Comment by panabee | Hacker News Reader

Comment by panabee | Hacker News Reader

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i wrote a blog post on this, but i believe crowdfunding, assuming regulation and government policy don't interfere, will accelerate the demise of patents, especially software patents. the purpose of patents is to foster innovation, but they arguably seem to have the opposite effect today.

effectively, patents protect the two constituent groups required for innovation: (1) creators and (2) investors.

music, art, film, restaurants, and mobile apps demonstrate that patents are not necessary for people to invent (though some IP like copyright seems mandatory). in some fields, the joy of creation and the promise of financial gain, even if unprotected and unsustainable, is sufficient motivation for invention.

the common thread, of course, is capital efficiency. it's far easier to risk investment and innovation when little money is required. investors are needed for innovation in capital intensive areas, but investors historically have been ROI motivated and sought assurances, such as patents, that their money will yield a return.

crowdfunding enables creators to break from ROI-investors and find financing from a different set of people: those who want not a ROI, but a specific product or service. most importantly, these "investors" care less about patents or the long-term viability of a company. they just want a product/service to exist -- from anyone.

we're already seeing this unfold on kickstarter and indiegogo. the question is whether lobbyists and governments cripple crowdfunding, or allow it to reach its maximum potential.

if people will innovate, regardless of patents, and other people will underwrite products, regardless of patents, why do we need patents to foster innovation?

The purpose of patents isn't to incentivize innovation. Its to protect capital intensive R&D from the free rider effect and to allow the fruits of R&D to be the subject of transactions. Crowd funding in this context is a joke. Wake me up when someone crowd funds a blockbuster anti-cancer drug or disease resistant crop. We're talking capital investments that start with a 'b'. Nobody is going to fund that if the results can be easily copied (eliminating ROI), whether we're talking about traditional investors or crowd funders.

A great example is the Spaceship One patents. The arrangement there was that Scaled Composites would do the R&D, and Paul Allen would invest, and companies like Virgin would commercialize. Having a property right that can be the subject of transactions is tremendously valuable for these sorts of arrangements.

The purpose of patents absolutely is to provide incentives for innovation. What you describe as the purpose (protecting capital intensive R&D from free riders) is merely the method.

To the extent that the method does not result in the purpose, the patent system is a failure.

i'm not sure why you say patents aren't supposed to encourage innovation: http://en.wikipedia.org/wiki/Patent. they exist to encourage invention by ensuring someone cannot copy your r&d efforts. after all, the purpose of r&d is to innovate and discover. i didn't say patents would be abolished immediately or for all sectors. pharma products, in particular, require hundreds of millions of dollars and cannot get crowdfunded right now. but if we're to ever eliminate patents, crowdfunding will play a central role.

> The purpose of patents isn't to incentivize innovation.

That's directly contrary to the text of the U.S. Constitution, article I, section 8, clause 8, which gives Congress the power: "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."

The Supreme Court's canonical explanation of patents' constitutional purpose was written by Justice Clark, for a unanimous Court, in Graham v. John Deere Co. of Kansas City, 366 U.S. 1 (1966): [1]

==BEGIN QUOTE==

... The clause is both a grant of power and a limitation. This qualified authority, unlike the power often exercised in the sixteenth and seventeenth centuries by the English Crown, is limited to the promotion of advances in the "useful arts." It was written against the backdrop of the practices—eventually curtailed by the Statute of Monopolies—of the Crown in granting monopolies to court favorites in goods or businesses which had long before been enjoyed by the public. See Meinhardt, Inventions, Patents and Monopoly, pp. 30-35 (London, 1946).

The Congress in the exercise of the patent power may not overreach the restraints imposed by the stated constitutional purpose.

Nor may it enlarge the patent monopoly without regard to the innovation, advancement or social benefit gained thereby.

Moreover, Congress may not authorize the issuance of patents whose effects are to remove existent knowledge from the public domain, or to restrict free access to materials already available.

Innovation, advancement, and things which add to the sum of useful knowledge are inherent requisites in a patent system which by constitutional command must "promote the Progress of . . . useful Arts."

This is the standard expressed in the Constitution and it may not be ignored. ...

==END QUOTE==

Id. at 5-6 (emphasis in original, extra paragraphing added.)

As 'wnoise correctly points out down-thread, protecting capital-intensive R&D from free riders is not an end in itself, but merely a means for achieving that end.

[1] http://scholar.google.com/scholar_case?case=9105652591497305.... The decision was 7-0; two justices (Stewart and Fortas) took no part, which usually means they recused themselves because of conflicts of interest such as personal business investments in one of the parties.

You're right that's the stated purpose of patents. But that rationale arose before we had a solid understanding of modern economics. I'm talking about the rationale for patents in that context. Its prevention of free riding. Just as Posner would say the purpose of the tort system is to shift the cost of exercising care to the party that can bear it at least cost, or the purpose of environmental laws is to internalize negative externalities, etc.

Point taken -- maybe a better phrasing would be that the purpose of the patent system is to try to mitigate disincentives to innovation, viz., the free-rider problem.

The solution might be to limit protection to machine code and the improvements in semiconductor design and conclude that higher level programming is routine experimentation (call it if a pimple faced teen can develop it in a hackathon it is per se obvious).

Actually that's almost already the standard. I can't speak to the specifics of how it's enforced, but something is legally unpatentable if a pimple faced teen could develop it in a hackathon. The standard is whether it is non-obvious to a person of ordinary skill in the art.

What people say the standard is is quite a different thing from what the standard actually is. Don't look at the text of the law, look at what gets patented and what doesn't. The text is irrelevant.

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