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 http://www.digitalproductions.co.uk/index.php?id=177 . 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.