Compulsory Licensing Rather Than Artificial Monopolies?

from the an-idea... dept

A while back Mark Proffitt sent in an interesting blog post that I’m just now getting around to writing up. In it, he wondered what an “abundance-based intellectual property” system might look like:

We already have systems that work like this. The X Prize is a bounty for achieving a desired technological goal. That can provide a one-time payment. But often the value of a new discovery is not realized until some time later. So we might make a slight change to the intellectual property laws.

Instead of the government granting the person that discovers an idea a temporary monopoly, the people as a whole through the government own the right and license it to everyone. Of course the government collects taxes so good ideas would increase tax revenue. The government would pay the inventor a small percentage, maybe 5 – 10% of the taxes collected on income from the idea.

This would eliminate wasteful intellectual property disputes. If you use the idea, you owe the tax and the government has the ability to collect it. And the tax is only collected if the idea is being vigorously promoted. The business and government share the same goal of promoting the idea. Society benefits because new ideas are discovered and brought to market. The inventor benefits because the government is collecting the royalties for them.

This system would drastically reduce the cost of medicine because every medical discovery would be generic from the first day. Companies would compete based on their ability to provide the highest quality products and service at the best price. Researchers could operate independently from manufacturers. This could become a great revenue source for universities.

There’s more to the idea than that, but that’s the basic summary of the concept. I’ve seen similar suggestions in the past as well, but I’m not convinced that it makes much sense. Would it be better than the existing system? Perhaps, but even that would require a lot more analysis and modeling. The problem with it, in general, is that you’re adding a tax where one probably isn’t needed, and the tax is too early in the system — taxing the use, rather than the income. We already have an income tax and taxing on top of that just seems problematic, taking away the incentive to actually innovate. On top of this, such a tax sounds like a bureaucratic nightmare. How would it be tracked? Who would know when to pay the tax and how it would be distributed? The traditional tax system doesn’t involve the government figuring out who to pay as well, and this would add a lot of overhead that makes this whole thing quite inefficient. I guess I just don’t see the need for such a system at all, if we can let competition in the marketplace itself focus on rewarding innovators.

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Comments on “Compulsory Licensing Rather Than Artificial Monopolies?”

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Hulser (profile) says:

Re: Duration is the problem

Seems to me that most of the issues with patients, copyrights, etc. go away if we just limit the duration.

I would tend to agree, however the problem with the current system is that it’s prone to the boil-the-frog-slowly effect. If, every few years, IP maximalists bump up the duration of a patent or a copyright, the general public doesn’t really feel the effect and they get away with it.

The system being described has its problems, but it seems to be less reliant on one particular factor that can be manipulated slowly over time.

greg.fenton (profile) says:

Re: allocation

And just think of the lawsuits against the government by various companies all claiming to have been part of any given idea, and thus deserving of a cut of the taxes.

The idea as proposed does not solve some of the key issues around the patent system we discuss here: simultaneous and/or independent invention, obviousness, and first-to-the-patent-office.

Free Capitalist (profile) says:

Agree, Bad Road

There would be absolutely no benefit to the arts or sciences by making the government a collection society under the guise in the article.

I cannot think of any better way to create a disincentive to innovation than to 1) force the government determine who should by attributed to an idea (license), 2) enforce taxes on any “children” of said idea that would be redirected to the government’s named owner(s).

For one, the government can’t account for the taxes it collects already. See: the social security system. Why would anyone trust the government accurately manage anything that ends up in the general fund (i.e. all tax revenue including SS)?

For another, who the heck thinks the government would actually let a “little guy” stay attributed to a multi-billion dollar idea? Any license worth the effort would be indentured by insiders and attributed to a previously invisible prior license.

No thanks. I think this is actually the system copytards would prefer, rather than having to extort individuals directly.

Hulser (profile) says:

An incentive for public domain

Would it be better than the existing system?

I see at least one benefit to this kind of system: the incentive for companies would be to move IP into the public domain as fast as possible. If you’re paying the government a fee/tax for using some bit of publicly-held IP, you’d want to get that off your books as soon as possible. It would completely reverse the current incentive which is to stockpile as much IP as possible.

Ryan says:

Re: An incentive for public domain

Why would it be any different than it is already? Companies would just owe licensing “fees” to the government rather than other companies. The only difference I can see is that the government would be more enabled to screw over everyone and thus further encourage reform(which this idea is allegedly supposed to be), but I can’t see how a positive that involves the government massively increasing its overhead and reach, adding a bunch of new taxes, and increasing the already enormous complexity of the tax code by untold factors is really a positive.

greg.fenton (profile) says:

Re: Re: An incentive for public domain

Companies would just owe licensing “fees” to the government rather than other companies.

Oh, I fear it would be worse than that. I can easily see both the government and those companies that “submitted the IP” to push for having the taxes apply to end-users, not just the companies that leverage that “IP”. More taxes for the government and a cut of a bigger pie for those “IP” generators.

Hulser (profile) says:

Re: Re: An incentive for public domain

Why would it be any different than it is already?

I think it comes down to permission. In our current system, you’re basically held ransom to the demands of the IP owner. You either pay them their fee and get to use the technology or you don’t. But if it’s more of an open environment, where anyone can use an idea, but they have to pay based on their profit, it would be more likely that more companies would be using the idea. And the more companies using an idea, the more likely it would be that those companies would want to find a way to eliminate the requirement to pay the fee. In short, I think the pressure would shift from the corporate world mostly wanting to expand copyright and patent durations to mostly wanting to shorten them.

The only difference I can see is that the government would be more enabled to screw over everyone and thus further encourage reform(which this idea is allegedly supposed to be)

I tend to be in favor of smaller government, so I’m definatelly not saying that I completely agree with this model. But it is interesting to think about a system that better worked to achieve the original goals of patents and copyrights.

greg.fenton (profile) says:

Re: An incentive for public domain

And the downside is that companies would be moving IP into the public domain as fast as possible.

Seriously, define “IP”.

I could easily see a boardroom filled with lawyers, execs and engineers cranking out as many sticky notes of bullet points as possible and a constant stream of submissions to the government. Everyone would be clambering to submit any and all “IP” and then lobby the government for credits on these things so they could get a cut of the tax revenues.

This is a system just aching for abuse.

I can’t believe the IP-maximalists (or at least the IP lawyers) haven’t thought of it sooner!

Hulser (profile) says:

Re: Re: An incentive for public domain

I could easily see a boardroom filled with lawyers, execs and engineers cranking out as many sticky notes of bullet points as possible and a constant stream of submissions to the government.

I only know what I’ve read on TD, but I don’t think any one is proposing to get rid of the patent application process and just grant a patent to every application.

Anonymous Coward says:

Re: Re: Re: An incentive for public domain

There is a germ of a good idea there. The way I understood this is that all patents are licensed automatically and the governments are the collection agency for the license tax. They used tax instead of fee is where things go sour. A small per unit fee that would be easy to count. The percentage needs to be small enough not to be a burden and big enough to pile up nicely.

There should be a fee on patent applications that is large enough to dissuade bogus application but cheap enough to allow applications. Perhaps a large escalating fee only for really bogus or redundant ideas that get rejected from serial offenders.

It sounds like the argument was aimed at the Pharmaceutical industry which levers government funded research into patents all the time. We pay for the research and get charged through the nose for the fruits of the research.

Mark Proffitt (profile) says:

Re: Re: Re:2 An incentive for public domain

Yes, you understand the basic concept. It eliminates licenses altogether.

The tax I suggested was directing a portion of the existing income tax towards royalty payments. As you pointed out it should be small enough to not be a burden but big enough to pile up. That is a detail that would need to be worked out.

And your idea of dissuading bogus patent applications is good. That is a problem under both the proposed system and the current system. Although it would not be as harmful under the new system since all ideas are free to use.

It definitely would address the problem caused by the pharmaceutical industry double dipping or even worse holding back inventions.

Richard (profile) says:

Royal Commission for Awards for Inventors

The closest thing to this proposal that has been tried in the past was the Royal Commission for Awards for Inventors


During the war the British government essentially suspended the patent system (it would have got in the way of defeating the Nazis) after the war Inventors could apply to be rewarded for their inventions (regardless of whether they held a patent)

Thus Frank Whittle received £100000 (Then a really substantial sum) for the jet engine – even though he had let his patent lapse before the war.

This was funded out of general taxation a better option IMO than through the cumbersome licensing system proposed here.

Such a system could be applied on a rolling basis now. Inventors could apply and be rewarded if they could show that their invention was in widespread use. Such a system would encourage widespread publication and dissemination of ideas since you would need to get your idea into use to be rewarded.

ChurchHatesTucker (profile) says:

Re: Royal Commission for Awards for Inventors

“This was funded out of general taxation a better option IMO than through the cumbersome licensing system proposed here.”

That’s no different, really, than the compulsory tax on media that some countries practice. It’s easier (you just tax everyone, and give the money to a self-appointed licensing agency) but not better.

Richard (profile) says:

Re: Re: Royal Commission for Awards for Inventors

it’s easier (you just tax everyone, and give the money to a self-appointed licensing agency) but not better.

Easier IS better by definition since it absorbs less resources in bureaucracy.
General taxation is much cheaper to collect than specialised tax schemes.
It is also fairer than the media taxation that you talk about – or at least it spreads any unfairness more thinly across the population.

The big point about this scheme was that it was tried (twice – once in each war) and it worked.

There was more meaningful innovation during WW1 and WW2 than at any time before or since.

You may not like these government bureaucracies – but they are better than the alternative that we have now (which also BTW involves a VERY significant government bureaucracy
in the form of the patent office).

Arguably a rewards commission need be no bigger, no more inefficient and no corrupter than the patent office currently is.

Then you would save all the money that is currently wasted in private litigation.

xs (profile) says:

The key problem with patent these days is that it’s used more as a barrier to entry into a market than a tool for getting fair compensation for innovation. So any change to patent system needs to address the two interconnected problem of promoting spread of innovation and faily compensating the innovator.

I think a compulsary patent market should do the trick. All patents needs to be submitted to the market to receive patent rights, and license is compulsary if someone is willing to pay the price. Owner of patent sets initial license fee upon submission, but the price will automatically adjust downward, and the higher initial price you set, and the longer it sits with no one license it, the faster it drops. Also, patents doesn’t need to be completely original. Follow on work will simply be linked to the original, and anyone licensing the follow on patent just need to pay the license fee of the original patent(s).

Andrew D. Todd (user link) says:

A System of Prizes

You might look at Arthur Squires, _The Tender Ship_, 1986. My memory is a bit shaky on this, because it’s about twenty-some years since I checked it out of the library, but as I recall, in one of the essays, he proposed a system somewhat along those lines. He was specifically looking for a replacement for the NSF grant system, and his idea was to replace grants to people to do what they claimed they could do with prizes for actual results. A sum of money would be allocated from general revenue, and portioned out to different departments and grant officers (“rotators” in NSF-speak), as they are now, and each within its field of competence would do pretty much what the Nobel Prize judges do. To modify the system to cover patents, it would merely be necessary to stipulate that applicants surrender their patent rights in making application, publish their data, etc., in short, do engineering as open science, or open source, if you prefer. A substantial fraction, five or ten percent, of what the government spends on technology, through the Department of Defense, the Department of Energy, and the Department of Heath and Human Services (Medicare, Medicaid), etc., would be allocated to prize money. We might be talking somewhere in the ballpark of a good solid hundred or two hundred billion dollars a year. Enough money to make it worthwhile for people to throw away their patents.

Under this system, you don’t have to keep track of who uses what technology. It’s all public domain by that point. All you have to do is to establish rough allocations of money, for example, does Computer Science and Digital Logic get more or less money than Materials Sciences. Out of Computer Sciences and Digital Logic’s allocation, whatever that turns out to be, does Operating Systems and Concurrency get more or less money than Formal Languages and Parsing. And so on, until you get down to the the individual grant officers, who would presumably be former patent examiners.

Arthur Squires was a physical chemist. During the Second World War, he had worked for Mark Kellogg in a branch of the Manhattan Project, separating U-235 from U-238. The title of the book derives from an essay about the sinking of the ship Gustavus Vasa, back in the seventeenth century.

Anonymous Coward says:

i can imagine another side effect: secrecy. if you are foreced to license something once you patent it companies will just not patent anything until they are basically hitting the market to get first mover advantage. and if someone else gets there first they only have to pay a small license fee. so in the end they cant lose, but the public can lose years waiting for production.

Jose_X (profile) says:

Re: Re:

>> i can imagine another side effect: secrecy. if you are foreced to license something once you patent it companies will just not patent anything until they are basically hitting the market to get first mover advantage. and if someone else gets there first they only have to pay a small license fee. so in the end they cant lose, but the public can lose years waiting for production.

This doesn’t make sense to me. If they are producers, then the public will wait anyway. If they are not producers, there is an incentive to publish so that others can pick up on the ideas.

In any case, there is less stifling and more reasons to hunt for good invention ideas.

We can also start the “royalty” duration countdown starting with when a product comes to market (rather than when you file). This would encourage publishing as quickly as possible.

See prior comment I made. Near the end, we can see that with the help of some rules things like bad and broad patents get throttled by the market, and even the tax/royalties rates can be moved around largely by free market forces (of inventors or of “patent” traders).

I didn’t dig down deeply into details, but we can set boundaries based on statistical analysis (expectation of patent quality and number per category) and then the year to year variations can be determined by the inventions for that year. The boundaries help keep everything sane for the consumer paying the tax and helps throttle where inventors spend their time.

Jose_X (profile) says:

Let’s focus on patents. I will describe a variation of the ideas expressed in the article.

The devil would be in the details, of course.

There are many positives, for example:

A sales tax would seem normal and well supported. The product itself defines the expected use so just pay at the time of buying.

Decoupling R&D from manufacturing, etc, is good I think.

Avoiding significant legal costs and threats (a sort of tax) is very good.

Stifling effect disappears largely. This is very very good.

We can still have some things not be taxed, eg, software and other “processes”; however, the system detailed a bit below makes it natural to categories more fine-grained than simply “software”.

Some of the uglier details (with some associated benefits or drawbacks):

A regulation would go into effect (as part of the new USPTO) that, if you manufacture or sell a product belonging to a listed class, you have to register (fill out a form and the form can aggregate products.. maybe done once per year). You include your personal contact info and an id and maybe a description of each product as well as it’s category. We won’t tax twice, but having manufacturers and retailers give information enables double-entry accounting to some degree (and error detection). Most income taxes are handled this way I think (record who paid and who earned). An initial implementation would go heavy on the generalizing to avoid complexity.

Inventors have to apply for each product class on a yearly basis. Here we essentially gather in one place today’s patent/inventor database plus many of the information that make it into courtrooms in lawsuits.

The database of products can be huge but the database itself would be useful to the public for other uses; thus, we are piggy-backing on this work being done for inventors’ sake. Also, there will be much overlap from year to year. Remember that an initial implementation might be fairly coarse-grained.

The public can contribute products as well. This essentially allows the inventors to look after themselves. This scales better than to have USPTO do all checking (impossible) and provides checks and balances (policing) to what vendors list. The vendors are responsible once per year to make sure what they have listed is fairly accurate (note that third parties will contribute products so vendor has to be allowed to object). Conflicts can get posted to allow further public contributions (ie, making things public keeps people more honest). Finally, perhaps the USPTO makes a final decision.

I think the idea is to have a large percentage of the tax proceeds go to the inventors, but this is a government taxing and incentive issue. Do they want the USPTO to get subsidized or to make money?

One approach is that we don’t analyze each product for patents. We can have those vendors that make/sell more patented technologies pay the same as those who use less (like insurance or like Internet pay by month and not by bandwidth). This would encourage all to look at patents and ideas for exploitation opportunities (a clear improvement over today’s patent system).

Product classes would only be approximately graded based on some expected level of innovation activity (see below). This avoids complexity and can be tuned over time.

Based on their study and the applications they accept for a given year, perhaps the USPTO, aided by public opinions and analysis, determines the tax rate for the classes of products. Eg, a product class generally with little innovation claimed gets a small percentage tax. Other product classes get perhaps much more. Normally, we’d expect the max tax to be clearly under 20% since there is much that goes into producing a product that is much more costly than “the idea (R)”.

The applicant’s patent category determines how many years they are entitled to funds from that category (ie, this is more flexible than simply 20 years flat). The category-duration values get adjusted on an ongoing basis (year to year), perhaps by the USPTO, again with public input.

If we use approximations as mentioned above, the USPTO’s job becomes significantly easier. We can start coarse and refine over time if we desire.

We might have a special program for those that produce many patents yearly. Another option is to only allow this tax to be for small firms and individuals and let the largest of companies keep negotiating amongst themselves and suing each other. However, we would need to specify who gets a pass and who doesn’t. It might just be best to have a special bulk application process for the larger players and deal with it that way.

We can even encourage private groups to pool inventor members — perhaps they get a better deal overall (lower costs or something). This moves workload to the public. Inventors can try to deal alone with the USPTO or shop around for better rates from a co-op (reminds me of the health insurance debates).

The applicants may also get a different percentage weight relative to other applicants for the same product class. Some inventions are more crucial than others. [We may or many not get this detailed.]

We can also set things right (with public input) by having broad ideas, generally (but not always), receive less weight than the more specific ones. Note that a broad idea will naturally tend to cover more product classes.

Also, we might as well here raise the bar beyond “nonobvious and novel” to something like “spectacular and novel”.

In any case, the damage for bad and broad patents is minimized. The inventors themselves, because they compete for percentages, will police this and have incentives to criticize the bad patents.

We would need a procedure for challenging patent weights and categories. [Again, we can start off by being general and add complexity only over time if it seems there would be gains in fairness, etc.]

Also, there is another market driven effect that inventors will tend to spot the areas where they can make more money. We might be able to have the percentages be determined by free market mechanisms, eg, instead of having a tax value be fixed per product class, the USPTO instead finds a ceiling (and maybe a floor) and inventions themselves get assigned a percent (also using statistical data from other years along with special analysis to any noteworthy patents) until the cap is reached and then all invention percentages get normalized. If the cap is not reached, no problem. This “room to grow” will likely attract future inventors.

With the above framework, we can even deal with software by dividing it into classes. Eg: general purpose, linked to consumer hardware, generates hardware, linked to industrial robots, closed vs open source, etc.

Open source would get favorable treatment because of the contribution it represents to society. [And if you get it for $0, without strings attached, you are OK, even if it is closed source.]

We might include tax categories for some types of services.

Note that popular inventors might gain volunteer contributions to the database from the public or from their customers. Thus, inventors are rewarded for being “nicer” people, and those most likely to get support from the public will end up making extra money.

Not all is rosy. It’s much easier to simply kill patents or limit them significantly and keep the current system, but if we want a motivational system, then adding a little complexity might allow most of the very negative effects of today’s patent system to be avoided. In fact, it’s easier to simply drop software patents, but at some point in time the government might want to tax this industry anyway. Also, it makes sense to tax closed source relative to open source. Closed source brings costly lock-in and cannot be leveraged so well by other inventors and users. A tax would help even the playing field somewhat to shift industry focus to service and customizations, where the majority of the software is free and comes with accessible “blueprints”. Open source contributes to the “inventors” industry, let’s not forget.

Anyone interested in detailing this a bit by looking at specific industries or patents?

Doesn’t Canada have a limited version of this for authors?

Monopolies need to be scaled back or killed, the sooner the better. We need people to be able to leverage what is around them as easily as possible. Inventors and authors should not be looking to making fortunes. They can go into business if fortunes is what they want. See . Inventing is actually fun in ways that implementing the gritty details and supporting products isn’t. And who says good inventors can’t try to rely on trade secrets, sell to large companies (see link), or simply get hired with a nice salary?

Monopolies: bad.

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