On August 7–8, 2007, I conducted a simple survey through Patently-O. [See Survey]. Readers were asked whether the patent system, taken as a whole, had been positive (made money) or negative (lost money) for their company. The results below show the responses of 131 corporate employees who are all highly involved with their company patents.
The results here follow a predictable pattern: On average, pharmaceutical companies see patents as a profit center while software companies see patents as an overall loser. (At 95%CI, Software & EE results each differ significantly from Pharm results).
Notes:
- Next time: Is this an important question?
- The Survey [LINK]
- Bessen & Meurer: Negative Return on the Patent System
- On the process:
- The above graph merges responses from small corporations with those from large corporations. It also excludes individuals at law firms, government entities, and educational institutions.
- Individuals responded to the question: “Overall, has your company made money from the patent system?” There were three potential responses: “Clearly positive (made money”, “Unsure whether positive or negative”, and “Clearly negative (lost money).” For the graph above, these responses were converted to a simple numerical scale: 1, 0, and -1, respectively. The y-axis above ranges from -1 to 1.
No American Tissue Manufacturer, socialists just TAKE the fruits of your hard labors and GIVE them to your lazy neighbor… thus destroying the ability of random talented individuals from actually gaining large economic benefit by using their own hands…and simultaneously removing any incentive to do so.
No American Tissue Manufacturer, socialists just TAKE the fruits of your hard labors and GIVE them to your lazy neighbor… thus destroying the ability of random talented individuals from actually gaining large economic benefit by using their own hands…and simultaneously removing any incentive to do so.
“Unless of course no one has a problem with the U.S. becoming a socialist backwater.”
We proudly endorse this comment. The threat of socialism is teh super duper scary prospect for The Greatest Country Ever in the History of World (TM), even worse than the threat of a nuclear bomb launched from Tehran striking Des Moines. It starts with bad patent cases and the next thing you know there is a communist in your bathtub. Just be sure to pay attention to what your neighbors are saying. Are they normal? Do they keep unusual hours? Do they eat strange foods? If we are vigilent, we can prevent teh scourge.
I website dedicated to the grievences of one Ronald J Riley:
link to ronaldjriley.blogspot.com
Anonymouse- When reading posts, it’s important to consider the source
Erez said: What do you suggest instead?
All I am saying is, it’s no good to look at these issues from an ideological point of view, which is what the critics of my post here are doing, which is in fact a very obvious case of projection, given the character assassination that goes on in those posts.
The only ideology any of us have to pay attention to is- is it working?
In the case of software, we have a proof that progress does not need patents; that proof of course being the break-neck speed of software development over the last 30 years and the recent economic development of the internet.
How did progress happen without patents? This is an interesting question. I have my own ideas, none of which I am sure anyone here is interested in hearing. But the point is- there’s the reality, now we deal with it. We can opt to explain it, or otherwise, but it’s not an option to pretend it isn’t there or that it’s other than it is.
To answer your question, the way software companies make money is through product quality, and reliability which doesn’t, as it happens, much rely on patents. That’s just the way it is.
I know for a fact that the tools I use are not protected by patents, yet the companies that sell them convince enough customers to by them to do very well for themselves.
Moreover, some very large companies , Sun and IBM have competing tools which they give away for free.
How does a company survive and even thrive facing market-killing tactics from multi-nationals and without patent protection? It just does. It doesn’t strike anyone I know as mysterious, except, of course, people whose interaction and knowledge of domains they would presume to dictate policy over is completely armchair.
But that’s the danger of letting ideologues run the show. They destroy the thing they have injected themselves as stewards of, even while they denying that that destruction is happening (see: denial).
They dismiss the experts with ad hominem, slander and charges that the experts are hostage to ideology and special interest (see: projection).
But see the Bush admin’s war on the reality of human-caused global warming, the state of the war, and science and reality generally for details and examples
link to waronscience.com
Caveman wrote:
“To review Patent 101, the right to exclude is the fundamental purpose of a patent and should allow patentees some degree of control over the commercialization of the technology”
Right, this is what’s written on the patent cover page.
I took this promise seriously when I appied for a patent on some technology to be used mostly for embedded types of programs.
It is damn hard to reverse-engineer what’s going on inside of those DSP chips in e.g. cell phones or other similal devices.
Now I am stuck with the EBay decision and the damage apportionment provision of the current patent “reform”
What it means is this: if I ever discover infringement of my patent by some manufacturer I will be denied injunction and can only recover very small damages -probably much smaller that the cost of the effort of reverse engineering the damn ship, not to mention litigation costs…
So much incentive for using patent protection…
Trade secrets forever !!!
“Clearly open source/free software group does not understand the purpose of patents. The purpose is to offer an incentive to an inventor to put the time, work, and money into fully disclosing the invention for the purpose of advancing the arts.”
I would add to the above “…of advancing the arts, in exchange for a limited grant of the right to exclude others from making using or selling the claimed invention.” To review Patent 101, the right to exclude is the fundamental purpose of a patent and should allow patentees some degree of control over the commercialization of the technology. Some of the recent decisions diluting the permanent injunction provisions of the system really erode this fundamental right and should be stricken down. Unless of course no one has a problem with the U.S. becoming a socialist backwater.
I can tell you first hand that the open source community is not adverse to applying for a patent or two (or a hundred)…
As a former software geek (of the “hard” variety, e.g. embedded signal processing systems) I have no problem with programmers in general. I can tell you that, when programming in more “soft” territory, e.g. Windows applications, I never worried a lick about patents. I can bet that anyone using a MS SDK to code up a proprietary application should probably not worry about patents either.
Anony Mouse,
To add to CaveMan’s excellent comments, let’s start from the other direction. A programmer conceives a great idea and wants to design and implement it for the greater good of humanity.
The programmer can get a job in a large corporation where he will get a pitiful salary to do what he is told. His idea may not fit with the company’s “mission” or “image” or “market niche”. If the programmer tells the idea, a manager may steal the idea. If the idea is developed and is marketed and succeeds, what happens? The inventor gets a warm handshake, the manager a promotion and the CEO takes home a big bonus.
Alternatively, the programmer can go to a VC fund and tell them “give me money because I have a great idea”. Will they give the programmer money without knowing what the idea is? No. If he tells the idea without at least a patent application defining his idea, will they steal the idea in order to save paying the programmer? Yes, it’s their duty.
Sadly, the world of business is a nasty, backstabbing place where the small innovators have no chance against the big and rich monopolies and oligopolies. Inventors, surprisingly, don’t want to help humanity from the goodness of their heart, they want to be paid.
Patents are the only way I know to give the small guy a chance and thus encourage innovation.
What do you suggest instead?
Clearly open source/free software group does not understand the purpose of patents. The purpose is to offer an incentive to an inventor to put the time, work, and money into fully disclosing the invention for the purpose of advancing the arts. The cost of a patent, both labor and to file for the patent can easily top $100,000 and may even represent millions of dollars.
Software hacks do nothing advance the collective arts. Rather they code for their own profit and rationalize that other’s creations should be socialized for their selfish interests. Contrary to their beliefs, recoding someone else’s invention in a marginally different way does not make the person doing so an inventor.
What is really ironic is that the software cult shares the same goals as the corporate patent pirates and that both groups have an entitlement mentality. In both cases they are unimaginative dullards who lack ethics. That sounds to me like their mentalities are very similar to those whom we incarcerate. Now there is a good idea.
Ronald J. Riley,
President – http://www.PIAUSA.org – RJR at PIAUSA.org
Executive Director – http://www.InventorEd.org – RJR at InvEd.org
Washington, DC
Direct (202) 318-1595 – 9 am to 9 pm EST.
The other point that many seem to miss is the economic efficiency argument favoring a strong patent system. If a legal monopoly is granted to a developer of a product, and the public notice provision is served, then others will presumably allocate resources to other more productive activity, including collateral technology associated with the patented technology.
This is how we avoid the extremely economically inefficient VHS/Betamax-type result. Also, apologies in advance to all the communists out there, but patents protect the ability of new technology developers to actually make profits/rents at least for a while.
CaveMan
I hate to say it, but this is a ridiculous question if you think about it. Particularly in a forum like this where many of the comment contributors (especially the software geeks) and even many of the article contributors are in no position to judge whether money is made as a result of patent activity. Its really just a survey about free floating opinions.
Also, “soft” software types are the most likely to have a negative, collectivist attitude about intellectual property. The typical “soft” software geek has seen it all, done it all, and thinks it all should belong to everyone as he/she feverishly downloads illegal MP3s.
The “real” software types, that is, for example, the folks writing specialized code to create new approaches or to optimize signal processing performance, compression performance, and the like, I’m sure are quite pleased with the patent system and the royalties they are making as the world beats a pathway to their door clamoring for licenses for the (patent protected) fruits of their labor.
But hey, I’m just a cave man.
GMS said : With that in mind, it seems like “attracting investors” may be one of the more important functions the system could play.
Well that is where you go wrong. In a nutshell, investment activity can be beneficial and even necessary to a functioning IP system, but such investment activity does not itself create such a thing. If it did, we would simply let money go where it wants without any governmental regulation of any type and the whole edifice of IP would be redundant.
While that scenario may appeal to some Libertarians and other market extremists, it has no point of tangency with reality.
Investors attach themselves to anything that serves their immediate needs, even if that thing is, on the whole, bad for society, the economy and even investors as a general class.
So investment money can be seen in all kinds of illegal activities. Even though such activities (bootlegging) are bad for the economy, still investment is present.
But we all know this. Investment, like people is necessary, important and worthwhile, but not sufficient.
So what is the measure?
The measure is -does it promote on the whole, scientific (roughly) and economic progress, that is, in the long-term. Long-term concerns are not a market specialty; it’s just not a question investors as a class are meant to answer. It’s a question that needs to be answered through study and science by people whose only concern is the long-term health of society. This is civics 101.
There’s no reason to be frightened if, as it happens, some areas of progress are not best served through patents, since, if true, the net effect would be economic advancement with more money, value and economic activity. This is the same argument behind tax cuts for the wealthy. Of course it’s everything whether such hypotheses are true or not. But that is a matter for study.
ANONY MOUSE claims “Because a thing attracts investors cannot serve as an argument that that thing is good.”
ANONY MOUSE appears to be making a similar argument in reverse (i.e. that attracting investors is a bad thing, or at least that it cannot be an indication of a good thing). The U.S. patent system may very well be “based” on the concept of advancing science and the useful arts. However, that is merely the basis for Congress’s authority to legislate in the area of intellectual property. It has been argued by many greater minds than mine that the U.S. patent system has been designed and implemented for primarily economic motives. The system is designed to promote innovation and stimulate economic growth (whether that is accomplished that goal is an entirely different argument).
With that in mind, it seems like “attracting investors” may be one of the more important functions the system could play. It can be argued that attracting investment in a company that is going to then be allowed to continue its research and development efforts does actually “promote science and the useful arts” as well as the economic motives behind the legislative implementation of the patent system.
I understand and appreciate the “open source” argument that patents are used solely as a stick to threaten innocent, innovative organizations into paying monopoly rents or to not enter a market. However, even the most ardent open source advocate has to ultimately find a way to make a living (and may even be interested in attracting that same investor).
Granted, anyone who “supports” the concept of obtaining a patent purely for the sake of having a patent seems to be encouraging the ultimate demise of the system. Poor quality patents (whether software or not) are BAD for the overall perceived value of the system and changes should be made to eradicate them.
Ultimately, changes to the system to improve patent quality and eliminate overly broad, obvious software patents in particular would be a good thing. But don’t jump to the conclusion that all software patents are protecting swampland (bad software).
“In this context, a thing is good if it promotes the useful arts and sciences, not investors.”
This question isn’t answered by the survey. Nobody is volunteering any information about whether they make beneficial use of previously patented inventions that might not have been financed without the patent system. After all, this is what society is supposed to get in exchange for creating a monopoly. Instead the survey seeks to figure out whether different participating parties are making money or have lost many in individual cases.
THOMASON SAID:
“When a company can attract investment, and perhaps more quality investors, because it holds registered IP, then an inquiry about ‘profiting’ from patents seems to be miss an as important reason for pursuing patents.”
But there is a logical fallacy embedded in your argument.
You argue that because this thing- in your example, a patent on software – attracts investment, it is a good thing.
We could create the same arrangement if we reverted to the something like the dispensation of kings and selling was restricted to those the king decreed. Investors would get behind those companies too. They wold create “value” in exactly the same way and for exactly the same reason.
Because a thing attracts investors cannot serve as an argument that that thing is good- it’s a self-affirming argument.
In this context, a thing is good if it promotes the useful arts and sciences, not investors.
And that is what is at issue. Arguments of the sort you made beg the question.
Not meaning to be too hard on anyone here !! – you can see from your own argument that a kind of anti-promotion of the useful arts and sciences may be the net effect of software patents.
If people are lining up to buy into swampland, (bad software) BECAUSE of patents, whilst others are being restrained from creating other-than-swampland owing to such patents, (for this is the power of patents- exclusion from the marketplace), then this is a net negative for society, even as a few may profit locally.
Q: did these software companies make any money at all?
Apart from that, it’s never been contradicted [to me] that venture funds feel greater comfort about their money when the software company has some applications or issued patents. The VCs may not care if the patents are obvious, or the applications all that masterfully-prosecuted. It’s that, if you’re buying swampland, you’d at least like to hold a deed that describes its metes and bounds.
When a company can attract investment, and perhaps more quality investors, because it holds registered IP, then an inquiry about ‘profiting’ from patents seems to be miss an as important reason for pursuing patents.
what is the scale of the ordinate (y-axis) on this graph??
if I read your survey correctly, it had three choices but the scale has 5 gradation lines. not sure what this means?
Thanks anon. I have an issue with the “meaningfully different” explanation with respect to explaining differences between the references cited and the claims. That requirement is void for vagueness. I mean what is going one in the USPTO? It seems that the USPTO has issues with the Constitution. Now you can get around the 13th Amendment prohibition against slavery using ethical rules thereby forcing us to perform your job and still charge our clients money for examination (please note the jury is still out on this one, because I am not sure your 10.18(b) rule does not violate an individual’s right to counsel-more on that later), but you cannot really believe that the courts will allow you to provide a vague requirement and leave the USPTO as the sole interpreter of whether the vague requirement has been satisfied? Get a grip.
I don’t know if this has been reported yet – but the proposed IDS rules were sent to the OMB for approval on July 27.
AGENCY: DOC-PTO RIN: 0651-AB95
STAGE: Final Rule ECONOMICALLY SIGNIFICANT: No
RECEIVED DATE: 07/27/2007 LEGAL DEADLINE: None
It’s always fascinating to see what peoples’ perceptions of value are. I suspect that if you posed the question of the value of copyrights, you might see these trends reversed.
In some ways, I see this as a challenge for patent reform. Everyone is talking about reigning in “patent abuse”. No one is talking about making patents inherently more valuable. That’s a reform worth fighting for.
Is there some way, for example, to change the fundamental nature of patents so that they would be of more value to the software community?
Open Source provides an interesting example. I would argue (actually, I have argued, see link to bakosenterprises.com) that Open Source does a much better job than patents in terms of encouraging timely and useful disclosure of inventions in the field of software. Disclosure is instantaneous and world wide with open source. Compare that to the 18 month delay of patents. Disclosure is functional source code with annotations. You can download it and run it. Compare that to flow charts written on 8 ½ “x 11” sheets of paper.
Patents are still essentially based on 19th century technology and they are failing the needs of the software community. Perhaps it’s time for an upgrade.
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