streamlines their inventory and manufacturing processes. I think I went over how opening all of this up can improve things. Basically let the market do the heavy lifting of the creating. Seed it by putting an idea out there. Let people build all kinds of interesting stuff on it. This adds value. Then learn the best way to implement these things inside the bundles of scare and infinite goods that are your products.

            pharmaceutical manufacturers – now these guys are fun. An example that's used over and over here is the fashion industry. Right now they have little to know IP protection. So they fight fiercely among themselves to stay fresh, hip, modern, fashionable. They are constantly innovating. Basically fashion is a huge knowledge industry. The manufacturing techniques of Louis Vuiton and the Gap aren't really all that different. It's the knowledge and reputation, both infinite goods, that differentiate the products. The same could be true of the pharmaceutical industry. With all of their protections, how few work on any given drug and how costly are they to develop. What would happen if they shared their knowledge with the rest of the world and let scientists all over the world participate in the development of new drugs, treatments, etc. there are still some substantial manufacturing and testing costs that go into drugs so the pharmaceutical companies could still position themselves there to capture the value added to their product. Yes, they would no longer have one blockbuster, like say Viagra, to market to the whole world. Rather they would have 1,000's of products to market to the whole world. Their costs would come down and they would have almost every drug be profitable. How expensive is a failed drug?



            In fact this site and others are advocating for exactly that. Because of infinite goods, the barriers to entry have changed.

            I think I addressed design above. Let me touch a little bit more on barriers to entry. On one hand, you don't want a lot of barriers to entry. You want as many people to understand what you're up to as possible. Many hands make light work and all that. You want millions of eye balls and millions of brains all working on your problems. Think of infinite goods as being a SETI program for humans. The barriers that will differentiate will be things like attention, reputation, access and time. Those that gain the attention of the market will have an advantage as always. With infinite goods, now it's infinitely more valuable with so many different things competing for attention. Reputation, I think this one goes without saying. One quick example though. Metalica built up a reputation of making great music for their genre. Then they developed a reputation as being 'evil' when they sued their own fans and tried to suppress Napster. For all the years they built up their good reputation, they destroyed it pretty quickly and gained a negative reputation. They are now working on repairing the damage to their reputation that their actions caused. Access as been addressed over and over on Techdirt so i'll leave it at that. Time is going to become more and more valuable. As information continues to flow and people understand more and more things, their time becomes valuable. For example, I will probably never work on my own car. I understand a great deal about my car and how to maintain it, but I feel that it is worth it for me to pay someone else skilled in maintenance to do it for me. I value the other things I know how to do more than I value the costs I would save doing the maintenance on my own vehicle.

            Look at Red Hat. They offer all their products for free. Anyone can download them and anyone can distribute them. Heck, anyone can do exactly what Red Hat does and charge for services like set up, optimization, enterprise, etc. So why aren't there innumerable competitors in this space? Because Red Hat has their reputation as a barrier to entry.

            I think Mike covered this well.

            Business models that incorporate infinite goods are winning in the market place.

            You don't just own infinite goods by themselves. You also own numerous products that are a scare good bundled with an infinite good. You also own products that are 2 or more infinite goods bundled together. The point of understanding infinite goods is to say there's one way of doing something. The point is that because infinite goods are well infinite, they insert a Zero into all of the businesses models already out there and make it possible for the creation of many new and profitable ones. When an input to a business model costs Zero that really changes things for the better.

            This article about Lee is shown as yet another example. Without infinite goods, what would Lee or anyone else have to do to get every major company in your field to come to you unsolicited and offer you $$$? Lee achieved this result with minimal cost. All he did was share his idea and help push it out to as many people as wanted it.

            No idea about the vegematic. Could you send me the link? Okay, Lee is one example that works. The point is that he's yet another example of someone understanding infinite goods and making it work for them. Infinite goods can work in numerous ways.

            infinite goods is not about eliminating IP.

            Mike addressed this.

            it's rather about pointing out the nature of ideas and infinite goods being in conflict with artificial scarcity. patents and other forms of intellectual property create artificial scarcity in infinite goods.

            Mike addressed this.

             

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              identicon
              Lonnie E. Holder, Oct 29th, 2008 @ 6:04am

              Re: some answers

              I imagine there is quite a bit of development cost in developing proprietary engines. There's the initial development costs, the costs to protect them with patents, the costs to maintain all the secret information, the cost to bring new people up to speed on your proprietary information and the risk that all of these costs ultimately could fail in the market place.

              The bulk of the cost is in building prototypes and testing. The other costs are relatively negligible. However, in spite of spending millions (how many is unknown), Caterpillar announced this year that they are leaving the long haul truck engine market because they were unable to figure out how to meet the 2010 emission standards. How would you have changed this situation? I assure you that Cummins would not want to be forced to give their proprietary knowledge to Caterpillar.

              What would happen if engine makers open sourced the design side, ie. the infinite goods side, of their business and focused on the manufacturing side. The chip maker AMD is doing something similar to this. What would happen is the cost of developing the infinite good would drop to near zero.

              The cost is dependent on significant experimentation and long term testing. Based on what we know today, the cost of prototyping and testing systems of this type will continue to be a significant cost. Tooling alone continues to be a huge cost. If the "infinite good" is the design, the cost will continue to be significant well into the future because of the need to demonstrate actual performance.

              Tens of thousands would join the current hundreds in working on every facet of modern engines.

              Ummm...tens of thousands are working on every facet of modern engines.

              This lowers the initial development cost as well as decreases the cost of replacement for employees.

              I do not follow this. Going from hundreds of expensive employees to tens of thousands of expensive employees reduces cost? Seems a little backward.

              Now you have a large pool of experienced developers to choose from if you want one in house. His learning curve would be no where near as steep as with proprietary information.

              One of the biggest problems is lack of a qualified pool of candidates. The numbers of engineers graduating each year continues to drop. The number choosing to go into engine development continues to drop. While you have a neat little theory, the reality is that the actual pool of participants continues to decrease.

              So there would be 2 huge savings in this model. The engine manufacturer could focus on manufacturing techniques, efficiencies, etc.

              They already do.

              With all of their protections, how few work on any given drug and how costly are they to develop.

              Either you misstated, or you have no clue what you are talking about. "How many work on any given drug"? Even the pharmaceutical companies do not know, because they continue to work their way through hundreds or even thousands of chemical combinations before finding one that is efficacious without being harmful. Sometimes they discover a drug that does one thing while looking for a drug that does something else. This discovery process is phenomenally expensive, which is why pharmaceutical companies are so protective of what little they do know. They need the payback for that investment. Someone will make the investment, somewhere. All you are describing is redistributing wealth among the pharmaceutical companies. the costs will still be the same in aggregate.

              What would happen if they shared their knowledge with the rest of the world and let scientists all over the world participate in the development of new drugs, treatments, etc. there are still some substantial manufacturing and testing costs that go into drugs so the pharmaceutical companies could still position themselves there to capture the value added to their product.

              I have no idea what you just said, but scientists who have the capability to participate in the search for new drugs already do.

              Rather they would have 1,000's of products to market to the whole world. Their costs would come down and they would have almost every drug be profitable. How expensive is a failed drug?

              You missed the point completely. The vast majority of drugs (5000:1, by some estimates), are failures. The price of trying to find a drug that does something useful. Logically:

              You are seeking a drug to treat a specific condition.

              You begin with basic formulas that you believe might have properties to treat the specific condition.

              You test.

              You analyze the result.

              You reformulate.

              Repeat infinitely, or until you discover something that treats the specific condition.

              Each time you develop a formula that does not work, it is a failed drug. That failed drug will never be a success.

              In fact this site and others are advocating for exactly that. Because of infinite goods, the barriers to entry have changed.

              Wait a moment. According to people here, infinite goods have always existed. Therefore, the "barriers to entry" could not have "changed" in response to infinite goods that have always existed.

              On one hand, you don't want a lot of barriers to entry.

              As a manufacturer, the more barriers to entry that exist, the better off I am. Why would I not want a lot of barriers to entry?

              Look at Red Hat...So why aren't there innumerable competitors in this space? Because Red Hat has their reputation as a barrier to entry.

              Well, engine manufacturers have hundreds of millions of dollars in capital investment as a barrier to entry in manufacturing engines. However, there is no barrier to entry in inventing new engine features. Indeed, engine manufacturers have largely "open sourced" their technology through thousands of patents. However, in spite of the benefits of participating in the design of new engines, which anyone, anywhere is free to do (your "infinite good"), few people do. Why? Well, internal to companies that produce products such as engines, transmission, cars, planes, etc., there is the realization that the "infinite good" is worthless until the efficacy of the "infinite good" has been verified. So, time to build the expensive prototype and test it. When the "infinite good" has the same value that others here think it does (meaning, zero), then another solution must be tested. The aggregate of companies that make a specific product have to choose which solutions they test because such tests are expensive. The cost of finding solutions is the significant barrier to entry. The lack of available participants to finding solutions is a barrier to entry. The lack of appeal in designing engines is a barrier to entry.

               

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                Aaron deOliveira (profile), Oct 29th, 2008 @ 6:54am

                Re: Re: some answers

                this conversation is going really well :) i'll have a response for you later today. either at lunch or after work.

                 

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              •  
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                Aaron deOliveira (profile), Oct 29th, 2008 @ 9:16am

                Re: Re: some answers

                You've presented some interesting business cases. Let me first say that in some of these cases the understanding and application of infinite goods is not going to have an immediate effect. Infinite goods are not a magic pill that cures business ills. Some of these businesses have issues that go deeper than their business model.

                The other reason is for a company to truly work with and understand infinite goods, they have to shift their entire culture. They have to approach the business they're in from a new perspective.

                So on to the great business cases we're talking about.



                I imagine there is quite a bit of development cost in developing proprietary engines. There's the initial development costs, the costs to protect them with patents, the costs to maintain all the secret information, the cost to bring new people up to speed on your proprietary information and the risk that all of these costs ultimately could fail in the market place.

                The bulk of the cost is in building prototypes and testing. The other costs are relatively negligible. However, in spite of spending millions (how many is unknown), Caterpillar announced this year that they are leaving the long haul truck engine market because they were unable to figure out how to meet the 2010 emission standards.

                ---

                How would you have changed this situation? Great question.

                If we're assuming that Caterpillar can adopt the culture necessary to participate in infinite goods, then here's what they could have done.

                They can open the problem up to the world to solve. I think your reference to Cummins means that they have developed such an engine, so we already know it's possible. Having numerous people working on this problem would come up with a solution that Caterpillar could manufacture. They already have the infrastructure in place to do the manufacturing.

                Why would the world work on such a project? If Caterpillar did it right, because the people working on it find their own benefits in contributing to the project.

                Look at Sun Microsystems participation in several open source projects. They seed the project and provide support. The open source community builds all kinds on new value on top of what Sun and others have put out there. Sun then gathers it up and packages it in such a way as to sell to their enterprise customers and others. Caterpillar, over time, could do the same thing with their engine design problem.

                Right now because their proprietary work can't solve this problem, they are losing out on the entire market of long haul truck engines. So they lost all that they invested in their R&D, patents, etc. and they lose the market as well.

                Understanding and working with infinite goods does not mean that anyone would compel Cummins to release any of their proprietary knowledge. Rather, it would be a bad business decision for Cummins to only use their proprietary information. Cummins has hundreds of employees. A properly developed open source community has thousands even tens of thousands of people working on the same problems. Cummins would ultimately lose market share if they continued only to use their proprietary work. They would lose market share because there's no way they could keep up with the work being done by the open source community.



                What would happen if engine makers open sourced the design side, ie. the infinite goods side, of their business and focused on the manufacturing side. The chip maker AMD is doing something similar to this. What would happen is the cost of developing the infinite good would drop to near zero.

                The cost is dependent on significant experimentation and long term testing. Based on what we know today, the cost of prototyping and testing systems of this type will continue to be a significant cost. Tooling alone continues to be a huge cost. If the "infinite good" is the design, the cost will continue to be significant well into the future because of the need to demonstrate actual performance.

                ---

                Lee from this article is a great example. He just proved the concept of "head tracking" something that will probably prove very valuable for video games in the future. How much did it cost to develop? Not much. Some parts from a Wii and a computer and some infrared lights. Far below any companies R&D budget. Would they have to go in and clean things up a bit? Yes, but the grunt work of finding new and useful applications has been taken care of by Lee in this example. And yes this example can be reproduced almost anywhere in almost any field.



                Tens of thousands would join the current hundreds in working on every facet of modern engines.

                Ummm...tens of thousands are working on every facet of modern engines.

                ---

                Millions then. My point was that no matter how many people a company hires they can not hire every person that would want to work on any given problem. There is no way a company can employees that number anywhere near the size of a good open source community. In an open source community, a company that participates does not have to pay every person that is working on a project, yet they still benefit from all of their work.



                This lowers the initial development cost as well as decreases the cost of replacement for employees.

                I do not follow this. Going from hundreds of expensive employees to tens of thousands of expensive employees reduces cost? Seems a little backward.

                ---

                It does seem a little backward because you're still thinking in terms of controlling the people working on the problem.

                First, The employees are expensive for several reasons. You have to pay them for their time. You have to get them through the learning curve of your proprietary product. There is no where outside of your company for them to experience the propriety information, secrets so you have to take them through that learning curve.

                In this example, if you have your design information outsourced people are already using it and understanding it for their own projects and ideas. They are already well versed. If the information is outsourced it can reach these tens of thousands of people. Rather than have to hire someone who has a background in design or coding or whatever, it would be more useful who has a background in the designs, codes, etc. that I am using in my business.

                There are 2 ways this decreases costs. The first is that you're receiving benefits from people working on the problems that you don't employ. The second is that you don't have to invest as much in training to get new employees through your learning curve. Also, you don't lose as much when employees go. If you are participating actively in an open source community, the people in the community should know as much as your employees.



                Now you have a large pool of experienced developers to choose from if you want one in house. His learning curve would be no where near as steep as with proprietary information.

                One of the biggest problems is lack of a qualified pool of candidates. The numbers of engineers graduating each year continues to drop. The number choosing to go into engine development continues to drop. While you have a neat little theory, the reality is that the actual pool of participants continues to decrease.

                ---

                This pool continues to decrease because of the failure of patents and proprietary information. Because all the information in this field is currently controlled by patent holders, employees destinies are controlled by the bets that these companies make. The employee has to spend a great deal of their own money, time and effort to gain the skills necessary to work in this field, and then they have no direct control over their destiny. That's a huge disincentive to enter into the field.

                If rather those in the engine development field participated in the open source community and freed up their information then they would have people participating in their field from their youth. Look at hobbies like go carts and remote control cars and even restoring actual automobiles. People that are drawn to these endeavors would be able to apply the information, knowledge and experience that the engine design companies have open sourced without patents. By the time they were employable. They would already have experience in the exact field and also already have worked on projects similar to the one their employers need them to work on.



                So there would be 2 huge savings in this model. The engine manufacturer could focus on manufacturing techniques, efficiencies, etc.

                They already do.

                ---

                I agree they do. They are very good at it. My point is that a huge cost for them is developing their infinite goods, the new designs, over and over. They have to spend on R&D and prototyping, etc. with no guarantee on a return. What if they didn't spend that money and instead relied on developing an open source community for their new designs? They would save money and have products developed faster.



                With all of their protections, how few work on any given drug and how costly are they to develop.

                Either you misstated, or you have no clue what you are talking about. "How many work on any given drug"? Even the pharmaceutical companies do not know, because they continue to work their way through hundreds or even thousands of chemical combinations before finding one that is efficacious without being harmful. Sometimes they discover a drug that does one thing while looking for a drug that does something else. This discovery process is phenomenally expensive, which is why pharmaceutical companies are so protective of what little they do know. They need the payback for that investment. Someone will make the investment, somewhere. All you are describing is redistributing wealth among the pharmaceutical companies. the costs will still be the same in aggregate.

                ---

                This discovery process is phenomenally expensive....

                My point exactly. Properly embracing infinite goods can drastically lower the cost of the discovery process. To some degree this already happens in university. Pharmaceutical companies realize that universities are doing research in their field. They share their information with the universities. Universities have developed many new drugs, treatments, etc. that go on to be marketed by pharma companies.

                Under the current system only select universities get to participate in the research and other individuals or groups. I believe the rate of discovery would increase significantly if pharma companies participated in the open source community.



                What would happen if they shared their knowledge with the rest of the world and let scientists all over the world participate in the development of new drugs, treatments, etc. there are still some substantial manufacturing and testing costs that go into drugs so the pharmaceutical companies could still position themselves there to capture the value added to their product.

                I have no idea what you just said, but scientists who have the capability to participate in the search for new drugs already do.

                ---

                Yes they already do, but they do it in an incredibly hampered way. They are bound by non-disclosure agreements and trade secrets and such. I do not believe that the best way to solve a problem is to have everything locked down where only a few people can see it and work on it.

                Rather if they weren't so worried about controlling every little aspect of everything, information could flow freely and problems would be addressed by the masses instead of by the individual. The individual would still have an impact. The difference is that the success or failure of a product wouldn't hang on the efforts of only the individual.



                Rather they would have 1,000's of products to market to the whole world. Their costs would come down and they would have almost every drug be profitable. How expensive is a failed drug?

                You missed the point completely. The vast majority of drugs (5000:1, by some estimates), are failures. The price of trying to find a drug that does something useful. Logically:

                You are seeking a drug to treat a specific condition.

                You begin with basic formulas that you believe might have properties to treat the specific condition.

                You test.

                You analyze the result.

                You reformulate.

                Repeat infinitely, or until you discover something that treats the specific condition.

                Each time you develop a formula that does not work, it is a failed drug. That failed drug will never be a success.

                ---

                Even if the ratios of failures to successes remains constant, having many more people working on the problem would get to results much faster. Think of it as the difference between having one processor in a computer work on something and having 100 processors work in parallel. The 100 processors will get the work done faster. And if the pharma companies aren't having to shoulder the cost of operating those 100 processors, which represent all the people in the open source community, they could dramatically decrease their costs of development.



                In fact this site and others are advocating for exactly that. Because of infinite goods, the barriers to entry have changed.

                Wait a moment. According to people here, infinite goods have always existed. Therefore, the "barriers to entry" could not have "changed" in response to infinite goods that have always existed.

                ---

                Yes infinite goods have always existed. What's changed is peoples access to them as well as the cost of copying them. Previous to the digital age, it was very expensive to copy music, either by hand or on a medium like a record or a CD. now music can be copied for next to nothing digitally. As these barriers fall away, the infinite goods that have always existed are now acting more like the infinite goods they are. Previously because it was so expensive, music acted a lot like a scare good. It required a lot of money to produce and distribute. Now it costs next to nothing to produce or distribute. Now music and other infinite goods can act according to their unique properties.



                On one hand, you don't want a lot of barriers to entry.

                As a manufacturer, the more barriers to entry that exist, the better off I am. Why would I not want a lot of barriers to entry?

                ---

                It a world where everything is expensive and resources are limited, yes barriers to entry make you better off. That's not the world we live in any more. There are resources out there, infinite goods, that are now unlimited. Trying to control everything gives you 100% of $1. Understanding infinite goods gives you 1% of $1,000,000,000...

                I think i covered why most barriers to entry are bad in the previous post. Let me know if you want to go over it again.



                Look at Red Hat...So why aren't there innumerable competitors in this space? Because Red Hat has their reputation as a barrier to entry.

                Well, engine manufacturers have hundreds of millions of dollars in capital investment as a barrier to entry in manufacturing engines.

                ---

                we are in agreement



                However, there is no barrier to entry in inventing new engine features. Indeed, engine manufacturers have largely "open sourced" their technology through thousands of patents.

                ---

                Patents do not create open source communities. The enforcement of patents actively deter the work of an open source community. Yes the patent is published, but no one is free to build on that information without having to go through the patent process themselves. It is all very costly and prohibitive.



                However, in spite of the benefits of participating in the design of new engines, which anyone, anywhere is free to do (your "infinite good"), few people do. Why?

                ---

                Few people do because currently there are massive negatives in the form of patents and litigation. If you took a Hemi engine and improved upon it and then tried to put that product back in the market you would be sued by Dodge. They would use their patents as a barrier and come after you. That is why few people do.



                Well, internal to companies that produce products such as engines, transmission, cars, planes, etc., there is the realization that the "infinite good" is worthless until the efficacy of the "infinite good" has been verified. So, time to build the expensive prototype and test it.

                ---

                I've said over and over here that the use of infinite goods can drastically reduce the expensive part of prototyping.



                When the "infinite good" has the same value that others here think it does (meaning, zero), then another solution must be tested. The aggregate of companies that make a specific product have to choose which solutions they test because such tests are expensive.



                The cost of finding solutions is the significant barrier to entry.

                ---

                This cost of finding the solution is carried by the open source community. The reason they carry the cost is because in an open source community, they also benefit monetarily or otherwise from the discovery of the solution.



                The lack of available participants to finding solutions is a barrier to entry.

                ---

                As I said above, the lack of active participants comes from the negatives that are inherent in patent protection. Look at any well developed open source project. There is no lack of participants.



                The lack of appeal in designing engines is a barrier to entry.

                ---

                I addressed this as well. The lack of appeal will change once communities are engaged throughout their entire lives the way open source does. Yes, there are children that are coding for open source projects.



                So far this has been an excellent conversation. Keep it coming. :)

                 

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                •  
                  identicon
                  Lonnie E. holder, Oct 29th, 2008 @ 11:09am

                  Re: Re: Re: some answers

                  Aaron:

                  Infinite goods are not a magic pill that cures business ills. Some of these businesses have issues that go deeper than their business model.

                  Thank you. That was really my main point.

                  If we're assuming that Caterpillar can adopt the culture necessary to participate in infinite goods, then here's what they could have done.

                  They can open the problem up to the world to solve. I think your reference to Cummins means that they have developed such an engine, so we already know it's possible. Having numerous people working on this problem would come up with a solution that Caterpillar could manufacture. They already have the infrastructure in place to do the manufacturing.

                  Why would the world work on such a project? If Caterpillar did it right, because the people working on it find their own benefits in contributing to the project.


                  I have one comment regarding your potential solution. Lack of competition. Essentially, you are saying that Caterpillar and Cummins (and Detroit Diesel, and Ford, etc.) will develop one solution, regardless of whether it is the best, most cost effective solution. That is not good for our economy or our society. Innovation is reduced, costs will likely remain higher than they could have been. Effectively, we will have a quasi-monopoly because there will only be one solution with multiple producers.

                  Look at Sun Microsystems participation in several open source projects. They seed the project and provide support. The open source community builds all kinds on new value on top of what Sun and others have put out there. Sun then gathers it up and packages it in such a way as to sell to their enterprise customers and others. Caterpillar, over time, could do the same thing with their engine design problem.

                  The big difference is that testing software is a bit easier than testing a diesel engine. When your next door neighbor builds a diesel engine test stand in his back yard for $500,000, you are going to think he is crazy and then you are going to ask him to stop because he needs to test day and night.

                  My real point is that ideas are ideas until they become a piece of metal that works, which involves extensive, expensive, testing. The guy next door is not going to create a viable solution until the scarce resources permit his solution to be verified.

                  Understanding and working with infinite goods does not mean that anyone would compel Cummins to release any of their proprietary knowledge. Rather, it would be a bad business decision for Cummins to only use their proprietary information.

                  Given that they are soon to have 100% of the long haul truck market in the United States, they might disagree with you.

                  Cummins has hundreds of employees. A properly developed open source community has thousands even tens of thousands of people working on the same problems. Cummins would ultimately lose market share if they continued only to use their proprietary work. They would lose market share because there's no way they could keep up with the work being done by the open source community.

                  First, anyone is free to develop technology to improve Cummins' technology. The vast majority of Cummins' technology is available in patents, which means that their technology is open source.

                  Second, the problem is not lack of open source, but the ability to test solutions. Companies such as Cummins get "solutions" from outside inventors all the time. Virtually all of these "solutions" neglect to consider certain engineering details (most or all of which were available with a bit of reading research). Then, a company such as Cummins must prioritize valuable test stand time to evaluate the proposed solution. While "open source" solutions occasionally occur, they are rare. So, millions of people are free to create solutions, but it is unlikely that any of these solutions will be validated.

                  What would happen if engine makers open sourced the design side, ie. the infinite goods side, of their business and focused on the manufacturing side.

                  Effectively, they already have. Where are the solutions? Oh, sorry. Lots of solutions, no validation, which costs money, a lot of money. So, the cost of developing the infinite good can never drop to zero because of the expensive tests it takes to validate.

                  Lee from this article is a great example. He just proved the concept of "head tracking" something that will probably prove very valuable for video games in the future. How much did it cost to develop? Not much.

                  Now let him do the same thing with a diesel engine aftertreatment system.

                  I agree that in certain circumstances, such prototyping can be done. However, then it has to be taken from the concept stage to the production stage, which costs even more money. Then, in order to satisfy customer needs, the system needs to be redesigned to be sufficiently robust to meet anticipated environments. More money.

                  Yes, but the grunt work of finding new and useful applications has been taken care of by Lee in this example.

                  Grunt work? Inventing? Obviously, inventing is beneath you. You and I must travel in different circles. What do you do for a living?

                  And yes this example can be reproduced almost anywhere in almost any field.

                  What kind of engineering do you do?

                  My point was that no matter how many people a company hires they can not hire every person that would want to work on any given problem. There is no way a company can employees that number anywhere near the size of a good open source community. In an open source community, a company that participates does not have to pay every person that is working on a project, yet they still benefit from all of their work.

                  Cummins, and any other engine manufacturer, would still have to prioritize potential solutions and test them. Time and money. Who is more likely to develop a viable aftertreatment system for a diesel engine? Lee in his basement with a roll of duct tape and some wire, or a spectrum of engineers with chemical, mechanical and electrical backgrounds and design tools related to an aftertreatment system?

                  This lowers the initial development cost as well as decreases the cost of replacement for employees.

                  Nice theory. You would think that since most mechanical devices are effectively "open source" that this would have happened already. However, it has yet to happen and does not appear to be ready to happen any time soon.

                  It does seem a little backward because you're still thinking in terms of controlling the people working on the problem.

                  People cannot be controlled. If they want to develop an engine or an aftertreatment system, particularly if a company such as Caterpillar or Cummins finds the design potentially viable, I think they would welcome the design whole-heartedly. However, there is an issue of credibility.

                  You have to get them through the learning curve of your proprietary product. There is no where outside of your company for them to experience the propriety information, secrets so you have to take them through that learning curve.

                  The vast majority of the design details are in patents. The majority of the trade secrets are in how products are produced, not in the products themselves. Even when trade secrets exist in the product, frequently they are related to life or effectiveness, so the concept should still be easy to acquire and demonstrate.

                  This pool continues to decrease because of the failure of patents and proprietary information. Because all the information in this field is currently controlled by patent holders, employees destinies are controlled by the bets that these companies make. The employee has to spend a great deal of their own money, time and effort to gain the skills necessary to work in this field, and then they have no direct control over their destiny. That's a huge disincentive to enter into the field.

                  Excuse me? You do need a degree. You do need a degree in an appropriate field. That will not change. If anything, patents make knowledge more widely available to people

                  There have been significant studies on why the number of engineering students continues to decline in the United States, the only country where such a decline continues to occur. None of those studies has ever blamed patents. Quite an interesting, completely unproven, conjecture.

                  If rather those in the engine development field participated in the open source community and freed up their information then they would have people participating in their field from their youth.

                  Well, it is great then that engines are available to be worked on and torn apart, because many of the employees for Caterpillar, Cummins and others worked on diesels in their youth.

                  What if they didn't spend that money and instead relied on developing an open source community for their new designs? They would save money and have products developed faster.

                  I am sure they would love to have you teach them about who is going to bear the burden of the cost instead.

                  Universities have developed many new drugs, treatments, etc. that go on to be marketed by pharma companies.

                  The cost is still there, a portion of it has just been shifted to another entity, at least partially paid for by tax dollars. Now you run into another group of complainers who say that corporations should be doing their own research or paying for all the costs of university research.

                  Yes they already do, but they do it in an incredibly hampered way. They are bound by non-disclosure agreements and trade secrets and such. I do not believe that the best way to solve a problem is to have everything locked down where only a few people can see it and work on it.

                  That is untrue. If Boston University wants to work toward a solution for colon cancer, then they do. They are free to share their findings, or not. If Joe the Plumber's Pharmaceutical Endeavors wants to seek a treatment for colon cancer, they can. In the broadest sense, every person on the planet may seek a cure for colon cancer. If there are roughly 6 billions solutions, someone must prioritize the 6 billion solutions into those that are most likely to succeed, and then begin the initial studies to determine which will go on to the next step. All this scarce resources. Essentially, we do not have time to evaluate 6 billion solutions because someone has to be working on aftertreatment systems for engines.

                  Rather if they weren't so worried about controlling every little aspect of everything, information could flow freely and problems would be addressed by the masses instead of by the individual.

                  One of the things I find humorous is that drug research is probably one of the most widely dispersed ongoing research activities. There are papers presented all the time, sharing results of various tests and approaches. While the drug companies may guard information zealously, nearly everyone else, which is a LOT of people, is free with theirs. Interestingly, the drug companies typically end up making the discoveries versus the hospital and university researchers, who have open source on their side.

                  Even if the ratios of failures to successes remains constant, having many more people working on the problem would get to results much faster.

                  I feel like I am a record and a scratch keeps pushing the needle back. WHERE are the resources to do what you suggest? EVERY pharmaceutical researcher on earth is working on a solution for SOMETHING. If someone "open sourced" their miniscule amount of knowledge, that does not necessarily mean even ONE more person will work on trying to solve that problem. Indeed, in many cases no one else is interested in the problem or the solution (AKA orphan drugs).

                  Think of it as the difference between having one processor in a computer work on something and having 100 processors work in parallel. The 100 processors will get the work done faster. And if the pharma companies aren't having to shoulder the cost of operating those 100 processors, which represent all the people in the open source community, they could dramatically decrease their costs of development.

                  Unless you run out of computers...which is about where we are with pharmaceutical research.

                  It a world where everything is expensive and resources are limited, yes barriers to entry make you better off. That's not the world we live in any more.

                  Actually, with limited exceptions, this is still the world we live in. You yourself said that the effect of "infinite goods" has yet to be felt in the manufacturing industries. I agree. I also suggest that unless something changes significantly (and what that might be, I am unsure), they will never be as effective in manufacturing as they are in, say, music.

                  Patents do not create open source communities. The enforcement of patents actively deter the work of an open source community. Yes the patent is published, but no one is free to build on that information without having to go through the patent process themselves. It is all very costly and prohibitive.

                  The entire paragraph is in error. In fact, people build on existing patents all the time. Try a Google search for "picket fence" and "patent strategy." Essentially, this strategy is to develop improvements based on a patent that ultimately become the best way to practice the patent, and then use that leverage to negotiate cross licenses to permit use of the original patent. Done all the time. Goes to show that patents are "open source" and that enforcement is not necessarily a deterrent.

                  Yes, it is more effective to patent the improvement in order to be able to gain a license to the original patent, but in the case of an independent inventor, you can either publish your improvement for the world to see, like Lee, or approach someone about buying your idea without a patent, being careful not to reveal the details until an appropriate contract is written.

                  Few people do because currently there are massive negatives in the form of patents and litigation. If you took a Hemi engine and improved upon it and then tried to put that product back in the market you would be sued by Dodge.

                  Maybe. Probably not. Manufacturers, especially big manufacturers, rarely sue people. Fundamentally, there is little money in law suits. I was trying to find the last time that Cummins, Detroit Diesel or Caterpillar sued someone over engine-related technology. Apparently, it has been a while. Engine companies are not very litigious.

                  They would use their patents as a barrier and come after you. That is why few people do.

                  Then they are using patents as an excuse for doing something. Patents may be a barrier in some industries, but for most industries patents have rarely been a barrier. I suspect that someone with a great, proven idea will always be able to sell the idea, if they can get to the right person.

                  I've said over and over here that the use of infinite goods can drastically reduce the expensive part of prototyping.

                  Waiting for the details.

                  This cost of finding the solution is carried by the open source community. The reason they carry the cost is because in an open source community, they also benefit monetarily or otherwise from the discovery of the solution.

                  However, without the testing, on a test stand that costs half a million dollars, it is unlikely that anyeon is going to believe your solution. Lots of money needs to be spent on some kind of validation.

                  As I said above, the lack of active participants comes from the negatives that are inherent in patent protection. Look at any well developed open source project. There is no lack of participants.

                  Non sequitur. I would love to find just one engine inventor that says they do not participate in inventing better engines because of patents. Most people just do not worry about patents, except as a source of information, until they actually invent something.

                   

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                    Aaron deOliveira (profile), Oct 29th, 2008 @ 11:24am

                    Re: Re: Re: Re: some answers

                    your responses are coming faster than mine. i'll try to get my response to this out tonight if not tomorrow. we're starting to see eye to eye on some things.

                    i really think we've cleared away some of the barriers in our communication.

                    i'll get something up as soon as i can tonight.

                     

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                    Aaron deOliveira (profile), Oct 29th, 2008 @ 6:19pm

                    Re: Re: Re: Re: some answers

                    working late today and tomorrow. so i'll just summarize here rather than do a point by point.

                    first let me say, i've really enjoyed disecting these ideas with you.

                    in the manufacturing examples i think we're talking about 2 sides of the same coin. i'm pointing out the infinite goods that are bundled in the products and you're pointing out the scare goods. i think that my statements about decreasing the costs of infinite goods and that they increase the value of scare goods is correct. i think that your statement that there are still significant costs on the scare side of manufacturing such as materials, tooling, production, etc. is also correct. since manufacturing is such a scare good dependent industry (that's not a bad thing, just the reality of manufacturing) it will not be as affected by infinite goods as say the music industry.

                    hate to say it, but patents are not open source. the definition of open source is that you can take what is and do whatever you want with it. you can build on it, you can extend it, etc. yes patents put the information out there, but people are not free to build and extend what's patented. the very idea behind a patent is to limit. limits are not open source.

                    we're going to have to agree to disagree on copying. i think it's a great thing. mostly because when things can be copied, you no longer have to bear all of the costs. if everyone copies your work suddenly you become the creator of 6 billion copies. this gives you a lot of opportunities. for example. firefox. with all the copies out there Google is paying firefox for the use of their search bar.

                    if you want to continue this discussion with me (and i'd love to) please email me at marroncito@yahoo.com

                    right now i don't have the time to keep up with you. you form your responses so quickly. :) this conversation could continue at a slower pace via email.

                    again thanks for the great conversation. i'm done posting on this article.

                     

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    Ronald J Riley (profile), Oct 28th, 2008 @ 6:19am

    Aspirations are way too low

    1) We do not know if Johnny Chung Lee invented anything because he has not had his work reviewed and validated with a patent examination.

    2) If Johnny Chung Lee actually has produced significant inventions his aspirations are way too low. Working for a big company is rarely in the interest of a real inventor.

    3) Patents are still mandatory if the inventor expects to receive fair value. Getting a job is not fair value.

    4) While getting a patent is likely to lead to a fight with a patent pirating transnational the good news is that today there are plenty of patent enforcement companies and contingency litigators ready and willing to extract fair value out of the thieves. A fringe benefit is seeing them whine about so called trolls followed by seeing those companies handed their heads at trial.

    Ronald J. Riley,


    Speaking only on my own behalf.
    Affiliations:
    President - www.PIAUSA.org - RJR at PIAUSA.org
    Executive Director - www.InventorEd.org - RJR at InvEd.org
    Senior Fellow - www.patentPolicy.org
    President - Alliance for American Innovation
    Caretaker of Intellectual Property Creators on behalf of deceased founder Paul Heckel
    Washington, DC
    Direct (202) 318-1595 - 9 am to 9 pm EST.

     

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      Greevar, Oct 28th, 2008 @ 7:20am

      Re: Aspirations are way too low

      2) If Johnny Chung Lee actually has produced significant inventions his aspirations are way too low. Working for a big company is rarely in the interest of a real inventor.

      3) Patents are still mandatory if the inventor expects to receive fair value. Getting a job is not fair value.

      I disagree. Bringing an invention to market involves a lot of risk of investment. The market will decide the invention's "fair value". A job offer to the inventor is up to the inventor's discretion of what is "fair value". You may not think that is fair, but perhaps Mr. Lee does? Fair is an arbitrary concept that differs in the mind of every person.

      You seem to think that if someone comes up with an innovative idea, that it belongs to them and the world should kiss his ass while handing over gobs of money. Ideas are not unique and therefore not scarce. Talent on the other hand, is scarce and it is has value. That's why Mr. Lee is receiving so many job offers.

       

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      Aaron deOliveira (profile), Oct 28th, 2008 @ 8:05am

      Re: Aspirations are way too low

      1) We do not know if Johnny Chung Lee invented anything because he has not had his work reviewed and validated with a patent examination.
      this is semantics. whether or not Lee had his work reviewed and 'validated' with a patent examination is irrelevant. Lee chose to put his ideas out in the marketplace and they have been shown to have numerous benefits to both himself and the marketplace as a whole. whether you call it invention, or innovation, or some other word, Lee has done something important.

      2) If Johnny Chung Lee actually has produced significant inventions his aspirations are way too low. Working for a big company is rarely in the interest of a real inventor.
      again with the semantics. the significance of is work has already been shown in the marketplace. the market has already valued his contribution. thousands of people around the world are using his work. his whiteboard is being used in classrooms. even the students are comprehending it and demonstrating it. businesses also valued his work. they made UNSOLICITED offers to him. previous to infinite goods, what would you have to accomplish to have every major company in your field come to you unsolicited and let you write your own ticket? whatever it was, it would cost several times more than what Lee spent spreading his ideas far and wide.

      whether or not he falls into a definition of 'real' is immaterial.


      3) Patents are still mandatory if the inventor expects to receive fair value. Getting a job is not fair value.
      no they are not. the value has moved. it is no only to be found in scarcity. the value is still there for the inventor/innovator to capture. the only difference is that now they have to capture it differently. Also, there is far more value to capture now then there has been under the artificial scarcity of patents.

      a quick tangent to patent attorneys in this. they will still be valuable in a world of infinite goods, but they too will have to change where they collect value from. specifically, they understand intellectual property far beyond the average. rather than use that knowledge to try to limit something that inherently doesn't have limits, they can use their advanced knowledge to add value and capture it.

      as has been mentioned above, the point of this article is not "an inventor got a job". the point is that something amazing happened. every major company in Lee's field was competing for him. they offered to let him write his own ticket. so he did. he chose Microsoft because he felt that it would allow him to reach more people. that is what he determined to be the 'fair value'.

      would not every inventor/innovator love to have every company in their field clamoring to work with them? Lee could have just as easily worked as a consultant or as a contractor or decided that he wanted to be a VP of something. the point is that his use of infinite goods and his work spreading his idea led to the result of his entire industry wanting to pay him UNSOLICITED. the other point is that this can be reproduced.


      4) While getting a patent is likely to lead to a fight with a patent pirating transnational the good news is that today there are plenty of patent enforcement companies and contingency litigators ready and willing to extract fair value out of the thieves. A fringe benefit is seeing them whine about so called trolls followed by seeing those companies handed their heads at trial.
      what these patent enforcement companies are finding out is that it is very hard and very expensive to limit something that is infinite. they're standing in the middle of a river trying to stop it's flow with their hands. trials have the short term benefit of extracting a comparatively small some from an individual. what doesn't seem to be taken into consideration is the collateral damage that is done to your own customers and your own market. you make your customers criminals and breed distrust of your company. you create a huge net negative. why use your products when they come with the risk of being dragged in front of a judge. in time, replacement products will take over the customers and the market.


      5) Thank you for joining the conversation. Someone with a background like yours should have a lot to add to this conversation.

       

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      DanC, Oct 28th, 2008 @ 8:37am

      Re: Aspirations are way too low

      1) We do not know if Johnny Chung Lee invented anything because he has not had his work reviewed and validated with a patent examination.

      I like how Riley is immediately skeptical of someone's ability to invent something simply because it hasn't been submitted to the patent office.

      But show him a little company / inventor v. big company patent lawsuit and he'll immediately go into a rant about the big company "stealing" from the little guy regardless of the facts.

      2) If Johnny Chung Lee actually has produced significant inventions his aspirations are way too low. Working for a big company is rarely in the interest of a real inventor.

      And now Mr. Riley is the gatekeeper for determining what constitutes a "real" inventor. Perhaps he can add it to his list of meaningless affiliations. And why is working for a big company not in the interest of an inventor exactly?

      3) Patents are still mandatory if the inventor expects to receive fair value. Getting a job is not fair value.

      Do you actually have anything besides your typical propaganda to substantiate this claim?

      I believe Mr. Lee is in a much better position than you to determine whether or not he received fair value for his inventions.

       

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      Douglas Gresham, Oct 28th, 2008 @ 10:05am

      Re: Aspirations are way too low

      Let's play logical fallacy bingo, with your host, Ronald J Riley!

      1) We do not know if Johnny Chung Lee invented anything because he has not had his work reviewed and validated with a patent examination.

      Honestly - patents cause more inventions, where an invention is only valid if it has a patent? This is a logical fallacy called "begging the question".

      2) If Johnny Chung Lee actually has produced significant inventions his aspirations are way too low. Working for a big company is rarely in the interest of a real inventor.

      You don't get to decide what a 'real' inventor is. One who invents is an inventor, it has nothing to do with their aspirations. We call this fallacy "no true Scotsman".

      3) Patents are still mandatory if the inventor expects to receive fair value. Getting a job is not fair value.

      Assertions made without backing them up with evidence. We call this fallacy an "ad-hoc argument", or possibly an "argument from ignorance" (I don't understand it, therefore it's not true).

      4) While getting a patent is likely to lead to a fight with a patent pirating transnational the good news is that today there are plenty of patent enforcement companies and contingency litigators ready and willing to extract fair value out of the thieves. A fringe benefit is seeing them whine about so called trolls followed by seeing those companies handed their heads at trial.

      The use of the words 'pirating' and 'thieves' is an example of a fallacy of "emotional appeal" - trying to elicit an emotional response rather than dealing in facts (and yes, I know the other side uses the word 'troll'; neither use is a valid argument without evidence). It's also a "non sequitur" fallacy, in that levels of litigation and RJR's personal satisfaction at seeing the 'pirates' beaten in court does not imply anything about whether patents are necessary to stimulate innovation, which is the actual point of the argument.

      Get your logical fallacy bingo scorecard at http://rationalwiki.com/wiki/Logical_fallacy and play along next time!

       

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        Lonnie E. Holder, Oct 28th, 2008 @ 2:16pm

        Re: Re: Aspirations are way too low

        1) We do not know if Johnny Chung Lee invented anything because he has not had his work reviewed and validated with a patent examination.

        Honestly - patents cause more inventions, where an invention is only valid if it has a patent? This is a logical fallacy called "begging the question".

        Riley did not create a logical fallacy. All he did was point out that we do not know whether Johnny Chung Lee has actually invented something. Who is in a position to objectively judge whether his device is novel, and have they made a determination that his device is indeed inventive? Seeing that he obtained a job sways in favor of his device being inventive, but secondary issues (delivery, creative marketing, etc.) could also have initiated an offer of employment.

         

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          Mike (profile), Oct 28th, 2008 @ 4:57pm

          Re: Re: Re: Aspirations are way too low

          All he did was point out that we do not know whether Johnny Chung Lee has actually invented something.

          Curious on this one: if someone invents something in a vaccuum and no one ever finds out about it, is it still an invention? Does it matter?

          Shouldn't we celebrate those who actually did something with the invention, as Lee did here?

          Setting up ridiculous and useless barriers about who is a real "inventor" by having a board of certified experts award one with a prize is a really, really bad solution.

           

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            Lonnie E. Holder, Oct 28th, 2008 @ 6:53pm

            Re: Re: Re: Re: Aspirations are way too low

            Curious on this one: if someone invents something in a vaccuum and no one ever finds out about it, is it still an invention?

            Yes

            Does it matter?

            I guess from the viewpoint that a number of people seem to think that Lee's mechanism was an invention, and then these same people point to how Lee became a modest success without the patents that these same people seem to categorically think that pro-IP people believe are necessary for success, thus proving their point, then yes, it does matter.

            Shouldn't we celebrate those who actually did something with the invention, as Lee did here?

            To rephrase, should we celebrate what Lee did with his device (since we have not been able to determine whether his device is an invention)? Sure, clever marketing of his device. Hurrah for him.

            Setting up ridiculous and useless barriers about who is a real "inventor" by having a board of certified experts award one with a prize is a really, really bad solution.

            lol...Don't tell me, tell someone who cares. I neither stated that Lee is a real inventor or an unreal inventor. The only distinction I make is with the word "invention." Lee is certainly clever and managed to leverage his device. Ron Popeil would be proud.

             

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              Mike (profile), Oct 28th, 2008 @ 8:58pm

              Re: Re: Re: Re: Re: Aspirations are way too low

              I neither stated that Lee is a real inventor or an unreal inventor. The only distinction I make is with the word "invention."

              Again, I'm curious as to why you believe there needs to be a board of certified experts to determine if someone is, or is not, an inventor.

              What's wrong with the ACTUAL definition of an inventor: someone who creates something new, as Mr. Lee did.

               

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                Lonnie E. Holder, Oct 29th, 2008 @ 6:13am

                Re: Re: Re: Re: Re: Re: Aspirations are way too low

                Again, I'm curious as to why you believe there needs to be a board of certified experts to determine if someone is, or is not, an inventor.

                I never said there needed to be a board. An invention is a new, useful, and nonobvious improvement of a process, machine, or product. Is Lee's device useful? It appears to be. Is Lee's device new? I do not know. There are a lot of electronic devices that exist. Is Lee's device a non-obvious improvement? Again, I do not know. I do not care. Why do you keep coming back to a question about something I never asked?

                 

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                  Mike (profile), Oct 29th, 2008 @ 7:27pm

                  Re: Re: Re: Re: Re: Re: Re: Aspirations are way too low

                  An invention is a new, useful, and nonobvious improvement of a process, machine, or product

                  No, that's the definition of a PATENT, not an INVENTION.

                  It's rather worrisome that you think they're synonymous.

                   

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                    Anonymous Coward, Oct 29th, 2008 @ 8:44pm

                    Re: Re: Re: Re: Re: Re: Re: Re: Aspirations are way too low

                    "No, that's the definition of a PATENT, not an INVENTION."

                    The original quote is a bit underinclusive, but why this is so if of no moment. What is important to mention is that novelty, utility and non-obviousness are the legal standards by with the patentability of an invention is determined.

                     

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                      Lonnie E. Holder, Oct 30th, 2008 @ 6:30am

                      Re: Re: Re: Re: Re: Re: Re: Re: Re: Aspirations are way too low

                      I had to go dig for the original post...

                      You are right Anonymous. The novel, utility and non-obviousness are what make an INVENTION potentially worthy of having a PATENT granted on it. So, the definition is not that of patent, it is essentially a kind of invention, not that any of this matters. Seems more like a trivia quesition than any substantive advancement of the discussion.

                       

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                        Anonymous Coward, Oct 30th, 2008 @ 7:20am

                        Re: Re: Re: Re: Re: Re: Re: Re: Re: Re: Aspirations are way too low

                        You touch on a point that is largely overlooked in discussions, even by those who are familiar with our patent system.

                        Anytime one crafts a solution to a problem he/she has created an invention. I do this all the time in my garage when I need to get something done and do not have a specific tool for this purpose. However, simply because one has invented something does not mean that their invention is patentable. That determination can only be made in the context of the requirements stated in our patent laws.

                         

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          Douglas Gresham, Oct 29th, 2008 @ 12:49am

          Re: Re: Re: Aspirations are way too low

          Au contraire, Lonnie. Given that it's in the context of an argument of whether patents encourage invention, defining "inventions" as "patents" means RJR's argument becomes "patents encourage patents". That's a tautology, and using it to support his case is begging the question. Further, by defining "invention" only as "that which can get a patent", you write off a ton of stuff that the patent system hobbles which is socially and economically useful, like simultaneous invention

          Who is in a position to objectively judge whether his device is novel, and have they made a determination that his device is indeed inventive?

          How about the market? Just a thought.

           

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            Lonnie E. Holder, Oct 29th, 2008 @ 6:18am

            Re: Re: Re: Re: Aspirations are way too low

            Au contraire, Lonnie. Given that it's in the context of an argument of whether patents encourage invention, defining "inventions" as "patents" means RJR's argument becomes "patents encourage patents". That's a tautology, and using it to support his case is begging the question. Further, by defining "invention" only as "that which can get a patent", you write off a ton of stuff that the patent system hobbles which is socially and economically useful, like simultaneous invention

            Inventions do not equal patents, but patents equal inventions. You can have an invention without a patent, but you cannot have a patent without an invention.

            As far as "patents encourage patents," that is not a tautology, but it is true. Indeed, regular posters on this web site have stated that because company A patents, company B feels they must also patent.

            Who is in a position to objectively judge whether his device is novel, and have they made a determination that his device is indeed inventive?

            How about the market? Just a thought.

            The market may be responding to the marketing technique (which can be novel and inventive) rather than the device itself. Non-innovative devices have responded to clever marketing in the past (remember Tom Sawyer and the white washed fence? Creative marketing at work!).

             

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              Douglas Gresham, Oct 29th, 2008 @ 7:01am

              Re: Re: Re: Re: Re: Aspirations are way too low

              Inventions do not equal patents, but patents equal inventions. You can have an invention without a patent, but you cannot have a patent without an invention.

              As far as "patents encourage patents," that is not a tautology, but it is true. Indeed, regular posters on this web site have stated that because company A patents, company B feels they must also patent.

              RJR's argument is a tautology in the sense that the desired outcome is more inventions (well, more innovation, but let's say the two are correlated). His argument is "if there are more patents, there must be more inventions" - which if patents are equated to inventions becomes "if there are more patents, there must be more patents". That is a tautology.

              To address your point, I'd argue that a patent on something doesn't imply an invention (see: method patents), or necessarily even an innovation (although that may be a function of the patent system's pragmatic brokenness rather than any inherent issues), but you're right that not all inventions have or even can get patents. The point I was making is that you can't measure the success of the patent system by counting the number of patents - you have to look at the economics. Of course, when people do that, you just say it won't work in real life for real inventors. Round and round we go.

              The market may be responding to the marketing technique (which can be novel and inventive) rather than the device itself. Non-innovative devices have responded to clever marketing in the past (remember Tom Sawyer and the white washed fence? Creative marketing at work!).

              And this is a problem because . . . ? Marketing doesn't just mean advertising, it means finding out what people need, making your product fill that need and convincing people that it fills the need. If you don't do that, people don't buy your invention and the world isn't made any better - and under the current system, when you fail you then take your patent and litigate against the person who has managed to do it properly. Call me crazy, but I'm not one for rewarding failure and punishing success.

               

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                Lonnie E. Holder, Oct 29th, 2008 @ 7:20am

                Re: Re: Re: Re: Re: Re: Aspirations are way too low

                RJR's argument is a tautology in the sense that the desired outcome is more inventions (well, more innovation, but let's say the two are correlated). His argument is "if there are more patents, there must be more inventions" - which if patents are equated to inventions becomes "if there are more patents, there must be more patents". That is a tautology.

                Okay, I see that point, regarding the tautology. I think I agree, based on the way you phrased it. If there are more patents, I would think there must be more inventions. As you note later, not all inventions are patented, and assuming that the ratio of patented to unpatented remains relatively constant, then more patents should mean there are more inventions.

                On the other hand, if you are saying that more patents leads to more inventions, that may or may not be true.

                To address your point, I'd argue that a patent on something doesn't imply an invention (see: method patents), or necessarily even an innovation (although that may be a function of the patent system's pragmatic brokenness rather than any inherent issues), but you're right that not all inventions have or even can get patents. The point I was making is that you can't measure the success of the patent system by counting the number of patents - you have to look at the economics. Of course, when people do that, you just say it won't work in real life for real inventors. Round and round we go.

                Business method patents: Point taken.

                Success of the patent system: I agree regarding your comment on the number of patents. I also agree regarding the economics. I am unsure of why people claim "it won't work in real life for real inventors." That makes no sense. People have invented. People have gotten patents. People have licensed their patents for money. That is proof that patents can have economic value.

                Your other question is better. Does the money spent on patents generate a net economic gain? Businesses must think so, otherwise, knowing they must account for their actions to their shareholders, why would they spend money on something that makes no economic sense?

                The market may be responding to the marketing technique (which can be novel and inventive) rather than the device itself. Non-innovative devices have responded to clever marketing in the past (remember Tom Sawyer and the white washed fence? Creative marketing at work!).

                And this is a problem because . . . ?

                It is not a problem, it is a cool thing. However, white washing the fence was not an invention.

                Marketing doesn't just mean advertising, it means finding out what people need, making your product fill that need and convincing people that it fills the need.

                Very good definition of marketing.

                If you don't do that, people don't buy your invention and the world isn't made any better - and under the current system, when you fail you then take your patent and litigate against the person who has managed to do it properly. Call me crazy, but I'm not one for rewarding failure and punishing success.

                I sort of disagree. Typically, two kinds of organizations tend to litigate (there are lots of reasons to litigate, but many if not most fall into two classes). First, there is the small entity or individual inventor who invented something, never had the ability to produce the item themselves, and tried to license the item, only to discover how difficult licensing is. Then there is the entity that invented something, produced it, established the market for the item, only to have someone copy the item. The inventive entity that made the market and succeeded is being rewarded for their success. The inventive entity that failed is being rewarded (if they succeed in court) for their failure. No system, especially one with no intellectual property, is perfect.

                 

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                  Douglas Gresham, Oct 29th, 2008 @ 8:31am

                  Re: Re: Re: Re: Re: Re: Re: Aspirations are way too low

                  Success of the patent system: I agree regarding your comment on the number of patents. I also agree regarding the economics. I am unsure of why people claim "it won't work in real life for real inventors." That makes no sense. People have invented. People have gotten patents. People have licensed their patents for money. That is proof that patents can have economic value.

                  My meaning was that evidence that patents create a net economic detriment (overall, not just for an individual patent holder) is met with the objection that abolishing patents wouldn't work in real-world cases, and vice-versa. I haven't ever intentionally claimed that a patent has no economic value, nor that in most cases a patent has negative economic value for the patent holder.

                  Your other question is better. Does the money spent on patents generate a net economic gain? Businesses must think so, otherwise, knowing they must account for their actions to their shareholders, why would they spend money on something that makes no economic sense?

                  Wrong question. Obtaining patents certainly can make sense in a world where everyone else has them and leverages them against you (see previous TD articles on the matter). The right question is what would happen if *all* patents vanished, not what would happen if yours did and everyone else kept theirs. When we talk about the varying economic benefit, we mean for society as a whole, not just for an individual patent holder. That inventors can succeed without patents *while* others have them to use against said inventors is, in fact, a more compelling case than them just succeeding in a patent vacuum.

                  I think that's the key point you missed in what I was arguing. Removing or weakening patents would make some better off and some worse off, and I'm sure nobody on either side denies this. If the net effect across all cases is beneficial, we should do it; if not, we shouldn't.

                  On the litigation front, I never denied there were other reasons for patent litigation. I'd add a third to your list - patent trolls (emotive term, I know, but it conveys a specific meaning too). Not perfect, indeed.

                   

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    Lonnie E. Holder, Oct 29th, 2008 @ 7:05am

    Numerous? How many? 10? 100? 1000? I balance that with millions, and perhaps tens of millions of inventions with patents behind them.

    Lonnie, learn a little bit of basic logic. It would help. If you are making an absolute argument, it only takes one example to disprove.

    Well, then you have just made my case for me, since I have millions of examples. So, a business model using patents is valid, because we have at least one example.

    Just do not limit my choices to that business model.

    You are confused. No one is limiting your choice of a business model. What we'd like to limit is the GOVERNMENT choosing what business models are protected. Let's remove that and let the market compete. I don't want the gov't picking winners. Why do you?

    The government never picks the winners. The market decides whether an invention is worth buying. Further, the GOVERNMENT is NOT choosing what business models are protected. The AMERICAN PEOPLE, through their representatives, made this decision. If you are not happy with this decision, you need to work through your representative to get the laws changed.

    I think I must have missed those scenarios. Can you point them out to me?

    There's a search engine. It might help. But you might want to look at the economic research. There are some good pointers in Boldrin and Levine's book, for example.

    I need to get back to reading their book. Perhaps the examples are in the second half, because they are not in the first half.

    The patent system is neither "good" nor "bad." The patent system is without value.

    How do you figure? I assume that if it is limiting the economic pie, holding back new innovations and decreasing new business, then, I think there's a fair argument that it is bad. The economic research on this is pretty clear. A patent system does not increase innovation, and often holds back innovation.

    Interesting, the economic research I have seen says that patents encourages innovation and increases new business. Further, the companies that have intellectual property would certainly say that IP is good. The patent system has been shown to increase innovation.

    Now, you can argue, and I would agree, the IP has not been beneficial to all businesses. Universals are rare.

    Is slavery neutral?

    Of course not. And I would never mention slavery in a discussion on "infinite goods" and the theories that are mentioned here. Injecting emotionalism unbecomes you.

    Since we do not know what a competitive price is or what a monopoly price is, we cannot know whether someone can be "more successful" without patents.

    Uh, what?!? Learn some economics. Otherwise this conversation is useless. You are flat out wrong if you believe it is not possible to tell whether or not someone can be more or less successful without patetnts.

    Hello, I did not say this. There is this economist named Rothbard (ever hear of him?) that said this.

    I think the most we can say is that "someone can be successful without patents." However, we do not have any proof that we can extrapolate the models shown thus far to a universal.

    There you go again. We've pointed out aggregate studies at the macro level showing *exactly that*. That is IS a universal thing. And the response is always "but that doesn't work at the individual level."

    We have proof that companies and individuals can be successful with patents. We have Rothbard stating that patents are not necessarily bad. Ergo, you do NOT have a universal.

    Actually, I am unable to think of one person driven out of business by an engine company, a car company, or a plane company.

    What about those who never started because of the risk of getting sued for patent infringement? What about those who never started, knowing that licesning would be too expensive? What about those who focused on other industries where patents weren't such an issue?

    Man, you are a piece of work. Gee, I am thinking about getting into the car business. But *whines* I am afraid of being sued. Revelation: I am never starting because of being sued for patent infringement. Great excuse. How about companies like Kia, Hyundai and Daewoo that have entered the car market, in spite of these supposed barriers? Weren't they afraid of getting sued? In fact, Hyundai (along with Ford) have car quality higher than Toyota's. Why did Hyundai enter the market if they feared being sued? Further, how many times has Hyundai been sued by other car companies?

    The biggest problem is the UNKNOWN loss hindered by a monopoly system that you support. It's basic economics that monopolies drive out good business. To say that it hasn't happened is, again, pure ignorance on your part of most basic economics.

    I guess you must know better than Rothbard. Where are your papers on this subject. You must be a great economist to disagree with someone with the credentials of Rothbard.

    Rothbard was unable to determine that there was ANY loss due to patents. Further, as I noted previously, Rothbard was unable to prove that patents either led to lower or higher costs of anything.

    No, you are extrapolating one business model to a universal.

    I have never done so. You are flat out lying at this point. I don't support any single business model. I support understanding the economic realities in order to create a better business model. From there, there are tons of business models, however.

    I apologize if I misunderstood your comments. Further, since you agree there are tons of business models, since you agree that understanding economic realities aids in generating the most appropriate business model for a particular business, then surely you must agree that a business model using patents could be just as viable as a business model that incorporates "infinite goods" or "free" as a part of the model.

    What I do not support is the gov't picking a business model that wins by setting up protectionist policies that diminish competition and innovation.

    The government does not pick the model. The company picks the model. The American people, through their government, have made the model available to be chosen. As Rothbard and others have pointed out, patents do not universally diminish competition and innovation, and in fact have been demonstrated to increase both.

    That is incorrect. There are multiple patent-based business models. In fact, many business models are ENABLED by the presence of the patent system, which permits both patent based business models as well as non-patent based business models.

    No, I'm afraid that once again, your lack of economic understanding is showing. Business models create a protectionist barrier. If that "enables" business models, then why don't we enable other protectionist policies?

    Have you been sleeping under a rock? We have enabled dozens of protectionist policies. Given your economic expertise, I am sure you can think of several dozen without thinking hard.

    I don't want the gov't favoring ANY player in the space or ANY business model through protectionism. Let the market work out the best, most efficient business models. Why are you so against competition?

    I am FOR competition. Unfortunately, our government (permitted and frequently encouraged by US), has done a lot to limit competition. Consider how many protectionist policies there are to be eliminated. Intellectual property protection (which creates dubious limitations), may not even be the most significant among those policies. In fact, probably are not the most significant.

    I am unsure of how many individuals and companies exist in the United States, but in 2002, Samson Vermont wrote that 11,000 suits were filed in the five previous years. That is about an average of 2,200 suits per year. Even if each suit named multiple parties, that still comes to a few thousand entities per year. Hardly seems to warrant "likely to get sued."

    Once again ignoring those who were pushed into settling, ignoring those who went a different direction to avoid getting sued. If you don't think that patents destroy economic incentive you don't talk to many entrepreneurs.

    Then there are the entrepreneurs who came up with a great idea and had it stolen by someone else, destroying their economic incentive. If you think patents do not aid economic incentive, then you haven't talked to many entrepreneurs who have them.

    Side note: About 30% of all patents are awarded to individual inventors. About another 30% of all patents are awarded to small and medium sized companies. Guess who also does most of the suing?

    The ones I talk to are scared shitless of doing anything useful. It's a shame.

    I know many entrepreneurs who are leveraging their inventions. I deal with these people frequently, and they have generally been quite successful. I am sorry that you deal with people who are scared to exploit their inventions, but it does not need to be that way.

    The USPTO enforces nothing. They are essentially a recording and licensing agency.

    If only that were true. The head of the Patent Office has been a major factor in setting policy over the years, and a big supporter in increased protectionism.

    Repeat, the USPTO does not enforce anything. They are not granted that power. Jon Dudas has attempted to set policy, but legal suits are in play to halt that, rightfully so. Dudas has overstepped his bounds, and eith Congress needs to confirm his ability to do what he tried to do, or not. Dudas has not been a "big supporter in increased protectionism." In fact, he has been accused to weakening the ability of companies to get protection.

    On the other hand, when other business models get in the way of my business model, then we have a really serious problem.

    No, Lonnie, that's called COMPETITION, and it's a GOOD THING that increases the economic pie and leads to innovation.

    Well, my innovation led to patents, and I am competing, and that's a good thing because my invention increased the economic pie. I am glad you are allowing me to use my business model rather than limiting me to certain ones.

    Why do you hate competition?

    I think competition is a grand thing. I think it drives companies to be better. Every new patent that is issued in my field is another opportunity to innovate around, finding something even better. Otherwise, we would just copy what came before.

    I believe I have put forth a convincing case, multiple times.

    Really?!? So far we have pointed out that your "convincing case" is based on a weird misunderstanding of economics and business, and your response has been to ignore the main points.

    My "weird case" has support from economists, such as Rothbard. Who have you cited as an expert? You. I do not recall having ignored any points. If you wish me to focus on one point, then state your one point and lets have at it.

    In fact, once again, here, you FAIL to explain what it would take to put together a convincing case that protectionist models are better than the free market.

    You have failed to put together a convincing case that lack of protection will aid in advancing the market. How do you deal with a situation where a new product requires $100 million in investment, requires a ten year payback period, but reverse engineering can be done in two years? The answer is that new products (like engines, cars, airplanes, etc.) will no longer be developed without some kind of protection. The company that invents goes bankrupt, and the copiers prosper.

    Why do you think it is impossible to put forward a convincing case that patents are never a valid part of a business model?

    I don't think it's impossible to put forward such a case. I've been asking people to do so for years. Yet, not a single one has presented economic evidence that makes the case. They post anecdotes only. I've shown both economic evidence. I think I win.

    I have shown economic evidence (Rothbard's essays on the subject) as well as anecdotal evidence. I think I win.

    What does it take to prove to you that there are scenarios where a huge investment in a new invention should be protected long enough to at least have a chance to repay the investment?

    Easy. Show me the economic research.

    http://books.google.com/books?id=Etl-1y0_ryAC&pg=PA35&dq=payback+periods+for+ph armaceutical+research

    Note especially where the author states that payback periods for some pharmaceuticals can be three decades or more. Eliminate patents, eliminate payback, eliminate the incentive for new drugs.

     

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    Lonnie E. Holder, Oct 29th, 2008 @ 2:34pm

    Gresham's Comments

    Sorry, but the market doesn't reward plain old copies. It rewards you when you do something better than your competitor.

    Now, that is not completely true, is it? Once a product has hit commodity status, purchasing is all about price, as numerous studies and economists have proven. Thus, there is a tendency among commodity goods to be nearly the same as their competitors, and about the only thing left is the name and price. We have seen this happen in electronics especially, where plain old copies of televisions, VHS players and DVD players have taken over the majority of the market. Even computers have succumbed to this tendency. There are very few suppliers of video cards, and most of the big players use the same ones.

    That's why it's called competition. IP is a limitation on what your competitor can do, so it's a limit on the ways in which they can attempt to do something better than you, so it's a limit on how they can compete, so it's a limit on competition.

    Oh my. So you can't just copy what the other guy did? So they have to come up with something unlimited by the other guy's IP, to enable new options with better features, thus unburdening themselves with old technology, thus expanding competition. Why do you think we had projection tv's, LCD tv's, plasma tv's and LED tv's? Inventive companies looking for another way around the other guys patents. I love the competition because it gave me more choices. God forbid that I would have been stuck with projection tv's forever.

    Maybe there will be duplicate products on the market, but that's an incentive to make yours stand out, right? The fashion industry is a great example of this.

    Keep pulling out the fashion industry. It is not relevant to manufacturing televisions and cars. Different capital requirements, different business model. It is not applicable.

    You also completely ignore the fact that patents don't just stop you producing an identical copy, they stop you using what is covered by the patent in any context without permission. Say you invented a kitchen fork and got a patent on "a multiple-pronged instrument for manipulating malleable objects by means of skewering or scooping" (yeah crappy description, I'm tired) - you wouldn't be stopping me just from producing an identical kitchen fork, but also garden forks, sporks, various types of skewers, multi-headed screwdrivers, tridents (!) . . .

    I am thinking that multi-pronged screwdrivers would not be covered by your description.

    You used "means" in your language, which automatically means that the inventor is limited to what was disclosed in his patent application.

    Yes, equivalents might be covered, based on claim language. However, in actual practice, courts have narrowed (and narrowed, and narrowed some more) what they consider to be equivalent. The actual window of competition limits for manufactured goods is relatively small. You file a patent application. You develop the mechanism. It goes on sale some time later. You develop the market. By the time anyone is even interested in your device, ten years of patent life has gone by. So you have to wait ten years to be a copier. The market develops further and you can be ready with the killer product that kicks the inventor off the market, or, the inventor has to continue to innovate or risk losing market share when the patent expires, which is what most innovators do.

    Alternatively, we could say the patent should be limited to something more concrete like "a four-pronged 6-inch metal implement used for the transfer of food from plate to mouth by way of skewering or scooping", which means you only stop me directly copying you - except then I could just make a fork with 3 prongs, or one made of plastic, or one that was 5 inches long, or whatever.

    I would have written the claim to be "a utensil comprises a plurality of prongs spaced a distance to enable to the transport of food." Now, the problem would be that pitchforks (assuming they were already invented), would make your claims obvious, and you would never get the patent.

    In other words, instead of directly copying, people copy making just enough changes not to infringe, which both fails to address the fundamentals of your argument and decreases the value of the patent to the inventor.

    Depending on how novel the invention, this is how the system actually works most of the time. In fact, that was one of the intents of the patent system.

    If you can show me 1) that copying actually decreases innovation...

    Well, if you are open minded. The last time I tried this all I got was, "bull crap," "you are wrong," "this is OBVIOUSLY incorrect," etc. Note, not one shred of proof, merely indignant remarks.

    Scenario 1:

    Assumption: Patents do not exist.
    Assumption: Assume that all innovators use incremental innovation.
    Assumption: Any producer will be motivated to maximize shareholder wealth.
    Assumption: Four producers, each selling 100,000 units per year that perform an essentially identical function and sell for $100 each, with a margin of 5%.
    Assumption: The OEM's supplied by each producer demand at least six months of evaluation prior to purchase of any product with a design change.

    It is a new calendar year, 1900. Price changes among commodities require the four producers to increase price by an average of 5%.

    Producer A has decided to do something different. Producer A has invented a feature that permits cost of the product to be reduced by 5%.

    Producer A has spent $25,000 developing the new feature.

    Producer A goes to Supplier P to propose uses of the new feature. Supplier P is interested and demands samples of the unit with the new feature for testing.

    Producer A supplies prototype units to Customer P.

    Customer P, who always buys from Producer A and Producer D, immediately goes to Producer D and asks Producer D whether Producer D can also make the same feature for the upcoming model year. Producer D states that it can, and since all Producer D needs to do is reverse engineer the design, Producer D expends $10,000 to test components and reverse engineer the design, then providing samples to Customer P.

    In the meantime, Producer's B and C, who monitor testing done by Customer P, hear about the new mechanism and quickly set out to locate one of the new mechanisms, ultimately examining a field test unit in a small town in Tennessee. They quickly reverse engineer the development and present the development to their customers, using Customer P's anecdotal results to help sell their product.

    By the time calendar year 1901 comes along, Producer A has spent $50,000 in development and tooling, Producer B has spent $35,000 in reverse engineering and tooling, Producer C has spent $35,000 in reverse engineering and tooling, and Producer D has spent $35,000 in reverse engineering and tooling. All four companies continue to sell their units for $100, and all four maintain their current customer base.

    However, Producer A has now lost $15,000 in profit compared to Producer's B, C and D, and Producer A's board of directors is upset with Producer A's president, telling the president that the next time Producer A should copy, since the environment is such that being innovative is punished.

    Scenario 2:

    Assumption: Patents do not exist.
    Assumption: Assume that all innovators use breakthrough innovation.
    Assumption: Any producer will be motivated to maximize shareholder wealth.
    Assumption: Four producers, each selling 100,000 units per year that perform an essentially identical function and sell for $100 each, with a margin of 5%.
    Assumption: The OEM's supplied by each producer demand at least six months of evaluation prior to purchase of any product with a design change.
    Assumption: Producer A sells only to Customer P.

    It is a new calendar year, 1900. Producer A has spent the last three years, and nearly $3 million (more money than the company makes in profit) to develop an entirely new unit. Producer A goes to Customer P to pitch the new unit.

    Customer P is wildly enthusiastic, and agrees to Producer A's request that Customer P not share this information with any other producer. Because Customer P is risk averse, Customer P decides to limit production to 25,000 units, and is willing to pay $110 per unit because it has more features than the standard unit. The profit to Producer A is thus $15 per unit.

    The product is released onto the market in 1901. Producer A makes $375,000, recouping some of his investment in the new product, but Producer A's net gain over what he would have previously sold is only $250,000.

    Producers B, C and D see the new product in 1901, and immediately set about copying (because they know they can copy for $1 million versus the $3 million development cost expended by Producer A).

    During 1901, the customers of Producers B, C and D ask these producers when they will have an equivalent unit, and these producers promise by 1903. Since there is significant cost in switching Producers, the customers agree to wait one more year.

    During 1902, Customer P decides to replace 90% of his product line with the new unit, because market acceptance has been good. So, Producer A nets $1,350,000, or $900,000 more than he otherwise would have, and has thus repaid $1,150,000 of his $3,000,000 investment.

    However, in 1903 all producers can now supply a virtually identical product, and each of the three producers goes to Customer P advising that they can supply the new unit for $105. Customer P returns to Producer A, and advises Producer A that Producer A needs to lower the unit price to $105, or Customer P will switch to another Producer. Producer A lowers unit price to $105.

    Okay, how did we fare? The gross expenditure of all four producers for the breakthrough product was $6,000,000. The total amount recouped was $1,150,000. Thus, the four producers spent $4,850,000 that was unnecessary to spend since the end result was that everyone copied the leader, and no one's position was improved.

    After examining the end result, the management of the four producers realized that it was better to keep doing what they were doing rather than innovating, since innovating never repaid the investments made.

    Scenario 3:

    Assumption: Patents exist.
    Assumption: Assume that all innovators use breakthrough innovation.
    Assumption: Any producer will be motivated to maximize shareholder wealth.
    Assumption: Four producers, each selling 100,000 units per year that perform an essentially identical function and sell for $100 each, with a margin of 5%.
    Assumption: The OEM's supplied by each producer demand at least six months of evaluation prior to purchase of any product with a design change.

    It is a new calendar year, 1900. Producer A has spent the last three years, and nearly $3 million (more money than the company makes in profit) to develop an entirely new unit. Producer A goes to Customer P to pitch the new unit.

    Customer P is wildly enthusiastic, and agrees to Producer A's request that Customer P not share this information with any other producer. Because Customer P is risk averse, Customer P decides to limit production to 25,000 units, and is willing to pay $110 per unit because it has more features than the standard unit. The profit to Producer A is thus $15 per unit.

    The product is released onto the market in 1901. Producer A makes $375,000, recouping some of his investment in the new product, but Producer A's net gain over what he would have previously sold is only $250,000.

    Producers B, C and D see the new product in 1901, and since Producers B, C and D know that Producer A invariably patents their inventions, each sets out to develop a different, innovative product.

    Producer A sells 90,000 units in 1902, with the net gain of $1,150,000, as above.

    Producers B, C and D need more time to develop a unique solution, so they ask for more time from their customers. However, the customers of their customers are switching to Customer P's product, so the customers of Producers B, C and D also move some of their purchases to Producer A, a total of 150,000 units, who now charges $120 per unit to Producer A, B and C. Producer A nets makes a gross profit of $5,250,000 in 1903, since Customer P has switched all production over to the new unit.

    Producers B, C and D quickly recognize the threat to their business, and go through extensive cost reduction exercises, ultimately lowering their price to $95 in order to be able to keep their remaining business in 1903.

    Substantial price differentiation has now been realized with the increased compeition.

    In 1904, Producers B, C and D each have a new product that offers various new features. Each is a breakthrough product. However, none of the new units is identical in features to the others. Each producer knows it must win business back from Producer A, so each offers the new product at $105, thus offering new features at a substantial price reduction from Producer A.

    Producer A, who now has the biggest share of the market, sees the first significant competitive threat in several years, and takes several actions. First, Producer A lowers its price to $105 in order to keep business. However, Producer A has not been waiting for the cash to roll in, Producer A has leveraged its profits into more innovation, and quickly springs out its improved unit, which it will sell for $107 per unit.

    Okay, what happened? Well, as compared to the other scenarios, customer choices exploded. In the original scenarios, customers essentially ended up with two choices; the old unit and the new unit. In scenario 3, customers ended up with four breakthrough choices, the original, now significantly price-reduced units (I will count those as one, though those were probably four more units; the price would be reduced to continue to get as much from the sunk cost as possible), and then the newer unit with more innovation, for a total of six choices. You can imagine where invention will go. Profits will be expended back into invention and innovation, and competition will become more fierce, with each company capitalizing on their unique approaches to unit construction.

    I know which scenario I would pick.

    2) that there is a wording of patent law that would allow for the prevention of copying without promoting this kind of busywork while maintaining someone else's ability to do something new with your idea, then you might have an argument.

    I think I lost something in the translation here. What is the question?

     

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    Anonymous Coward, Oct 29th, 2008 @ 2:40pm

    Mr. Holder,

    It is clear from your comments that you are coming from a point of "real life" experience, and not from what is generally "theoretical life" experience. If only more who comment on this site had even a modicum of your experience the discussions/comments would certainly be more informed and useful.

    I had to smile reading comments about the possibility of open source design of complex mechanical/electro-mechanical/etc. products. They reminded me of an auto commercial some years ago that involved the design of a car by committee.

     

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      Lonnie E. Holder, Oct 29th, 2008 @ 7:28pm

      Re: Real World

      Anonymous:

      Yep, technician first, then engineering for a couple of decades plus. One of the critical decisions in every project is payback period. If we are unable to make payback in the required period, the project is not done, and we look at another project.

      I do remember the car designed by committee. We have seen examples of products designed by committee. Fundamentally, a committee can never design anything; never works. Now, a committee LED by a strong leader can cut through the BS and get stuff done.

       

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    Douglas Gresham, Oct 29th, 2008 @ 4:20pm

    Sorry, but the market doesn't reward plain old copies. It rewards you when you do something better than your competitor.

    Now, that is not completely true, is it? Once a product has hit commodity status, purchasing is all about price, as numerous studies and economists have proven. Thus, there is a tendency among commodity goods to be nearly the same as their competitors, and about the only thing left is the name and price. We have seen this happen in electronics especially, where plain old copies of televisions, VHS players and DVD players have taken over the majority of the market. Even computers have succumbed to this tendency. There are very few suppliers of video cards, and most of the big players use the same ones.

    Because better pricing isn't real competition. Obviously. Your electronics example is amusing; if it were the case people would only buy the cheapest, whereas we see that people pay extra for extra features. Mentioning video cards just shows an ignorance of the colossal barrier to entry there is in chip fabrication.

    That's why it's called competition. IP is a limitation on what your competitor can do, so it's a limit on the ways in which they can attempt to do something better than you, so it's a limit on how they can compete, so it's a limit on competition.

    Oh my. So you can't just copy what the other guy did? So they have to come up with something unlimited by the other guy's IP, to enable new options with better features, thus unburdening themselves with old technology, thus expanding competition. Why do you think we had projection tv's, LCD tv's, plasma tv's and LED tv's? Inventive companies looking for another way around the other guys patents. I love the competition because it gave me more choices. God forbid that I would have been stuck with projection tv's forever.

    This is just plain wrong. First off, the other guy's IP precludes incremental improvement of your TV which is valuable too - imagine if someone invented a colour TV and was prevented from selling it because it used the same CRT technology as the incumbent black-and-white one? Secondly, if LCD/plasma/LED TVs are better, then they'll succeed in the market without patents, and so there's plenty incentive to create them and supersede the incumbent tech (unless you can show solid evidence to the contrary). Thirdly, those doing the "copying" aren't necessarily the same people as those creating the new technologies, and you've still not shown any evidence (where evidence != thought experiment or rhetoric) that demonstrates this "copying" limits said innovation in any way.

    I won't quote all of your scenarios for fear of over-inflating this post, nor am I particularly interested in the made-up numbers. Further, your thought experiments are not a substitute for evidence - you can keep coming up with examples, but until you show data to back them up people will - quite rightly - call bullshit on you. That said, rebuttals:
    Scenario 1: Company A goes to Supplier P, says they have a prototype and asks to discuss it under NDA. Company A launches the product onto the market. Company B sees it, goes to P to ask for it, but they can't reveal it. They reverse engineer it and bring a prototype to P, at which point it'd be reasonable for P to manufacture it. Meanwhile, A's product has been out and selling, giving them brand recognition and time to innovate further in order to compete; B launches the copy, take a hit on their reputation for being uninnovative and are still behind on the innovation stakes. Suddenly it makes a lot of sense for B to not only incorporate the new feature but do something different as well.
    Scenario 2: other than your numbers being conflated to the point of being flat-out bad business sense, you write off the long term benefits of A being first to market. I don't go out to buy a vacuum cleaner, I want a Hoover. I don't want a cola, I want a Coke. You don't factor in the reputation that Company A has gained by giving the market what it wants. You seem to assume that once all of them have an equal product, they'll get equal market share, which is just wrong. You don't factor in the 2 years that Company A now has to innovate and keep its technological advantage (which sounds like encouraging innovation, no?). You assume that in the 2 years, the customers won't switch to A, and that they can't be customers of A and the others simultaneously. A only supplying P is a monumentally stupid business decision. Most absurdly, you claim that profits trending towards marginal costs is the sign that competition won't happen, when it's the definition of what happens in a competitive market.
    Scenario 3: scientific method 101 states if you're going to test something, you change that variable and ONLY that variable, so it's unfair to say A is now willing to serve other customers than P. You assume that B, C and D wouldn't have done the cost-cutting without patents, which is unsubstantiated. You assume A only saw the threat to its business in this scenario, which is an unfair comparison. You state that A will only start to innovate again once B, C and D start to compete, which in a patent-free scenario A would have had to be doing from day 1 in order to preserve its advantage (in fact, what's likely to happen in this scenario is litigation because of ambiguity in the patent, but we'll let that slide). You also treat "burst" innovation and incremental innovation as if they exist independently, when if "burst" innovation exists at all it certainly exists alongside incremental innovation, and precluding the incremental innovation limits competition just the same (also I note you didn't give a scenario involving patents and incremental innovation . . . I wonder why). You also assume that all companies will be able to have these "burst" inventions, whereas I find you get some basic revolutionary principle that allows for the new product, and then you get a cycle of iterative refinement of and building upon that idea (and the one with the idea has the advantages discussed in scenario 1).

    2) that there is a wording of patent law that would allow for the prevention of copying without promoting this kind of busywork while maintaining someone else's ability to do something new with your idea, then you might have an argument.

    I think I lost something in the translation here. What is the question?

    I want you to show that there is any wording of monopolistic patent law that both stops people from copying your invention (where copying includes making changes that are sufficient to prevent infringement but insufficient to actually improve the functionality, for instance changing a 4-pronged kitchen fork into a 3-pronged one) and allows incremental invention (that is to an invention based on the fork but different in function, such as a spork). Evidence that copying is actually detrimental is much more important to the argument, though.

    I'm not going to spend any more time going over any further ridiculously flawed thought experiments because I get the impression you're attempting (badly) to ad-hoc argue your position rather than using them as a device to understand where I'm coming from. If you want to engage me further, bring some data to the party.

     

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      Willton, Oct 29th, 2008 @ 4:37pm

      Re:

      I won't quote all of your scenarios for fear of over-inflating this post, nor am I particularly interested in the made-up numbers. Further, your thought experiments are not a substitute for evidence - you can keep coming up with examples, but until you show data to back them up people will - quite rightly - call bullshit on you.

      I'm sorry to interupt, but if you want actual evidence, then you're going to be out of luck, as there is no evidence in the manufacturing world of a world without patents. Patent law has been in existence ever since the industrial revolution. You will be hard pressed to find any actual evidence that will support or rebut any theory on a world without patents in the manufacturing world because such evidence practically does not exist. So, your demand for such evidence is wholly unreasonable.

       

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        Douglas Gresham, Oct 29th, 2008 @ 5:13pm

        Re: Re:

        Are you suggesting that every country with any manufacturing capacity has and always had patent law, and that said patent is uniformly strong and well-enforced throughout the world? Dear me. As a starter for ten, check out http://levine.sscnet.ucla.edu/general/intellectual/againstfinal.htm and in particular chapter 8.

        There are issues with it such as us not having a good and consistent way to measure innovation (it staggers me that there are serious papers out there that use number of patents granted as such a measure), the evidence being correlation which doesn't necessarily imply causation, and you have outside influences to consider - so often what you get upon the introduction of a patenting system is a sharp increase in investment from foreign countries that have strong IP laws (although that's a poor measure too; I'd like to see return on investment and increase in GDP, but I digress), then a tailing off over time and as patent law is strengthened.

        Finally, I'm arguing the base condition - patents are an artificial construct that restrict ideas that would otherwise naturally be shared, which logically should put the burden of proof on those arguing for patents (although I understand that given we're proposing changing accepted wisdom - however mistaken this wisdom is - means we have to back up our arguments too).

         

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          Lonnie E. Holder, Oct 29th, 2008 @ 7:46pm

          Re: Re: Re:

          What I find interesting about the Boldrin and Levine paper is that they tend to minimize the positive results using value laden language, and tend to emphasize the negative results. Essentially, their book is not objective. They are clearly biased against patents, which hurts any case they attempt to make against patents.

          Chapter 8 includes information on studies that indicate there are positive relationships between patents and innovation, but Boldrin and Levine cleverly phrased those statements so that the negative comments surrounding them tend to overwhelm them.

          I also note that chapter 8 uses dubious comparisons of measure. For example, Boldrin and Levine looked for an increase in R&D spending with an increase in patent protection. What evidence is there that stronger patent protection would generate more R&D expenditures? Earlier in the chapter Boldrin and Levine noted that implementation of patent protection in fact aided innovation early in U.S. history, and then turn around and appear to claim that is no longer true.

          I suggest that once a patent system is in existence, the determiner of R&D expenditures is more influenced by the state of the economy rather than patent law. Now, elimination of patent laws would likely influence R&D expenditures.

           

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        Mike (profile), Oct 29th, 2008 @ 9:28pm

        Re: Re:

        I'm sorry to interupt, but if you want actual evidence, then you're going to be out of luck, as there is no evidence in the manufacturing world of a world without patents.

        This is not true. As has been noted repeatedly, both the Netherlands and Switzerland industrialized without patents, and both had thriving (and, at times, innovative) manufacturing operations that were highly competitive during those times.

        They did eventually add in patents, but it was not to encourage more innovation, but the opposite: to put in place protectionist policies that slowed down innovation, so that those who had originally benefited from the lack of IP protection no longer had to keep innovating and competing at the same pace against new upstarts.

         

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          Lonnie E. Holder, Oct 30th, 2008 @ 5:20am

          Re: Re: Re:

          This is not true. As has been noted repeatedly, both the Netherlands and Switzerland industrialized without patents, and both had thriving (and, at times, innovative) manufacturing operations that were highly competitive during those times.

          Yes, and the very same article noted that Switzerland (I do not recall regarding Netherlands) specialized in industries where it was relatively easy to keep technology secret. So, the summary point was that nations without patent preferred manufacturing activities where keeping trade secrets was relatively easy. Nations with patent focused on manufacturing activities that were more easily reverse engineered.

          That same article also noted that increased patent protection also generated more foreign investment dollars.

          Now, before you throw a ticker tape parade in glee because you have "proof" that lack of patents can work, also consider that the Swiss invented the quartz watch, and decided the technology was not what people wanted and Japan essentially exploited the technology (patenting the improvements, I might add), virtually destroying an entire Swiss industry.

          They did eventually add in patents, but it was not to encourage more innovation, but the opposite: to put in place protectionist policies that slowed down innovation, so that those who had originally benefited from the lack of IP protection no longer had to keep innovating and competing at the same pace against new upstarts.

          If you keep saying something often enough, it might become true. Boldrin and Levine, who you seem to enjoy pointing to, in chapter 8, which you also pointed me to, noted in more than one case that studies of innovation and patents found "little or no increases" in the various measures they used to benchmark patents and innovation. If you read all their various comments, overlooking the intentional bias they put into their phraseology, that the net results of all the studies they quote is mixed. There is no clear relationship between innovation or lack of innovation. Your statement that patents stifle innovation is strictly an unsupported opinion.

           

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            Mike (profile), Oct 30th, 2008 @ 3:37pm

            Re: Re: Re: Re:

            Yes, and the very same article noted that Switzerland (I do not recall regarding Netherlands) specialized in industries where it was relatively easy to keep technology secret.

            I'm not sure which "article" you are referring to. I'm talking about the actual research, which shows exactly the opposite of your claim. In fact, the biggest success stories in Switzerland were in the chemicals industry (the precursor to the pharmaceutical industry), where trade secrets were not effective and products were readily reverse engineered.

            There was also a growing success in the electrotechnical industries within Switzerland, prior to patent protection -- again, which is not easily protected by trade secrets.

            The only thing I can think of is that you may be thinking of Petra Moser's article on countries without patent protection, but that only touched on what was at the World's Fair, not the actual economy of Switzerland.

            That same article also noted that increased patent protection also generated more foreign investment dollars.

            Again, I'm not sure what "article" you are referring to, but the research I've seen showed the opposite. The greatest flow of foreign investment happened BEFORE patent protection was established. In fact Eric Schiff's study of Switzerland found regular investments in Switzerland by companies who started elsewhere and established new offices in Switzerland where they were more free to innovate. For example, Schiff talks about how Knorr, a German company that held many German patents later opened an office in Switzerland, because they were more able to innovate there without fear of being limited as in Germany.

            Now, before you throw a ticker tape parade in glee because you have "proof" that lack of patents can work, also consider that the Swiss invented the quartz watch, and decided the technology was not what people wanted and Japan essentially exploited the technology (patenting the improvements, I might add), virtually destroying an entire Swiss industry.

            I'm not quite sure what you think that proves. So Switzerland tried to rest on their laurels, was unable to keep innovating and lost an industry. That's good. That's progress. That's how it should be.


            If you keep saying something often enough, it might become true. Boldrin and Levine, who you seem to enjoy pointing to, in chapter 8, which you also pointed me to, noted in more than one case that studies of innovation and patents found "little or no increases" in the various measures they used to benchmark patents and innovation. If you read all their various comments, overlooking the intentional bias they put into their phraseology, that the net results of all the studies they quote is mixed. There is no clear relationship between innovation or lack of innovation. Your statement that patents stifle innovation is strictly an unsupported opinion.


            I did not point you to chapter 8. I believe that was someone else. But if you read the research by Eric Schiff, along with research from Hall and Jones, Park and Ginarte, Sakakibara and Branstetter, Scherer and Weisburst, Lerner's research, Qian's research, Aghion's research and many others you begin to get a pretty complete picture. Patents do not encourage more innovation. There are so many studies that show this from so many different angles, to claim otherwise is unsupportable.

             

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              Lonnie E. Holder, Oct 30th, 2008 @ 6:27pm

              Re: Re: Re: Re: Re:

              Yes, and the very same article noted that Switzerland (I do not recall regarding Netherlands) specialized in industries where it was relatively easy to keep technology secret.

              I'm not sure which "article" you are referring to. I'm talking about the actual research, which shows exactly the opposite of your claim. In fact, the biggest success stories in Switzerland were in the chemicals industry (the precursor to the pharmaceutical industry), where trade secrets were not effective and products were readily reverse engineered.

              I am speaking of Boldrin and Levine, chapter 8, where they present actual research that indicated the specialization of Switzerland in industries that were more amenable to secrecy than patents.

              That same article also noted that increased patent protection also generated more foreign investment dollars.

              Again, I'm not sure what "article" you are referring to, but the research I've seen showed the opposite.

              Again, I refer to Boldrin and Levine, chapter 8, where these results appear to have been based on actual research.

              I did not point you to chapter 8. I believe that was someone else. But if you read the research by Eric Schiff, along with research from Hall and Jones, Park and Ginarte, Sakakibara and Branstetter, Scherer and Weisburst, Lerner's research, Qian's research, Aghion's research and many others you begin to get a pretty complete picture. Patents do not encourage more innovation. There are so many studies that show this from so many different angles, to claim otherwise is unsupportable.

              Well, my bad then. Anyway, the studies cited by Boldrin and Levine are the basis for my comments. I am not saying the studies are good or bad, they were merely cites by Boldrin and Levince. You may claim those studies are wrong or flawed, but when Boldrin and Levine, who are no friends of patents, note that a particular study shows "weak support" for patents, then it is what it is. Now, in the interest of fairness, Boldrin and Levine also tended to pooh pooh any portions of these same studies that showed benefits to innovation for a variety of reasons, but that is another story.

               

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      Lonnie E. Holder, Oct 29th, 2008 @ 8:28pm

      Re:

      Because better pricing isn't real competition.

      Well, by golly, you better go let Wal-Mart know that. They will surely be disappointed. Incidentally, that is REAL data. Wal-Mart's business model is to compete on price.

      Obviously. Your electronics example is amusing; if it were the case people would only buy the cheapest, whereas we see that people pay extra for extra features.

      Oh please, do you actually pay attention when you go to the store? When you say people "pay extra," you are talking about price differentiation of $5 to $10 within a price range. If someone goes to the store with $300 to spend, they will look for an item in that price range, extra features be danged. Further, I see skids of cheap DVD players ($30 each) going out the door, while the $150 DVD players sit basking in the fluorescent lights.

      Mentioning video cards just shows an ignorance of the colossal barrier to entry there is in chip fabrication.

      I must be ignorant. I did not think any video card manufacturers were in the chip making business any longer because of the margins.

      This is just plain wrong. First off, the other guy's IP precludes incremental improvement of your TV which is valuable too - imagine if someone invented a colour TV and was prevented from selling it because it used the same CRT technology as the incumbent black-and-white one?

      Where did you learn your intellectual property law? The other guy's IP does NOT preclude an incremental improvement of anything. In fact, and as noted in Chapter 8 of Boldrin and Levine, incremental improvement on another guy's IP is a technique used by many competitors. Lots of REAL DATA to back this up.

      Secondly, if LCD/plasma/LED TVs are better, then they'll succeed in the market without patents, and so there's plenty incentive to create them and supersede the incumbent tech (unless you can show solid evidence to the contrary).

      Well, they will succeed in the market place if anyone can afford to develop them. However, as noted in chapter 8 of Boldrin and Levine, if someone can figure out how to make such technology and keep key portions of the process secret, then recovering the significant investment is easy, and competition and innovation will be reduced.

      Thirdly, those doing the "copying" aren't necessarily the same people as those creating the new technologies, and you've still not shown any evidence (where evidence != thought experiment or rhetoric) that demonstrates this "copying" limits said innovation in any way.

      Well, my academic exercise is just as valid as those in Boldrin and Levine. Perhaps more so, since I have been in those environments and have been part of the decision making process, so my "theoretical" exercise is fact based for the patent scenario.

      I won't quote all of your scenarios for fear of over-inflating this post, nor am I particularly interested in the made-up numbers.

      Too bad, they are actually fairly real numbers, but you would probably not realize that.

      Further, your thought experiments are not a substitute for evidence - you can keep coming up with examples, but until you show data to back them up people will - quite rightly - call bullshit on you.

      For the patent scenario, the numbers are about as real as you can get, including the portions where the competitors also made their breakthrough products. Now, here is the interesting thing, the number of patents total devoted to the products between the competitors was somewhere in the neighborhood of 100, and yet all the competitors had unique products, AND made incremental improvements. So take your BS and stick it where it came from.

      That said, rebuttals:

      Scenario 1: Company A goes to Supplier P, says they have a prototype and asks to discuss it under NDA.
      Customer P is a well-known company, and they refuse (real example), or they ignore the NDA and tell another Company anyway, knowing that Company A would not dare take their biggest customer to court (also a real example) Company A launches the product onto the market. Company B sees it, goes to P to ask for it, but they can't reveal it. They reverse engineer it and bring a prototype to P, at which point it'd be reasonable for P to manufacture it. Meanwhile, A's product has been out and selling, giving them brand recognition and time to innovate further in order to compete; B launches the copy, take a hit on their reputation for being uninnovative and are still behind on the innovation stakes. Perhaps they take the hit, but customers do not care, they are too price sensitive and they do not want to be locked into one supplier. Again, real life example. Suddenly it makes a lot of sense for B to not only incorporate the new feature but do something different as well. B cannot afford to do something different, because they do not have the resources, and all they need to do to sell is just do what A did. In fact, in the real example, B did not do quite as well as A did and Customer P bought anyway.

      Scenario 2: other than your numbers being conflated to the point of being flat-out bad business sense, you write off the long term benefits of A being first to market. You ASSUME the long term benefits of being first to market in a world without patents. In a world WITH patents, being first has been of no benefit as an OEM supplier. I don't go out to buy a vacuum cleaner, I want a Hoover. I don't want a cola, I want a Coke. You don't factor in the reputation that Company A has gained by giving the market what it wants. When you deal with OEM's you sometimes have to throw those assumptions out the window. Reputation means a little, but not much. You seem to assume that once all of them have an equal product, they'll get equal market share, which is just wrong. Again, you ask for REAL data, and this example is taken from REAL life. OEM's are far more driven by price than reputation. You don't factor in the 2 years that Company A now has to innovate and keep its technological advantage (which sounds like encouraging innovation, no?). You assume that in the 2 years, the customers won't switch to A, and that they can't be customers of A and the others simultaneously. There is a cost to switching suppliers, and Customers would prefer not incurring that cost if they can help it. Again, REAL situation, not theoretical. A only supplying P is a monumentally stupid business decision. No, smart business decision. P does not want to incur the cost of switching suppliers unless there is clearly a financial benefit to do so, and that has not been demonstrated in this case. Again, the scenario is from a REAL world situation, only with patents instead of without. Most absurdly, you claim that profits trending towards marginal costs is the sign that competition won't happen, when it's the definition of what happens in a competitive market. Either way, that is what will happen, and the companies that spent money to innovate are unable to recoup their cost of innovation.

      Scenario 3: scientific method 101 states if you're going to test something, you change that variable and ONLY that variable, so it's unfair to say A is now willing to serve other customers than P. You assume that B, C and D wouldn't have done the cost-cutting without patents, which is unsubstantiated. This situation is a factual one. It actually happened. You assume A only saw the threat to its business in this scenario, which is an unfair comparison. You state that A will only start to innovate again once B, C and D start to compete, which in a patent-free scenario A would have had to be doing from day 1 in order to preserve its advantage (in fact, what's likely to happen in this scenario is litigation because of ambiguity in the patent, but we'll let that slide). I did not intend on saying that A would innovate again after B, C and D start to compete. A will continually innovate. However, this is a mere technicality. You also treat "burst" innovation and incremental innovation as if they exist independently, when if "burst" innovation exists at all it certainly exists alongside incremental innovation, and precluding the incremental innovation limits competition just the same (also I note you didn't give a scenario involving patents and incremental innovation . . . I wonder why). Breakthrough innovation tends to be a project focus. On that project, incremental innovation will be incorporated into the final product, so was the incremental innovation part of the project, and therefore breakthrough, or was it incremental innovation that wasn't recognized? Does it really make a difference? In the REAL life scenario, the OEM's refuse to take any innovation until they have had a chance to send the innovation through summer and winter testing, so "incremental" innovation accumulates through the year, is tested, and is introduced in the following year.

      As for why I did not introduce a scenario with patents with incremental innovation, I had three reasons. First, I was getting tired. Second, it seemed like the incremental example would add little. Third, it is harder to compare the real world examples because the four primary competitors innovated in different areas in different ways, so a one-to-one comparison was difficult. I wanted to keep the scenario as true-to-life as possible and I just lacked data for this scenario.

      You also assume that all companies will be able to have these "burst" inventions, whereas I find you get some basic revolutionary principle that allows for the new product, and then you get a cycle of iterative refinement of and building upon that idea (and the one with the idea has the advantages discussed in scenario 1).

      Pardon me if I laugh, but this situation did happen, only with three competitors. There was several approaches, patents were filed on all the approaches by the different competitors, and all three found markets. You can say whatever you will, but the scenario happened. The fourth competitor is a relative newcomer, but I really threw the fourth in to make the math easier.

      2) that there is a wording of patent law that would allow for the prevention of copying without promoting this kind of busywork while maintaining someone else's ability to do something new with your idea, then you might have an argument.

      I think I lost something in the translation here. What is the question?

      I want you to show that there is any wording of monopolistic patent law that both stops people from copying your invention (where copying includes making changes that are sufficient to prevent infringement but insufficient to actually improve the functionality, for instance changing a 4-pronged kitchen fork into a 3-pronged one) and allows incremental invention (that is to an invention based on the fork but different in function, such as a spork). Evidence that copying is actually detrimental is much more important to the argument, though.

      I am still not quite sure I understand the question. I might have treated this question more seriously, but since you want to insult my knowledge and my experience, and you treat my experiences with disdain, it is evident that your mind is closed.

      I'm not going to spend any more time going over any further ridiculously flawed thought experiments because I get the impression you're attempting (badly) to ad-hoc argue your position rather than using them as a device to understand where I'm coming from. If you want to engage me further, bring some data to the party.

      I guess I lived the last couple of decades of my life in a fantasy. While the numbers were changed to protect the innocent, the situation is accurate. The fact that you are essentially calling me a liar is unbecoming to you, and makes you unworthy of talking to further. Good night and have a good life.

       

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    Douglas Gresham, Oct 30th, 2008 @ 1:34am

    Lonnie: You obviously missed the sarcasm in my first sentence. Of course pricing is a valid competitive model.

    I speak whereof I find. Your scenarios may well be real-world, but if you abstract them I have to deal with them in the abstract, don't I? Boldrin and Levine use them as devices for explaining their data-backed conclusions (I briefly mentioned the issues with that data before). If you give the actual examples, so we can use the specifics of each case for a discussion (as we've done in the case of Johnny Chung Lee), then you can claim we're talking about the real world; otherwise we're talking about the world carefully filtered through your point of view.

    Further, even if they're entirely accurate what's to suggest your scenarios are not the exception but the rule? I've already said some will benefit from abolishing patents and some won't; what's key is a net benefit. To that end, I'd be interested to know what your scenario 3 actually was.

    You missed out what I consider to be one of the key points in your response - that A can use the time that B is using to copy them to innovate further and stay ahead of the curve. That's where the incentive for innovation comes from.

    Finally, I maintain that A only supplying P may well be great for P, but not for A (again, if I knew the situation maybe I could address it). If we assume A can supply many producers and that there's a cost to the supplier of switching producer then being first absolutely carries an advantage, and that was a key difference between your patents/no patents example that renders any comparison between the two rather moot.

     

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      Lonnie E. Holder, Oct 30th, 2008 @ 6:24am

      Re:

      Lonnie: You obviously missed the sarcasm in my first sentence. Of course pricing is a valid competitive model.

      I spent a substantial amount of time writing those scenarios, and I was tired and in a very serious mood. I apologize (which others on this web site should learn how to do) for missing the sarcasm.

      I speak whereof I find. Your scenarios may well be real-world, but if you abstract them I have to deal with them in the abstract, don't I? Boldrin and Levine use them as devices for explaining their data-backed conclusions (I briefly mentioned the issues with that data before). If you give the actual examples, so we can use the specifics of each case for a discussion (as we've done in the case of Johnny Chung Lee), then you can claim we're talking about the real world; otherwise we're talking about the world carefully filtered through your point of view.

      Boldrin and Levine's book has issues. I keep saying I am going to finish it and document the issues, but other personal matters have gotten in the way. Until I can be more comprehensive, I do not consider Boldrin and Levine's work objective or definitive. They also make numerous assumptions, and they deliberately skew their interpretations of studies in their favor. So, you are talking about the world colored by your point of view.

      Further, even if they're entirely accurate what's to suggest your scenarios are not the exception but the rule?

      That has been my point all along. I believe that those scenarios WILL be the rule.

      I've already said some will benefit from abolishing patents and some won't; what's key is a net benefit. To that end, I'd be interested to know what your scenario 3 actually was.

      Hallelujah! You see my point. I never said that patents benefited everyone. I have even gone so far as to say (gasp, compromise, reason, logic, frequently four-letter words on this website) that patents appear to hinder innovation in some technology fields.

      As for net benefit, that I am unable to calculate. Insufficient data. However, remember what Adam Smith postulated. He said that business will move where is has the best competitive advantage. Manufacturing (and I do not mean pressing CD's, DVD's or assembling computers from piece parts) is already moving offshore. Manufacturing (again, that business that involves tooling, castings, stampings, and all those other messy metal parts) probably gains the most benefit from patents in terms of being able to recoup the huge expenses required to develop and build a new product (and of course pharms, but their cost is in finding an efficacious drug; the manufacturing part is relatively easy). If we want manufacturing to move out of the United States even faster, eliminate patents. I will be sad, because I will have to take a job at Wal-Mart, or McDonald's.

      Unfortunately, I am unable to provide more details. Originally I allowed a company name to enter my scenario, and I deleted it (I have probably already said too much). The scenario was real, and continues to be real. What I neglected to put into the scenarios was some additional information that you might find useful and interesting:

      o OEM's want more innovation and features, but they either will not pay the full cost for the innovation or feature, or they will not buy at all. They are very price sensitive. I have seen incredibly innovative features, from us and our key competitors, that our OEM's would not purchase because of the increased cost.

      o Incremental innovation is not permitted during a model year. Perhaps a third of our OEM's insist on testing each innovation prior to permitting the innovation to enter production. Further, they create their service manuals and other support documentation prior to the new model year introduction, so any innovation will require changes they do not want to make in the midst of a model year.

      o I was lazy with Producer A. I could have had Producer A supplying other people, but that would have taken longer to document. The real problem with OEM's is that changing from one supplier to another is a real pain for OEM's. They will do it, but only at the end of the model year and only if they can prove to themselves that the cost of change is worth it. You can imagine the costs involved. They have to maintain multiple sets of parts for warranty and service, they have to enter new parts in the system, they have to purchase parts to fill their supply chain, people need trained, etc. The costs are considered by OEM's significant, so for them a change is painful. However, they will go with a lower price quite readily if the lower price outweighs the cost of change.

      o Our OEM's would PREFER to have all their suppliers copy each other. They would sacrifice innovation for identity, because then they could buy based strictly on lowest price, and then they would have little cost in changing from one supplier to another. Innovation has some value, but unless the innovation is more than incremental, their interest is usually lukewarm, at best. We actually had an OEM demand that we permit a competitor make a patented feature because it worked so well (incidentally, patents have been issued on incremental improvements of that feature to a company other than mine). Naturally, we refused. That particular feature, while some might call it incremental, turned out to be a wonderful breakthrough for that feature. There have been dozens of designs to accomplish the same purpose, some of them dating back two or three decades, but until our design, they were all too complicated and costly. Yes, it is a huge selling feature on our product. To answer an anticipated question, while our design is patented, the patent is relatively narrowly focused and others continue to try and come up with another design as simple as ours. In fact, I think you can say that we spurred innovation, because up to our design, most people used what had existed or modifications of what had existed, and few people put any effort into improvements. Once we demonstrated the efficacy of our design, suddenly there was all kinds of investment in coming up with a competing design.

      o OEM's come in three types. Let's say there are about 50 OEM's. Several OEM's are early adopters. Typically, one large OEM and several medium-sized OEM's are early adopters. Usually market penetration with a new product is 1% to 5%. The second group of OEM's wait to see what the early adopter's experience with the new product is. The second group will adopt three to five years after new product introduction. The final group of OEM's, the smallest group, are the late adopters, and they will adopt only after verifying that the new product will perform consistently without warranty issues. They typically adopt in the five to seven year time frame. These preferences have remained generally consistent over the last couple of decades. There have been some small moves between groups (one early adopter moved to a more conservative approach after a warranty issue, a couple of second group adopters have pressed to move into early adopter status), but the groups have remained relatively static based on how risk averse they are.

      You missed out what I consider to be one of the key points in your response - that A can use the time that B is using to copy them to innovate further and stay ahead of the curve. That's where the incentive for innovation comes from.

      I agree, and I thought I made it clear, that A would continue to innovate. However, and this is a point that seems to keep getting overlooked, copying is easier and faster than innovating. Copying of incremental innovation can be done extremely quickly. Because OEM's will only permit changes at the end of a model year, and because several OEM's think it is okay to tell our competitors about our innovations (and we hear about our competitors as well - NDA's be hanged, I guess), competitors can copy almost as fast as we can innovate. I would say the lag from innovation to copy (or equivalent design, because patents prevent exact copies), is somewhere around three months. We essentially remain even with our competitors when we innovate incrementally. Breakthrough designs are easier to protect, because it takes a couple of years of development before we even begin talking with OEM's, and then we only talk in general terms, so unless our competitors are working on new designs (which they typically are), we can have a huge head start.

      Finally, I maintain that A only supplying P may well be great for P, but not for A (again, if I knew the situation maybe I could address it). If we assume A can supply many producers and that there's a cost to the supplier of switching producer then being first absolutely carries an advantage, and that was a key difference between your patents/no patents example that renders any comparison between the two rather moot.

      I believe you meant Producer A and Customer P.

      I disagree that the example is rendered moot. Again, as I noted earlier, I was lazy with Producer A. However, I could easily have had Producer A supply multiple customers, which Producer A actually does. However, all the significant OEM's change Producers only if there is a clear cost advantage (I do not recall ever having seen a customer switch companies because of innovation, except to the extent that innovation reduces price and the price reduction outweighs the cost of switching producer). While you allude to the advantages that Producer A has, you neglect to point out the advantage in any detail.

       

      reply to this | link to this | view in chronology ]

  •  
    identicon
    dinnerbell, Oct 30th, 2008 @ 8:56am

    stop the shilling!!!

    as to “self Proclaimed inventors” ...in my instance I have patents in the US and overseas, I have filed, prosecuted, appealed, licensed, and litigated patents and patent applications since the early 90's. so much for your “self proclaimed” accusation which incidentally holds about as much water as the rest of your jibberish. We know what the challenges are and what needs to be done. We’ve done it. You may ignore us, but we will not be ignored. Count on it.

     

    reply to this | link to this | view in chronology ]

  •  
    identicon
    Douglas Gresham, Oct 30th, 2008 @ 3:58pm

    Lonnie:

    Boldrin and Levine's book has issues. I keep saying I am going to finish it and document the issues, but other personal matters have gotten in the way. Until I can be more comprehensive, I do not consider Boldrin and Levine's work objective or definitive. They also make numerous assumptions, and they deliberately skew their interpretations of studies in their favor. So, you are talking about the world colored by your point of view.

    The key difference is they present actual evidence (that even if they omit details we can research ourselves) and put their slant on it, but because you're relating abstract versions of 'real' examples we're not getting the full picture. You couldn't possibly cover the whole case in the limited space, and you'll cover the points you feel important (it's called confirmation bias). It's understandable, but it makes it difficult to carry the argument further, which is why I asked for something more substantial.

    I think it was me that pointed to Boldrin and Levine as a starting point for someone who said evidence just flat-out didn't exist. I didn't mean it to be "this is the only evidence, and it's totally bulletproof". I did also mention that there are weaknesses in the data they choose to use in that it shows only shows correlation, and only between variables that aren't ideal for assessing levels of innovation. I'll make a point of using a better starter in future :)

     

    reply to this | link to this | view in chronology ]

    •  
      identicon
      Lonnie E. Holder, Oct 31st, 2008 @ 7:04am

      Re:

      In fact, the biggest success stories in Switzerland were in the chemicals industry (the precursor to the pharmaceutical industry), where trade secrets were not effective and products were readily reverse engineered.

      The reason given in Chapter 8 of Boldrin and Levine is precisely the point I have been making:

      In the 1880's, for example, two of Switzerland's most important industries chemicals and textiles were strongly opposed to the introduction of a patent system, as it would restrict their use of processes developed abroad.

      I agree. Why innovate if you can copy? Let someone else do the hard work so you can copy their results and reap the benefits, so you do not have to spend the dollars to innovate.

      I also point to Italy and the Italian pharmaceutical industry, which others have pointed to as an example of a successful industry prior to the introduction of patents.

      The introduction of patents destroyed the Italian pharmaceutical industry. Why? Because their expertise was copying the drugs invented by others. They had little or no invention capability of their own. Once they could no longer copy, their business model (copy what others invented), was kicked out from under them. Is this a negative thing?

      Well, if everyone had the same business model, then who would innovate? The Italian pharmaceutical industry knew they could never recoup investment costs in developing new drugs (which can take decades), so they focused on figuring out how to reduce the cost of copies. If everyone thought like this, then who would develop the new drugs?

      As for studies, Sokoloff, Lamoreaux and Kahn showed that patented innovations "tend to be traded more than those that are not, and therefore to disperse geographically farther away from the original area of invention."

      As has been stated many times before, though without proof (and gee, here is a study), patents were intended to improve access of technology to the public, generally through speed, but here is a study cited in an anti-intellectual property document showing that actually happens.

      Also from Boldrin and Levine, summarizing 23 studies on patenting and innovation, "strengthening IP increases the flow of foreign investment in sectors where patents are frequently used."

      Kanwar and Evanson have data for 31 countries in the period 1981-1990. They found a correlation between higher patent protection and increases in R&D as a fraction of GDP.

      Hall and Ham noted "The results suggest that stronger patents may have facilitated entry by firms in niche product markets..."

      Park and Ginarte studied 60 countries from 1960 to 1990 and found that the strength of IPR (including pharm) led to growth of R&D in developed countries.

      Cohen et al/Levin et al found that patents were not important for securing returns on innovation, except in pharmaceuticals.

      Arora et al also found that increasing the "patent premium" does not increase R&D except in pharm and biotech.

      Here's the bottom line:

      For every study that "clearly" shows that patents lead to a net negative, there is a study that shows that patents lead to a net positive.

      My Dad always told me that figures lie and liars figure, and in many cases, these studies do exactly that. Some of these studies are marvelous, objective studies. Some of them begin with bias, and end with bias, and the result (surprise, surprise) is biased, depending on whether you are either for intellectual property or against intellectual property.

      After having reviewed dozens of these studies, the real conclusions seem to be these:

      o Patents have have helped some industries (clearly proven by numerous studies).
      o Patents have clearly harmed some industries (also clearly proven by numerous studies).
      o It is virtually impossible to determine whether patents have led to a net negative or a net positive on industry as a whole (eliminating the individual net negatives and net positives).
      o Since the patent system was set up to foster innovation, and since it is clear that we have evidence of where it has helped and where it has hurt innovation, then perhaps we need to review patent laws and change the protections in a manner that leads to a net positive.

      I close with this quote from economist Edith Penrose, from 1951:

      If national patent laws did not exist, it would be difficult to make a conclusive case for introducing them; but the fact that they do exist shifts the burden of proof and it is equally difficult to make a really conclusive case for abolishing them."

       

      reply to this | link to this | view in chronology ]


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