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Patents Vs Innovation - the Tabarrok Curve 210

Posted by Unknown Lamer
from the wrong-side dept.
New submitter Optimal Cynic writes "Slashdot likes to argue about intellectual property and patents, and it's clear that both extremes are undesirable. Dr Alex Tabarrok has tackled the question — what is the right level of patent protection? His answer is the Tabarrok Curve, which applies the Laffer Curve methodology to innovation."
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Patents Vs Innovation - the Tabarrok Curve

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  • Tabarrok seems to tacitly assume that innovation can be regulated via legislation. It seems to me that this non-proven, basic assumption has been proven wrong more than once, e.g. during the few years preceding the internet bubble of the '90s. The tip of the curve, then and there, lay completely to the left. ( Where IMHO it should be, but I am trying to separate facts from discussion from personal opinion here. )
    • by stenvar (2789879) on Tuesday June 25, 2013 @05:31AM (#44098875)

      Tabarrok seems to tacitly assume that innovation can be regulated via legislation.

      Where in the world do you get that idea from?

      He just says that too much patent protection has a cost that, at some point, must outweigh any benefits, so the optimal level of patent protection is not the maximum one. What the optimum level is, he doesn't know

      If you're of the school that believes that patent protection is always bad, then his argument isn't meant for you. He isn't arguing for more patent protection with people like you, he is arguing against more patent protection with people who say "since some patent protection is good, more must be better".

      • Where in the world do you get that idea from?

        From TFA, as in these lines:

        So, we’ve constructed the patent system: people have a 17 year exclusive right to such public goods. That is, we’ve made them excludable by law

        I am not necessarily of the "school that believes that patent protection is always bad". I am of the school that believes that patent protection is, sometimes, a necessary evil, and bad at all other times.

        • by stenvar (2789879)

          And how does that translate into "regulation of innovation"???

          • by narcc (412956) on Tuesday June 25, 2013 @07:08AM (#44099097) Journal

            To be clear, he said "Tabarrok seems to tacitly assume that innovation can be regulated via legislation". Which, to answer your question, he supported by quoting the article: "So, we’ve constructed the patent system: people have a 17 year exclusive right to such public goods. That is, we’ve made them excludable by law".

            I honestly don't see how you could possibly still be confused, having read both the article and the parent's posts.

            • by jythie (914043)
              I think they are disagreeing on the specific phrasing of 'regulating innovation'. Both are agreeing that the piece talks about regulation that has an impact on innovation, but not on if that means innovation is being regulated.
          • by khallow (566160)

            And how does that translate into "regulation of innovation"???

            How is this not fairly obvious? Innovation is the process of turning ideas into viable economic products. Patents provide monopoly access to certain ideas for a period of time. Hence, they are regulation on access to ideas (a key issue in the innovation process) and thus, regulation of innovation.

            • by Weedlekin (836313)

              It is not obvious because turning ideas into viable economic products is an aspect of the totality of innovation, not the entirety of it. So stenvar's question was completely correct, because while it is true that patents affect some types of innovation, they do not affect all of them, so they are not a regulation of innovation.

        • by Savage-Rabbit (308260) on Tuesday June 25, 2013 @07:44AM (#44099203)

          Tabarrok seems to tacitly assume that innovation can be regulated via legislation. It seems to me that this non-proven, basic assumption has been proven wrong more than once, e.g. during the few years preceding the internet bubble of the '90s. The tip of the curve, then and there, lay completely to the left. ( Where IMHO it should be, but I am trying to separate facts from discussion from personal opinion here. )

          Where in the world do you get that idea from?

          From TFA, as in these lines:

          So, we’ve constructed the patent system: people have a 17 year exclusive right to such public goods. That is, we’ve made them excludable by law

          I am not necessarily of the "school that believes that patent protection is always bad". I am of the school that believes that patent protection is, sometimes, a necessary evil, and bad at all other times.

          For the benefit of those who did not read TFA: What he is saying is that patent protection can boost innovation but if that protection is too great the patents get used as a weapon to bash competitors with the result that there is a net drop in innovation. Furthermore he is arguing that we have passed well beyond the point where patent protection is a demotivating influence on innovation so in that sense you actually agree with him. One only has to look at his curve to see this:

          http://b-i.forbesimg.com/timworstall/files/2013/06/tabarrokcurve.png [forbesimg.com]

          In that graph, if you move too far to the left and you have no patent protection at all which stifles innovation, move too far to the right and have excessive patent protection also stifles innovation, stay somewhere in the middle and patent protection will actually boost innovation above the two extremes. You seem to be mostly arguing for the greatest innovation being achieved at a point that is very close to the left hand extreme. I'm not saying he is right in every detail but the basic idea of applying the Laffer tax revenue curve [wikipedia.org] to innovation seems sound. Too much red tape around patents is just as detrimental to innovation as overtaxation is to state revenue. Likewise too little patent protection is just as likely to stifle innovation as excessive tax cuts are likely to screw up state finances.

          As regards the legal system he eventually suggests that it may not be the patent system that is at fault so much as the legal system it self:

          Knowledge is a public good and thus in a pure free market we think that too little of it will be produced. Too strong a protection and again too little will be produced.

          These are the sorts of thorny questions that we instituted government to deal with for us. Hands up everyone who thinks that our current politicians are going to get this necessary balance right? Quite: it might be that it’s not so much the patent system which is not fit for purpose as the legislative.

          Basically he is hypothesising here that we can move ourselves further to the left on his Tabarrok curve mostly (though presumably not exclusively) by legal reform rather than patent reform. I am no lawyer but it seems pretty obvious to me that fixing the legal system such that patent trolling by two bit law firms in East Texas and general patent warfare by major corporations were made significantly harder than it currently is, might be a good idea. In fact the whole issue of anti-competitive and SLAPP lawsuits and the power they give people with lots of money to spend to extort less wealthy people/organisations/companies is something that needs urgent fixing.

          • His hypothesis makes sense but it only looks at the time constraints. I assume he did this because it is the easiest thing to legislate and not have to deal with constitutional matters in the US, since the constitution directs the government "To promote the Progress of Science and useful Arts, by securing for limited Times to Authors and Inventors the exclusive Right to their respective Writings and Discoveries;"

            It would be nice if we could shorten the patent life to 15 years, limit the exclusive use of a

            • by cpt kangarooski (3773) on Tuesday June 25, 2013 @09:23AM (#44099789) Homepage

              His hypothesis makes sense but it only looks at the time constraints. I assume he did this because it is the easiest thing to legislate and not have to deal with constitutional matters in the US, since the constitution directs the government "To promote the Progress of Science and useful Arts, by securing for limited Times to Authors and Inventors the exclusive Right to their respective Writings and Discoveries;"

              No, the Constitution only empowers the federal government to grant patents and copyrights. Article I, section 8 does not direct it to do so, however, any more than it directs the government to grant letters of marque and reprisal to privateers, which is another power it holds. Making the US a patent free zone mitt be a bad idea, but it would be perfectly constitutional.

          • by devent (1627873) on Tuesday June 25, 2013 @09:24AM (#44099805) Homepage

            It's just his opinion. And his curve is a straw man that he puts out of his ass.
            Where is the evidence that some patent protection is good? Ah right there is none. Everybody just assumes that some patent protection is good for innovation. That is just like creationism or like any other theology.

            There is evidence that more patent protection is bad. See software patents. But where is the evidence for the other side, i.e. no patent protection as bad?

            Don't come to me with some mind experiments like "But without patent protection where is the incentive to innovate". People have innovate for freaking 50,000 years. Our patent system, or our capitalist system is just about 250 years old.

            I repeat. There is no evidence that any patent protection increases innovation.

            There is plenty of evidence that too strong patent protection hampers innovation. See software patents, patents on DNA, business patents, and so on.

            There is also evidence that no patent protection actually increases innovation (I posted already here but I post again)
            The only real empirical study that I know of is The patent game [slashdot.org].
            See http://www.youtube.com/watch?v=q1Pi4w8ddA8 [youtube.com]
            And they come with quite surprising conclusions.

            "pure common system" means no patent protection.

            1. patents increase innovations?

            Average unique innovations is lower in the "pure patent system", and is higher in the "pure common system"
            Productivity, aka economic activity, the "pure common system" is almost double the "pure patent system"
            Per capita wealth, the total amount of dollars generated in the system: "pure common system" is almost 4 times that of the "pure patent system".

            Conclusion: "Despite received wisdom, commons spur innovation better then do patents"

            • by tlhIngan (30335) <slashdot AT worf DOT net> on Tuesday June 25, 2013 @11:36AM (#44101085)

              It's just his opinion. And his curve is a straw man that he puts out of his ass.
              Where is the evidence that some patent protection is good? Ah right there is none. Everybody just assumes that some patent protection is good for innovation. That is just like creationism or like any other theology.

              There is evidence that more patent protection is bad. See software patents. But where is the evidence for the other side, i.e. no patent protection as bad?

              You can apply history to it - patents have been around only a few hundred years - dating back to just before America.

              You could also try to frame it in context of say IP protection. Is copyright good? Bad? Too much? Too little?

              Will open-source succeed without copyright? Would you write a program to scratch your itch if it wasn't under copyright protection? Realize that the latter means it's effectively modified-BSD licensed.

              Software is a tricky thing because until its invention, patents were used for "things" and copyright was used for "creative works" and neither the twain shall meet. After all, writing a book doesn't get patent protection (other than design patents, if the book has certain ornamental features). The work itself doesn't have utility other than being entertaining (hopefully), but that's it. Likewise, the printing press used to make the book isn't copyrightable - there's no "expression" going on other than maybe a few decorative items to give it better form.

              Software though, is both. It can be a creative work meant to be enjoyed, or a part of a machine. In effect, it's forcefully combining two areas of IP protection that were never intended to be combined in the first place. And both are being twisted to accommodate this ill-fitting piece.

              Perhaps what needs to happen is sitting down and realizing this - that software should not be patented nor copyrighted, but covered under its own IP protection category because of its unique nature. After all, if you get rid of software patents, you're saying if I build a machine out of electromechanical parts, I can patent that, but if I replace some of those electromechanical parts with software to make it more flexible, simpler and more reliable, it's suddenly unpatentable? (And software can be hardware, too, thanks to modern VLSI RTL).

              It's probably time to stop forcing software into copyright and patents and realize it's got its own attributes from both, and crafting IP protection appropriate for this reality than bending existing protections about.

        • by Muros (1167213)

          Where in the world do you get that idea from?

          From TFA, as in these lines:

          So, we’ve constructed the patent system: people have a 17 year exclusive right to such public goods. That is, we’ve made them excludable by law

          That doesn't tell us anything about what he thinks though. That is merely a comment by him about what we, as a society, have put in place.

      • by Cenan (1892902)

        If you're of the school that believes that patent protection is always bad, then his argument isn't meant for you.

        Him having a different audience in mind does not exclude "us" from using his ill thought out arguments against him. Using the curve he presents, we could easily argue that zero strength patents yield the same amount of innovation as we see today (draw a horizontal line from the "we are here" point to the Y axis), but with the added benefit of having no patent trolls and litigation that produce nothing of value to society. If we factor in the side industry of patent litigation (and assume that patent litigat

        • by jalopezp (2622345)

          Using the curve he presents, we could easily argue that zero strength patents yield the same amount of innovation as we see today (draw a horizontal line from the "we are here" point to the Y axis),

          ooh, yeah... no. A drawing like that means he thinks the curve is concave with a local maximum above zero. And 'we are here' means he thinks we're to the right of the maximum. Talking about actual levels of innovation is way beyond his argument.

          If we factor in the side industry of patent litigation...

          This is precisely what he argues is the cost of patent law. It's already taken into account.

          It also assumes that there is only one point on the curve with a global maximum value for innovation, yet is see no argument from him as to why that would be the case.

          It is in fact there. Note a couple of things, both said in the article:

          1. (1) Knowledge (innovations, invention) is a public good [wikipedia.org] - it is non-exclusive and non-subtractable-, s
    • by Camael (1048726) on Tuesday June 25, 2013 @06:13AM (#44098973)

      An even more fundamental assumption he makes is that intellectual property legislation is desirable because it encourages innovation. Why should that be a given?

      Take for example, the very same example cited in TFA, Sir Issac Newton and his mathematical principles. Isaac Newton composed Principia Mathematica during 1685 and 1686, and it was published in a first edition on July 5, 1687 [wikipedia.org]. Copyright did not exist at that time; the very first copyright law, the Statute of Anne was enacted only 23 years later in 1710 [wikipedia.org].

      The point I am trying to make is that people will innovate and create, even without the protection of intellectual property laws.

      On a separate point, if the whole rationale for intellectual property legislation is to promote innovation, shouldn't the focus be on protecting the rights of the actual person doing the creating, as opposed to whichever faceless entity who may own the contractual right to make use of the invention? Start by making intellectual property rights vest only in the creator, and make it non transferrable. This will force commercial entities to grant a fair share of the profits to the real innovators instead of the giving an unearned bonus to the patent troll who own a large number of the patents today. The way it is structured today, it is very clear that intellectual property legislation only benefits those with the capital to buy over the rights and not the creators themselves.

      • by mwvdlee (775178)

        The point I am trying to make is that people will innovate and create, even without the protection of intellectual property laws.

        Which is why has graph, on the left edge where no intellectual property laws exists, still has a level of innovation.
        The graph only states some amount of legislation facilitates the financial incentives and the assumption that financial incentives encourage innovation in general.
        It also states that too much legislation actually has a negative net effect on innovation.
        His graph seems to make no attempt at actually pinpointing any problems, it merely tries to explain that there is some undefined amount of leg

        • by KiloByte (825081)

          Except that "protection", while it rewards the person in question, greatly harms dissemination of the idea. Thus, the first question to answer is whether that curve isn't strictly monotonic, which I think it is.

          • Your claim is refuted in TFA, citing Stradivarius. The idea is that low or lacking patent protection encourages "secret science", wherein the inventor estimates a better financial return if he never publicizes his advance. Patents, except the few that are secret for military purposes, are public record and easily available.
            • So some way to encourage disclosure could be beneficial. That way does NOT have to be exclusivity, monopoly. Certainly, no one should have the "right" to tell others that they can't use some idea at all. But not only do we hand out monopolies, we let monopoly holders refuse to deal, denying everyone else. They don't have to license at any price at all. One thing this does is allow obsolete and inefficient industries to continue. They acquire the patents to better methods and bury them, so that everyon

          • by ceoyoyo (59147)

            It doesn't. Protection encourages dissemination. With no intellectual property protection, many innovations and creations are kept as trade secrets. For every Newton you can cite, there were thousands of minstrels who didn't share their songs and blacksmiths, bakers, cobblers, stone masons, swordsmiths, etc. who didn't share their secrets. You used to have to be initiated into a guild to learn any of those things. Some of those guilds became extremely powerful because of it.

            Overbearing protection disco

        • by devent (1627873)

          His graph he gets out of his ass. There is no evidence that backs up the graph. I can draw a nice graph and then conclude anything.
          Even the Laffer Curve is a non-model.

          From Wikipedia:
          "[...] the curve need not be single peaked nor symmetrical at 50%". And in fact the peak range from 32% to 70%.
          So first, it can have multiple maxima, and second, studies shows that the peak range from 32% to 70%.

      • by khallow (566160)

        On a separate point, if the whole rationale for intellectual property legislation is to promote innovation, shouldn't the focus be on protecting the rights of the actual person doing the creating, as opposed to whichever faceless entity who may own the contractual right to make use of the invention?

        No. because by contract the faceless entity is the one actually doing the creating. All this talk of "real innovators" ignores that they need various things such as support staff, infrastructure, and capital which are provided by the "faceless entity" in exchange for that contractual right. Without such a transferable right, then one also ends up with unresolvable issues of ownership in cases where there is no one person who is responsible for all of the creating.

        Second, it should be painfully obvious to

      • by greg1104 (461138)

        Start by making intellectual property rights vest only in the creator, and make it non transferrable. This will force commercial entities to grant a fair share of the profits to the real innovators instead of the giving an unearned bonus to the patent troll who own a large number of the patents today.

        Dream on. What would actually happen is a combination of two things. One, employees doing research for large companies will get paid less, on the theory that now they get directly rewarded for the things they invent. It will work just like tipping does for food service people: their base income will drop because this expected (but not guaranteed) revenue would get lumped in as part of their compensation. Of course researchers will actually make nothing that way in the average case, due to the large cos

      • by gtall (79522)

        Using Newton in this day and age is a bit disingenuous. His output was merely some well-thought out thoughts. Try coming up with the next drug to cure some current disease this way. You won't get past, gee, wouldn't it be neat if the disease worked like this, then I'd have a cure. It takes 100s of millions of dollars to come up with a single drug that hits the market. What's never shown are all the false starts and compounds that failed. And even then the FDA can send you back to the drawing board. And if y

        • Using Newton in this day and age is a bit disingenuous. His output was merely some well-thought out thoughts.

          Yeah, I don't know what the big deal was about Sir Isaac. All that fame over a few intelligent musings. Big deal, we probably get 100 of those per day on Slashdot.

      • An even more fundamental assumption he makes is that intellectual property legislation is desirable because it encourages innovation. Why should that be a given?

        There's a book about it [amazon.com]. If you're going to be contrarian, you should at least familiarize yourself with the standard ideas, and the evidence that supports them. The evidence that copyright encourages writers is so huge that if you don't think so, you probably haven't looked. Patents encourage inventors as well; the only question is whether they deter other inventors more (which is the topic of this story).

    • No via legislation, but via money. That goes for the innovation that is a result from a controlled R&D process.

      It does NOT effect the innovation that comes from pure serendipity, and that's why that curve neither starts nor ends at zero. But note that the right minimum is lower than the left one. Both ends describe a point where no money is invested anymnore, either because there is no money to make with inventions or inventing is to expensive because an invention would contain and base on an existing,

    • by DragonTHC (208439)

      When Kennedy said he wanted a man on the moon, were there not laws passed to facilitate the budget required?

      That single goal inspired a generation of scientists and the most innovative period in the history of the world.

    • by hedwards (940851)

      Indeed, I'd be surprised if there were much validity to this. Especially seeing as the Laffer Curve is a complete joke. It's never been particularly well supported by evidence, and runs completely counter to actual historical data. At least in the US the times when the economy was doing best, were times when the Laffer curve would predict that the economy would be in the tank due to excessive taxation on the rich.

  • by l3v1 (787564) on Tuesday June 25, 2013 @05:15AM (#44098841)
    Well, the first thing that came to mind when seeing it was this: http://xkcd.com/323/ [xkcd.com] :D
  • Assurance contracts (Score:5, Informative)

    by IamTheRealMike (537420) <mike@plan99.net> on Tuesday June 25, 2013 @05:19AM (#44098857) Homepage

    Tabarrok is also known for his work on how to fund public goods via non-patent means, in particular his dominant assurance contract [wikipedia.org] form which is a variant of what Kickstarter does.

  • by ciaran_o_riordan (662132) on Tuesday June 25, 2013 @05:24AM (#44098863) Homepage

    For software, they don't help innovation, and promoting innovation can't be the only goal. Lots of non-innovative software development is really useful.

    * http://en.swpat.org/wiki/Studies_on_economics_and_innovation [swpat.org]
    * http://en.swpat.org/wiki/More_than_innovation [swpat.org]

    And it's really crucial that patents be analysed per-domain. The don't affect pharma and the auto industry the same, and they don't affect software the same either. The distribution models are different, as is the profile of who mass produces each thing, as is the complexity (number of ideas) that get added to a product within one lifecycle, and the length of product lifecycles...

    * http://en.swpat.org/wiki/Why_software_is_different [swpat.org]

    • by ikaruga (2725453) on Tuesday June 25, 2013 @05:58AM (#44098941)
      Another nice feature would be protecting only patents actually used in products made by the inventor or its partners, in order to take out those so called patent trolls that don't produce anything. If in the future the inventor actually decides to use the patent in an actual product and there is someone already using it there could be some sort of predetermined fee. Obviously I'm oversimplifying the huge problem, but something must be done about those parasites.
      • by jythie (914043)
        The tricky part there is what counts as a 'partner' and how you cover the trolls but not, say, universities who do not produce products but do depend on patents to fund their research.
      • So if I invent a new type of car engine I have to set up my own factory to make it, even though I know nothing about running a factory, don't have an established network of suppliers[1], don't have the finances to build one, and don't have anywhere to put it?

        Wouldn't it just be better all round if I sell or license the design to Ford or Mercedes? That way they can build it their existing plants with their existing expertise, and I can go back to my shed and invent a wi-fi sewing machine[2] or something.

        [1]

      • by Rockoon (1252108)

        Another nice feature would be protecting only patents actually used in products made by the inventor or its partners

        How about going back to only allowing patents on manufacturing processes, rather than fucking products?

        This is real simple folks. The government providers the service of patent protection in exchange for the publication of knowledge. The extremely simple idea being that trade secrets are bad for innovation, that the public benefits when there are fewer trade secrets.

        Products are not and can not be trade secrets so there is, in fact, absolutely zero benefit to the public for patents on products. Why sho

    • by KiloByte (825081)

      The reason their analysis excludes pharma is purely political: the big pharma lobby has such an immense power that anything they perceive as risk will be torpedoed. Having powerful enemies doesn't stop you from being right, though, merely might make holding your cards prudent.

      • by itsdapead (734413)

        The reason their analysis excludes pharma is purely political: the big pharma lobby has such an immense power that anything they perceive as risk will be torpedoed.

        Probably true.

        The silly thing is, Pharma is the easiest one to fix. If a country doesn't require new drugs to be licensed/approved based on (expensively gathered) evidence of their efficacy and safety then, well, they should. A fixed term exclusive right to manufacture could easily be built into the licensing process.

    • by ceoyoyo (59147)

      I disagree. It's crucial that patents NOT be analysed per domain. It's crucial that that basic requirements for a patent be applied consistently and as objectively as possible.

      The problem in the software domain is that most "innovation" is trivially easy and stupid things get patented. If you applied the non-obvious requirement consistently you'd find that only a few software patents, the ones that are actually deserving, would be allowed. You don't have an idea for a new drug in the shower and run out

  • Since when an arbitrary curve with extremum gets a name each time it applies to a phenomenon.

    • by SirGarlon (845873)
      Tarrabok has provided no evidence that the curve applies to this (or any) phenomenon. He might as well have done a parabola or freaking circle for that matter.
    • by ceoyoyo (59147)

      Beware things that people name after themselves.

    • by timeOday (582209)
      Too Much is too much, and Too Little is too little, whereas somewhere in between (although I can't say where) is Just Right. I've discovered this amazing formula applies not only to taxes, but one or two other things in life. Don't you see the brilliance?
  • The idea of an optimum patent strength is like kicking in an open door. It's pretty obvious that somewhere between no patents at all and long-lasting patents there is an optimum in terms of societal benefits.

    What's lacking unfortunately is the hard work of quantifying the societal benefits as a function on e.g. patent duration. Which incidentally is the 99% perspiration to accompany the 1% inspiration (which all of us probably has anyway).

    So Tabarrok's curve is a typical no-brainer (in both senses) as f

    • by jkflying (2190798)

      people that argue that patents don't contribute at all to spurring innovation (something that anyone who has ever pitched his idea to a VC with the objective of funding a startup will reject out of hand)

      I think that's exactly the point those people miss. Sure, you can come up with as much innovation as you want without any patent protections. But, if you ever want anybody to pay for your innovation to become more than just figments of your imagination, they need to know that they will be getting their money back.

      • by Qzukk (229616)

        So how did computing get as big as it did prior to the 1998 State Street Bank decision?

        • by ceoyoyo (59147)

          WWII.

          Not that the success of early computing has much to do with the patentability of business ideas. Computers consist of nice, concrete, physical components, which were patented up the ying yang.

      • by ThosLives (686517)

        What about getting your potential customers to pay for the innovation itself, rather than some third-party VC group that generally only wants to pay for the right to earn profits off the innovation?

        I think Kickstarter and the publicly-commissioned model could make the old funding models of VCs and banks and the like obsolete (for a large swath of products, at least). This reduces the middle-man effect, and ensures that the primary beneficiaries of innovation are the innovators and the consumers of the inno

        • by jkflying (2190798)

          Absolutely, this is an option that the Internet (and high-speed communication in general) has given us which wasn't available before. But even still, these kickstarted companies will have to charge much more to their initial customers if another company can swoop in and steal all their R&D the moment they have a successful product. The moment that happens the competitor will only have to pay incremental manufacturing costs, not the R&D which accumulated during the design process, and to be competiti

    • by trout007 (975317)

      There is nothing to stop a private non-disclosure agreement between you and the VC's before you pitch your idea.

      • by ceoyoyo (59147)

        That's not the issue. The VCs don't want to put money into something that isn't patentable, because they're not as likely to get their money back out again. If you don't have a patent and can't get one, that's bad. If you don't have a patent and might not be able to get one, that's almost as bad. If you've got a patent, clearly it's patentable, and that's good.

        Haven't you ever watched Dragon's Den / Shark Tank / Soul Sucking VC Rage II?

      • There is nothing to stop a private non-disclosure agreement between you and the VC's before you pitch your idea.

        And that would stop a third party coming along, making a knock-off of your invention, and pinching your customers (which are also the VCs') how, exactly?

    • by Kookus (653170)

      I think he was poking fun at innovation through naming the curve after himself even though it's just an application of the Laffer curve. See the parallels?

  • by fastest fascist (1086001) on Tuesday June 25, 2013 @06:47AM (#44099039)
    But the curve doesn't provide any answers! There's no method for deciding where on the curve we are at the moment, although the author seems to have arbitrarily decided on a point.
    • Worse than that: we're talking about things that can't be boiled down to two variables. At least the Laffer curve dealt with things that could easily be measured.

      This Tabarrok guy is a puffed-up idiot who likes making charts, because he thinks that's what smart people do. He has a long and prosperous career ahead of him.

    • by PhilHibbs (4537)

      And, where's the data? At least with laffer, there are some dots that you can kind of see could justify a curve if you close one eye and tilt your head. With this, it's just an arbitrary line and a cross. It is pure prejudice in the original definition of the term. I wish it were true, though, I really do, because it makes sense and would probably lead to better laws. But until I see some data, this is pure nonsense. And even with data, working out the direction of causality isn't easy.

  • There are natural patent monopolies that are rewarded to innovators in the market. If you are the first on the scene with a desirable product or service the consumers may reward you with monopoly prices. But as time goes on and other producers notice those outrageous profits it will lead others to enter that market and competition will reduce those profits to around the natural interest rate of the economy.

    The nice part about natural monopolies is that they adjust well to how great an innovation is. The mor

  • by Kirth (183) on Tuesday June 25, 2013 @07:36AM (#44099165) Homepage

    Well, patents might behave like that. Or they might not. Because there is actually NO data on why patents should foster innovation. People (and even scientists) just think they do, but any investigations so far turned up no positive correlation. So the verdict from 1851 still stands:

    Besides the caveats,
    by which one man attempts wrongly to appropriate to himself the bounty
    which the State gives for invention and which properly belongs to another,
    the granting patents “inflames cupidity,” excites fraud, stimulates men
    to run after schemes that may enable them to levy a tax on the public,
    begets disputes and quarrels betwixt inventors, provokes endless lawsuits,
    bestows rewards on the wrong persons, makes men ruin themselves for the
    sake of getting the privileges of a patent. Patents are like lotteries,
    in which there are a few prizes and a great many blanks. Comprehensive
    patents are taken out by some parties, for the purpose of stopping
    inventions, or appropriating the fruits of the inventions of others,
    &c. Such Consequences, more resembling the smuggling and fraud caused
    by an ill-advised tax than anything else, cause a strong suspicion. that
    the principle of the law from which such consequences flow cannot be just.
    (The Economist, 1851)

    • Because there is actually NO data on why patents should foster innovation.

      Well, actually there is. There's even a whole book on it. [amazon.com] There is absolutely no doubt that patents encourage inventors. The only question is whether they deter other inventors enough to reduce the overall level of invention.

  • Please stop assuming that economics is a physical science like physics. About the Laffer curve from Wikipedia:

    This is the curve as drawn by Arthur Laffer,[3] however, the curve need not be single peaked nor symmetrical at 50%.

    and further:

    The New Palgrave Dictionary of Economics reports that a comparison of academic studies yields a range of revenue maximizing rates that centers around 70%.[2] Economist Paul Pecorino presented a model in 1995 that predicted the peak of the Laffer curve occurred at tax rates around 65%.[12] A 1996 study by Y. Hsing of the United States economy between 1959 and 1991 placed the revenue-maximizing average federal tax rate between 32.67% and 35.21%.[13] A 1981 paper published in the Journal of Political Economy presented a model integrating empirical data that indicated that the point of maximum tax revenue in Sweden in the 1970s would have been 70%.[14] A recent paper by Trabandt and Uhlig of the NBER presented a model that predicted that the US and most European economies are on the left of the Laffer curve (in other words, that raising taxes would raise further revenue).[11]

    So what curve is the Laffer curve? It can have multiple maxima, it can be asymmetric, the peak can range between 32% and 70%. If physical science were based on such curves the Moon landing would miss the Moon and fly to the Sun, and probably miss the Sun and fly to Jupiter.

    Economics is a social science with a lot of psychology mixed in. The assumption that every individual in the economy

    • by trout007 (975317)

      Economics should be classified similar to Logic and Math. They are constructs of the human mind that are great tools to model the way the world works. But like any model you have to know the limitations.

      • by dargaud (518470)

        Economics should be classified similar to Logic and Math. They are constructs of the human mind that are great tools to model the way the world works. But like any model you have to know the limitations.

        Not really, because the knowledge of the 'rules' of economics changes their effect ('beating the system'). It should be more akin to quantum mechanics, with wavefunctions observing other wavefunctions.

      • Economics should be classified similar to Logic and Math.

        No. Economics is supposed to be a science, and hence valid only to the extent that it jibes w/ empirical data. Math is a whole different animal, since everything flows from pure reason applied to a set of self-consistent axioms (logic is a branch of math, the watered down rhetorical version of logic notwithstanding). There are no axioms in science. What are called first principles are basic and well demonstrated theories, but always subject to empirical invalidation.

        One of the biggest criticisms aimed at ma

    • > So what curve is the Laffer curve? It can have multiple maxima, it can be asymmetric, the peak can range between 32% and 70%

      Just recognition there there is a curve is a good starting point. The shape depends on a lot of factors in yet unknown ways which makes policy debates interesting.

      However the endpoints are known. One point is at zero taxes, which of course means no revenues. The other point is 100% taxes, which is what Genghis Khan experimented with when he razed conquered cities and exterminated

    • Most people who look at the Laffer curve don't think about it very deeply.

      For instance, it relates tax rate to government income, but many people act as if it relates tax rate to societal benefit.

      For another thing, it's clear that the curve will be different for different time spans and for how long in advance the rate is known. Consider Clinton's unconstitutional ex post facto income tax rate increase: by increasing taxes on money already earned, there was negligible possibility for people for people to ch

      • by Rockoon (1252108)

        For instance, it relates tax rate to government income, but many people act as if it relates tax rate to societal benefit.

        Don't forget the moral dilemma inherent in it.

        Now to start off with, I believe that the Laffer curve does apply in the best way that it can within the noisy system we call the economy.

        But suppose they could in fact figure out the Laffer curve to a great deal of confidence. Now then, is it moral for the government to use this knowledge to maximizing its revenue? Remember that the government does it via its monopoly on prison cells and men with guns.

        I believe that the only moral choice within tax polic

  • by Qzukk (229616) on Tuesday June 25, 2013 @07:46AM (#44099211) Journal

    1. Eliminate the Doctrine of Equivalents
    2. Especially with regards to "after-invented technology"

    What 1 means is that if you come up with a way to do the same thing, even if you do it a completely different way, they can still sue you in court and you get to spend a million dollars proving that not only did you not infringe on their patent, you came nowhere near infringing on their patent.

    What 2 means is that if someone invents something, and later someone else comes along and invents a better way to do something in the patent, it's still infringement because of fucked up court rulings that basically amount to "boo hoo the poor widdle inventors couldn't foresee this invention and shouldn't be penalized because they didn't think of it." Fuck that, if they wanted patent protection for it, they should have invented it themselves.

  • by Ihlosi (895663) on Tuesday June 25, 2013 @07:52AM (#44099239)
    Let's see:

    No patent protection: Everyone tries to keep their innovations secret. Innovations get lost because they're kept secret and are forgotten at some point. Inventors are kept from inventing things because it's hard to profit from their inventions, either because they're immediately copied or because of all the effort to keep them secret.

    Tons of patent protection: Great, invent something once and you and your descendants are set for life (just like copyright works today). Invention is stifled because inventors have no motivation to keep inventing after their first breakthrough - they're too busy throwing money out the window.

    So the sensible level of patent protection needs to be between those two extremes. Allow inventors to profit from the publication of their inventions, but keep the protection short enough to motivate an ongoing process of new inventions.

  • by Joe_Dragon (2206452) on Tuesday June 25, 2013 @08:09AM (#44099283)

    what about an public defender system for patents that can be used by innovations and company's who can't pay the costs of attorneys. that can help from people being bulled by BIG company's who can / have staff attorneys that can use the court system to shut people down.

  • Slashdot likes to argue about intellectual property and patents, and it's clear that both extremes are undesirable

    It is? I'm pretty sure the world would be a better place if people were not allowed to own ideas or expressions of ideas.

    • If you have spent time working in industrial research and development you would realize that the lack of patent protection for real innovations would be detrimental to investment in technology.

      Companies don't like investing large sums of money in anything and getting nothing out of it.

  • The end points of the laffer curve are supposed to be "obvious". At zero taxes there is no revenue, and at 100 % taxes there is also no revenue due to destruction of the economy. However, there is another argument (mine) that at 100 % taxes you simply have 100 % government control over the economy. This would mean a complete welfare state - every penny comes from the government and as soon as you spend it every penny goes back to them. Of course this means they control who gets money and presumably for what
  • I have a problem with companies that create no concrete products and exist solely as patent trolls. So why not ban that practice? Why can't you make a patent contingent upon the applicant actually producing a product that uses that IP?

    • To be fair, this does completely eliminate the concept of "inventor".

      Researchers, for example, may have some important invention, but who don't have the capital or experience to build a complex system that uses this feature they invented.

      Is it wrong for them to try to license their invention?

      While i agree with you about trolls, I just thought I would bring up a counter to your question.

Neckties strangle clear thinking. -- Lin Yutang

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