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The Law of Unintended Consequences: Patents
An anonymous reader writes "Fortune has an
interesting article about the relationship between patent law and innovation. It compares the biotech industry with the computer industry and discusses the effects of the Bayh-Dole amdendment, which has allowed universities to make a lot of cash. But in the process innovation and scientific collaboration seem to have been stifled."
Nothing will hurt innovation more than the Patent Reform Act of 2005.
Why? Because it sets limits on damages for willful and even fraudulent patent infringement so that large corporations will find patents easy to ignore.
Meanwhile, the limits are still big enough to remain a deterrant for small companies and independent inventors.
In other words, if you are a big corporations, you might be able to knowingly ignore patents while startups and inventors don't have the same benefit.
There are some good improvements in the Patent Reform Act of 2005 but this fundamental flaw is going to hurt innovation by making the patent system benefit a small percentage of companies at everyone else's expense.
Please write to your representatives and respectfully ask them to fix the flaws before it becomes law.
Grease keeps systems working smoothly. Lawyers, money speculators, used car salesman, and a zillion other occupations are society's grease. In a frozen static society, you could get rid of them once you had polished the system to the nth degree. But in a dynamic society, these greasers keep the various diverse parts all working together relatively smoothly.
But too much grease in a gearbox bogs it down. That's what has happened with intellectual property in general. Those idiots in Washington listened to their corporate sponsors and believed what they said about the more the merrier.
At some point, hopefully sooner rather than later, business and politicians will notice what the true innovators and researchers have long since learned the hard way, and cut back on the flow of grease. In the meantime, the rest of us are stuck with completely counterpdocutive IP legal wrangling getting in our way. It may take a long time to notice the drop in innovation and productivity, but I sure hope not.
Infuriate left and right
First off, mod parent up. That was a wonderfully cogent explanation.
However, I think there is still a case to be made that drug companies are getting something of a free ride at taxpayers' expense. Sure, they still have to invest money in bringing a drug to market, and paying for the trials to do that is expensive. But they do get a big break by the taxpayer footing the bill for much of the basic research. Perhaps drug companies that market medications based on publically funded research should have to pay back the cost of the research into the fund, so it can be used to pay for further research. That seems like a start at fair compensation for lowering their product development risk by several orders of magnitude.
Is human nature. Greed is a vice, not a virture, for a reason. Greed causes people to do evil and harmfull things and should not be confused with ambition. The ambitious man wants to build a business that is rich and successful, the greedy man wants to build an empire that will rule the economy with an iron fist and drain every last drop of wealth out of it that it can.
One of the things that never ceases to amaze me is how accurate Judao-Christian scripture is about teaching about human nature. We see the result of greed in the dotcom bubble burst and we see the natural lack of general altruism all around us from the greedy bastards like Andrew Fastow that tanked Enron to the people now trying to scam FEMA and Red Cross by claiming to be refugees. Human nature toward economics is greed, not altruism and not enlightened self-interest. That is why both pure Capitalism and essentially all forms of Socialism have utterly failed.
The problem I have with long patents is that they subject the economy to the control of lazy, greedy men and women. I and other fiction bloggers are proof that you don't need a long monopoly on your ideas to want to produce literature, music and discover new ideas. I have probably about 25-30 pages worth of just fiction material up for free for the other Christian sci-fi fans that read it, yet I don't really care right now about making money off of it. My muse is Christ, what is your muse?
Shorter monopolies will light a fire under the asses of these people and force them to create new things. I hate to break it to the laissez faire purists, but the security afforded by these long monopolies breeds **sloth**, not creativity. Too many seem to have forgotten that old saying: necessity is the mother of all invention.
Click here or a puppy gets stomped!
One fascinating phenomenon is how long it takes for the rough consensus of the "innovation community" (much of which is represented by many Slashdotters), that patents interfere with innovation, to begin to be reported in the "finance community" which depends on the innovators. That such reporting happens at all is really a testament to the relative freedom of the press - relative to all human history, that is. That such reporting will have little to no effect on patent interference with innovation is a testament to the relative slavery of politics, which controls the patent system, to corporations, which care solely about property, and not at all about "innovation" (so long as it's not necessary to profits). Perhaps relative to human history our politics is not so bad, but "not as bad as thousands of years of tyranny" isn't good enough.
--
make install -not war
I did RTFA. Like all Fortune articles, it's ten pages long, comprising four pages of anecdotes, two pages of buzz-clip quotes, four pages of unsupported supposition, and zero pages of logical reasoning. Fortune caters to the C?O set, so it eschews attention-span-draining critical analysis for talking points.
And yes, you DO pay twice (or X or multiple times X) when the company is granted a monopoly on a drug invented by someone else. The issue - and the point of the problem the article has with Bayh-Dole - is that those with patent monopolies tend NOT to license or cross-license their products - which raises the cost of those products to monopoly rates and limits the spread of the IP - which is supposed to be the point of patents in the first place.
Of course they don't license their products. If you spent $5 billion developing and testing a new drug, would you let your competitors buy the rights to sell their own versions? And if you did, how quickly do you think your company's investors - the people who paid money to help build your company - would sell their stocks and run?
Again, I'm not here to defend the pharmaceutical industry, which I view as undeniably corrupt. But their product strategy is simple reality, owing to the very simple fact that copying is easier than innovating. Isn't that why everyone (rightly) criticizes Microsoft - because it lets everyone else take the R&D risks, and then just copies their ideas? (Stacker/DoubleSpace, Netscape/IE, Eudora/Outlook, WordPerfect/Word, etc.)
- David Stein
Computer over. Virus = very yes.
There are most definitely other problems, many of which are overlooked during all the hand-wringing of "we don't have enough (US) scientists".
A) Over the past 5 years, there are a huge increase in federal funding for basic research. Unfortunately, most of the money went to fund a few large-scale projects run by well-investigators--we're talking about guys who are already at the peak of the funding heap and don't really have to worry about their salary and their entire labs' salary and jobs depending on whether the grant submission scores in the top 9% (probably be funded), or outside of the top 12-15% (probably not funded). What I'm saying, long-windedly, is that much of the recent increase in NIH money made a few large-scale, high-profile projects even larger, at the very same time that young invenstigators were seeing a precipituous drop in the percent of acceptance for the smaller new investigator grants.
b) 6 years of grad school, a doctorate, and then you find out that you really aren't paid any better than losers straight from Party U--and THEY probably get health care. Raise your hand if you're ready to quit yet, since your first grant is going to be rejected anyway.
c) it never fucking ends. You can be president of the school and a nobel prize winner and so important that they've decided to make you the first human cloned, and your grant STILL only has a 10-18% chance of being funded.
So, um, I can't remember how this pertains to the patent thing. The key to remember, however, is that the Pharmas tend not to do the most productive basic research, so many of the potential drugs arise from federally-funded work a universities, where people are pursuing utterly novel stuff. It's good for the rest of us to provide a mechanism for the school to approach a biotech and offer that novel product in exchange for any possible royalties.
The only bad patents are patents on genes or part of the genome. Those are fucking stupid and people should be beaten.
Assuming those numbers are NOT adjusted for inflation, then 12 billion 1980 dollars = about 29 billion in 2003 dollars. Growing 29 billion to 179 billion is an 8% increase per year.
I also wonder if this is a linear increase or if there was something sudden jump at some point. Taking two data points and trying to make some sort of comparison other then "this one is bigger" seems rather dumb.
In 1980 I was single, but in 2003 I had a family of four. That doesn't mean I was reproducing at a rate of 6.2% per year.
Can someone point to a data source that has amount spent on drugs each year? I searched the web, but so far I don't see any sources I would trust, mostly stories similar to this.
Hear hear! Grandparent post has clearly not read the article, the basic logic of which is as follows:
(1) Inventions are now patented which would not have been patented previously because researchers could not *automatically* get patents for federally-funded research. There was a complex process that wasn't invoked for relatively trivial or cumulative research.
(2) The change in law led to a cash grab, and a research culture in which universities encouraged staff to patent any new developments, even those growing out of collaborative research. This led to commercial barriers being formed (licensing) which inhibited research and industrial application.
(3) As a result of #2, the amount of research flowing back into the academic commons is being sharply reduced. This is also inhibiting research.
(4) As a result of #2 and #3, there is a visible and statistically significant reduction in the amount of innovation in the drug industry since 1980, measured in terms of the amount of significant new drugs being made available to the public, and those which are significant enough to merit fast-tracked approval.
So parent post is correct. You *do* pay twice, because you are paying licenses to use technology which was never previously patented because it grew out of the public domain and so there were greater barriers to patenting it because a bureaucratic approval process was required.
The argument is that the law made it possible to commercialize things which were not commonly commercialized before.
I'm surprised the parent was modded +5 insightful, since I'm not sure the poster actually took the time to read the article. Anyhow...
Technically, the Bayh-Dole law that the article talks about doesn't really say too much about companies being able/unable to patent the results of research that's been privately funded.
Even prior to the law, if you want to spend your money on research, you of course had the rights to patent the results. However, Bayh-Dole made it so that your company could spend tax-payer(read 'our') money to do research and development and then still be assured of your company owning the resulting intellectual property. So, the whole thing really seems like a big corporate well fair racket, whereby companies have been essentially gifted valuable IP by the American tax-payers.
Maybe the NIH or NSF should start acting a little bit like a VC firm in these cases. That is, if companies and/or universities want to profit by patenting the results of publicly funded research, then maybe the funding federal agency should get a proportion of the proceeds. That money could then be funded into other new and interesting research projects.
Amendments could still be useful. If the data suggested by the article is true, then they've identified a problem, and a possible solution that didn't work.
In today's terms you could say the problem is trying to help the US GOV to better leverage it's patent portfolio. We have the technology now to handle so much more information that it should be possible to amend the law to say that the US does own patents on research it funds, then it could have an aution of patent rights. The whole problem was businesses were hesitent to create prodcuts without patent protection.
The current system instead GIVES AWAY ALL PATENTS that were previously owned by the governemtn and says we'll pay you to do the work, if you discover something good for you, keep the patent and make your millions. Imagine instead if the government kept the patent ownership but auctioned off potentially profitable patents for AT LEAST the cost of the funding, and split part of the profit with the scientists. Extermely useful or critical patents could be kept instead of being sold off if deemed necessary.
Suddenly scientists are back doing science, businesses get ownership of already completed research with patent protection, scientists get a nice bonus check every once in a while, and the fed actually makes money on scientific research getting potential profit from the sale of the patent instead of sitting on the patents rights until they expire.
Instead you create a new feedback loop where investing in science generates new discoveries that can be sold to businesses for at least the cost of the discoveries and you could turn that money into more funding for schools and more discoveries.
Then maybe we could move away from the current USPTO cash cow that creates such worthless patents lately.
For a million, you better have the commercial side locked up before you risk it.
I disagree. For a million, or $10M or whatever, you better have the equivalent amount of money locked up before you risk it. But you do not need to have a guarantee of patent-protected commercial exploitability, or even patent-protected profitability in order to acquire that funding. Because of the environment you've been exposed to, that's what you see as the primary way to do business, but there are alternatives.
When information is power, privacy is freedom.
The main idea behind patents was that companies don't hold the ideas secret so that other can build further inventions upon them. If you admit that companies don't licence their inventions to others than it means that you agree that patents dont support their reason d'etre. Perhaps it is not that all patents are wrong, perhaps we only should change the law so that companies can profit from licencing patents more than from keeping them for themselves.
This is all about the spirit of free enterprise. We need research and development in order to progress as a society, but like all good things R&D involves time and resources and both thoses things cost money.
Where does that money come from?
Democrats/Librals believe that if the people pay for it, the people own it the benefit to this is that scientists are free to access the real pay dirt - information.
Republicans/Red-Necks believe that a grant is just that, a gift of money and that scientists should be free to profit from their innovation - the benefit of this is that you attract brighter minds and the industry can run itself relieving the tax burden of a constant stream of grants.
The question really is what is more important, a free market or a freedom of information?
Thats not an easy question to answer. People would say that Russia was a perfect example of why the Republicans are right. Others might say that America is a perfect example of why the Democrats are right. I say the truth is that both sides have fudged the system to a point where neither can be right.
I would have more sympathy for big R&D companies if I thought for one second that they had stopped asking for research grants or tax cuts to support their work. I would have more sympathy for big R&D companies if they could be trusted to return their products back into the public domain where it belongs. I would have more sympathy for R&D companies if they could be trusted to act with compassion where the bottom line must be second to the saving of lives and removal of people from absolute poverty. The one thing these companies can be trusted to do is protect their investors money, but thats about the only thing they are obligated to do by law.
Scared of flying, pointy things snce 1979!
There is so much money in pharma, that everyone, at every level of the economy, from the FDA, to lobbyists, to insurance companies, to advertisers, to sharks, to doctors, to resorts hosting boondoggles is in on the act. Of course it's going to cost 5 billion.
Welcome to the scam.
Oh, and the actual product does about as much as Dr. Foobar's Miracle Cure-All from the early 1900's? You can't expect anything costing that much to be worthwhile, can you?
Get thee glass eyes, and, like a scurvy politician, seem to see things thou dost not.--King Lear
If you think that developing biotech drugs in our modern society, with the current amount of litigation, clinical trials, reagents, and production costs is cheap, then you really are quite ignorant of how biotech research is conducted, and how biotech drugs are produced. It is very likely that drug (particularly biotech where patents aren't as important) companies will be able to stay in business if IP protections were removed, but they would shrink to a fraction of their current size, and the pace of research would slow drastically. If you took the time to look at what is going through Phas II and III clinical trials in the US (even just in the biotech industry) you would see that there are a LOT of potentially very powerful drugs about to come out. The pace of research has not slowed, the approvals process certainly has though.
"... is actually a fundamental problem built into all IP law:"
Actually, the even more fundamental problem is the assumption that a monopoly is an appropriate means to grant a return on investment.
The IP monopolies have many consequences; they have the same effect as taxes on specific products, slowing the economy, they create a disincentive for the adoption of newer technology, the create a disincentive to combine and join different research, they create a strong risk and roi based incentive to waste money on marketing instead of R&D, thus increasing economic waste in society and diverting money from wealth creating activities. They increase costs for the consumers, making the citizens globally less competetive, they increase costs for companies, making them globally less competetive, they increase costs for the state, making it less competetive, etc.
The larger the part of the economy that consists of monopoly powered industries, the more apparent the damage will become, leading to exactly the kind of consequences one can expect from the history of other monopoly-heavy economies.
You're just wrong.
because no company was willing to risk the capital to commercialize them without owning title"
If it was IMPOSSIBLE for ANYONE to "own title", the companies would not be at a disadvantage. It's only because titles CAN BE OWNED,that the market is unfair and unfree.
This is discussed at http://libertariannation.org/a/f31l1.html#4:
In his autobiography, Herbert Spencer tells a story that is supposed to illustrate the need for intellectual property rights. Spencer had invented a new kind of hospital bed. Out of philanthropic motives, he decided to make his invention a gift to mankind rather than claiming a patent on it. To his dismay, this generous plan backfired: no company was willing to manufacture the bed, because in the absence of a guaranteed monopoly they found it too risky to invest money in any product that might be undercut by competition. Doesn't this show the need for patent laws?
I don't think so. To begin with, Spencer's case seems overstated. After all, companies are constantly producing items (beds, chairs, etc.) to which no one holds any exclusive patent. But never mind; let's grant Spencer's story without quibbling. What does it prove?
Recall that the companies who rejected Spencer's bed in favor of other uses for their capital were choosing between producing a commodity in which they would have a monopoly and producing a commodity in which they would not have a monopoly. Faced with that choice, they went for the patented commodity as the less risky option (especially in light of the fact that they had to compete with other companies likewise holding monopolies). So the existence of patent laws, like any other form of protectionist legislation, gave the patented commodity an unfair competitive advantage against its unpatented rival. The situation Spencer describes, then, is simply an artifact of the patent laws themselves! In a society without patent laws, Spencer's philanthropic bed would have been at no disadvantage in comparison with other products.
ha! lessee, we gave the keys to our minds and souls to corporate America, and now we're surprised that a collection of "individuals" possessing all the qualities of a paranoid schizophreniac with a single-minded focus on profit had the wherewithall to screw us over.
will wonders never cease.
Seriously. Do you do any kind of research before you make such ridiculous statements?
Do you know anything about the path between licensing a drug concept from a university, and actually putting a drug on the market? In part, it involves:
By necessity, this is a lengthy, complex, costly process. If you shortcut the process, you get, you know, thalidomide.
I detest patents because they don't promote innovation. Cars became popular because a Mr Henry Ford broke the car patent and mass produced a car!
Your example is not an example of a "patent-free world." It's an example of a deceptive patent system that lures a company to develop a product by a promise of monopoly that turns out to be illusory. And you're right - that works very well... until those developer companies realize that it's consistently illusory, and stop developing new products. Then you're screwed.
I like capitalism, but bio-tech is a vulture preying on the lives of humans. They say, "Oh you want to live? Well here is a drug, but guess what it is going to cost you!"
For most Americans, the answer is: very little. Usually it's like a $2 co-pay, thanks to the miracles of health insurance and Medicare prescription drug benefits.
Of course, it's nowhere near this cheap. It's just that the costs are defrayed through other mechanisms. Those mechanisms absolutely need an overhaul - they're buckling under the weight of pharmaceutical company markups and other sleaziness - and we need to extend them to all Americans. But the drama you see in the sitution just doesn't exist for most Americans.
In other words you have proved the argument that by copying we get a vibrant industry! You get real innovation!
That's a more plausible argument in software, where the development costs are essentially nil. It's less persuasive in biotech because of the large initial costs.
In fact, the field of pharmaceuticals proves your suggestion catastrophically wrong. Do you have any idea how many great ideas for drug targets are unpatented, unexploited, and ready to be tried? Many thousands - probably closer to a million. We have hundreds of ideas for drugs that would probably cure every disease on the planet. They're not patentable, so they can be freely used!
In light of this fact, do smaller drug companies choose to develop new drugs based on them? No. They create knockoffs of Viagra and
Computer over. Virus = very yes.