Patent Attorney On Why We Need To Rethink Intellectual Property

Techdirt called our attention to an interesting video of patent attorney Stephan Kinsella's presentation on 'Rethinking Intellectual Property Completely.' It's a long presentation, but well worth the time to watch. There is also an ongoing series of posts discussing intellectual property rights on Techdirt for additional reading.

For those of you looking for it ...

article & bigger video can be found here [techdirt.com]

Old concept in a new world

Intellectual property is a very egoist concept nowadays, in a time in which technological innovation can help so many people. It depends on the way it is used; if you just sit on your invention for 20 years and prevent others from doing something similar, or if you sell it at an outrageous cost (see: drugs) it's really detrimental to humanity as a whole.

Re:Old concept in a new world

It depends on the way it is used; if you just sit on your invention for 20 years and prevent others from doing something similar, or if you sell it at an outrageous cost (see: drugs) it's really detrimental to humanity as a whole.

But it's equally detrimental if those innovations are never made. It's just as bad to NEVER INVENT something as to not sell it, or to sell it at high prices. Most people who innovate don't do it for free; they do it because they need to feed their families and might even hope to strike it big.

And the process of innovation is rarely cheap. You use the example of drugs. For every one drug that makes it to market, hundreds of drugs fail animal tests or basic safety tests, and tens more fail in human trials. These are extremely expensive. Right now we compensate drug developers for the risk and expenses of drug design by allowing them to sell the successful drugs at a price above cost. Requiring that drugs be sold at or near cost would put a halt to innovation that has saved countless lives; there'd just be no reason to sink millions (or even billions) into research and testing if any competitor could copy your product as soon as it it the shelves.

There might be other ways to encourage innovation (government grants, government funding, competitions, etc), but any solution has to recognize that innovation is rarely cheap.

Re:Old concept in a new world

If nobody can use something, it's still useless.

If nobody can improve it further (which is the original reason for improvement patents), then it's hampering innovation in the first place.

If someone were to patent running processes on a computer, where do you think software innovation is going to go?

For drugs, the price is now dictated by the maker regardless of the cost of manufacturing...hello superexpensive medicines in africa? Whoops?

The millions and billions are collective research, not just solely put on one product. It's throwing money at the wall, waiting for some to stick, and suing the hell out of everyone once something does.

Re:Old concept in a new world

The millions and billions are collective research, not just solely put on one product. It's throwing money at the wall, waiting for some to stick,

Yes, because it's impossible to know in advance which concept will work. There is no way to know that Molecule #1512 will be the one that will become a successful therapy, and that #1-#1511 will be failures. Investigating the first 1511 is an absolute prerequisite to finding out that #1512 is the one that will work. You call it "throwing money at the wall," but that's the only practical way to do drug research these days. You start with a bunch of compounds that look like possible candidates, then slowly weed out the ones that don't work or cause unacceptable side-effects or otherwise aren't promising.

If there were a way to know in advance which drugs would work then nobody would waste time looking at the unsuccessful ones.

Re:Old concept in a new world

But it's equally detrimental if those innovations are never made. It's just as bad to NEVER INVENT something as to not sell it, or to sell it at high prices. Most people who innovate don't do it for free; they do it because they need to feed their families and might even hope to strike it big.

This is a nice pipedream, but most innovations happen because companies want to sell a product. It would happen without a patent regime too.

And the process of innovation is rarely cheap. You use the example of drugs. For every one drug that makes it to market, hundreds of drugs fail animal tests or basic safety tests, and tens more fail in human trials. These are extremely expensive.

The process of innovation isn't cheap and the pharma companies know this too. That is why they got the US government to fund their research costs almost entirely. Direct research funding from the govt. drives 90% of base drug research, plus the huge tax breaks these companies receive basically means that the government pays for just about all drug research going on in the states. Safety testing is quite cheap compared to this.

Right now we compensate drug developers for the risk and expenses of drug design by allowing them to sell the successful drugs at a price above cost. Requiring that drugs be sold at or near cost would put a halt to innovation that has saved countless lives; there'd just be no reason to sink millions (or even billions) into research and testing if any competitor could copy your product as soon as it it the shelves.

I already said, but I'll reiterate my point: the government already pays for at least 90% of this research. These companies add 10% research, patent the government research and rake in the bucks. Please just do a cursory research and you'll find the numbers. By the way, pharma spends twice as much on advertising than on research (research nominally, without substracting the tax breaks from this number).

There might be other ways to encourage innovation (government grants, government funding, competitions, etc), but any solution has to recognize that innovation is rarely cheap.

Innovation is not cheap, but why pay for it if you can get the govt. to do so? Pharma wants to have their cake and eat it too. Even at the cost of lives due to the artificially high drug prices. If you look at the tech industry, it can be clearly seen that most research is done in order to sell a product.

Re:Old concept in a new world

Is the money you gain from prohibiting others from using the same idea in a generic drug worth the lives lost by those who are unable to afford your prices?

Re:Old concept in a new world

Probably not.

But if there is not a perceived investment opportunity, many drugs sold for high prices today (and lower prices tomorrow) would never have been developed.

Re:Old concept in a new world

But if there is not a perceived investment opportunity, many drugs sold for high prices today (and lower prices tomorrow) would never have been developed.

This is true, but maybe if we allocated our tax dollars better we would have better drugs yet. The way things are now, a lot of the research is already funded by tax dollars, even though private companies end up with the patents. They also pass up avenues for research that might result in cures, which are much less profitable than treatments.

The drug industry and health industry in general is a situation where the government interferes with the free market by enforcing patents and subsidizing some research and restricting other research. The problem is not necessarily government interference, but the fact that the government interference is directed by lobbyists making campaign contributions instead of by representatives acting in the best interests of the people.

Re:Old concept in a new world

Obviously you haven't worked in government much. I've worked in industry for years before working for the government. I thought I had seen lots of waste in big industry, but that's nothing compared to what gets wasted by the government.

Don't get me wrong. There are some things that are better done by the government even at the outrageous cost it requires, but it's almost never the most cost effective way to do something when the government does it.

Re:Mod Down!

For the both of you....

http://en.wikipedia.org/wiki/Thalidomide [wikipedia.org]

From 1956 to 1962, approximately 10,000 children were born with severe malformities, including phocomelia, because their mothers had taken thalidomide during pregnancy.In 1962, in reaction to the tragedy, the United States Congress enacted laws requiring tests for safety during pregnancy before a drug can receive approval for sale in the U.S.Other countries enacted similar legislation, and thalidomide was not prescribed or sold for decades.

And from http://en.wikipedia.org/wiki/Antibiotic#Antibiotic_resistance [wikipedia.org]

The problem of antibiotic resistance is made more widespread when antibiotics are used to treat disorders in which they have no efficacy, such as the common cold or other viral complaints, and when they are used broadly as prophylaxis rather than treatment (as in, for example, animal feeds), because this exposes more bacteria to selection for resistance.

The FDA exists to test and approve drugs to prevent tragedies such as the thalidomide and similar as well as to set usage policy to prevent future abuse of a drug. They are the balancing act between pharmaceutical advertisers pushing not only doctors but patients to demand specific drugs and the health and safety of the drug using public. In many cases, they are the only defense a patient has against the constant push for that magic bullet pill...

Re:quite wrong

It turns out that if you grind through the math, it's cheaper to have taxpayers pay 100% for drug development and have the drugs produced generically than to give drug companies this economic incentive.

Exactly, The proponents of the freemarket system don't understand the medical industry is so heavily regulated that such economic theory breaks down. All we're paying for is the profit, and risk liability for new drugs. Of course big pharma is going to charge huge amounts, they're on the hook for potentially hundreds of millions of dollars in litigation and settlements, even after they jump through all the governmental hoops, even when there is no concrete scientific evidence of the claims.

And the argument for abolishing drug patents becomes even more compelling once you realize that drug companies are incentivized to develop the most profitable drugs, not the ones for which there is the greatest need. Companies have the biggest incentive to develop tiny, patented variations of symptomatic treatments for common ailments like light allergies and colds. Other drugs are drugs that try to compensate for unhealthy living and lack of exercise. Those are not the kinds of drugs that it makes sense to develop from a public health point of view.

I disagree on that point. They have the incentive to capitalize on less competitive markets. You can spend the cash to patent an allergy medication, then are forced to advertise to carve out a small segment of that market. Meanwhile you can create treatments for which there is no alternative and can charge the maximum the market will pay. The reason some ailments are saturated with products is because they are better understood so it's easy to create treatments.
Alternatively government mandated research will become very focused based on the political climate and vocal special interest groups. Look at how much government spends on AIDS vaccine research vs how much of a public health threat it is.

Re:Old concept in a new world

Is the money you gain from prohibiting others from using the same idea in a generic drug worth the lives lost by those who are unable to afford your prices?

You've phrased this exactly backwards: is giving up a short term of exclusivity worth all the lives SAVED because someone took the time to invest the money in getting that drug from discovery through clinical trials.

Without patent protection, you'd have a free rider problem.

Re:Old concept in a new world

Drug companies love to talk about the cost of developing their drugs, but they easily spend more money Marketing their drugs than they do developing them. If there drugs are so good and wonderfull, shouldn't they sell themselves?

This [familiesusa.org] gives much more information.

Re:Old concept in a new world

With regard to drugs, doesn't the research and testing that goes into drugs cost major $$$$$ and time?

The research of new drugs costs nowhere near what the marketing does.

Take a look at the financial report of your average pharmco; approximately 15-20% is spend on R&D, 40% on marketing and administration, and 40% on comparatively inefficient production (compare generics pricing).

That means we'd get 5 times as much medical R&D if the insurance companies and government simply funded it outright and let the free market generics handle the production and marketing. Or we could get the same level we're getting today at a fifth of the cost.

The only thing patents give you is monopoly inefficiency. A level of inefficiency that surpasses even what governments can waste on their own.

Imagine the diseases we could cure and the medicines we'd have access to had medical research funding not been bogged down and hindered by a century of patents.

Oh, well, at least you can be sure your doctor is well equipped with complimentary pencils and golf vacations.

Re:Old concept in a new world

If you know anything about investment, you know that the higher risk, the higher the expected profit. Developing drugs is a risky business, because companies get only seventeen years at most of exclusivity in selling each drug, then they need to develop more "blockbusters" to continue their revenue stream. I suppose they seem "consistently profitable" to you because there are so many mergers and buyouts in the industry. The ones that aren't profitable disappear.

A better way of saying this...

How big businesses, attorneys, and the court system have hijacked our us patent system to squelch new entrepreneur innovation in the US...

Let me summarize the conclusion as well... Good ideas on IP change do not matter at this point because nothing meaningful will happen until we can somehow get congress to stop their continuous feeding at the trough of corporate lobbyists...

Re:A better way of saying this...

Exactly my point...

In fairness, history tells me that this behavior was caused by "too good of times" for too long. Meaning, during the good times people really just ignore what their elected officials do. Once things turn sour for more than a brief period, however, this will change... I guess only time will tell if history will repeat itself.. :)

Re:A better way of saying this...

Well, let me put it this way... Large businesses use patents in a strategy of what they call an "IP moat".... Meaning, the main reason MS, IBM, and countless other businesses are building huge patent portfolios are not because of all of the "innovation" they are doing, but rather because of their desire to protect their core business from any potential rising competition...

At first look, this does not seem like a bad thing, until you realize that most of the large businesses that exist today could have never grown up in such an environment.... Meaning, for a free market capitalism system to function, older obsolete businesses must die and new more competitive businesses must rise to take their place. In the current business environment, this mechanism cannot occur...

So, do you still think that startups are not being hurt?? :)

IP will never go away.

The concept of IP is here to stay. We have too many laws already on the books and there is too much money invested in IP for anything to drastically change. The power brokers in Hollywood and in Washington are only going to perpetuate the current system as long as they can.

Re:IP will never go away.

To say that copyright protection for recorded performances is permanent is like saying gasoline engines are forever going to power cars. There was a time before gas engines, and copyright recorded performances, and there will be a time that comes after.

As with gas engines and global warming, if we find that copyright protection for recorded performance amounts to pollution of the law and of the public domain, there is every reason to do away with that aspect of copyright protection.

Copyright is not a fundamental human right. Copyright is a deal: "I'll publish, if the governments protects publications." Unlike natural rights, copyright is a created right, a bargain between governments and publishers, and the bargain can be partially or fully revoked, or the term shortened. There is nothing immoral about revoking or curtailing copyright protection, especially for a relative novelty like recorded performances. It is a decision based on utility.

Intellectual Property Tax

This could be a wonderful revenue opportunity for cash-strapped state and local governments.

When such a court claim is made on infringement of this intellectual property by a business located within the tax jurisdiction, just take the claimed infringement value and multiply it by the prevailing property tax rate and invoice said property holder. (Be sure to tack on interest and penalties for back taxes.)

If property holder doesn't pay in 90 days, start lien and foreclosure proceedings.

To recover the costs of this collection, auction off this IP. If there is no starting bid (1% of value), property becomes public domain.

Re:Intellectual Property Tax

you Sir are a freaking Genius.

Tax ALL intellectual property based on it's value. All OSS and FSF IP has zero tax as it is given away freely.

Holy crap you hit the nail on the head in such an elegant way none of them will see it coming.

You found a solution to All if the Intellectual Property messes by giving the politicians something to tax. Holy crap I'm going to start talking about this to the right people to see if I can get it rolling in my state.

This is in fact the answer. As soon as governments start taking tax on IP these idiots at the RIAA, MPAA and BSA will stand back and go... wooooah. Wait a minute.

Base the TAX they get on how much they sued for infringement. That would make it that record companies need to ante up billions in taxes.

BRILLIANT!

Incentive

The incentive to save lives is big enough. All this "without money no one will do it" is BS. Without money no *company* will do it. Well, just don't make companies do it.

Look at all the philanthropic jobs that don't pay and the NPOs.

Create publicly funded labs. Create open lab diaries and open development. Make it an honorable job. Applications will flood in.

We don't need anymore pharmcos and anymore garden fountain commercials.

Re:It's some Ayn Rand follower

No, Stephen Kinsella is not a follower of Ayn Rand. In fact, I think he gets a great deal of pleasure out of mocking them:

http://blog.mises.org/archives/004065.asp [mises.org]

This column, An Unnatural Disaster: A Hurricane Exposes the Man-Made Disaster of the Welfare State by capital-O Objectivist Robert Tracinski makes some insightful points, if you can get past the giggle-inducing Objectivist stock-phrases like "sense of life".

http://www.lewrockwell.com/blog/lewrw/archives/010779.html [lewrockwell.com]

I've noted before Randians' bizarre practice of "officially" "breaking" with one another (other comments on this).

Now some Objectivists who actually have a sense of humor have made up an "Official Solo Schism Form Letter". Funny stuff. The letter is lampooning Objectivist nobody Diana Mertz Hsieh, who felt compelled to Officially, Publicly Break with a former Objectivist friend, the brilliant Chris Sciabarra (who is a decent, sincere, honest person who did not deserve to be treated like this), and to justify it by printing his private correspondence to her and a set of charges to any normal person would appear very bizarre (strange for a Randian, eh?).

...

Update: Just came across the latest Official Objectivist Denunciation: Andrew Bernstein of the Ayn Rand Institute has apparently been pestered into apologizing for having =gasp= published a short piece in the "Journal of Ayn Rand Studies". Bernstein's apology states "I deeply regret my thoughtless decision to contribute to this journal, and hereby irrevocably repudiate any and all association with it."

Well, then, Dr. Bernstein--it's official--and more than that, irrevocable! Thanks for letting us know!

He goes on: "To all who are sincerely concerned with Objectivism, I apologize, and recommend a complete repudiation and boycott of this journal and of any and all of Mr. Sciabarra's work."

Okay! I hereby repudiate and boycott Sciabarra.

And now I take it back! ha ha, I forgot to make it irrevocable!