A better patent system.

I just sent this letter to New Scientist magazine; no idea if they’ll print it or not, so I’m posting it here too, as several people have recently expressed interest in this idea:

James Love’s proposal for cash prizes to replace today’s patent monopolies (“Fair prices, fair profit”, page 24, Nov. 10-16 New Scientist Special Issue) would be a welcome improvement on the current patent system. But there may be an even better solution: sliding registration fees with a public buyout option.

Under this system, the patent applicant names a monetary value for the patent at the time of registration. They may pick any value at all — ten dollars or ten billion — but the registration fee will be a percentage of that value, so there is an incentive not to declare too high. Each year upon renewing the registration, the patent owner has a chance to adjust the declared value up or down, and the renewal fee adjusts accordingly.

Now comes the key: since the declared value of the patent is a matter of public record, any party can liberate the patent into the “public domain” (to use the language of copyright law, whence this proposal originally came) by paying the patent holder that amount, in a mandatory transaction. The registered owner must accept, and, having chosen the value in the first place, cannot claim to have received less than the patent’s worth.

This system preserves all the market dynamics that defenders of the current patent system rhapsodize about: there is still an open market in patents, and a patent can sell for more or less than its registered value (since a purchaser may be interested in retaining the monopoly, rather than in liberating). At the same time, the public always has a clear path by which to liberate a given patent, and at a speed that matches the urgency of the public’s need.

By doing away with the need for a national board to decide who gets cash reimbursements, and depending instead on free market dynamics, the proportional registration system may be more acceptable to those who worry about the political implications of having governments decide what rewards to give to what drug companies.

-Karl Fogel

I’m not convinced that any patent system at all is necessary, by the way, but the issues with patents are a bit trickier than with copyrights.

Patents are partly a means of preventing people from keeping secrets: if someone invents a new artificial heart valve, we want them to publish about it in great detail, and granting them a temporary monopoly as a reward for doing so is one way to ensure this happens. On the other hand, medicine and medical devices are almost always the example the patent industry uses when it wants to scare us into imagining a world devoid of innovation, so it’s appropriate to note that there’s a whole separate secrecy-prevention mechanism in place for that category of inventions: the medical approval process (in the U.S. this is run by the FDA, for example). You can’t get your drug or heart valve approved anyway without revealing the technical specs, so the anti-secrecy argument is rather weak in the very case of the poster-child industry for the pro-patent lobby, as it happens.

While I’d be very happy to see the proportional registration system adopted for either patents or copyrights, the real purpose of the proposal is to show that even if you accept the argument that monopoly-based market dynamics are necessary, there’s still a better way to do it than the way we do it now. I’d really like to see on what grounds the pro-monopoly lobby would argue against the proposal… They often talk about how we must “balance” the needs of the creators against the needs of the public (a false choice if ever there were one), but if balance is the desired goal, what could be more balanced than a system where the public gets a buyout option based on the owner-determined market value?

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