Do We Really Want The First To Come Up With An Invention To Own The Market?

from the does-that-make-sense? dept

Tim Lee has another excellent post on the state of the patent system these days, taking on the claim by Michael Mace that software patents are good because it stops big companies from competing with him, by questioning whether or not there’s a reasonable policy rationale for this. Lee’s point is that it’s not at all clear that letting the “first” own the market makes much sense:

Companies have other ways to protect their innovations. They can use copyrights, trade secrets, and the head start that any inventor has over copycats. Mace objects that these protections aren’t adequate to guarantee that the original inventor will win in the marketplace. But that’s the point: consumers benefit from the robust competition that results when inventors have only a limited advantage over competitors. The first company to enter some market shouldn’t be able to simply rest on its laurels. Remember, Facebook was a “me-too competitor” in the social networking space; it’s a good thing that Friendster and MySpace weren’t able to stop Mark Zuckerberg from entering its market.

The function of the patent system isn’t to maximize the profits of inventors. Rather, it’s to provide inventors with sufficient incentives to ensure they continue innovating.

This is a big point that is all too often ignored in these debates. People seem to think that the entire purpose of the patent system is to maximize the benefit of whoever got their first. But that’s simply not the case, and any argument based on that is faulty.

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Comments on “Do We Really Want The First To Come Up With An Invention To Own The Market?”

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Richard (profile) says:

Re: Patent system function

A secondary effect is profits for lobbyists and campaign contributions for politicians.

I’d say that the political effect is the primary purpose. It is, after all, the reason why the patent system is there in the first place. Patents are simply a systematic form of the patronage that governments have always bestowed on selected citizens in return for their loyalty. (Same is true of copyrights).

Anonymous Coward says:

Do patents help startups

i know you have just a a piece on whether patents help startups – which i showed my brother, who is a ‘bringer-to-market’ sort of person. What he said was that too often he has seen small start-ups being beaten by big companies who quickly reverse engineer their ideas and knock them out of business. Patents, he says, is a defence against this. Is this true?

Anonymous Coward says:

Re: Do patents help startups

I think it is a risk of doing business. But I think that it is offset by the fact that huge, monolithic companies are usually much slower to react to new and innovative ideas.

Patents wouldn’t provide much defense: the big company could just go ahead and do the same thing and then drag things along in court (because they have tons more money than the small company) and either kill off the small company with increasing legal costs or simply force them to settle for a pathetic amount. Even if the small company wins, they would have lost the competitive advantage by the time the dust settled.

Anonymous Coward says:

Re: Re: Re: Do patents help startups

But we’ve been narrow minded about this. We are assuming that the little company would be the one initiating hostilities (or rather, defending itself from the abuses of the big company).

Another much worse scenario is the big company initiating the hostilities for no good reason. For example: little company starts to become “dangerous” (eating up market share from big company), so big company unleashes it’s (extensive?) patent portfolio on little company. Boom! Little start-up is gone because they don’t have enough resources to defend themselves from that kind of assault.

If they’re lucky, big company will give them pocket change for their patents…

Jose_X (profile) says:

Re: Re: Re:2 Do patents help startups

If we are smart, we will make it illegal for large firms to sue small firms. We can even call it fair use if the small firm has reduced revenues and market share.

It should be among the easier things related to patent law to get a lot of constituents to support such a variation of the law.

Once we do this, large firms will really really dislike patents (because of patent trolls), and will be more likely to back significant patent reform.

Anonymous Coward says:

Re: Do patents help startups

“big companies who quickly reverse engineer their ideas and knock them out of business”

Citation needed. This is an urban myth.

Big companies are almost always too slow, too bureaucratic, too unresponsive, suffering from “Not Invented Here” syndrome, full of their own importance and held back by bad management. Big companies tend to be led by corporate psychopaths who are focused on office politics and short term quick fixes. They are not paying proper attention to actually running the business. Look at the big record companies. They have had people screaming at them for a decade to fix their business model, yet they are still just as lost as they were a decade ago.

Loki says:

Re: Re: Do patents help startups

an even better example is the browser. IE sat on it’s laurels for years because it all but owned the internet. Until Firefox (followed by Chrome and others) came along and knocked them off their pedestal. Yet despite Microsoft’s massive war chest and engineering department it has lost a large chunk of it’s hold that it will likely reclaim anytime soon (if ever).

Another good example is AOL, who at one time had like 25+ million subscribers. Most of my friends had AOL (in fact I met a large percentage of my friends through AOL). Yet where are they now. Almost nobody I know uses AOL anymore, they all moved to MySpace and later to Facebook.

While big companies can and do sometimes use their clout and muscle to “reverse-engineer” new tech and push upstarts out, if this were true in all cases then we’d still all be using AOL and IE. In reality, when monolithic companies use their clout and muscle to drive smaller competitors and upstarts out, it is not usually through “reverse-engineering” it is usually through political means like overly broad patents, overextensive copyright reforms, and other “regulations” that merely protect legacy players.

Not an Electronic Rodent says:

Re: Re: Do patents help startups

Big companies are almost always too slow, too bureaucratic, too unresponsive, suffering from “Not Invented Here” syndrome, full of their own importance and held back by bad management.

Maybe so but that doesn’t seem to stop them coming up with some vague patent they claim to own and “legalling” the smaller startup out of existence if they perceive competition, whether they eventually come up with a product themselves or not.

A strong, focused, agile patent system might offer the little guy protection. The current one seems biased way in favour of the mammoth.

st68 says:

Re: Re: Do patents help startups

Let’s say a back-yard inventor comes up with a simple, novel way to make fusion work at room temperature. Let’s say it’s really easy to reverse engineer, but very expensive to build the first reactors. (I know, long shot.) Should she be able to patent it, get her years of protection, build a business and profit from the idea?

Or, should she just publish the method and be done with it?

Without patent protection, as this example shows, it would only be economically feasible for academics and mid-to-large companies to be in the businesss of inventing stuff.

Anonymous Coward says:

Re: Do patents help startups

The part where people copy each others ideas and some perform better?

Off course it is, look at Facebook and Google both where the Yet-Another-Social-Network and Yet-Another-Search-Engine respectively.

Where is the problem in that really?

If business was futeball players would be patenting their moves so no other player could use them how is that cool?

Lawrence D'Oliveiro says:

Word For The Day: ?Mercantilism?

Centuries ago, it was an implicit assumption that competition was the enemy of a business. So businesspeople went to all kinds of lengths to ensure ?protection? for their business ventures, by getting governments to impose legal sanctions against any potential competitors.

Later, it was realized that businesses actually did better, and served their customers? needs better, if competition was allowed to thrive.

And so the older mercantilist era gave way to the modern capitalist era.

Patents are a hangover from the mercantilist era.

out_of_the_blue says:

First inventor doesn't "own" the invention.

To begin with, patents are so vague, either narrow or broad, take your pick these days, that there isn’t even an invention. 2nd, it’s only a basis for a civil suit, that the one “owning” the patent has to finance, after first waiting for a possible infringement. In no practical case does it prevent others from going to market, just makes it somewhat risky. 3rd, patents only cover the instantion, not the idea (though latter is intentionally claimed).

Framing patents as “own the market” is a straw-man. You’ve kicked the stuffing out of it, ending with a Freudian projection, but have only filled space here. System remains intractable.

“it’s a good thing that Friendster and MySpace weren’t able to stop Mark Zuckerberg from entering its market”
No, it’s not a good thing. — And that completely overstates and misunderstands the patent system; Mace disproves his own premise by exampling that the current system does NOT let anyone “own the market”, but of course he blunders on because has FIXED notions and is blind to all else.

Anonymous Coward says:

Re: First inventor doesn't "own" the invention.

Wrong, the patent system today is creating a few big companies that are essentially owning the entire market for segments of it.

There are 250.000 patents for mobile phones, who do you think control most of those patents?

Little guys? thousands of companies?
Nope a dozen companies holds the majority of patents in the area.

Anonymous Coward says:

There is a whole barn full of straw in this one, one of the biggest strawmen I have seen on Techdirt. I actually think Mike is getting desperate again.

Why is the only choices a totally open market with no IP, or some sort of lazy IP holder lying on the sofa for 20 years collecting checks? That is entirely unrealistic, it’s false, and it’s misleading.

By that standard, we would only have one cell phone, one cell phone network, one flat screen TV, one type of car, and so on. We don’t. It’s because except in rare cases (and they are rare) that an overly broad patent is granted, enforced, and supported by a court of law, there is always competition.

More importantly, there is always actual innovation. Companies and individuals who attempt to get the same (or often better) results using other methods, other ways to get things done. It’s why we have the patent h.264 video format, and then WebM, html5, flash, and many other ways to encode, store, and watch a video. We didn’t just get one player in the market getting a patent, we got multiple players, multiple patents, and plenty of good old fashioned innovation, where people didn’t just take an existing product and tack on a worthless extra “feature”, but whole new ways of doing things.

So Mike, if you are going to make a strawman, at least try really, really hard not to make it so easy to blow down.

Squirrel Brains (profile) says:

Re: Re:

Lol. I Can’t believe you mentioned the H.264 and WebM as good examples of competition. You do realize that H.264 is a patent pool full of overly broad patents that is used to scare anyone in the industry to pay rent to MPEG-LA or me destroyed? Most of those patents are not that inventive. In the same vein, MPEG-LA was (is?) going after the WebM format; they wanted to create a patent pool around it so they could further charge people rent because they didn’t want a free alternative to H.264. The biggest problem is that that whole field is marred by a patent thicket and it is impossible to create a video format that is not bogged down by those patents.

Anonymous Coward says:

Re: Re: Re:

It’s the point – even with the “pool full of overly broad patents” we still have incredible levels of true innovation, alternate methods, and such. They are “bogged down” to the point where we have many different media formats and delivery systems, options, and choices.

Yeah, I would say that there is only one company in that market. RIGHT.

Squirrel Brains (profile) says:

Re: Re: Re: Re:

I will grant you that there are other companies trying to get into the market, and it is taking a giant like Google to make some headway (they bought up a couple of small companies in order to create the WebM format). However, in reality, there is just one main company, MPEG-LA. Companies that make software that encode and decode video usually pay the MPEG-LA rent, even if they have a proprietary video format (which is probably a derivative of H.26L at some point). True, this license is pretty easy to get and the rates are standardized, but it is an economic cost that need to be paid in a lot of cases. It is still protection money.

Anonymous Coward says:

Re: Re: Re:2 Re:

My point is that there are other companies out there with other protocols who were not stopped in the market place. There isn’t “one company or open marketplace” as a choice, that is a strawman.

There may be one main company, but there is still plenty of space in the marketplace for true innovation, which is what is happening, Mike’s strawman aside.

Anonymous Coward says:

Re: Re: Re:3 Re:

What MPEG-LA does with it’s formats isn’t the issue – the issue is that there are other formats out there, not covered by MPEG-LA, and more coming all the time. It proves that there is not a “single owner” in the market place.

Once again, Mike is trying to paint a single section of fence as the great wall of China. You don’t like the fence, just walk around it. It doesn’t go far in either direction. Almost everyone finds their way around it, except perhaps those who want to be stopped by it.

Squirrel Brains (profile) says:

Re: Re: Re:4 Re:

I think you “wall of china” argument is good, but not in the way you mean it. The wall is long and it is hard to get around. Granted, there are a few people willing to make the journey, but those are the exception and not the rule.

However, I am still skeptical about your claim to their being many viable codecs that are not controlled somehow by MPEG-LA. HTML5 is its own patent mess. WebM may be in trouble (it has several defensive patents).

Richard (profile) says:

Re: Re: Re:4 Re:

What MPEG-LA does with it’s formats isn’t the issue – the issue is that there are other formats out there, not covered by MPEG-LA,

That may be sort of true – but guess what MPEG -LA really hates that and tries to do everything it can to get control of every format. The moment any other format starts to get some traction MPEG-LA will put put out a call to try and find a patent that they can hobble it with!

Plus – you tell me which camcorders I can buy that don’t use an MPEG LA covered format and therefore can be freely
used professionally.

What you say is technically true – but for almost all practical purposes MPEG-LA has a monopoly.

Anonymous Coward says:

Re: Re: Re:5 Re:

The only reason that MPEG-LA is in that position is because the camcorder companies decided it was cheaper to pay then it was to go off and be non-standard. In a business where standards are key, and being the oddball makes you useless, they choose to be standard.

They could easily choose not to be. If someone came along with a better codec and a better way to do things, they would move if the market wanted to go there.

HTML5 and WebM are signs that things are moving, and there are others out there bubbling under. Even with MPEG-LA’s virtual strangehold on the marketplace through a significant patent collection (not just a single patent, also important to understand), there is still room for others to try their luck.

It’s amazing, but it’s true.

JMT says:

Re: Re:

We didn’t just get one player in the market getting a patent, we got multiple players, multiple patents, and plenty of good old fashioned innovation, where people didn’t just take an existing product and tack on a worthless extra “feature”, but whole new ways of doing things.

Another way of looking at that is we have a bunch different ways of achieving the same thing, instead if the best way. Differing video formats have been a PITA for years. Imagine if instead those multiple players had been free to try a few different methods and pick the one they think worked best, then between them the best method (or maybe methods) rise to the top and become dominant.

I can’t see how developing multiple methods of achieving the same result can be considered an efficient use of resources.

Richard (profile) says:

"Do We Really Want The First To Come Up With An Invention To Own The Market?"

Another Henry George quote

Does the first person to arrive at a banquet acquire the right to turn back all the chairs and claim that no other guests can eat the food unless they agree to the first person’s terms? Does the first person with a ticket at the theater have the right to shut the doors and have the performance go on for him or her alone? Does the first passenger who enters a railroad car obtain the right to scatter baggage over all the seats and force all subsequent passengers to stand?

Thanks for the pointer Nicedoggy!

Dave Henn says:

Purpose of Patents; Software Patents?

The U.S. Constitution (Article I, Section 8, Clause 8) set forth the patent, though not in so many words. IMO, the primary purpose of the patent is to act as a bargained-for exchange: inventor tells how to make and use his/her invention and gets to have the right to exclude others from making and using that invention for a limited time. This serves two purposes, IMHO: it disseminates knowledge gained from innovation, and it gives an inventor an extra window of opportunity to profit from and/or keep others from profiting from his/her invention until the patent lapses. A patent does not guarantee any kind of financial return. I do not believe the Founders intended that the U.S. patent grant serve the same function as Letters Patents granted, for example, in England, in which they often really were given to favorites of the Crown. How the patents granted by the U.S. are used by patent owners, be they corporations or individuals, is another matter.Regarding software patents, these aren’t technically allowed in the U.S. – you can’t patent software per se, though the test for how tied to the physical world the claimed invention is and whether a given software implementation is actually statutory subject matter is ill-defined. That said, there are ways to patent software in the U.S., Europe, and many other domains around the world, so long as you craft the claims and disclosure to provide the right elements.Regarding the “first to get [there],” the U.S. has long, if not always, provided that the first to invent gets the patent where two or more applications are filed claiming the same invention. That led to the creation of an “Interference Proceeding,” in which evidence of date of invention is reviewed to determine who was the first to invent. This is going to change to the first to file, but the inventor named must still have invented the claimed material.This post sets forth my own opinions and does not constitute the opinions of any entity with which I am associated, nor does it constitute legal advice in any possible manner, nor does it render the reader my client in any way, shape or form.

Mike (profile) says:

Purpose of patents

I have to disagree with this stated purpose of patents.

The function of the patent system isn’t to maximize the profits of inventors. Rather, it’s to provide inventors with sufficient incentives to ensure they continue innovating.

While the purpose of patents is not maximize the profits of inventors it also is not to provide inventors with incentives to invent.

The purpose of patents is to encourage inventors to PUBLISH the details needed for someone else to recreate their non-obvious invention.

The idea is that in return for a limited time monopoly, the details of the invention are made public for everyone to use and build upon after a time. Otherwise inventions would always be closely guarded trade secrets, and many would be (in the past, probably not as much now) when the person guarding the secret dies without passing it on.

This is why patents should only be granted for tangible non-obvious inventions. (and this is where our current system has become incredibly broken).

staff (profile) says:

patent bill is bad for America

In Federalist No. 43, James Madison wrote regarding constitutional rights of inventors, “The utility of the clause will scarcely be questioned. The copyright of authors has been solemnly adjudged, in Great Britain, to be a right of common law. The right to useful inventions seems with equal reason to belong to the inventors. The public good fully coincides in both cases with the claims of the individuals.”

“patent reform”

Just because they call it ?reform? doesn?t mean it is.

The patent bill is nothing less than another monumental federal giveaway for banks, huge multinationals, and China and an off shoring job killing nightmare for America. Even the leading patent expert in China has stated the bill will help them steal our inventions. Who are the supporters of this bill working for??

Patent reform is a fraud on America. This bill will not do what they claim it will. What it will do is help large multinational corporations maintain their monopolies by robbing and killing their small entity and startup competitors (so it will do exactly what the large multinationals paid for) and with them the jobs they would have created. The bill will make it harder and more expensive for small firms to get and enforce their patents. Without patents we cant get funded. Yet small entities create the lion’s share of new jobs. According to recent studies by the Kauffman Foundation and economists at the U.S. Census Bureau, ?startups aren?t everything when it comes to job growth. They?re the only thing.? This bill is a wholesale slaughter of US jobs. Those wishing to help in the fight to defeat this bill should contact us as below.

Small entities and inventors have been given far too little voice on this bill when one considers that they rely far more heavily on the patent system than do large firms who can control their markets by their size alone. The smaller the firm, the more they rely on patents -especially startups and individual inventors.

Please see for a different/opposing view on patent reform.

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