

Ask HN: How to fix intellectual property law - kd5bjo

Every time intellectual property comes up, there seems to be two basic positions that get taken.  On one side is the position that intellectual property law is useful.  On the other, that it is broken.  It seems to me that both sides are right: the concept is useful, but the implementation is broken.  IANAL, but here is my understanding of the current state of things, as well as my ideas about how to fix them.  If this sounds reasonable, what is the best course of action to take?  If it doesn't, what's wrong with it?<p>There are four fundamental types of "intellectual property," and each has to be dealt with in its own way:<p>Trade secrets are IP that is fundamentally protected by not telling anyone about it.  There are legal protections against espionage, but not independent invention or accidental disclosure.  There don't seem to be any major complaints about how current law handles this.<p>Trademarks are signs of brand identity, and cannot be used by direct competitors.  The same trademark can be used by multiple companies so long as they operate in distinct markets (by industry or location).  The primary complaint about the law here seems to be around what can and can't be considered a trademark.  For example, can a fictional character's name or appearance act as a trademark?  Also, many companies are overzealous about sending C&#38;D letters to protect their trademarks, for fear of losing them.  All in all, this seems to work relatively well, especially relative to copyrights and patents; I have no suggestions to improve them at this time.<p>Patents exist to protect useful inventions.  The fundamental idea of a patent is that an inventor agrees to teach the industry about his new invention in exchange for a time-limited monopoly on its use.  The current patent system fails to live up to this ideal in several ways.  In practice, patents provide no real education because the language they are written in is too obtuse for anyone other than a patent lawyer to understand.  Also, the current practice seems to be to blatantly ignore patent infringement until the patent is almost expired and then sue for several years of damages.  Not knowing about the existence of a patent should be a valid defense against a patent infringement suit, and it should be the patent holder's responsibility to make sure that most other people in the industry know about the patent and how the invention works.  Also, patents should be voided if their inventors do not actively seek to enforce their monopoly.<p>Copyright protects creative expression.  The justification for copyright is to increase the value of creating creative works, so that society has a richer culture.  The current mechanism is through a (theoretically) limited-term monopoly on production of copies of the work.  As copying technology has evolved, this mechanism has started to become infeasible.  I propose that this mechanism should be replaced with a compulsory licensing scheme.  All technological barriers to making copies of creative works should be banned, but technologies to determine who has a copy should remain legal.  The copyright office should maintain a consumer-facing system through which anyone can buy a personal-use license for any registered work at standardized rates, and distribute the funds to the copyright holders.  Copyright holders may reduce the cost of a license as much as they like, but there will be a statutory maximum.  The maximum rate should be determined by the type and age of the work such that it is not too high to be prohibitively expensive to the average consumer nor too low to encourage creators.  All licenses sold will be both perpetual and transferrable.  In any sale, it is the seller's responsibility to make sure that the copy sold is properly licensed.
======
beagle3
Quoting+updating myself from <http://news.ycombinator.com/item?id=2855835> .Go
read the discussion if you find it interesting, the discussion touches on the
feasibility, flaws, objections, etc.

Intellectual "Property Tax".

Have everyone declare the value of their intellectual "property" (patents,
copyrights, trademarks, designs) - each and every item, for that year, on
their tax return, and have them pay 1% of the value as "IP tax".

The declared amount is what one pays for a compulsory license (through an
escrow - i.e., if I want to use it, I can just do that by putting money in an
escrow account set up for that "property" item, and be immune from lawsuit) or
if successfully sued, and up to 3 times that for willful infringement, _per
year_ -- and no more. But of course, property owner can always negotiate a
lower payment. This can apply equally to any kind of IP, including music
(which already has a compulsory licensing arrangement), videos and patents
(which do not).

All of a sudden, everyone has an incentive to state a reasonable value for
their patent. Copyright catalogs that are not being published (old music
recordings, old books, old movies) would be assigned 0 value by copyright
holder, in order to avoid tax - which would mean anyone can freely make a
copy. If they believe -- at the end of the year -- that someone is making a
profit at their expense, they can set the value as high as they want at the
end of that year, pay the tax, and sue the profiteer.

The important points are:

\- People keep forgetting that patents are an offensive measure. The only
right they give you is to sue others for infringement. They do not give you a
"clear to operate" approval. If you can't afford to sue later ($200K-$500K to
even consider a patent lawsuit in the US these days), the patent has negative
value for you (because it does cost $10K-$50K to maintain over the life of the
patent, but you won't be able to fend of infringement in court should it
happen).

\- It ties patent maintenance cost to patent value; the current system has
essentially fixed (and relatively low for bigcorp/trollcorp) costs for
potentially infinite value in the case of a successful lawsuit. e.g. -- you
can only find legos from the lego company, and magsafe adapters from Apple,
because they won't license it to anyone for a reasonable price, which is the
same as an infinite price as far as others are concerned.

\- There ARE nontrivial costs to maintaining the IP system -- courts, police,
customs and border protection, etc. These are mostly paid for by the tax base,
but enjoyed disproportionately by patent owners who declare huge values at no
additional cost.

\- Many people I've mentioned this idea to compare it to some (unspecified)
ideal system, or to a no-patent-law-at-all situation, and obviously find
problems. It is important to note that it is not worse for the individual
investor (they already need huge resources to successfully sue), or the
legitimate patent. It hurts patent trolls by introducing cost-of-carry for
their "property". It also forces patent bullies to actually care about patents
rather than collect as many as possible (If IBM assigns $1M value to each one
of their 30,000 patents, that would cost $300M/year to maintain. They won't).

\- It puts older and newer patents on equal footage. Any major reform that
does not address existing patents becomes unreasonably complicated or is
useless from the get go.

\- If patents last 20 years, this amounts to 20% tax over the lifetime of the
patent -- comparable to capital gains tax in most jurisdictions (which is what
you would pay if you sold it on day one for that some). If the value drops to
zero down the line, e.g. because of better technology - you've only paid in
proportion to the value you believed you extracted from it.

\- Finally, you could give tax credit for existing filing / maintenance fees -
which would mean that under the current fee structure, every patent in the US
would be considered worth ~$100K/year for the purpose of lawsuits.

~~~
kd5bjo
It definitely has some good points, but there are a few issues to consider:

* Compulsory licensing for trademarks doesn't make sense; their purpose is to ensure that the consumer knows who manufactured the product. If you can't exercise control over the people that use your trademark, it's useless.

* Patent litigation is too expensive for small firms and too cheap for large ones; figuring out how to fix this would be a big win. That can be done by adjusting the actual cost, the outcome probability, or the judgement amount. Time until judgement is also a big factor.

* This system doesn't address the problem of submarine patents, that are kept hidden for years until a lot of firms are unknowingly infringing, and then get sued for large damages. It needs to address how a company knows whether or not it needs to license a patent for its technology. Perhaps holding a patent on a technology should give you "clear to operate" approval, and existing patent holders must review and challenge patent applications before they're granted.

~~~
beagle3
Excellent points.

> Compulsory licensing for trademarks doesn't make sense; their purpose is to
> ensure that the consumer knows who manufactured the product. If you can't
> exercise control over the people that use your trademark, it's useless.

Perhaps it is wrong to bundle trademarks with the rest of them. The consumer
protection angle is what makes them different than the copyright and patent
monopolies.

Trademarks are sometimes used defensively - only Google Inc can lay claim to
be the device you use to "google stuff". However, they are sometimes used
offensively - e.g. Cisco vs. Apple on the iPhone trademark, and the still
ongoing Apple vs. Chinese-company-whose-name-I-don't-know iPad trademark.

The "use it or lose it" status of trademarks makes the current situation a
little better than patents, but still, offensive use of Trademark should cost
the user in proportion to their benefit.

A really crazy idea: "compulsory hostile trademark takeover" - you'd be able
to take over anyone's trademark for 100x the value they assign to it (And on
which they pay 1% tax or whatever). e.g. I can register a trademark 'iJoke'
for $75, but if I want to keep it, I need to say how much it is worth to me on
my tax return and pay 1%. Let's say I declare $1M. Then I need to pay $10K in
tax, and Apple can forcibly take it away for $100M (paid in advance, in
escrow) and waiting 12 months for me to lose my trademark rights (although
they gain shared trademark right away). A non-government "eminent domain", if
you will. Might also work well against domain squatters. Same underlying idea:
make cost-of-carry proportional to value.

> Patent litigation is too expensive for small firms and too cheap for large
> ones; figuring out how to fix this would be a big win. That can be done by
> adjusting the actual cost, the outcome probability, or the judgement amount.
> Time until judgement is also a big factor.

I agree, although I have no specific suggestion about how to adjust that. In
Finland, traffic tickets are a percentage of your yearly income, with a
minimum but no maximum. So a speeding ticket isn't cheap even for big earners
- a $60K ticket happens a few times a year. (They are still cheap to people
who already have a fortune but not come, though).

Perhaps there's someway to make that depend on value too -- e.g., there is a
progressive tax on income to be able to sue; e.g. when you sue someone, you
pay 0.01% of your yearly income for every day in court, whether you win or
lose. So 2.5% if you spend every workday in court suing people. Obviously,
court services are more valuable to you if you have more income.

> This system doesn't address the problem of submarine patents, that are kept
> hidden for years until a lot of firms are unknowingly infringing, and then
> get sued for large damages. It needs to address how a company knows whether
> or not it needs to license a patent for its technology. Perhaps holding a
> patent on a technology should give you "clear to operate" approval, and
> existing patent holders must review and challenge patent applications before
> they're granted.

On the contrary. Now you'd actually have an incentive to do a patent search,
and lock down low fees by private agreements so that they cannot be inflated
later the way submarine patents are used today.

Although it might help to codify this somehow; e.g., if you hold a patent,
declare value $1M (paying $10K/year to maintain). I offer you $10M upfront for
5 years license (Twice what you declare it is worth). You decline. I document
my offer, and use it anyway, paying only the compulsory $1M/year for the first
year. On the 2nd year, you declare it worth $10M (in an attempt to extract
more money from me). I'll have to pay up or stop using it. But _you_ can get
in trouble with the tax authorities for (allegedly) reporting a much lower
value.

Basic ideas:

1\. Tie cost-of-property-carry to real world value

2\. Use tax authorities to coerce everyone into estimating values sensibly and
defensibly.

~~~
kd5bjo
re: the iPhone and iPad trademark disputes; they arose because Apple launched
their product without bothering to secure the trademarks first. In the Cisco
case, they were a legitimate competitor (producing and marketing telephones in
the United States) and Apple really didn't have any right to the name. The
other one is a dispute over how Apple can market the iPad in China; no change
in US law is going to affect that.

Making people pay taxes on the value of their reputation, which is what this
sort of trademark tax would be, doesn't sit right with me. Economically, it
probably works fine.

For patent litigation, one problem is that legal costs can drive most small
companies out of business before they ever get a judgement. Even if they would
have won the case, they don't have the resources to make it to the finish.
This is a problem for all kinds of civil cases, but I haven't thought about it
enough to have a viable stance.

The problem with submarine patents is that even with a good-faith patent
search, you're likely to miss some relevant ones. They are deliberately
written to be as broad and hard-to-understand as possible; the only way to be
reasonably sure that you're not infringing is to be an expert on all the
patents that are currently in force.

------
a3camero
There are more kinds of IP:
-<http://en.wikipedia.org/wiki/Industrial_design_right>
(<http://en.wikipedia.org/wiki/Design_patent/>) -Integrated Circuit
Topographies: [http://www.cipo.ic.gc.ca/eic/site/cipointernet-
internetopic....](http://www.cipo.ic.gc.ca/eic/site/cipointernet-
internetopic.nsf/eng/h_wr00005.html) -Plant Breeders Rights:
[http://www.inspection.gc.ca/english/plaveg/pbrpov/guidee.sht...](http://www.inspection.gc.ca/english/plaveg/pbrpov/guidee.shtml)
-And other kinds of IP around the world

~~~
kd5bjo
That's true; I should have mentioned that I'm only familiar with the situation
in the US. In practice, I haven't heard anyone complaining about the handling
of design patents (or any of the other types of IP that you listed). That
means that they're either not a problem, or (more likely) that I don't move in
the circles where it is a problem.

------
spurgu
I understand the need for patents although I really really dislike them and
what they're doing on a grand scale. In the case where a small company makes a
discovery but doesn't have the resources to develop the product as fast as
larger companies would, I definitely see the need for a patent system. The
patent basically stops others from 'stealing' their idea.

But what if the patents were limited to 1-2 years and after that it would be
public domain? That way the initial inventor would gain the advantage of a
head start (and 1-2 years is huge by todays standards) and only hindering
global development by a year or two.

~~~
kd5bjo
Adjusting term limits on patents (downward) certainly makes sense in the tech
industry, though 2 years feels short to me. It probably makes sense to look at
how long it took various successful companies to get established, and set the
time limit to that kind of time scale. That way, if I have an invention that I
want to build a company around, I have a reasonable period of time to get it
off of the ground before I have copycats on my back. Their ramp-up time will
be much shorter, as I will have taught them how to make the thing that I've
built my business on.

------
angersock
_"Not knowing about the existence of a patent should be a valid defense
against a patent infringement suit, and it should be the patent holder's
responsibility to make sure that most other people in the industry know about
the patent and how the invention works."_

The problem with allowing this is that it becomes (as it has) _de facto_
procedure to never read patents because you might infringe. So, this fails to
uphold the idea that patents should teach society how to do a thing.

Better to just remove them entirely.

 _"The justification for copyright is to increase the value of creating
creative works, so that society has a richer culture."_

So, there's your issue right there: creative works have no value beyond that
which people assign to them. The utility I get from the _Mona Lisa_ is greater
than that I get for _Piss Christ_ \--and that is a personal preference, at
this point in time.

Creators should not be shielded from the free market: they either need to
pander to the public (if they want money), or they need to accept that what
they do is not motivated by money (and in so doing free themselves of their
audience's expectations). Copyright introduces scarcity and inflates value for
things that, quite frankly, don't deserve it.

~~~
kd5bjo
_Creators should not be shielded from the free market: they either need to
pander to the public (if they want money), or they need to accept that what
they do is not motivated by money (and in so doing free themselves of their
audience's expectations). Copyright introduces scarcity and inflates value for
things that, quite frankly, don't deserve it._

Note that I'm proposing to reduce scarcity by getting rid of traditional
copyright. If you want a copy of something, obtain it in any way you can and
pay for a license; you're guaranteed that the license is available and isn't
outrageously expensive. If you don't value the copy at the offered rate, don't
get a copy and don't pay for it.

As the marginal cost of a copy approaches zero, you need some kind of (group
or individual) patronage system for any production to be cost-effective. That
could be a viable way to go, but I'd like to see some more detail about how it
would work before I jump onboard with it.

