🚀 go-pugleaf

On 19 Aug 91 01:10:04 GMT, edguer@charlie.CES.CWRU.Edu (Aydin Edguer) said:

edguer> In article <PCG.91Aug18210217@aberda.aber.ac.uk> pcg@aber.ac.uk
edguer> (Piercarlo Grandi) writes:

pcg> My favourite solution would be, instead of granting the inventor
pcg> esclusive *manufacturing* rights, granting him exclusive *royalty*
pcg> rights for say 10-20 years on the actual selling price of products
pcg> incorporating that invention, i.e. a kind of sales "tax", going to
pcg> the inventor.

pcg> Everybody would be able to manufacture products incorporating any
pcg> invention, as long as they paid the royalty to the inventor.

pcg> The royalty would be by default something like 3-5% (which is
pcg> little for a new product, where profit margins can be supposed to
pcg> be something like 30-50%, and a lot for mature products, where they
pcg> can be supposed to be around 5-10%), and the inventor could reduce
pcg> (but not increase) it at will.

edguer> Huh?!  How is this different from the current state of affairs?

In two respects:

1) Currently patents grant a monopolistic right to *manufacture*, not to
*royalties*. An inventor has the option of never licensing the patent,
and of not even ever using it himself. Under my system everybody has an
intrinsic right to use the patent as long as they pay the default
maximum royalty.

2) The maximum royalty is capped at 3-5% of the sales price. It might be
true that some inventions may have an economic value that is greater
than that, so some inventor that under the current system could license
the patent for say 10% would lose under the new system, but there are
some justifications for this:

	a) capping the maximum royalty at 3-5% may benefit society in
	   encouraging wider adoption of inventions, just like free
	   (but not gratis) licensing. It could have the negative
	   effect of discouraging expensive research that would need
	   higher royalty fees to be economically viable, but this
	   might be deemed an advantage, as it would foster research
	   into economically useful, cheap small inventions that are
	   those that mostly make the economic fortune of a country.

	b) capping their maximum win is a price that inventors would
	   have to pay to enter the patent system at all, and it would
	   be a much simpler patent system. I think many inventors
	   would not object, just as most would would not object to
	   renouncing their current ability not to grant a license.

Summary: in the current system inventors who give up the secrets of
their inventions are granted exclusive manufacturing rights, which they
can then license if they want; if they decide to do so the royalty fee
is arbitrary and is essentially determined by whether a prospective
licensee would make more money licensing the patent for the asked fee or
doing without.

In my proposed system inventors who give up the secrets of their
inventions are granted a default, maximum royalty on all applications of
their invention, but anybody can use it without asking permission; if
the default fee is too high prospective users of the patent can try to
negotiate lower fees.

edguer> People use patented techniques all the time by paying for them.
edguer> Ask most modem manufacturers about "+++"... that they pay a fee
edguer> for.

But this is only because Hayes graciously licenses +++ to them. If Hayes
wanted there would be no Hayes compatible modem around.

edguer> The argument is that with the growing numbers of software
edguer> patents, giving away 3-5% for each patent, you will soon be
edguer> making negative money.

The alternative is not between gratis patents as you seem to imply and
freely adoptable patents, it is between freely adoptable patents and non
freely adoptable ones.

edguer> Let's see...  I am writing a spreadsheet that uses the X window
edguer> system.  I owe AT&T for my backing store and someone else for
edguer> natural order recalculation.  I decide to highlight the fields
edguer> that need to be entered, so I owe IBM for the Data Entry Screen.
edguer> I would also like to have distributed menus (yet more money to
edguer> IBM) and to give the user the option to use a Lotus 1-2-3 like
edguer> interface (money to yet another company).

edguer> Well so far I have to give up 15-25% of my money,

No, it's the inventor's money -- they own those patents, not you.

edguer> and those are just the patents (and copyrights) off the top of
edguer> my head!

This is precisely the current situation in any industry, if you can
persuade the patent holder to license it at you at all. For example
currently you simply cannot license a 1-2-3 look and feel for any price.

The alternative is between a system in which you may not license a
patent at all, or the asking price is without bounds, and a system where
the patent can always be licensed, at some default maximum fee or a
lower one if you can manage to get one.

edguer> But I would rather not argue from an economic view.  Steel
edguer> companies, drug companies, car companies, all have to put up
edguer> with this, and thanks to cross-licensing it works.

This is used to maintain oligopolies and raise barriers to entry to a
market. The companies in a patent cross licensing pool can withold those
patents from new entrants to the market if they want, and they routinely
do so.

The bad thing about the current patent system is not that patents are
expensive, it is that they give monopolistic rights that restrain
competition. Giving monopolistic manufacturing rights to inventors is a
socially inefficient way of rewarding inventions, because it both
encourages inventors to become manufacturers (where specialization as a
rule is more socially efficient) and it restricts the adoption of the
new invention to the inventor himself.

By ensuring a default maximum royalty my proposal makes it acceptable,
hopefully, to equate publication of an invention with its public
adoptability, at a price.

The default, maximum royalty has to be capped to some generous but not
very high amount to prevent inventors from effectively restricting
adoptability by asking for impossibly high royalty fees.

Since historical profit rates for most industries run to about 10%
thruout the life of a product, a default maximum royalty of 3-5% on
*sales income* gives a generous proportion of the profit to the
inventor, which if too expensive compared to the value of the invention
can always be reduced.

Note that the 3-5% is on sales income because to define it as percentage
of profits is both open to abuse and hard to measure (just like income
taxes, and only Governments can really make income taxes work). 3-5% on
sales income instead looks like a sales tax for which there are much
less problems.
--
Piercarlo Grandi                   | ARPA: pcg%uk.ac.aber@nsfnet-relay.ac.uk
Dept of CS, UCW Aberystwyth        | UUCP: ...!mcsun!ukc!aber-cs!pcg
Penglais, Aberystwyth SY23 3BZ, UK | INET: pcg@aber.ac.uk