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Source link: http://archive.mises.org/14753/patent-litigation-facts-2/

Patent Litigation Facts

November 24, 2010 by

A recent item in Forbes about the plight of smaller companies who can be bankrupted by patent lawsuits and threats from the medical device giants (see my post Going Toe To Toe With Medical Device Giants) concludes with an interesting and, for some, perhaps, eye-opening set of statistics about the costs associated with patent litigation and related facts. I append it below. For other interesting facts about the IP system, see my estimate of the costs of the patent system (Reducing the Cost of IP Law), as well as a growing collection of IP horror stories (The Patent, Copyright, Trademark, and Trade Secret Horror Files).

Pricey Patents

Intellectual property is a precious asset–if you can afford to protect it.

$10 million: Cost to defend a high-stakes patent suit
$3.8 million: Median damages awarded in patent infringement cases from 2001-07
482,871: Patent applications filed in 2009
191,927: Patents issued in 2009
2,700: Average number of patent-infringement lawsuits filed per year
$1,000: Hourly rate charged by top patent litigators
100: Average number of patent cases that go to trial each year
57%: Percentage of trials won by patent holders
34.6: Average number of months to secure a patent

Sources: USPTO website; General Patent Corp.; Stanford IP Database; Ropes & Gray; PricewaterhouseCoopers

{ 74 comments }

Silas Barta November 24, 2010 at 2:41 pm

It’s expensive to protect gold and artworks too. I guess those shouldn’t be property either. And people would still mine/produce them in proportion to consumer wants … right?

Matthew Swaringen November 24, 2010 at 2:51 pm

As a proportion of value protecting gold and artworks is cheap. This is not the case with patents based on the figures provided.

$10 million: Cost to defend a high-stakes patent suit
$3.8 million: Median damages awarded in patent infringement cases from 2001-07

Silas Barta November 24, 2010 at 3:22 pm

What about in poor countries with less social respect for private property norms?

nate-m November 24, 2010 at 10:45 pm

Well, for one, they have less burdens on them in terms of having to put IP crap and the plague of lawyers that go along with it.

Dave Narby November 25, 2010 at 4:44 pm

They all also are far less advanced economically and have much lower standards of living.

nate-m November 26, 2010 at 12:51 am

I still don’t see how one has anything to do with the other.

Most poor countries are poor because their governments suck. It’s something that we are going to learn in this country in a couple decades.

Dave Narby November 26, 2010 at 6:38 pm

My point is one of the major ways their governments suck is because they fail to protect and encourage their super-producers, including super-producers of valuable ideas.

Stephan Kinsella November 24, 2010 at 4:00 pm

So if a small company gets hit by a “meritless” or questionable patent lawsuit by a big company, they usually don’t have $10M in their pocket to defend. So they are screwed. I am against this. It’s a natural result of the patent system libertarians like you support. Disgraceful.

Silas Barta November 24, 2010 at 4:50 pm

I’m against it too, but it’s not a natural result of anything I support.

Look, government courts screw people all the time. That doesn’t mean anyone supporting property rights must also support anything like these stupid decisions.

Andras November 24, 2010 at 4:59 pm

Silas,
It seems there is no point of beating the drums over his cherry picking. He just can not comprehend that what he is doing is simply anti-property undifferentiated. He is on a mission! We have been just thrown to the newly spawn for practice. No real arguments here.

Anthony November 24, 2010 at 7:37 pm

Andras,

Ideas aren’t property.

The end.

Andras November 25, 2010 at 12:48 am

Anthony,
The whole debate is about whether ideas are property. What you wrote is a statement not an argument.

Stephan Kinsella November 25, 2010 at 6:44 am

Andras, waht’s funny is half the time your side says that you are not defending ideas being property, and then someone like you comes out and admits it. haha.

Andras November 25, 2010 at 12:25 pm

Stephan,
Why can’t you understand what you read? (And I am the joke!). I have not written that ideas property but what the debate is about. There is a range from zero to infinite here. Your view is at zero but mine is not at infinite. I don’t think ideas are property. However, I accept the current IP system. I have previously detailed my reasons of accepting it. (Having misunderstood my single sentence above I am not surprised that you could not comprehend my previous arguments.) Again, I accept the current IP system and not ideas being property. Huge difference!! You, as an expert should understand this. You try to mix the two. You know your reasons. I keep the limiters to differentiate.
I don’t think that the current IP system is perfect but I believe it is still much better than your alternative. My focus is on patents, preferably drug patents. The strongest of the IP laws. Have a real debate about them and you will see how strong is your non-IP alternative. But people should first understand what they are debating to have a real debate. Present facts not preconceptions unlike Boldrin&Levine’s did. Take the time and doublecheck their garbage.

Anthony November 25, 2010 at 1:31 pm

Andras,

If ideas are not property, then the modern IP system is of necessity nothing more than a series of forceful violations of actual private property in order to grant privileges to people who have something (an idea) that they don’t actually own.

Once you admit that ideas aren’t property and you still defend IP, then you should least admit that you disagree with the entire concept of “private property”, since you think that anyone’s use of their property can and should be at the whim of bureaucrats administering “IP” (who always have only the best of intentions, of course).

If, on the other hand, ideas are property then they can’t be stolen anyway unless the original owner no longer has access to them

(p.s. I know that Silas has said that ideas are not property, and apparently you would agree, so your assertion that the whole debate is about whether ideas are property seems misguided at best)

Dave Narby November 25, 2010 at 3:03 pm

What is property? Let’s use Wikipedia, as it’s got a pretty good entry on this subject: http://en.wikipedia.org/wiki/Property#What_can_be_property.3F

Guess what: Without society’s consent and enforcement by it’s laws, there IS NO PROPERTY.

ALL property is by definition a construct of civil society. It is whatever society agrees it to be. In fact, there was rather major war fought in part over this very fact, in this country.

If society decides that if you purchase or inherit a plot of land recorded and recognized by the state that it is then your property, then it’s your property!

If society decides that your original ideas are your property then they are!

Property is whatever society decides it to be.

More importantly:

This anti-IP crusade Kinsella and others are on has bothered me for some time, but I could never quite put my finger on it.

This stood out from the Wikipedia entry: “Many things have existed that did not have an owner, sometimes called the commons. The term “commons,” however, is also often used to mean something quite different: “general collective ownership” ” i.e. common ownership. Also, the same term is sometimes used by statists to mean government-owned property that the general public is allowed to access.”

By arguing for NO ownership of IP, Kinsella and the rest anti-IP crowd are actually arguing for COMMON OWNERSHIP OF IP.

Now I know why it has bothered me so much. With respect to IP, they are statists.

Peter Surda November 25, 2010 at 4:42 pm

By arguing for NO ownership of IP, Kinsella and the rest anti-IP crowd are actually arguing for COMMON OWNERSHIP OF IP.

This would be only true if IP extended the coverage of property rights into areas where no property rights exist without it. That assumption is incorrect. IP crowds out physical property rights, it does not amend them. Rather that IP opponents advocating “common ownership of IP”, IP proponents advocate the redistribution of physical property.

Anthony November 25, 2010 at 8:13 pm

Seriously, Dave?

Wikipedia says what property is and that is supposed to settle a philosophical debate on the nature of property? Are you joking?

It is true that different people have different conceptions of what property is, but asserting that property is nothing other than what society says it is does not allow for any conceptions of right and wrong.

If a society defined property as “something that cannot be owned by black people” would that be ok with you? Or would you say that property might just have some meaning outside of the state’s definition?

There is a wealth of information on this site about property as a natural right that predates governments (even animals recognize ownership), maybe you should look at some of it (search “natural rights”).

Stephan Kinsella November 26, 2010 at 1:05 am

Andras, we see almost daily reports of some new IP outrage. If we point them out, we are criticized as “cherry picking.” I suppose libertarian IP advocates–who usually agree with us that these are outrageous cases–would prefer that we keep quiet? Interesting.

Stephan Kinsella November 24, 2010 at 7:16 pm

you won’t say what stupid decisions you do and do not support, b/c that would require a coherent theory of IP. Hard to take you seriously.

Dave Narby November 25, 2010 at 4:53 pm

You sir, lack substantive arguments; and defaulting to pejoratives is clearly indicative of your extreme intellectual impoverishment.

nate-m November 26, 2010 at 12:56 am

Your missing significant history between this website and Silas. People tried having discussions with him in the past and it’s fruitless.

He’ll continue harping on some fantasy about how ideas are property yet is completely unable to relate it to anything meaningful or substantial and instead relies entirely on awful contrived stories when trying to make a point. When he chooses to pursue fantasies about how he things thinks things should work and ignores the practical results and limitations caused by attempting to make non-reality reality (ie. thoughts have ownership once expressed) through threat of force then it’s impossible to engage in any sort of fruitful dialogue.

Since then most people here have given up and are just depending on insults in a vain attempt to stop him from trolling.

Dave Narby November 26, 2010 at 6:41 pm

Sorry ‘nate-m’, but that’s not been my experience, quite the contrary.

Colin Phillips November 25, 2010 at 3:37 am

I don’t see how claiming that something which is not scarce (an idea) is equivalent to something which is scarce (property) is respect for property. It seems more like a disrespect for the idea of property.

Perhaps your definition of property is different from mine?

As an analogy, if we’re both talking about bananas, but my definition of banana only includes yellow and green fruit, but your definition includes yellow paint, we can’t really come to an agreement until you explain how something can be a banana without being a type of fruit, right?
How can something which is not scarce be considered property?

Dave Narby November 25, 2010 at 4:47 pm

Ideas are not scarce.

Novel and original ideas are.

Stephan Kinsella November 26, 2010 at 1:13 am

You are using scarcity in a different sense. This leads to argument by equivocation.

We are talking about scarcity in the economic sense of rivalrousness–the property that gives rise to the need for property rights.

Dave Narby November 26, 2010 at 6:42 pm

Fine.

Please explain how novel and original ideas are not scarce, and therefore valuable.

Edgaras November 27, 2010 at 3:03 am

As long as they are in your head – they can be at least semantically called “scarce”, I would agree with that… but when you release it into public and other people LEARN your idea, it is no longer scarce and you can not “protect it”. It becomes knowledge.

Wildberry December 2, 2010 at 7:09 pm

Stephan,
I wish I would have seen this earlier. You are absolutely right. Argument by equivocation pretty much sums up what is going on here.

Of all the equivocations, those concerning ideas are the greatest.

What is an idea? What are two ideas associated in a unique way? What are a thousand?
Are 10,000 ideas associated in a unique way, combined with scarces resources and labor to produce a unique and ultimately scare good still just an idea?

I would assert that from left to right above, you are moving in a direction from non-scarce to greater scarcity. Do you agee?

Furthermore, the scarcest good of all is one that does not yet exist. Agree?

Peter Surda November 25, 2010 at 5:18 am

It’s expensive to protect gold and artworks too.

That’s precisely the point. If you want to protect your “IP”, then you need to spend your own money to prevent others from learning it. If you want to control the activities of people after they learn it, you need to make contracts with them prior to them learning it.

Andras November 25, 2010 at 11:59 am

Excellent point Peter. Somewhere it costs to protect your “idea”. Both systems are “expensive”. Kinsella magnifies the cost of the current system and ignores the cost of his theoretical non-IP regime.

Peter Surda November 25, 2010 at 12:41 pm

You neglect to mention that the methods of protection advocated by you (i.e. what is colloquially referred to as “IP”) are based on violations of property rights. Or, since you are actually one of the few IP proponents that gets the externality issue, I can rephrase it: the internalisation of revenues you are advocating (= “IP”) must be offset by the externalisation of costs. From mathematical point of view, the “sum” is zero.

Dave Narby November 25, 2010 at 4:46 pm

Property is whatever society declares it to be.

Anthony November 25, 2010 at 8:14 pm

And if society declares that people can be property? It has happened before…

Matthew Alexander November 26, 2010 at 11:39 am

A society cannot declare anything, only individuals can. Even assuming that society could make declarations, why should we support what it declared? If what it declared were against logic and sense, which we use to derive natural rights, society would simply be wrong.

Kinsella, like all real libertarians, is concerned with justice, something which is discovered and reasoned, not fabricated by something called society, which is not an acting agent.

You could as easily declare that logic is whatever society declares it to be. And when society decided that “A” and “not A” were the same thing, you could dismiss any rational argument that went against society by the same method you have used here. You would be no more ridiculous for doing so.

If you are committed to supporting society’s alleged definition of property – and I shall leave alone the question of how you measure that – would you then join our side if we were able to convince society that IP is not actually property? It seems to me you must, to remain consistent. And if we were able to change society’s opinion, how would we do so? Obviously, by making arguments of logic, justice and practicality, like we are doing now.

Or is it your opinion that society must never change its mind, and that no attempt must ever be made to effect this change?

Peter Surda November 26, 2010 at 12:24 pm

Declarations do not fix logical fallacies though, which is my actual point.

Dave Narby November 26, 2010 at 6:44 pm

Anthony,

It did. It then declared them not property.

Nothing here disproves my point, however. Property is whatever society declares it to be.

Ray Rock November 24, 2010 at 5:04 pm

This is a problem with the tort system in general, it isn’t confined just to patent trolls and IP lawsuits.

Dave Narby November 25, 2010 at 10:45 am

Thank you.

Kinsella continues to deliberately misrepresent improper enforcement of patent laws (and all IP) as being something wrong with patent laws in general.

So instead of reforming the system, he would just jettison the system without considering the consequences.

I have previously stated that If patent protection is removed, then it logically follows that the only entities to benefit will be large, multi-national corporations with the ability to create and innovate in secret, and then bring those to market in volume and quickly enough so that they cannot be pirated/counterfeited.

Inventors/authors will be forced to become a cog in a larger machine, or face having their work appropriated via ‘intellectual eminent domain’.

Tens of millions of small and medium sized business would then simply cease to be as the fruits of their intellectual labor would be appropriated by the giants of manufacturing and marketing.

Kinsella has no argument to rebut this, which is not surprising, as there *is* no good argument to rebut this. Instead, expect more straw men and misdirection.

I feel sorry for him, as he is unfortunately in the position that the AGW crowd is, having expended a large amount of mental energy in pursuit of what is ultimately a really bad idea.

Matthew Swaringen November 25, 2010 at 12:21 pm

“I have previously stated that If patent protection is removed, then it logically follows that the only entities to benefit will be large, multi-national corporations with the ability to create and innovate in secret, and then bring those to market in volume and quickly enough so that they cannot be pirated/counterfeited.”

It does not logically follow. This is a non-sequitur and entirely in contest. When you keep making statements that other people don’t agree with you on there is no place to debate.

“Kinsella continues to deliberately misrepresent improper enforcement of patent laws (and all IP) as being something wrong with patent laws in general.”

Given that there is no consistent IP framework among IP adherents your basis for blaming him is a little shaky to say the least. I’ll grant that Kinsella tends to conflate the different groups of IP adherents (those supporting the current government regime and those who do not), but unfortunately libertarian IP advocates don’t give more than one-off statements about what they do and don’t agree with. When pressed for specific grounds for IP we will often get something like Andras “ideas are property” or Kerem’s “everything the person made is property” which are so broad as to destroy any reasonable limitations that might be posed by you or Silas.

It’d be helpful for you if you’d at least openly disagree (and especially say why you disagree) with such statements if you don’t want your views conflated with theirs.

“Inventors/authors will be forced to become a cog in a larger machine, or face having their work appropriated via ‘intellectual eminent domain’.”

To charge “eminent domain” you have to assume ownership in advance. This is a circular argument.

“Tens of millions of small and medium sized business would then simply cease to be as the fruits of their intellectual labor would be appropriated by the giants of manufacturing and marketing.”

Have you ever worked for a large corporation? They tend to be very inefficient, somewhat like governments. They also are very bad when it comes to taking ideas from the outside world that don’t fit into their framework. This is probably why they need bailouts, subsidies and regulation. I’m not saying no large corporations will exist in a free market but I do not think they will be nearly as common as you imagine nor will they excel at “appropriating” since they tend to believe their own propaganda.

“Kinsella has no argument to rebut this, which is not surprising, as there *is* no good argument to rebut this. Instead, expect more straw men and misdirection.”

Your argument is still a non-sequitur here. You have absolutely no proof that inventions absent IP are appropriated by large corporations to the extent that they drive out smaller competition. The other problem is your claim is empirical and based on your own opinion. If you seek to prove it you should try to get the data for it.

Dave Narby November 25, 2010 at 2:34 pm

Answer this:Absent IP protection, how will the individual innovator be compensated for the fruits of his mental labor?

Or another way to phrase it: Who pays the inventor to invent?

DixieFlatline November 25, 2010 at 7:09 pm

“fruits of his mental labor”

LMAO

nate-m November 26, 2010 at 1:48 am

“”"Or another way to phrase it: Who pays the inventor to invent?”"”

The same that happens nowadays: Pretty much none of them.

How many independent inventers you know can afford the $1000/hr lawyers it takes to litigate a patent case? How many major corporations are going to be willing to pay substantial royalties to inventors who are incapable of litigating them?

The actual numbers will be difficult to know for certain, but certainly the answer to #1 is “Very few” and the answer to #2 is going to be “none”.

The reality of the situation is that the vast majority of patents never get used for anything besides really mundane crap. They are used for fluffing up the assets of a corporation to make things like getting loans easier. They can put the patents in their portfolio to make potential investors think they are a innovative company with assets that the investors can use to recover part of their investment if everything goes south.

Actively enforcing patents are a game that is played by people who have hundreds of thousands of dollars to dump into their legal fees. Everybody else is excluded from participating in any way except being victims of IP lawyers and the lawyer’s employers. This is not a accident.

Dave Narby November 26, 2010 at 6:47 pm

At least under the present system, they have a chance.

You make a great argument for reforming the patent litigation system (which is my solution), but no argument for how dissolving it will benefit inventors.

nate-m November 26, 2010 at 7:06 pm

It’s a tiny chance.

Thats no way to justify the existence of such a destructive and expensive legal infrastructure required to maintain such a system, however.

Since it’s obvious that there is no natural ownership to concepts, methods, or ideas once they are expressed and absorbed by other people then the only possible justification one can make for the patent system is one of simple practicality:

Does the patent system foster more innovation then it squashes? Is the loss in liberty justified by the increase in profits of a few key industries? Does the legal expense and effort required to maintain the patent system compensated by the contributions that the patent system brings to the economy?

All signs point to no.

Dave Narby November 25, 2010 at 2:38 pm

“Your argument is still a non-sequitur here. You have absolutely no proof that inventions absent IP are appropriated by large corporations to the extent that they drive out smaller competition. The other problem is your claim is empirical and based on your own opinion. If you seek to prove it you should try to get the data for it.”

Google ‘ “Philo Farnsworth” RCA television legal ‘ for an example of IP being appropriated *even with* patent protection.

Stephan Kinsella November 26, 2010 at 1:19 am

“I’ll grant that Kinsella tends to conflate the different groups of IP adherents (those supporting the current government regime and those who do not),”

I try not to do this; I treat various arguments. but the proponents themselves are rarely clear about what they favor. I find they speak out of both sides of their mouth. If you point out egregious examples or problems with current IP law they agree with you. They will say they are not in favor of modern IP law. Yet they oppose efforts to abolish it! So which is it? and they almost never specify what their ideal IP law would look like. So they don’t favor current IP law and agree with almost every concrete criticism we raise (yet they don’t want to abolish it! even they they “don’t” favor it!); and they have no idea what the ideal IP system they allegedly favor would look like. What is one to do in the face of such wobbly, disingenuous “arguing”?

Peter Surda November 25, 2010 at 12:52 pm

If patent protection is removed, then it logically follows that the only entities to benefit will be large, multi-national corporations…

This argument has been refuted many times from many different perspectives. So I will just add a new one.

If it was correct, the same argument would apply to presence of physical property rights. Economies of scale would cause that small producers of physical goods are driven from market and are replaced by large, multi-national corporations. So, in order to remain consistent, you would not only have to advocate IP, but also the eliminationion of physical property rights.

Of course, both arguments are based on erroneous assumptions, I am merely pointing out the connection between assumption and conclusions.

Anthony November 25, 2010 at 1:41 pm

Not to mention that there are thousands of recorded instances of small businesses being forced to shut down by (often spurious) patent, copyright and trademark lawsuits by large multinational corporations.

I see more evidence to support the idea that without IP laws small and medium businesses would be better off (given the absence of the threat of superfluous lawsuits), but at the very least any rational analysis would show that the consequences of eliminating IP would not be all bad for small companies.

Dave Narby November 25, 2010 at 2:33 pm

You point out a problem with patent law enforcement, not with patent law itself.

Peter Surda November 25, 2010 at 4:29 pm

Since enforcement of patent law logically violates physical property laws, it is an inherent problem of the concept.

Dave Narby November 25, 2010 at 4:36 pm

By that logic, since all laws can’t possibly be properly enforced, then they should be eliminated.

You must be an anarchist.

Edgaras November 26, 2010 at 2:15 am

non-sequitur. What this has to do with anarchism at all?

Peter Surda November 26, 2010 at 12:04 pm

Dave,

regrettably, you miss the point. Which is that physical property rights and IP contradict each other. No amount of human’s desires can fix logical fallacies.

Dave Narby November 26, 2010 at 11:35 pm

You can claim I miss the point all you want, but it’s obvious to any rational person that you and Kinsella are evading the issue.

Peter Surda November 27, 2010 at 4:06 am

On the contrary, it is obvious that you are the one avoiding confrontation.This has been going on for months and is well documented. But I have patience. Others have been doing this for years.

Dave Narby November 25, 2010 at 2:44 pm

“This argument has been refuted many times from many different perspectives. So I will just add a new one.”

So say you. Better put up a page somewhere, every ‘refutation’ you have provided has been riddled with logical fallacies.

“If it was correct, the same argument would apply to presence of physical property rights. Economies of scale would cause that small producers of physical goods are driven from market and are replaced by large, multi-national corporations. So, in order to remain consistent, you would not only have to advocate IP, but also the eliminationion of physical property rights.”

Economy of scale does drive small producers out of the market. AFTER the IP expires. Or, after the IP is acquired by a larger manufacturer.

You are evading the point again, which is that IP is supposed to protect the innovator.

Peter Surda November 25, 2010 at 4:28 pm

Better put up a page somewhere, every ‘refutation’ you have provided has been riddled with logical fallacies.

On the contrary, the one producing logical fallacies is you. When this is pointed out to you, you run away from debate.

Economy of scale does drive small producers out of the market. AFTER the IP expires. Or, after the IP is acquired by a larger manufacturer.

So why not ban larger manufacturers outright, or eliminate physical property instead of fabricating a vague concept of “IP”? Another complete non-sequitur.

You are evading the point again, which is that IP is supposed to protect the innovator.

No, you are evading the point again, which is that you are using vague constructs and do not provide a framework for your theory.

Dave Narby November 25, 2010 at 4:43 pm

“On the contrary, the one producing logical fallacies is you. When this is pointed out to you, you run away from debate.”

For example?

“So why not ban larger manufacturers outright, or eliminate physical property instead of fabricating a vague concept of “IP”? Another complete non-sequitur.”

Straw man fallacy.

“No, you are evading the point again, which is that you are using vague constructs and do not provide a framework for your theory.”

Just because you can’t understand it (or pretend not to) doesn’t mean it’s not clear.

I’ll repeat the argument:

Innovations that don’t need patents will clearly exist whether or not we have patents. But the the reverse is not true. Where have you shown that patents *as such* prevent innovation?

Or to put it in one sentence: Please explain how repealing IP laws will provide innovators MORE incentive to innovate.

Anthony November 25, 2010 at 8:37 pm

Dave,

Countless companies in the process of actual innovation have been stomped on and held back by the enormous number of patents that stand in the way of any new product. RIM was almost destroyed by the threat of an injunction on the sale of their products due to a patent that was of dubious legitimacy.

In the future, one might assume that RIM will divert funds, personnel and resources away from their proper tasks (inventing and manufacturing devices which consumers want) and towards avoiding lawsuits from using independently discovered ideas.

Money spent on lawyers is money not spent on innovation, therefore IP law is necessarily causing a reduction in innovation. Whether the net result is an increase or decrease in innovation is not certain, but what is certain is that IP laws divert money to lawyers that could otherwise be spent on innovating.

Absent IP laws a person who designs, manufactures and sells a product will not have to fear that they are inadvertently violating a patent (sometimes held by someone who never had any intent to actually manufacture anything).

In two sentences:
Removing IP would assure people that they will not have their profits taken away just because someone else “owns” an idea that they independently discovered. This will give people more incentive to create and sell innovative products, rather than inventing something, waiting for someone else to go to all the expense of manufacturing it, and then suing them.

Peter Surda November 26, 2010 at 12:21 pm

For example?

For example: 1 2 3 4 5 6 7 8 9 10 11 12

Straw man fallacy.

Not quite. It helped to bright forth another problem of your argument: you are attempting to mask your dislike of multinational companies through the advocacy of IP. That’s disingenuous. Because if you eliminate the dislike (assuming, of course, that the actual assumption of IP favouring small companies is correct), all it would mean that if innovators are employed by the multinationals, a more efficient use of resources would result. So, it turns out that you are only repeating the same thing all other IP proponents are: you are advocating inefficient business models, because for some unexplained reason you consider them morally superiour.

Just because you can’t understand it (or pretend not to) doesn’t mean it’s not clear.
Since you have not provided an explanation, there is nothing to understand.

Innovations that don’t need patents will clearly exist whether or not we have patents. But the the reverse is not true. Where have you shown that patents *as such* prevent innovation?

I have explained the problem with your argument many times from many different perspectives, just consult the links above. I’ll just add new ones. You are attempting to present a quantitative difference as a qualitative one.

Or to put it in one sentence: Please explain how repealing IP laws will provide innovators MORE incentive to innovate.

This is not my argument. Multinational companies and innovation are not praxeological terms. They are vague concepts which refer to specific business models and some sorts of externalities.

That is why your argument fails. It is not accompanied by a framework to explain or evaluate it.

nate-m November 26, 2010 at 7:54 pm

“”Or to put it in one sentence: Please explain how repealing IP laws will provide innovators MORE incentive to innovate.””

That’s easy. By getting rid of needless legal overhead and burdens, as well as getting rid of government monopolies your going to decrease the expense and increase the competitiveness of corporations that actually produce goods. Getting rid of patents also reduces the entry into markets so it makes things much easier for start ups and innovative people to get started.

The difficult part is not creating inventions, the difficult part is actually getting them into production and producing real products that use those inventions.

A simple example is software. Almost all major innovations in software happened well in advance of the patent-ability of software. Since they have been patented the number of patents per year has increase exponentially while innovation is dying on the vine.

Now software patents are merely used as tools for people that don’t actually produce anything* and as tools by large businesses to keep smaller enterprises out of the market.

*these are known in the industry, fondly, as ‘patent trolls’.

Software is insanely complicated and the chances of you producing meaningful products while violating somebody’s patents somewhere is nearly 100%. Since patents do cover independent creations there is no defense in accidentally violating a patent. Your just as liable if you did it by accident or not.

So patent trolls are groups of lawyers that purchase up software patents from defunct software companies (which are constantly being created and going out of business). Since if you produce products your liable (see previous paragraphs) it’s impossible to sue people for patent violations since you’ll just get sued back. So these patents are practically worthless to medium sized enterprises and thus remain unlicensed when the companies go bankrupt. So patent trolls buy up the IP assets then proceed to start threatening anybody that has makes enough money by producing real products to justify the patent troll’s time and expense.

Since the patent troll produces no products of their own it’s impossible for them to violate another company’s IP and thus there is no defense against them. They can go around threatening everybody else with no worry about any sort of penalty.

For large software companies with significant legal budget software patents become a bit like nuclear arms. Then it works like ‘M.A.D.’ theory did for the cold war. One large software firm sues one then they get sued back and then all hell breaks loose. To avoid that these major corporations put a significant amount of effort in cross licensing everything. This has the desirable side effects of looking good on paper financial-wise AND excluding small companies from competition due to their lack of legal budget and patent arsenal.

You can see the effect of this in the current smart phone market. Currently the most innovative and cheap software product out on the market is the Google Android OS. Nokia, Apple, RIM, Oracle, and other companies are now suing the hell out of anybody that produces a Android phone. And the people that are producing the Android hardware are suing right back.

As a result a significant portion of your cost of your phone is going straight into lawyer’s pockets and is not spent on any sort of research and development.

Android, which is a open source OS were the manufacturer and developers have relinquished almost all copyright restrictions and have spent a huge amount of money avoiding patents as much as possible. Google and other companies are making millions on this software that they developed and are given away for free, but you still end up paying 20-50 dollars per phone to people that DID NOT HAVE A SINGLE FUCKING THING to do with any of it’s development.

If it costs 1000 per hour to fight a patent and your lawyers estimate it will cost about 200 hours of work to fight a bad patent and win, then you’ll pay the licensing fee every single time if it’s less then 100,000 dollars. The patent trolls know this and set their licensing fees accordingly. Even if you do end up fighting the patent and winning for less then the licensing fees then you’ve just handed your competitors a free present. They not only avoid the licensing AND the legal fees, but they can spend their money on production and increasing their competitive level. You’ve just helped dig a grave for yourself by winning against a bad patent. Thus the terms and prices for patents are not set by the market or demand or anything like that… they are set based on the wages of the lawyers and difficulty of defeating it in a court of law.

This is the reality of software patents. It’s a unmitigated disaster. And this is EXACTLY how it works when you try to make software IP work in the real world.

So software is mostly what I know. I can’t go into details about pharmaceuticals or pesticides or whatever since I have little involvement in those industries. However with software I witness this first hand.

Dave Narby November 26, 2010 at 11:45 pm

Anthony,

“Countless companies in the process of actual innovation have been stomped on and held back by the enormous number of patents that stand in the way of any new product. RIM was almost destroyed by the threat of an injunction on the sale of their products due to a patent that was of dubious legitimacy.”

‘dubious legitimacy’? One of two scenarios come to mind: They ripped off someone’s IP, or someone else abused the IP system to jam up RIM. Hardly a reason to eliminate IP.

“In the future, one might assume that RIM will divert funds, personnel and resources away from their proper tasks (inventing and manufacturing devices which consumers want) and towards avoiding lawsuits from using independently discovered ideas.”

And instead, RIM will spend that money (and likely much more) in creating devices that are difficult to copy/reverse engineer.

“Money spent on lawyers is money not spent on innovation, therefore IP law is necessarily causing a reduction in innovation. Whether the net result is an increase or decrease in innovation is not certain, but what is certain is that IP laws divert money to lawyers that could otherwise be spent on innovating.”

That is an indictment of the legal system, not IP.

“Absent IP laws a person who designs, manufactures and sells a product will not have to fear that they are inadvertently violating a patent (sometimes held by someone who never had any intent to actually manufacture anything).”

But they will have to fear that their innovation, the result of untold hours of work and capital, will be appropriated by another company.

“In two sentences:
Removing IP would assure people that they will not have their profits taken away just because someone else “owns” an idea that they independently discovered.”

…And insures they will have their profits taken away by someone who copy their ideas and exploit them with a larger distribution/manufacturing system!

“This will give people more incentive to create and sell innovative products, rather than inventing something, waiting for someone else to go to all the expense of manufacturing it, and then suing them.”

Logically, it actually follows they will instead have more incentive to develop in secret, and work methods of creating products which are hard to copy, increasing the cost of innovation, and reducing the number of innovations brought to market.

Dave Narby November 26, 2010 at 11:57 pm

“nate-m”,

“”Or to put it in one sentence: Please explain how repealing IP laws will provide innovators MORE incentive to innovate.””

” That’s easy. By getting rid of needless legal overhead and burdens, as well as getting rid of government monopolies your going to decrease the expense and increase the competitiveness of corporations that actually produce goods. Getting rid of patents also reduces the entry into markets so it makes things much easier for start ups and innovative people to get started.”

First, it’s not a “government monopoly”. That’s incorrect. It is the right to be the sole manufacturer of a product for a limited period of time. A monopoly is something quite different, please look up the term and use it correctly.

What you propose will increase the amount of money and time spent developing products in secret, and an resources spent on making them hard to copy. It will also further shift the advantage to large multinational corporations, who will no no longer have to deal with the legal shield of patent law before they rip off some smaller company’s products.

” The difficult part is not creating inventions, the difficult part is actually getting them into production and producing real products that use those inventions.”

If you seriously think coming up with an innovative product is easy, you are a fool, no way to put it more politely.

” A simple example is software. Almost all major innovations in software happened well in advance of the patent-ability of software. Since they have been patented the number of patents per year has increase exponentially while innovation is dying on the vine.”

Given the tens of millions of software packages created yearly, your opinion that patents are discouraging innovation are not very credible.

” Now software patents are merely used as tools for people that don’t actually produce anything* and as tools by large businesses to keep smaller enterprises out of the market.”

Again, your opinion, and if this is true, it is a failing of government, not the principles behind IP.

” *these are known in the industry, fondly, as ‘patent trolls’.”

Again, you make my argument that the IP legal system needs reform. Thanks!

” Software is insanely complicated”

Good code is hard to write, I know.

” and the chances of you producing meaningful products while violating somebody’s patents somewhere is nearly 100%. Since patents do cover independent creations there is no defense in accidentally violating a patent. Your just as liable if you did it by accident or not.”

Abuse of IP laws are not an argument to repeal IP laws. Would you eliminate the tort system?

” So patent trolls are groups of lawyers that purchase up software patents from defunct software companies (which are constantly being created and going out of business). Since if you produce products your liable (see previous paragraphs) it’s impossible to sue people for patent violations since you’ll just get sued back. So these patents are practically worthless to medium sized enterprises and thus remain unlicensed when the companies go bankrupt. So patent trolls buy up the IP assets then proceed to start threatening anybody that has makes enough money by producing real products to justify the patent troll’s time and expense.”

Again, your argument addresses the legal system…

” Since the patent troll produces no products of their own it’s impossible for them to violate another company’s IP and thus there is no defense against them. They can go around threatening everybody else with no worry about any sort of penalty.”

IP law abuse again.

” For large software companies with significant legal budget software patents become a bit like nuclear arms. Then it works like ‘M.A.D.’ theory did for the cold war. One large software firm sues one then they get sued back and then all hell breaks loose. To avoid that these major corporations put a significant amount of effort in cross licensing everything. This has the desirable side effects of looking good on paper financial-wise AND excluding small companies from competition due to their lack of legal budget and patent arsenal.”

IP law abuse again.

” You can see the effect of this in the current smart phone market. Currently the most innovative and cheap software product out on the market is the Google Android OS. Nokia, Apple, RIM, Oracle, and other companies are now suing the hell out of anybody that produces a Android phone. And the people that are producing the Android hardware are suing right back.”

IP law abuse again. In fact, everything that follows is an argument for reforming the IP system, but not doing away with IP.

” As a result a significant portion of your cost of your phone is going straight into lawyer’s pockets and is not spent on any sort of research and development.

Android, which is a open source OS were the manufacturer and developers have relinquished almost all copyright restrictions and have spent a huge amount of money avoiding patents as much as possible. Google and other companies are making millions on this software that they developed and are given away for free, but you still end up paying 20-50 dollars per phone to people that DID NOT HAVE A SINGLE FUCKING THING to do with any of it’s development.

If it costs 1000 per hour to fight a patent and your lawyers estimate it will cost about 200 hours of work to fight a bad patent and win, then you’ll pay the licensing fee every single time if it’s less then 100,000 dollars. The patent trolls know this and set their licensing fees accordingly. Even if you do end up fighting the patent and winning for less then the licensing fees then you’ve just handed your competitors a free present. They not only avoid the licensing AND the legal fees, but they can spend their money on production and increasing their competitive level. You’ve just helped dig a grave for yourself by winning against a bad patent. Thus the terms and prices for patents are not set by the market or demand or anything like that… they are set based on the wages of the lawyers and difficulty of defeating it in a court of law.

This is the reality of software patents. It’s a unmitigated disaster. And this is EXACTLY how it works when you try to make software IP work in the real world.

So software is mostly what I know. I can’t go into details about pharmaceuticals or pesticides or whatever since I have little involvement in those industries. However with software I witness this first hand.”

A brilliant argument for reform of the patent laws with respect to software. Seriously! You should send that to your representative, it’s quite good.

Peter Surda November 27, 2010 at 3:58 am

Looks like my post was blocked, so here’s another try.

For example?

For example: 1 2 3 4 5 6 7 8 9 10 11 12

Straw man fallacy.

Not quite. It helped to bright forth another problem of your argument: you are attempting to mask your dislike of multinational companies through the advocacy of IP. That’s disingenuous. Because if you eliminate the dislike (assuming, of course, that the actual assumption of IP favouring small companies is correct), all it would mean that if innovators are employed by the multinationals, a more efficient use of resources would result. So, it turns out that you are only repeating the same thing all other IP proponents are: you are advocating inefficient business models, because for some unexplained reason you consider them morally superiour.

Just because you can’t understand it (or pretend not to) doesn’t mean it’s not clear.

Since you have not provided an explanation, there is nothing to understand.

Innovations that don’t need patents will clearly exist whether or not we have patents. But the the reverse is not true. Where have you shown that patents *as such* prevent innovation?

I have explained the problem with your argument many times from many different perspectives, just consult the links above. I’ll just add new ones. You are attempting to present a quantitative difference as a qualitative one.

Or to put it in one sentence: Please explain how repealing IP laws will provide innovators MORE incentive to innovate.

This is not my argument. Multinational companies and innovation are not praxeological terms. They are vague concepts which refer to specific business models and some sorts of externalities.

That is why your argument fails. It is not accompanied by a framework to explain or evaluate it.

Peter Surda November 27, 2010 at 4:25 am

Looks like the system does not like the amount of links, so I put them onto an external site.

For example?

I collected twelve links where you run away from discussion. They can be found
here.

Straw man fallacy.

Not quite. It helped to bright forth another problem of your argument: you are attempting to mask your dislike of multinational companies through the advocacy of IP. That’s disingenuous. Because if you eliminate the dislike (assuming, of course, that the actual assumption of IP favouring small companies is correct), all it would mean that if innovators are employed by the multinationals, a more efficient use of resources would result. So, it turns out that you are only repeating the same thing all other IP proponents are: you are advocating inefficient business models, because for some unexplained reason you consider them morally superiour.

Just because you can’t understand it (or pretend not to) doesn’t mean it’s not clear.

Since you have not provided an explanation, there is nothing to understand.

Innovations that don’t need patents will clearly exist whether or not we have patents. But the the reverse is not true. Where have you shown that patents *as such* prevent innovation?

I have explained the problem with your argument many times from many different perspectives, just consult the links above. I’ll just add new ones. You are attempting to present a quantitative difference as a qualitative one.

Or to put it in one sentence: Please explain how repealing IP laws will provide innovators MORE incentive to innovate.

This is not my argument. Multinational companies and innovation are not praxeological terms. They are vague concepts which refer to specific business models and some sorts of externalities.

That is why your argument fails. It is not accompanied by a framework to explain or evaluate it.

Stephan Kinsella November 26, 2010 at 1:23 am

“IP is supposed to protect the innovator.”

Supposed by whom? Actually, it’s “supposed” to encourage inventors to publicly disclose ideas they would otherwise keep trade secret, by promising the lure of a temporary patent privilege. It’s not about protecting the innovator. Even the Founders did not believe there’s any natural right to have a patent on your innovations.

Dave Narby November 27, 2010 at 12:04 am

You can’t seriously be arguing that patents aren’t supposed to protect the IP rights of the patent originator!

Do you even know the definition of the word, sir?! Let me provide it for you!

From http://www.merriam-webster.com/dictionary/patent

Definition of PATENT

a : open to public inspection —used chiefly in the phrase letters patent

b (1) : secured by letters patent or by a patent to the exclusive control and possession of a particular individual or party
(2) : protected by a patent : made under a patent c : protected by a trademark or a brand name so as to establish proprietary rights analogous to those conveyed by letters patent or a patent : proprietary

If you claim ignorance, then you are clearly a complete fool, because only a fool would argue for repealing patent law and not know the definition of the word!

But I must assume you knew it, which is even worse, because it means your dishonesty is absolutely astounding!

Stephan Kinsella November 27, 2010 at 8:35 am

Dave, you miss my point. You said “supposed”; this implies a subjective believe–someone “supposes” it’s the case. And so I’m subtly–too subtly apparently–pointing out that we dont’ all buy the propaganda. And in fact, as I pointed out, the stated purpose of patent law was to encourage publication of otherwise-secret ideas. The means by which this goal is accomplished is to promise a temporary state monopoly privilege in exchange for publication. That’s why when you file a patent application there are various requirements: it has to be a written disclosure; it has to be enabling (look it up); it has to disclose the “best mode.”

Citing “the dictionary” in a legal or political discussion is often the tactic of rubes and nuts, by the way, so be careful.

Stephan Kinsella November 26, 2010 at 1:16 am

“Kinsella continues to deliberately misrepresent improper enforcement of patent laws (and all IP) as being something wrong with patent laws in general.”

I have advanced a variety of arguments attacking the case for IP. My anti-IP case does not rest merely on pointing out some egregious examples.

“So instead of reforming the system, he would just jettison the system without considering the consequences.”

I don’t want to reform the income tax code either.

The rest of your argument makes no sense whatsoever.

Dave Narby November 27, 2010 at 12:08 am

You avoid the argument, conflate the issue, and then resort to hand-waving.

You sir, are unfit to be on Mises.org. They do themselves a tremendous disservice by allowing you to publish here.

Any rational person who reads your responses will doubtless take Mises.org less seriously as a result.

nate-m November 26, 2010 at 2:11 pm

Life sucks sometimes:

There’s been a lot of very obnoxious misuse of software patents in recent years. This ranges from patent trolls wielding submarine patents to overly-generic patents being used to scare everyone else out of a business. But at least in most of the cases, the patents were an original idea of some sort, even if that idea was far too general to be patented.

The situation just got worse. We now have a company scraping open source commit logs and patenting them.

Today, someone brought this patent application by Tandberg to my attention. It looked like a mildly interesting idea — and then I was hit with a freight train of deja vu.

http://x264dev.multimedia.cx/archives/589

Patents being created by rummaging through open source software repositories.

Dave Narby November 27, 2010 at 12:09 am

Again, you provide a great example of why the patent law system needs reform. Seriously, it is an excellent example.

Peter Surda November 27, 2010 at 4:18 am

Again, you provide an excellent example of not thinking the argument through. You have not defined what IP is supposed to be, what that alleged function has with the current law and how a proper law should look like. On one hand, you criticise others for wanting to abolish IP for the deficiencies it contains, on the other you do not explain how to fix it.

Of course, since physical property and IP contradict each other, one can only increase one at the cost of decreasing the other. You criticise others for wanting to eliminate one, but are oblivious that any other solution at least partially eliminates the other. So the same objection that you present can be also presented to you. If it makes no sense from your point of view to reduce IP beyond a certain threshold, why should it make sense to reduce physical property beyond a certain threshold?

The actual problem in your arguments is, as explained innumerate times, the use of vague terminology and mistaking personal emotions for sound assumptions.

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